Federal Regulatory Barriers to Grid-Deployed Energy Storage

by  Andrew H. Meyer

Until recently, the most advanced form of grid-deployed energy storage involved pumping water up a hill.  But newer storage technologies like flywheels and chemical batteries have recently achieved technological maturity and are well into successful pilot stages and, in some cases, commercial operation.  If widely adopted these new energy storage technologies will fundamentally alter the operation of our electricity system. A new PAPER analyzes the legal and policy significance of these emerging technologies.

Energy storage carries electricity through time, just as transmission lines carry it through space—without it, electrical energy must be used at the instant it is generated.  Storage resources transform electrical energy into another form of energy that can be stored and then used to regenerate electricity when needed. Because the United States grid has extremely limited energy storage capacity, grid operators must match the supply of thousands of generators with the load of millions of end users in an unceasing, moment-to-moment dance of staggering complexity.  And the dance is only becoming more complicated as renewable resources like solar and wind—which have variable and unpredictable outputs—constitute an increasing portion of our generation mix.

Energy storage can address some of the major energy challenges of our time by enhancing the reliability, resiliency, and efficiency of our electricity system, while reducing greenhouse gas emissions.  Among other benefits, energy storage resources can reduce our dependence on inefficient peaking plants, increase the capacity factor of existing generation and transmission infrastructure, and facilitate the integration of renewable resources—all with zero direct emissions.

Recent studies predict we are on the cusp of an energy storage boom. Driving the storage renaissance is a dramatic surge in federal and state support, and the increasing cost-competitiveness of certain advanced storage technologies.  But federal regulations threaten to undermine the successful deployment of storage on the grid.  Depending on the circumstance, a storage device might behave like any of the traditional grid classifications:  generation, transmission, distribution, and even load.  These multifaceted operational characteristics, which make storage so useful, also confound regulatory rules and categories tailored to the more rigid operational characteristics of legacy technologies. Consequently, storage resources either cannot access certain electricity markets or are inadequately compensated for the services they provide.  This federal regulatory lag impedes the commercialization of technologies that the federal government itself supports with billions of dollars in funding, and obstructs the success of state policies promoting storage and the integration of renewable energy resources.

Laudably, FERC has proactively addressed some particular barriers to storage, which this paper will discuss, but many significant barriers remain. Part I of this Article introduces energy storage, particularly its history, its operational uses, and its benefits.  Part II introduces federal electricity regulation, and analyzes various FERC-jurisdictional opportunities and barriers to energy storage.  It also highlights recent FERC actions that proactively address or incidentally impact energy storage resources.  Finally, Part III proposes actions FERC should take to remedy identified barriers.  In particular, it argues that FERC is required under the Federal Power Act to eliminate unjust, unreasonable, and unduly discriminatory barriers to energy storage in organized wholesale markets and resource adequacy planning processes.  It then argues that the Commission should clarify its policies for classifying storage devices, without arbitrarily limiting storage resources from maximally benefiting the grid by performing multiple functions.  Finally, it argues that energy storage resources should be considered comparably alongside traditional resources in transmission planning processes.

The author welcomes any comments, corrections, or suggestions relating to this draft paper:  ahm2138@columbia.edu.

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