Electric storage resources technical conference set

U.S. energy regulators have scheduled a technical conference to discuss electric storage resources and how they could fit into the electric grid -- and how they might be compensated for doing so.  The Federal Energy Regulatory Commission will convene the discussion on November 9, 2016.

An electric storage resource is a facility that can receive electric energy from the grid and store it for later injection of electricity back to the grid.  Different projects might use different storage mediums -- for example, batteries, flywheels, or pumped hydropower.  A storage resource could be as small as a household battery, or as large as gigawatt-scale pumped storage. Projects could be interconnected in various ways -- such as to the transmission system, distribution system, or behind a customer meter -- and could serve different markets, ranging from regional transmission organizations and independent system operators, to transmission or distribution utilities, to customers or end users of electricity.

While each energy storage resource configuration offers its own different advantages and disadvantages from various perspectives, overall the Commission has noted that "storage resources may fit into one or more of the traditional asset functions of generation, transmission, and distribution."  In the Commission's Notice of Technical Conference, it expressed a desire "to explore the circumstances under which it may be appropriate for electric storage resources to provide multiple services, whether the RTO/ISO tariffs need to include provisions to accommodate these business models, and how the Commission may ensure just and reasonable compensation for these resources in the RTO/ISO markets."

The specific subject of the conference described in the Notice is "the utilization of electric storage resources as transmission assets compensated through transmission rates, for grid support services that are compensated in other ways, and for multiple services."  The Notice also sets up discussion of other issues including

(1) potential models for cost recovery for electric storage resources utilized as transmission assets, while also selling energy, capacity or ancillary services at wholesale;

(2) potential models to enable an electric storage resource to provide a compensated grid support service (like a generator providing  ancillary services under a reliability must-run contract) rather than being compensated for providing transmission service; and

(3) practical considerations for electric storage resources providing multiple services at once (i.e., providing both wholesale service(s) and retail and/or end-use service(s)). 

FERC will webcast and transcribe the conference, in addition to allowing in-person attendance.  The Commision directed those wishing to participate to submit a nomination form online by 5:00 p.m. on October 14, 2016.

Energy storage is attracting increased interest.  In another open docket, the Commission issued a series of data requests and a request for public comment in an effort to identify barriers to electric storage resources' participation in organized electricity markets in the U.S that could lead to unjust and unreasonable wholesale electricity rates.  In 2009, then-Chairman Wellinghoff testified before the Senate Committee on Energy and Natural Resources on the role of grid-scale energy storage as it relates to U.S. energy and climate goals, including its ability to integrate variable resources such as wind and solar into the grid.  Meanwhile, states too are pursuing storage opportunities.  A Massachusetts state energy office has issued a report finding that Massachusetts has the potential to develop for 600 MW of energy storage by 2025, which could lower costs, reduce carbon emissions, and improve grid reliability.

FERC Order No. 784 boosts energy storage

Energy storage - the ability to store electricity and deliver it to the grid as needed - has the potential to create great value for society.  New technologies, ranging from batteries to mechanical flywheels, are expanding options for energy storage.  Now, a federal rule issued last week known as Order No. 784 significantly expands opportunities for energy storage providers to capitalize on these advances.

Traditionally, electricity has been difficult to store.  While society has been able to generate electricity for over a century, technologies to store that electricity once it has been generated have been elusive.  As a result, electric grid operators have needed to balance the supply and demand for electricity in real-time, leading to costly inefficiencies like the continual need to ramp generators up and down.  To keep the grid balanced, grid operators rely on so-called "ancillary services" like regulation and frequency response made possible by fine-tuning generators' output -- or now by energy storage technologies.

Despite recent federal rulings like the Federal Energy Regulatory Commission's Order No. 755 enabling enhanced compensation for energy storage, the market for energy storage has been restricted by regulation.  Until last week, the Federal Energy Regulatory Commission restricted third parties from selling ancillary services at market-based rates to public utility transmission providers under a 1999 ruling known as the Avista order.  Under Avista, transmission customers had two choices for how to procure their share of the grid's ancillary services.  First, customers could purchase ancillary services from their local public utility.  Second, customers could self-supply regulation and frequency response services - but could only do so from resources deemed comparable to those used by their public utility.  This restriction stripped away the benefit of self-supplying ancillary services because customers couldn't tailor their purchase of regulation and frequency response services to their own needs, but rather had to buy services based on their transmission provider's overall resource mix.  For example, customers were powerless to choose resources that could respond more quickly or more accurately than those used by their utility, meaning customers faced the risk of buying too much - or too little - ancillary services.

Order No. 784 significantly reforms the Commission's ancillary service regulations.  By November, public utilities must take into account the speed and accuracy of regulation resources, which opens the door for greater efficiency in transmission customers' purchase of regulation resources.  For example, Order No. 784 allows customers to save money by buying a smaller amount of faster or more accurate energy storage resources.

