By Amanda Durish Cook
MISO must fully consider the special attributes of energy storage devices before developing new rules that enable those resources to participate in the RTO’s wholesale markets, stakeholders said this week.
Stakeholders participating at a July 24 Common Issues workshop asked MISO to recognize the ability of storage to postpone transmission upgrades, classify prospective storage projects under a new study process, and create specific compensation rules and modeling procedures for the technology.
And participants had another piece of advice: Be prepared to change the rules as storage technology advances.
Workshop leader Carolyn Wetterlin of Xcel Energy said the workshop would not directly produce policy decisions but was rather intended to gather ideas on integrating storage into MISO markets. She said the RTO would plan a follow-up meeting for Aug. 24 to decide which stakeholder committees would take up energy storage issues.
Storage as a Transmission Solution
Entergy’s Ayesha Bari said battery storage should not be treated purely as a generation resource because it can respond more quickly than a generator and does not depend on fuel sources. Batteries are more akin to transmission assets because they do not produce power but provide “time-shifted load consumption on the electric grid,” she said. They can also be recommissioned for use at other problem sites after helping to defer a transmission project as long as possible.
Invenergy Director of Regulatory Affairs John Fernandes agreed with the principle of using storage to defer transmission and distribution system upgrades. He offered the example of installing a battery to equip a 100-MW substation to handle a 125-MW peak load, with charge gathered when load is less than 100 MW to in order to handle the extra 25 MW during peak intervals. He also asked for rules that would monetize such use.
“If we can firm up the opportunity and how this looks in MISO, we’ll get a lot more proposals,” Fernandes said. “I’m not sitting here asking for a handout for energy storage; I’m talking about optimizing the grid.”
Fernandes said MISO must specifically address the instances when a storage resource is required to remove itself from market participation in order to recharge. “In some places, they call that not following your set point, and that’s frowned upon,” he said to laughter from stakeholders.
“I think a product definition and market rules could assist modeling. What are your thoughts on that?” Customized Energy Solutions’ David Sapper asked.
“I think there needs to be a good bit more certainty on development rules and processes before robust projects are brought forward,” Fernandes replied.
Entergy’s Yarrow Etheredge said that MISO’s annual Transmission Expansion Plan — rather than the RTO’s interconnection queue — is the more appropriate forum for considering the use of storage based on its potential benefits to the system, which could require specific studies.
“You’re not looking at the right things in the generator interconnection process,” she said.
Jason Burwen, policy director with the Energy Storage Association, joined the chorus, saying storage can also defer transmission upgrades by relieving congestion. Batteries can also provide several uses beyond ancillary services, including “grid balancing, backup, system capacity, network capacity, curtailment avoidance and energy arbitrage.” He said MISO’s “lack of clear market mechanisms” fails to monetize storage benefits.
“The main barrier to storage is lack of an effective means to value and compensate it for its capabilities,” Burwen said. “If we can modernize the Tariff, operating and planning structures, we expect that they can compete on their own merits.”
Fernandes introduced a concept he dubbed “smoothing with storage,” in which storage can flatten renewable output spikes by providing firm output over a one-hour time block. Xcel’s Beth Chacon added that storage technology can temper rapid solar ramping rates.
Lorenzo Kristov, an adviser on market and infrastructure policy at CAISO, said the future grid may be an “integrated decentralized system” in which the RTO manages several local distribution areas comprised of microgrids, a departure from a central transmission system that delivers energy across hundreds of miles.
Kristov said energy storage market integration requires complementary strategies, which include valuing storage’s services and not just the delivered electricity, laying out “storage-as-demand response” rules and creating procedures for either resource owners or RTOs to manage a battery’s state of charge and set maximum charge and discharge rates.
“There really aren’t well-defined services that these storage resources can be compensated for,” Kristov added.
DTE Energy’s Nicholas Griffin said his company’s pumped storage facility in Ludington, Mich., currently offers into the market one day at a time through an energy limited resource offer based on the company’s own optimization to determine the amount bid into the market. About 10 hours of pumping at the Ludington station yields about eight hours of generation for the 1,872-MW facility.
Griffin said DTE would like MISO to model storage assets as both generation and load sources in market and planning processes and optimize generation and load cycles as far as 10 days in advance. The RTO should also learn to “better leverage a flexible source or sink of energy for operational or reliability reasons,” Griffin said.
“We want MISO to fully leverage existing assets while enhancing the market to accommodate new ones,” he added. “All these resources are different, and we need to figure out to properly and adequately compensate them for services that are needed.”
“If you want to talk batteries, well, I guess I have a huge battery at Lake Winnipeg,” said Manitoba Hydro’s Audrey Penner, noting the company has pumped hydro storage capability between 2 and 10 TWh. Penner said she “strongly disagrees” with limiting a MISO storage definition to either a battery definition or four-hour storage capabilities.
Burwen said that several megawatt-scale storage facilities are nearing a decade of operations across the nation and said that technological advances in storage capability, including flow batteries using electrolyte liquid and flywheel mechanical storage, are driving a surge in new projects.
“You’re opening up a very wide range of possibilities,” he said. “Utility and transmission owners, customers and third parties are all operating battery storage.”
The cost of lithium ion batteries — the nation’s dominant storage technology — have decreased from about $1,000/kWh in 2010 to $273/kWh in 2016.
“Costs of battery storage have been declining very rapidly,” Burwen said. “Battery storage generally tops out at four hours, but I think that’s a matter of cost. You’re going to see potentially longer duration assets as those costs go down.” By 2020, developers are expected to add about 3,900 MWh of storage on an annual basis in the U.S., Burwen said, citing projections from the ESA.
“It could change how we use energy,” said MISO Director of Market Research and Development Jessica Harrison, adding that the RTO continues to mull storage definitions.
“We want to work quickly, but we don’t want to move too quickly. We don’t want to pin ourselves in a corner” by getting storage rules and definitions out too soon, she said.
“There is absolutely no one-size-fits-all solution for this area,” MISO External Affairs Policy Advisor Jennifer Richardson said.
MISO took a stab at one solution earlier this year in a FERC compliance filing responding to a complaint by Indianapolis Power and Light over compensation for a 20-MW battery at the utility’s Harding Street Station. (See MISO Ordered to Change Storage Rules Following IPL Complaint.) The RTO proposed to create a new resource category — Stored Energy Resource–Type II — that would not be limited to providing regulation services (ER17-1376). Instead, it would be required to function largely as a DR resource, except that it would be treated as a regular generation resource for settlements, and would not be eligible for revenue sufficiency guarantee or day-ahead margin assurance payments.
Richardson said that while MISO generally agrees with FERC’s Notice of Proposed Rulemaking requiring RTOs to remove market barriers for storage and distributed energy resources, it also believes the two types of resources should be considered separately. (See FERC Rule Would Boost Energy Storage, DER.)
MISO thinks that “prescriptive measures for DERs aren’t as ripe,” Richardson said, adding that the RTO must collect more data on how DERs behave in other markets before it creates its own rules.
Fernandes cautioned MISO against taking too much time to craft storage rules, noting that the discussion has already gone on for over a year.
“I guarantee whatever rules are put in place for storage will have to be changed frequently,” he said. “If [it takes too much time] to get revenues in place, we’re going to go somewhere else.”
“We expect this to be a continuing process. We don’t expect to have one response and call it a day,” Harrison said.
“The worst thing that I think can happen is we do nothing and we receive very specific FERC guidance on a tight timeline,” Richardson said.