FERC just issued Order 841 requiring RTOs and ISOs to develop participation models for energy storage resources. This is huge for the industry. Electric storage resources will need to be eligible to provide all capacity, energy, and ancillary services they're technically capable of providing. Dominion Energy here in South Carolina is already talking about how this might affect their integrated resource planning. Anyone else seeing utilities scramble to figure out the implications?
New FERC Order 841 - Energy Storage Resources
Absolutely seeing that here in Colorado. Xcel Energy is completely reworking their storage procurement strategy. The order requires minimum size requirements to be no larger than 100 kW, which opens the door for a lot more distributed resources. But the real game-changer is the dual participation rule - storage can provide multiple services simultaneously as long as it's technically feasible.
Gulf Power down here in Florida is already filing tariff revisions with the Florida PSC to comply. They're particularly interested in the wholesale market participation provisions since we're not in an RTO. The order allows state-jurisdictional storage to participate in wholesale markets while still being subject to state regulation for retail services. It's going to create some interesting jurisdictional issues.
Nadine, that's exactly what we're seeing with Westar/Evergy here in Kansas. The dual jurisdiction aspect is going to be a nightmare for auditing purposes. How do you allocate costs and revenues when the same battery is providing frequency regulation to SPP while also doing peak shaving for local distribution? The accounting is going to be incredibly complex.
Georgia Power is taking a wait-and-see approach, but their IRP filing hints at 500 MW of storage by 2025. The interesting part of Order 841 is the locational requirements - RTOs have to accommodate the physical and operational characteristics of storage, including location constraints. That means utilities can't just stick batteries anywhere; they have to consider grid impact.
TVA is being very cautious about this. They've issued a white paper saying they need 18 months to develop appropriate market mechanisms. The challenge for us auditors is that the order requires storage resources to have a single point of contact for all services, but the cost allocation methodologies aren't clearly defined yet. We could see some serious cross-subsidization issues if utilities aren't careful.
Otter Tail Power up here in South Dakota is completely overwhelmed by the compliance requirements. They have until December 2019 to file their participation model with MISO. The real question is how this affects rate design for customers who install behind-the-meter storage. If those systems can participate in wholesale markets, should they be paying full retail rates for grid service?
That's the million-dollar question, Diane. Public Service Company of Colorado just proposed a new storage rider that tries to address some of these issues, but it's really a first draft. The order gives RTOs until September 2018 to submit compliance filings, so we should start seeing more concrete proposals soon. The devil will be in the details of how they define "technically capable" for different service types.
Scott raises a great point about the "technically capable" definition. I've been reviewing some of the FERC technical conferences, and there's still a lot of ambiguity. A 10 MW / 40 MWh battery clearly can't provide the same services as a 10 MW / 10 MWh system, but how will the markets differentiate? The duration requirements for different ancillary services vary significantly.
The compliance deadline is approaching fast, and I don't think most utilities are ready. FERC extended the compliance date to April 2019 for some RTOs, but that's still a tight timeline. We're going to see a lot of hastily written tariffs that will need major revisions once the market starts operating. This is definitely something to monitor closely for our clients.
Great discussion everyone. I just wanted to add that we're starting to see the downstream effects here in Tennessee as TVA implements their storage strategy. The key for auditors will be ensuring proper cost separation between wholesale market revenues and retail services. I've been developing some audit procedures specifically for storage assets that I'll share at the next conference.