As described previously in this blog, FERC in 2018 adopted a rule aimed at clearing away obstacles to participation by electric storage resources in wholesale markets administered by Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs). FERC has issued orders addressing the compliance filings of two RTOs: the PJM Interconnection (PJM) and Southwest Power Pool (SPP). The FERC compliance orders will be of keen interest to storage resources and other market participants in PJM and SPP.
The 2018 FERC rule required each RTO to revise its tariff to establish a participation model for electric storage resources that recognizes their physical and operational characteristics. The participation models must do the following:
- Ensure that electric storage resources are eligible to provide all services that they are technically capable of providing.
- Ensure that storage resources can be dispatched and can set the wholesale market clearing price as both a wholesale seller and wholesale buyer.
- Account for the physical and operational characteristics of storage resources through bidding parameters or other means.
- Set a minimum size requirement not to exceed 100 kW for participation in the organized wholesale markets.
- Specify that the sale of energy from the market to a storage resource that the resource sells back to the market must be at the wholesale market clearing price.
The PJM and SPP compliance orders
FERC’s orders on the compliance filings found that both proposals generally meet the objectives of the storage rule. FERC did find, however, that each proposal required additional provisions or clarifications and directed further compliance filings from the RTOs. Most of the compliance issues address highly technical aspects of storage operation and market participation.
FERC directed PJM to take the following actions, among other things:
- Propose tariff language that specifies the three different modes of operations in which storage resources may be dispatched: continuous mode; charge mode; and discharge mode.
- Modify the tariff to more appropriately account for a storage resource’s state of charge conditions through bidding parameters or other means in both its day-ahead and real-time market dispatch.
- Propose tariff provisions that describe the metering and accounting practices for storage resources.
- Revise the tariff to state that PJM will not charge a distribution-connected storage resource for charging energy if the distribution utility is unwilling or unable to net out from the host customer’s retail bill any energy purchases associated with the storage resource’s wholesale charging activities.
- Explain how PJM’s metering and accounting practices will allow for participation in retail and wholesale markets and to make any necessary tariff changes to ensure the separation and proper accounting of wholesale and retail uses.
FERC directed SPP to take the following actions, among other things:
- Remove a proposed tariff section that appears to apply to storage resources that choose to aggregate supply or provide support for that section. FERC states that resource aggregation is outside the scope of this compliance filing because the rulemaking orders did not address the aggregation of storage or other resources.
- Include in the tariff criteria for allowing storage resources to choose to participate as supply or demand for a given market interval.
- Include a basic description of SPP’s metering methodology and accounting practices for storage
- Explain how the tariff allows storage resources to participate in both wholesale and retail markets, or alternatively, revise the tariff to allow storage resources that provide retail services to also participate in SPP’s wholesale markets. (The tariff does not explicitly state that storage resources are allowed to participate in both retail and wholesale markets).
FERC also directed each RTO to include in its tariff the rules and practices regarding minimum run-time requirements, and initiated separate proceedings to address those requirements. The rulemaking orders required that each RTO have tariff provisions allowing a storage resource to provide all services that it is technically capable of providing. A resource is “technically capable” of providing a service if the resource can meet all of the technical, operational, and/or performance requirements that are necessary to reliably provide that service. One of those requirements is meeting the minimum amount of time a resource must “run” if it is called upon.
Commissioner McNamee’s concurrences
One issue that was particularly contentious in the rulemaking proceeding was whether FERC has jurisdiction to apply the rule to storage resources located on the distribution system and “behind the meter” for retail service. In the rulemaking orders, FERC held that it has exclusive jurisdiction over the wholesale markets and the criteria for participation in those markets, including market rules for participation of resources connected at distribution-level voltages or behind the meter. State regulators, utilities and others argued that FERC does not have the authority to override existing state laws or tariff requirements that prohibit or limit a storage resource interconnected with the distribution system or behind a retail meter from directly accessing the wholesale market. This issue is now the subject of judicial review.
Commissioner McNamee had dissented in the rehearing of the 2018 rulemaking order, arguing that FERC exceeded its authority in the storage rule by depriving the states of the ability to determine whether distribution-level storage resources may use distribution facilities so as to access the wholesale markets. The Commissioner wrote a separate concurrence to each compliance order discussed here, stating that he approved the compliance filings to the extent they comply with the Commission’s orders adopting the rule; he also noted that the orders are pending judicial review and reiterated his view that the Commission should have allowed an opt-out provision for states.