Frequency regulation and Order 755

Managing an electric grid requires a constant balancing act: instantaneously matching supply and demand.  Grid operators maintain this real-time balance using a variety of tools, from traditional generation dispatch to innovative demand response.

Among the many parameters that must be balanced is the frequency of the alternating current on the grid.  Each element of the grid must operate not only in synch but at the same frequency -- in the U.S., typically about 60 hertz.  If supply and demand become imbalanced, the frequency of the grid power shifts away from 60 Hz, causing equipment damage, reliability problems, and even safety risks.

Traditionally, grid operators instructed generators to ramp up or ramp down small amounts as needed to maintain frequency regulation.  While this generator-based approach works by injecting additional power into the transmission grid where needed, new technologies exist that may be able to provide frequency regulation more effectively.  Compared to generation resources, flywheels, batteries, and other energy storage technologies may be able to regulate the grid's frequency not only at a lower cost but also with fewer emissions and other environmental impacts, as they do not rely on incremental fuel consumption.  Storage is considered more capable of matching the grid operator's constantly-changing regulation signal.

Energy storage resources can also respond more quickly to grid frequency disturbances, providing a valuable fast-response frequency regulation service.

A recent federal order is designed to compensate those who can provide fast-response frequency regulation most effectively.   FERC Order 755 (123 page PDF) requires grid operators to compensate frequency regulation resources based on the actual service they provide.  Previously, grid operators paid fast responders the same price for frequency response as that paid to other providers, without regard to the more valuable speed and power quality provided by fast responders.

Under Order 755, grid operators will have to pay fast-responding frequency regulation resources a quality-based price.  Given the energy storage technologies now under development, many anticipate that Order No. 755 will give birth to an expanded frequency regulation industry.  For example, estimates of the total frequency regulation market size for the organized electric markets in the U.S. range from 4,000 megawatts to 7,500 MW.