States should play role in determining future of energy storage market, panel says

SCOTTSDALE, Ariz. – Panelists at a session held here Monday at the National Association of Regulatory Utility Commissioners (NARUC) conference agreed that states should have active roles in determining the future of their energy storage markets but had differing opinions on the impacts of a recent Federal Energy Regulatory Commission (FERC) order.

In February, FERC issued Order 841, which aimed to remove barriers to energy storage resource participation in the capacity, energy and ancillary services markets. The order directs Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) to revise their market rules so that they recognize the physical and operational characteristics of energy storage resources.

However, industry groups including NARUC, the Edison Electric Institute, the American Public Power Association and the National Rural Electric Cooperative Association have requested a rehearing of the FERC decision on the grounds that it exceeds the agency’s jurisdiction.

“Order 841 applies to storage in transmission, distribution, behind-the-meter, and I think that went a little too far into what should have been states’ rights,” Charlie Bayless, associate general counsel for the North Carolina Electric Membership Corp., said. “FERC has jurisdiction over wholesale markets and… factors that affect wholesale prices. The Federal Power Act reserved for the states everything else, mainly retail markets.”

The FERC order, he noted, does not gives states an option for opting out, as some prior FERC orders have.

Kelly Speakes-Backman, CEO of the Energy Storage Association (ESA), argued that FERC Order 841 simply levels the playing field, while still leaving an important role for states, as well as RTOs and ISOs, to fill. She encouraged states to get involved in the processes by which RTOs and ISOs are creating plans to provide to FERC.

“To obstruct that process is leaving this value on the table,” Speakes-Backman said. “All that FERC Order 841 is really looking to do is figure out a way to fairly and safely and reliably allow storage to get revenue from the values that it’s already contributing to the grid. And so to begin to become a part of that process is, I think, a really important step in order to modernize the grid.”

Judy Chang, principal at the Brattle Group, which recently conducted a study on the energy storage and the potential impacts of the FERC order, also offered advice to states.

Regulators, she said, should take steps to clarify the role of utilities and consider customer storage investments while inviting many, varied stakeholders to participate in decision-making processes and identifying objectives for energy storage specific to their state.

Jeff Burleson, vice president of environmental and system planning at Southern Company, emphasized that each state should be able to choose its own methods for integrating storage.

“… We believe that each state and regulatory authority ought to have the opportunity to determine the business model and ownership model and valuation model that works best for its particular system or its particular state,” Burleson said. The best path forward, he noted, may look different across each of the four states in which Southern Company operates.

Research from the Brattle Group shows that the future of Order 841 and the actions that states, RTOs and ISOs take relative to it could have a significant impact on the future growth of energy storage.

The Brattle Group found in its study that the storage market could expand to 50 gigawatts if state regulatory policies build on Order 841. Approximately half of the potential value of storage could be realized through wholesale electricity markets, while the other half must come from the transmission and distribution (T&D) and customer level. As compared to capturing only the wholesale value market, the study found, combining the FERC policy with state-level policies could increase the market potential of storage by three to five times.