Energy Storage on the Grid: Transmission Equipment or Market Participant? (Again)

Michael Giberson

In the wholesale power markets world, commercial energy storage concepts are commonly somewhat of an afterthought. None of the large regional wholesale power markets integrated into transmission operations put too much effort into thinking about energy storage as they developed their market rules.

A part of the problem is that the transmission system and the rules that surround it is set up to move power from generation sources to electrical loads. Grid-connected energy storage devices are something of a hybrid: sometimes act like generators – supplying power – and sometimes act like loads – consuming power. They don’t always fit neatly into traditional categories. Further mixing things up, energy storage can contribute greatly to system reliability, usually treated as a matter for transmission-system based coordination rather than market transaction.

But as commercial-scale energy storage begins to arrive on the scene it has become more important to sort through these issues.

I’m just quoting myself from a post of 14 months ago on the topic of integrating energy storage players into regional power markets.  At the time the case involved American Electric Power’s desire to add a battery storage system as part of a transmission system upgrade in Texas, and a request that the energy storage device be treated as transmission facilities (and therefore have costs recovered through regulated transmission rates) rather than as an energy market participant of some sort.  The PUC of Texas permitted AEP its battery-storage-system-as-transmission-facility.

Last week FERC took initial action on a similar request (link goes to decision; see also FERC news release).  Western Grid Development LLC has proposed installing energy storage devices on the CAISO-managed transmission system and seeks to have its system treated as transmission facilities. The comments and protests filed in response to the Western Grid raise the same concerns heard in the AEP/Texas case.  Some parties object that storage inherently involves participation in energy buying and selling and therefore the systems ought to be energy market participants; Western Grid states that any purchase or sale of energy would be incidental to operation of the system in support of the transmission grid, done only at the direction of CAISO, and net revenues – if any – would be refunded to transmission ratepayers.

In FERC’s decision, it agreed that the facilities could be treated as transmission equipment so long as they are built and operated as described by Western Grid, and so long as the CAISO approves the project as part of the ISO’s regional transmission planning process.  (CAISO, by the way, filed a strong protest in response to the Western Grid request, so I expect Western Grid will have much work to do to gets its project off the ground, even with this preliminary approval by FERC.)

FERC was clear that this decision is limited to Western Grid’s project as proposed and does not suggest any general position on the treatment of energy storage devices on the grid.  In fact no general position may be available, given, as FERC explains, “electricity storage devices …do not readily fit into only one of the traditional asset functions of generation, transmission or distribution. Under certain circumstances, storage devices can resemble any of these functions or even load. For this reason, the Commission has addressed the classification of energy storage devices on a case-by-case basis.”

By the way, a number of the key people involved in Western Grid are also working together on the Tres Amigas project though (I think) no official links exist between the two companies.

One thought on “Energy Storage on the Grid: Transmission Equipment or Market Participant? (Again)

  1. There is another issue regarding stored power: the difference between baseload power, peaking power, and regulation power. Batteries aren’t very helpful for baseload power, unless they’re paired with a variable generating source (like wind), in which case they’re clearly part of a generator. Their most common use is for peaking power, to buy power when it’s cheap, store it, and sell it back when it’s expensive. Again, not a problem to see it as a generator plus a purchaser, and not a ‘transmitter’. But regulation power is different. It consists of very short spikes of power supply when the grid is destabilized by sudden increases in demand. This stabilizing function consists of small amounts of power in total, since the bursts are short. For this, batteries are ideal. See for a PJM trial of batteries for regulation power, and how that could applies to electric vehicle batteries. In this case, there is an argument that transmission networks should be permitted and even encouraged to employ batteries to improve grid stability and reliability.

    Bottom line: storage comes in different flavors, which probably require different rules. I think that some technical characteristics would clearly differentiate peaker storage (e.g., time to activate measured in minutes rather than milliseconds, total capacity in 100s or 1000s of megawatt-hours) from regulation storage.

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