Industry in holding pattern as FERC rulemaking lags

Source: Sam Mintz, E&E News reporter • Posted: Friday, December 22, 2017

The Federal Energy Regulatory Commission is lagging on a rulemaking for the energy storage industry, leaving companies uncertain of how to proceed with rapid changes in technology.

In its notice of proposed rulemaking (NOPR) in November 2016, FERC said the rule would “more effectively integrate electric storage resources into organized wholesale markets to enhance competition and help ensure that these markets produce just and reasonable rates.”

Specifically, the proposal would require grid operators to accommodate energy storage and define distributed energy resource aggregators as market participants.

FERC took public comments on the rulemaking for 60 days, shortly before losing its quorum last February. The agency had only one of five commission seats filled for months.

Since the agency is back at full strength, the commission has been focused on responding to Energy Secretary Rick Perry’s request for a FERC rule requiring grid operators to compensate coal-fired and nuclear power plants. The panel is also working through a backlog of more routine orders that piled up last summer.

At least one other NOPR seems to have jumped over the storage rule in FERC’s queue: The agency announced today it was taking action on a rule involving pricing for fast-start resources.

“I’m finding that companies are holding their breath until there’s some regulatory certainty to move forward on,” said Jason Burwen, policy and advocacy director at the Energy Storage Association.

Burwen does acknowledge FERC has been “attentive” to storage technology in recent years and expects the new commission could act on the rulemaking as soon as the first quarter of 2018.

“Ultimately, policy just has to catch up with technology,” he said. “Our industry is now banging up against the limits of market frameworks that never contemplated cost-effective, widespread, highly flexible storage, and even with a final order from FERC, there will still be a time-lag for [regional transmission operators] and [independent system operators] to make needed changes.”

In the meantime, state regulators are stepping up.

In October, the Washington Utilities and Transportation Commission directed utilities to consider energy storage in their planning and procurement. That same month, the Massachusetts Department of Public Utilities began investigating whether energy storage systems might be eligible for net metering.

Levi McAllister and Brooke McGlinn, attorneys at Morgan Lewis, noted those examples in a recent blog postsaying state action will likely continue to move forward ahead of federal regulators.

“This will present challenges in trying to capture the growing technological capabilities and value of energy storage without certainty that those resources are able to fully participate in wholesale markets alongside generation,” they wrote. “As a result, we expect stakeholders and state regulators to continue to explore new frameworks to monetize the services that energy storage provides and help with project funding.”

‘It takes time’

Meanwhile, the technology keeps moving forward.

Costs have declined rapidly, and there is more than 800 megawatts of battery storage deployed across the country — in all but one of the seven regions where FERC oversees grid operators.

“It’s common sense that markets will only be competitive when all resources can participate, and so the last commission rightly focused on removing barriers to storage,” Burwen said.

That steady support for energy storage seems to exist at the newly populated FERC, as well, but the rule doesn’t appear to be a top priority.

Neil Chatterjee, who served as FERC chairman for three months starting in August and remains a commissioner, has said he made a commitment to Sens. Sheldon Whitehouse (D-R.I.) and Ed Markey (D-Mass.) to act quickly on the storage NOPR, which he “absolutely supports.”

But he was unable to do the rulemaking in his first months at FERC, even as the commission finalized other major decisions, like a new policy on hydropower permitting.

“One of the things that was interesting to me as I came into the commission: People’s perceptions of where things are in the process, from outside the building, sometimes don’t always accurately reflect where they are in the building,” Chatterjee said in a recent interview.

“I personally thought the storage process was a lot more far along.”

Chatterjee added, “These major undertakings are complex. It takes time. There are 1,500 really smart, dedicated people at the commission working through these complex issues right now. I’m confident we’ll get a result, it’s just hard to predict time.”