United States: FERC Orders On PJM's Frequency Regulation Market Give Energy Storage Providers Another Recent Win

On March 30, 2018, the Federal Energy Regulatory Commission (FERC or the "Commission") issued separate orders (i) partially granting one of two challenges to PJM Interconnection, L.L.C.'s (PJM) frequency regulation ("Regulation") market reform1 and (ii) rejecting PJM's proposed operational enhancements to its Regulation market ("October 2017 Proposal").2 Given the overlap in issues raised during the proceedings, the Commission also established a technical conference to explore PJM's Regulation market design under its requirement that wholesale electricity market operators compensate for Regulation service "based on the actual service provided."3

To maintain reliability on its transmission system, PJM procures Regulation service (i.e., the instantaneous injection or withdrawal of power to balance supply and demand) through a market mechanism that compensates resources for their ability to accurately adjust output or consumption in response to an automated signal sent by PJM.4 While PJM historically procured Regulation service from coal-fired steam plants and natural gas combustion turbines, changes to PJM's Regulation market following FERC's Order No. 755 contributed to a 236 MW increase of installed energy storage capacity in PJM from 2012 to 2016, with more than 90 percent of that capacity participating in the Regulation market.5 According to a recent Moody's assessment, however, subsequent reform to PJM's Regulation market "imperil[ed] the income streams for many" energy storage projects,6 leading to the challenges described herein.   

Together with Order No. 841, FERC's orders, partially granting one of those challenges and rejecting proposed changes that may have further imperiled energy storage providers in PJM, demonstrate its continued commitment to accommodating energy storage's operational characteristics and service capabilities in the wholesale electricity markets. The orders thus serve as an interim win for energy storage providers in PJM while they await Order No. 841's two-year deadline for larger, widespread reforms.

PJM's Frequency Regulation Market

PJM employs two dispatch signals for the procurement of Regulation service: a "RegA" signal for slower, sustained-output resources, such as coal-fired steam plants and natural gas combustion turbines, and a "RegD" signal for faster, dynamic resources, such as energy storage. In its market-clearing process, PJM adjusts a Regulation resource's two offer prices—reflecting the amount of available capability (a capacity offer) and the amount of work provided, or "mileage" (a performance offer)—using a benefits factor curve (BFC) to weigh the tradeoffs between the signals on a comparable basis.7

In 2015, PJM revised the BFC methodology—in a business manual rather than its tariff, which would have required a FERC filing—to mitigate operational issues caused by an oversupply of RegD resources. As PJM observed, the BFC was originally designed to be "unconditionally energy neutral over a 15-minute interval," which led RegD resources to "maintain power balance over the interval, through the neutrality reset, regardless of" the grid's reliability needs.8 Revisions to the BFC therefore capped the share of RegD resources needed to meet PJM's total Regulation requirement at 40 percent—down from an original cap of 62 percent—and established a 26.2 percent cap for RegD resources providing Regulation service during certain morning and evening "excursion hours."

In January 2017, PJM modified the RegD signal to be "conditionally neutral" over 30 minutes to further enhance operational efficiency and better integrate the two dispatch signals. Broader reforms followed in PJM's October 2017 Proposal, where PJM proposed to (i) replace the BFC with a "Regulation Rate of Technical Substitution Curve"; (ii) modify performance scoring in its market-clearing process to focus on the single attribute of precision; (iii) substitute "effective megawatts" for the "mileage" component in PJM's settlement of performance payments; and (iv) revise the calculation of lost opportunity costs.