This flexibility creates a premium value for providers of these fast or accurate energy storage solutions.  Order No. 784 also eases the barriers for third-party entry into ancillary service markets, and revises accounting and reporting requirements to improve market transparency and better account for public utilities' use of energy storage devices.

Order No. 784 creates significant opportunities for utility customers, as it opens the door for lower-cost and more precise ancillary services.  The order also creates opportunities for innovative companies developing and implementing energy storage technologies like batteries, compressed air, and flywheels, as Order No. 784 both increases consumer demand for these technologies and reduces developers' barriers to entry into the markets.

For more information about Order No. 784 and the opportunities it creates, contact Todd Griset at Preti Flaherty at 207-623-5300.

Beacon Power sale approved by FERC

The Federal Energy Regulatory Commission has approved a transaction through which bankrupt flywheel energy storage firm Beacon Power will transfer its assets to new owners.

Beacon Power subsidiary Stephentown Regulation Services LLC built an energy storage system in Stephentown, New York.  The project bears a 20 MW nameplate capacity, and uses Beacon's patented flywheel technology to help the New York Independent System Operator balance the electric grid, providing regulation service under the grid operator's Limited Energy Storage Resource tariff.  Beacon was able to develop the program using a $43 million loan guarantee from the U.S. Department of Energy's loan program office in 2010, and benefits in theory from FERC Order No. 755, which required grid operators to pay more for fast-responding frequency regulation that Beacon Power's flywheels may be able to provide. Nevertheless, Beacon went bankrupt at the end of 2011.

Last month, private equity firm Rockland Power Partners proposed to buy the bankrupt company for $30.5 million: $5.5 million cash and a $25 million promissory note to the DOE.  Rockland says that it intends to continue operating the Stephentown plant and developing a second facility in Hazle Township, Pennsylvania.

As part of the deal, Stephentown Regulation Services LLC filed an application to FERC under section 203(a)(1) of the Federal Power Act requesting Commission authorization to transfer its flywheel facility and related interconnection facilities (the “Facility”) located in Stephentown, New York, together with Stephentown’s rights, title and interest in, to and under, various assets including its market-based rate authority, its books and records and other related jurisdictional agreements to Stephentown Spindle, LLC, a subsidiary of Rockland.

FERC granted Stephentown's request last week, authorizing the transfer of Beacon's jurisdictional assets. Although there are a few remaining steps for Beacon and Rockland to figure out, this regulatory approval largely paves the way forward for the New York flywheel energy storage project to change hands to its new owners.

Flywheel co Beacon Power sold

Flywheel-based energy storage developer Beacon Power Corp. may have a new lease on life, as private equity firm Rockland Capital proposes to buy the bankrupt company for $30.5 million.

Beacon Power patented a composite flywheel technology for use in balancing supply and demand on the nation's electric grid, an application known as frequency regulation.  Unless this balance is maintained in real-time, problems can arise ranging from poor power quality to blackouts and safety hazards.  Historically, grid operators controlled the output of electric generators to maintain this balance, but flywheels and other energy storage technologies may be able to smooth out disturbances on the grid more , more cost-effectively, and with fewer environmental impacts.

Beacon Power's business model has involved building, owning, and operating flywheel-based frequency regulation plants on a merchant basis.  Indeed, Beacon Power describes itself as "a global leader in the development and commercialization of flywheel-based energy storage solutions for grid-scale frequency regulation services and other utility-scale and unitary energy storage applications."

In August 2010, Beacon Power received a $43 million loan guarantee through the U.S. Department of Energy's loan program office.  That financing helped Beacon Power develop its 20 MW flywheel project in Stephentown, NY.  But in October 21, Beacon Power filed for Chapter 11 in federal bankruptcy court.

At about the same time, federal regulators changed the way grid operators pay for frequency regulation.  FERC Order No. 755 required grid operators to pay more for fast-responding frequency regulation -- just the kind of service that flywheel operators like Beacon Power may be able to provide best.

Now, Rockland Power proposes to pick up where Beacon left off, buying Beacon's assets for $5.5 million cash and a $25 million promissory note to the DOE.  Rockland says that it intends to continue operating the Stephentown plant and developing a second facility in Hazle Township, Pennsylvania.  Order 755 has given the energy storage industry a needed boost, which may be enough to let Rockland succeed with flywheel energy storage.

Ener1 bankruptcy and DOE grant

Battery maker Ener1 is in news for yesterday's Chapter 11 bankruptcy filing, two years after its subsidiary was awarded a $118.5 million grant from the U.S. Department of Energy.

Ener1 Inc. holds several operating companies.  Its subsidiary EnerDel produces automotive-industry thin cell lithium-ion batteries in Indiana.  Other subsidiaries focus on fuel cells and nanotechnology, as well as manufacturing automotive-grade lithium-ion batteries in South Korea.

