MISO Energy Storage Market Reforms Possible with Utility Complaint to FERC

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Post date: February 7, 2017
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*This is an update of a post that was originally published in December*

On October 21, 2016, Indianapolis Power & Light Company (IPL), an Indianapolis based, vertically integrated utility, filed a formal complaint with the Federal Energy Regulatory Commission (FERC) against the Midcontinent Independent System Operator (MISO) under Section 206 of the Federal Power Act over what it perceives as the mistreatment of its Harding Street Station Battery Energy Storage System (HSS BESS) (Docket EL17-8). Essentially, IPL’s complaint boils down to three “asks,” with plenty of details surrounding timing, ongoing proceedings, and stakeholder input left for FERC to figure out.

First, IPL wants FERC to tell MISO to create a market mechanism for Primary Frequency Response (PFR). PFR is an automatic response by some resources to a rapid change in the frequency of the system. The grid in the U.S. is operated at a nominal 60 Hz, which is maintained by keeping real-time supply and demand on the whole system in nearly perfect balance. PFR is the “first responder” for keeping that balance intact when something unexpected happens, like a large generator tripping offline, shown as the “Arresting” and “Rebound” periods in Figure 1.

 

Figure 1. Frequency Response Spectrum
Source: National Electric Reliability Corporation, 2015

 

Providing PFR is the HSS BESS’s primary function. MISO’s current market construct does not explicitly compensate generators for providing PFR. Instead, this service is lumped into the provision of, and compensation for, frequency regulation under Schedule 3 of MISO’s Tariff in accordance with FERC Order 888. Because the battery is providing only PFR, there is no way for IPL to make money through MISO’s markets under this particular operation scheme.

Second, IPL is asking FERC to direct MISO to change its dispatch protocols for the Stored Energy Resource (SER) asset classification. IPL has argued that having the battery participate in MISO’s market as an SER, providing frequency regulation, would damage the battery, shortening its useful life from 10 years to three. If your customers are paying for this asset, that’s a big problem. MISO has been working with IPL on this issue for the last two years, but the two sides have yet to come up with a solution

Lastly, IPL is asking FERC to direct MISO to modify its frequency regulation market to more closely resemble PJM’s. You may recall from previous GPI blogs about energy storage that PJM’s market is the most habitable for lithium-ion batteries because of the way its frequency regulation market is structured to compensate resources based on their comparative ability to respond quickly. MISO’s Market Subcommittee currently has a market enhancement call “AGC enhancement for fast-ramping resources,” which could achieve what IPL is requesting. Our work in 2016 landed this issue as a high priority item on MISO’s Market Roadmap for 2017.

The challenge that lays ahead for FERC is to balance the needs of IPL and the needs of the industry as a whole to develop a solution that works for everyone. FERC is using ongoing proceedings to develop a record of the industry’s perspective on emerging energy storage opportunities1, including a November 9thtechnical conference on the use of energy storage as a transmission asset and for multiple uses. IPL’s complaint also calls for ongoing stakeholder discussion at MISO through 2017.

If FERC decides to rule in IPL’s favor, the energy storage market in MISO will get a blast of certainty to how these assets will be dispatched and compensated. However, this will only address a portion of the energy storage market we are working to improve because there are still significant barriers preventing distributed energy resources, including energy storage and demand response resources, from participating in MISO’s markets. Regardless of how FERC rules in this case, GPI is actively engaged to shape the development of energy storage in MISO to enable greater grid flexibility and maximize renewable energy potential.

UPDATE:

Following the inauguration of President Trump, Commissioner LeFleur was tapped to take over as acting Chair which resulted in current Chairman Bay announcing his resignation effective February 3rd. That action left the Commission with only two Commissioners and unable to hold quorum beginning February 3rd. Before losing quorum, FERC took swift action on a number of pending proceedings, one of which was the complaint filed by IPL against MISO in October, 2016.

FERC denied much of the requests of the compliant, choosing not to require MISO to implement a market product for Primary Frequency Response and not to have MISO pay a battery to charge while providing market services. However, the Commission did rule in favor of IPL’s request that MISO modify its market rules to allow energy storage assets to provide capacity, energy, and ancillary services in MISO’s markets. MISO now has a six month compliance filing timeline to outline how it will meet the requirements of FERC’s ruling.

It is important to note that MISO has already addressed some of the pieces of this ruling. In late 2016, MISO completed revisions to its business practice manuals to preliminarily detail how a capacity accreditation for an energy storage asset would be calculated. MISO is now in the process of determining what additional changes will be needed to comply with the Commission’s determination, and to meet the needs of future energy storage assets to facilitate market participation.

These efforts may also affect how MISO implements any pending final rule to come from FERC’s current Notice of Proposed Rulemaking on Energy Storage Participation in Market Operated by Regional Transmission Organizations and Independent System Operators (Docket AD16-20), which will likely also direct MISO to enable energy storage resources to provide all market services. But with no quorum at FERC, and uncertainty over when new Commissioners will be appointed, the quick action taken on this case sets the process in motion of formal Tariff revisions to enable energy storage resources to fully participate in MISO’s markets. 

 

FERC has proceedings addressing PFR (Docket RD15-6), storage Interconnection (Docket ER16-1211), market participation for energy storage (Docket AD16-20), and storage as a transmission asset (Docket AD16-25). MISO’s Market Roadmap also has several energy storage-related items.

 

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