Energy Storage Complaints

The Energy Storage Association (ESA) filed a complaint challenging PJM's changes to the BFC methodology and the January 2017 modification to the RegD signal. On the BFC, ESA argued that such changes should have been filed at FERC, since the BFC directly affects the wholesale rate. On the RegD signal modification, ESA argued that PJM is effectively asking "RegD resources . . . to maintain any output level for any length of time" such that energy storage resources "designed for PJM's RegD signal may no longer be physically capable of providing Regulation service consistent with their operational characteristics."9

Renewable Energy Systems Americas and Invenergy Storage Development, LLC also filed a complaint challenging only the January 2017 RegD signal modification, alleging a similar claim to ESA: the modification forces energy storage resources to "'either modify their technology at significant'" cost, "'or no longer participate in . . . [a] market for which they were specifically designed.'"10

FERC Orders and Technical Conference

The Commission partially granted ESA's complaint and ordered PJM to include the BFC and the parameters governing its Regulation dispatch signals in its tariff. Since the BFC "adjust[s] the offer prices of RegD resources," the Commission explained, "it directly affects . . . the rates, terms, and conditions of Regulation service."11 The Commission therefore found the PJM tariff to be unjust, unreasonable, unduly discriminatory, or preferential by failing to include the BFC methodology "and the parameters governing its RegD signal."12

The Commission was likewise critical of PJM's October 2017 Proposal, which it found to be inconsistent with Order No. 755 and the Commission's implementing regulations. Specifically, the Commission concluded that PJM's substitution of "effective megawatts" for the "mileage" component in the settlement of performance payments violated Order No. 755's requirement that "'[a] resource's performance must be measured based on the absolute amount of regulation up and regulation down it provides in response to the system operator's dispatch signal.'"13 The Commission did not discuss the October 2017 Proposal's additional proposed reforms, given PJM's statement that the four components are "interdependent," but welcomed a revised filing that "fall[s] within [Order No. 755's] framework . . . to ensure just and reasonable and not unduly discriminatory or preferential rates."14

In its complaint order, the Commission also established a technical conference to explore "the purposes for which PJM procures Regulation service from Regulation resources," noting that the procurement of "Regulation service for purposes other than moment-to-moment balancing could . . . negatively affect the ability of [RegD] resources to fully participate in the Regulation market."15 The conference will also examine PJM's Regulation market design with respect to the requirements of Order No. 755, with particular attention to PJM's two-part market-clearing and settlement system.

What's Next?

PJM recently indicated that it will refile the three components of its October 2017 Proposal left untouched by the Commission.16 As such, energy storage providers should closely monitor PJM's stakeholder process and any subsequent filing, as well as developments related to the Commission's technical conference on PJM's Regulation market—the date of which has not been set.

Footnotes

1 Energy Storage Ass'n v. PJM Interconnection, L.L.C., 162 FERC ¶ 61,296 (2018) ("Complaint Order").

2 PJM Interconnection, L.L.C., 162 FERC ¶ 61,295 (2018) ("PJM Order").

3 See 18 C.F.R. § 35.28(g)(8) (2018); Frequency Reg. Compensation in the Organized Wholesale Power Mkts, Order No. 755, FERC Stats. & Regs. ¶ 31,324 (2011) (Order No. 755), order on reh'g, Order No. 755-A, 138 FERC ¶ 61,123 (2012).

4 Learning Center: Regulation Market, PJM, https://learn.pjm.com/three-priorities/buying-and-selling-energy/ancillary-services-market/regulation-market.aspx (last accessed Apr. 18, 2018).

5 The design and application of utility-scale battery storage varies by region, EIA (Feb. 28, 2018), https://www.eia.gov/todayinenergy/detail.php?id=35132.

6 Peter Maloney, Project finance getting more viable for energy storage, Moody's says, Utility Dive (Mar. 21, 2018), https://www.utilitydive.com/news/project-finance-getting-more-viable-for-energy-storage-moodys-says/519701/.

7 Complaint Order at PP 5-6.

8 PJM Order at P 14.

9 ESA, Complaint, Docket No. EL17-64-000, at 23, 29 (filed Apr. 13, 2017).

10 Complaint Order at P 23.

11 Id. P 104.

12 Id. P 102.

13 PJM Order at P 52.

14 Id. PP 55-56.

15 Complaint Order at P 111.

16 PJM Market Implementation Committee Briefs: April 4, 2018, RTO Insider (Apr. 9, 2018), https://www.rtoinsider.com/pjm-market-implementation-committee-market-power-test-90121/.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions