On February 15, 2018, the Federal Energy Regulatory Commission (“FERC”) unanimously voted to remove barriers for electric storage resources to participate in the capacity, energy, and ancillary services markets operated by regional transmission organizations (“RTOs”) and independent system operators (“ISOs”). FERC’s Final Rule requires each of these RTOs and ISOs to develop a plan for revising its tariff structure that establishes a participation model for various electric storage resources.

Currently, electric storage resources, such as large-scale batteries, pumped hydro systems, and thermal energy storage, play a more limited role in RTO and ISO markets, often participating only in fast-responding frequency regulations markets. FERC’s new rule seeks to expand energy storage’s participation beyond these roles by requiring RTOs and ISOs to develop a participation model that specifically accounts for the unique physical and operational characteristics of electric storage resources.

The Final Rule provides the following criteria for the participation models:

  • First, electric storage resources must be “eligible to provide all capacity, energy and ancillary services that it is technically capable of providing.” This criteria will eliminate some wholesale market rules that limit the services electric storage resources may provide.
  • Second, the models must ensure that participating systems “can be dispatched and can set the wholesale market clearing price as both a wholesale seller and wholesale buyer consistent with rules that govern the conditions under which a resource can set the wholesale price.” In other words, ISOs and RTOs must develop a participation model that accounts for the unique ability of electric storage resources to both purchase/store energy off the grid and to sell energy back to the grid.
  • Third, the models must “account for the physical and operational characteristics of electric storage resources through bidding parameters or other means.” In other words, the markets must take into account electric storage resources’ duration and operating parameters.
  • Finally, the models must “establish a minimum size requirement for participation in the RTO and ISO markets that does not exceed 100kw.”

FERC’s Final Rule will go into effect 90 days after publication. After this, each RTO and ISO is required to file its tariff modifications to comply with the Final Rule within 270 days of the publication date, and to implement the modifications within one year of the filing date. This timeframe will allow various stakeholders and interested parties an opportunity to review and comment on the proposed tariff changes submitted by each RTO and ISO.

While pumped-storage hydro is currently the dominate form of electric energy storage in the United States' RTO and ISO markets, other technologies like batteries and flywheels are becoming more commercially viable, and will likely benefit from FERC’s order. In issuing its Final Rule, FERC noted that the United States’ energy storage resource capacity is expected to grow more than sevenfold over the next five years, and FERC hopes to support this growth to enhance competition and promote greater efficiency in the national’s electric wholesale markets.