Article

Energy Storage in Wholesale Markets Following Order Nos. 841 and 841-A

15 Oct 2019

In 2018, the Federal Energy Regulatory Commission (FERC) issued Order No. 841[1] to remove barriers to the participation of electric storage resources in the capacity, energy, and ancillary service markets operated by Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs). Order No. 841 comes after various other FERC reforms to accommodate technologies that provide non-generation services to the grid.[2] In addition to accommodating electric storage resources in RTO/ISO markets, Order No. 841 is intended to enhance competition, help RTO/ISO markets produce just and reasonable rates, and support the resilience of the bulk power system.[3] (For a more detailed description of Order No. 841, see our prior client alert here.)

For all that Order No. 841 does, there are several notable issues that are not included in its provisions. For example, Order No. 841 does not address the distinct set of issues related to hybrid renewables-plus-storage projects. Likewise, Order No. 841 does not cover distributed energy resource (DER) aggregations, even though FERC’s underlying proposal contained potential DER aggregation reforms. Instead, FERC created a separate proceeding (Docket No. RM18-9-000) to further explore DER aggregation in RTO/ISO markets. Order No. 841 also does not give states a right to “opt out” of the rule, which would allow state and local regulators an option to prevent these reforms from becoming effective. Regarding jurisdiction, FERC concluded that Order No. 841 stops short of encroaching on state jurisdiction or creating a right for electric storage resources to use distribution facilities to access wholesale markets. 

Several parties requested rehearing of Order No. 841, and FERC addressed these challenges on May 16, 2019 in Order No 841-A.[4] FERC provided some clarification but denied the legal challenges to Order No. 841, and FERC was not persuaded to roll back the reforms it announced in Order No 841. A central challenge to Order No. 841 focused on FERC’s jurisdiction under the Federal Power Act and whether FERC had the authority to undertake its reforms without encroaching on state jurisdiction. Overriding the dissent of one FERC Commissioner and arguments of some parties, Order No. 841-A confirmed that FERC has jurisdiction over electric storage resources that access wholesale RTO/ISO markets, even if those resources interconnect at the distribution level or behind the meter. Various challengers have filed an appeal of Order No. 841 with the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) on the basis that the Federal Power Act does not provide FERC with the authority to require that distribution facilities permit electric storage resources to use the facilities to access wholesale markets.[5]

In the meantime, FERC’s directives in Order No. 841 remain effective while the appeal remains pending, and the RTOs/ISOs have submitted compliance filings to implement Order No. 841. The six RTOs/ISOs each have different market structures and rules, and FERC anticipated that the differences in the market design of the RTOs/ISOs would require a certain amount of flexibility to implement the requirements of the final rule. FERC also requested that the RTOs/ISOs respond to several questions related to their proposed compliance with Order No. 841. In general, FERC requested that the RTOs/ISOs explain in greater detail how the specific market tariff provisions permit electric storage resources to participate in their markets. For example, FERC asked MISO to explain its proposed process for phasing in the deployment of small electric storage resources, given that FERC expects all electric storage resources with a capacity of 100 kW or more to have access to the electric storage participation model.  FERC asked PJM for further information regarding its proposed requirement for electric storage devices to maintain output over a 10-hour period.

The way FERC is implementing Order No. 841 in the compliance process, along with a determination of the rule’s legality by the D.C. Circuit, will likely have a significant impact on future FERC activity related to electric storage and other distributed energy resource policies. In particular, how the D.C. Circuit addresses FERC’s jurisdiction in the context of energy resources that interconnect at the distribution system to participate in wholesale electricity markets may affect the number of distribution-level interconnections and pave the way for – or impede – future actions by FERC to address other resources, including distributed energy resource aggregations.  


[1] Electric Storage Participation in Markets Operated by Regional Transmission Organizations and Independent System Operators, Order No. 841, FERC Stats. & Regs. ¶ 31,398 (2018).

[2] See, e.g., Preventing Undue Discrimination and Preference in Transmission Service, Order No. 890, FERC Stats. & Regs. ¶ 31,241 (2007); Frequency Regulation Compensation in the Organized Wholesale Power Markets, Order No. 755, FERC Stats. & Regs. ¶ 31,324 (2011); Third-Party Provision of Ancillary Services; Accounting and Financial Reporting for New Electric Storage Technologies; Order No. 784, FERC Stats. & Regs. ¶ 31,349 (2013); Third-Party Provision of Primary Frequency Response Service; Order No. 819; FERC Stats & Regs. ¶ 31,375 (2015).

[3] Order No. 841 at P 2.

[4] Electric Storage Participation in Markets Operated by Regional Transmission Organizations and Independent System Operators, Order No. 841-A, 167 FERC ¶ 61,154 (2019).

[5] See Am. Pub. Power Ass’n, et al. v. FERC, Case Nos. 19-1142 and 19-1147 (consolidated).

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