Picture of IPL's Harding Street Station [Source DOE Global Database]
Last week, Indianapolis Power & Light (IPL) filed a complaint with the Federal Energy Regulatory Commission (FERC) seeking a prompt response to regulatory and market barriers that exist within the Midcontinent Independent System Operator (MISO). At issue is a state-of-the-art 20MW battery energy storage system that was installed at the company’s Harding Street Station outside Indianapolis that has been operational since May of 2016.
This grid-connected storage system is active and ready to provide multiple competitive grid services, but the current market rules in MISO are preventing the system from participating and forcing IPL to operate the system in a suboptimal manner. Without proper market structures that recognize the value delivered by energy storage systems, there is no way that the system can be dispatched cost-effectively. And without market signals that reflect the storage system’s operating parameters, the storage system could be unintentionally compromised or damaged.
Currently, IPL’s system is providing frequency control services (including Primary Frequency Response) and is contributing to system reliability requirements and lowering costs. Even with these benefits, the market rules that are in place strongly favor less-effective incumbent technology at the expense of better grid performance and resilient grid.
These types of regulatory and market limitations are prevalent throughout the entire US electric system, and energy storage systems are a prime example of how current market rules limit the ability to capitalize on the multiple values of advanced energy technologies.
“There is no provision in the MISO Tariff to compensate IPL for essential reliability services”
The crux of the complaint that IPL is putting forward is twofold – that current rules do not take into account the full range of services advanced energy technologies like storage provide, and that those technologies are not able to be compensated for the variety of services they can provide. Since advanced energy storage systems have historically not been a major part of grid operations, system operators across the country are facing similar challenges to those within the MISO market.
First, the current market rules do not accommodate advanced energy technologies properly, and therefore would put an undue burden on the systems, potentially damaging those systems and shortening their lifespan. If an energy storage system was simply treated like a traditional grid asset (i.e., a Generator, Load, or Transmission) we risk both underutilizing the performance and value of storage systems and also using them outside their intended use and design.
Energy storage systems are purpose-built, designed to operate within a bandwidth of their capacity to ensure high performance and also maintain the health of the overall system. If for example, we require a storage system to continuously discharge throughout the day without recognizing the need to maintain a proper state of charge, then current market procedures would create a situation where grid operators could damage an asset unintentionally as well as reduce the benefits the device provides.
Second, IPL is raising another critical challenge that energy storage systems face in competitive markets – an inability to receive remuneration for the value being provided to the system. In the example cited their filing, IPL is noting that their Harding Street Station is currently providing essential reliability services, augmenting the entire MISO system and ensuring that they meet NERC requirements and avoid penalties for non-compliance. This is just one example of the multiple value streams that these energy storage systems can provide that are currently not compensated within markets.
Again, these challenges are not unique to MISO by any means – energy storage systems are only recently becoming common on the electric grid and deployments are accelerating rapidly. There is an immediate need to adapt regulations to make sure that they keep pace with technology, recognize system performance, and reward the holistic value to the entire electric system – in MISO, and other markets around the country.
Changes on the Horizon
Earlier this year, FERC demonstrated bold leadership in undertaking AD16-20, a process by which they will review the implementation of current FERC orders related to energy storage and potentially explore new provisions that need to be developed to fully accommodate fair and competitive storage system market participation. FERC is currently in the process of developing a response to the ISO/RTO operators and multiple grid stakeholders that submitted comments as a part of this process in early 2016, and a response is anticipated before the end of the year.
This response could take multiple forms – from recommendations and observations to specific guidance in the form of a formal FERC Order – but regardless it will have a substantial impact on the treatment and compensation provided to energy storage systems. Also recently announced, FERC will be holding a technical conference in November (Docket AD16-25) that will explore the use of energy storage for multiple services simultaneously across asset categories which will also influence how markets are expanded and implemented in the coming years.
The individual ISO/RTO markets and FERC have repeatedly recognized that energy storage systems are very valuable to the grid, but they have yet to fully reflect that assertion in the specific market and regulatory rules that govern operations and compensation. Each of these entities has developed transparent and inclusive stakeholders proceedings as a means to address these shortcomings, but systems like IPL’s Harding Street Station show that regulations to date have not kept pace with technology advancement and deployment. Prompt action is necessary so that we do not miss out on the immense value and benefit that these systems provide.