Pacific Northwest National Laboratory,
Keywords: energy storage, transmission system planning, market design, energy regulation
Summary:This presentation summarizes a forthcoming research paper that identifies a participation framework by which energy storage assets may provide both regulated transmission service and competitive market services to the electric grid. Because the electric grid is a real-time delivery system, it must be large enough to meet the highest levels of demand and withstand any reasonably foreseeable contingencies, even if that demand only occurs for a few hours per year and those contingencies never manifest. The result is that the transmission system is much larger than what is usually needed and it has significant excess capacity most of the time. Recognizing this, the U.S. Federal Energy Regulatory Commission (FERC) issued a policy statement in 2017 supporting the deployment of energy storage for the dual uses of regulated transmission service and competitive market service. By allowing this usage model, FERC reasoned, revenue earned through market operations when the storage asset isn’t needed for transmission could be shared with customers and system costs could be reduced. This type of use is becoming increasingly relevant amid growing calls for significant new investments to improve the flexibility of the transmission system and increase its ability to incorporate variable renewable energy generation. But this approach represents a significant change in electric grid operations, which have historically separated transmission and generation functions into distinct siloes. To deploy dual-use storage, the differences between how transmission and generation systems are planned, expanded, and compensated will need to be resolved. To date, no regional electricity market operator in the U.S. has resolved these challenges. This presentation summarizes the barriers in transmission planning and market design that inhibit dual-use storage, describes the principles that a dual-use project must satisfy to meet both transmission and market functions, and identifies policy options that satisfy those principles. Recognizing that policies and objectives vary by region, the dual-use participation framework presented here is designed to be flexible. Rather than identifying a single pathway, it identifies the principles that a participation model must satisfy and the options available to grid operators and their stakeholders in satisfying those principles within each region's unique framework. Those principles can be summarized in three key questions: When will the asset participate in the market? How will it participate in the market? Where will it recover its costs? By identifying the tradeoffs associated with dual-use and multiple options for answering those questions, this work can objectively inform regional proceedings on dual-use energy storage and facilitate consensus building among stakeholders.