Battery making unit EnerDel won the $118.5 federal grant in 2009 for its proposal to expand two battery factories in Indiana and add a third facility.  Many of the details of the proposal are available in the final Environmental Assessment prepared by the Department of Energy in support of the incentive:

The proposed financial assistance would help EnerDel expand its manufacturing and testing capabilities at two existing facilities and start up a third facility for future development into a complete lithium-ion battery manufacturing plant. The existing EnerDel facilities consist of a 92,000-square-foot building in Indianapolis and a 32,000-square-foot building in Noblesville, just north of Indianapolis. The lithium-ion battery manufacturing capacity of the Indianapolis facility would increase through the addition of equipment, and the Noblesville location would transition into full use as a prototype development and battery testing facility through the addition and change-out of equipment. The exteriors of the Indianapolis and Noblesville facilities would be unchanged. The third facility is a newly acquired vacant warehouse near Greenfield, Indiana, just east of Indianapolis. This 423,000-square-foot building would require minor construction and equipment installation on the exterior of the building; however, essentially all of the work necessary to transform it into a manufacturing plant would consist of installation of equipment inside the building.

EnerDel received a $118.5 grant pursuant to a cost-sharing arrangement.  Ener1 has since said that electric vehicles haven't caught on with drivers as quickly as it expected.  Key customer, Norwegian electric vehicle maker Think Global, went bankrupt in June 2011. 

Yesterday's bankruptcy filing by Ener1 comes at a time when policymakers are scrutinizing the energy department's grant and loan programs.  Following the recent failures of other DOE loan guarantee and grant recipients such as Solyndra LLC and flywheel energy storage developer Beacon Power, Ener1's bankruptcy will likely add to the debate over the proper model for federal investment in the private sector energy industry.

Utah pumped storage project seeks license

Electricity can be tricky to store once it is generated.  Batteries, flywheels, and other energy storage technologies can provide some storage capacity, but pumped storage -- using electricity to pump water uphill during times of low power pricing, and letting it fall back down to generate electricity when needed -- is the most-used bulk electricity storage medium in the US.  As of 2010, the United States was home to 21.5 gigawatts of pumped storage generating capacity.  Pumped storage can be used both to balance supply and demand on the electric grid and to arbitrage fuel and electricity costs. 


While some question whether electricity produced through pumped storage should qualify as renewable energy, pumped storage in the US is regulated by the Federal Energy Regulatory Commission as hydropower.  Most pumped storage projects will ultimately need a FERC license, but obtaining a preliminary permit is a typical first step in the approval process.  A preliminary permit gives a developer the right to investigate the feasibility of a project, typically for a three-year term, and convey exclusive first priority to file for a full license during that window.

This month, a proposed pumped storage in the Utah desert applied for a preliminary permit.  Utah Independent Power, Inc. filed its application to FERC for a preliminary permit for the Long Canyon Pumped Storage Project (18-page PDF).  Utah Independent Power proposes to build two dams to store water drawn from the Colorado River near Moab, Utah.  These dams would create an upper reservoir on the high plateau above Long Canyon and a lower reservoir at the end of Long Canyon.  The developer suggests that the power required for pumping would be supplied to the proposed project through the transmission grid using existing off peak power, while power would be produced by the project during peak periods and sold through the Western Electricity Coordinating Council grid at competitive peak rates.

The principals behind Utah Independent Power are no strangers to investigating pumped storage projects, having been involved in other proposals in the desert Southwest in recent decades.  Indeed, in 2008, Utah Independent Power applied for and obtained a preliminary permit for the Long Canyon Pumped Storage project.  (Here is Utah Independent Power's 2008 application, and the Commission's 2008 order issuing preliminary permit.)  Utah Independent Power surrendered that preliminary permit in 2011, along with another preliminary permit for the nearby Bull Canyon Pumped Storage project.  Its 2012 Long Canyon application bears significant similarities to its earlier proposal, with some differences including a slightly lower upper dam.

Utah Independent Power's proposal is likely to trigger significant interest.  On the one hand, being able to use existing natural resources -- in this case, Colorado River water and canyon topography -- to store electricity may be an attractive proposition.  On the other hand, Colorado River water is already scarce and at the center of water right fights.  Moreover, the Long Canyon project would lie close to scenic and protected lands, such as Dead Horse Point State Park and Canyonlands National Park.  An existing jeep road runs along Long Canyon, and the area receives both motorized and non-motorized recreation.  In 2008, the State of Utah filed comments questioning the applicant's rights to the necessary water and land, as well as the impacts to the viewshed and natural landscape from the dams, transmission lines, and other project facilities.

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.

FERC Order 755 promotes energy storage

New technologies have the promise to help electric grid operators perform the challenging task of balancing supply and demand at all times.  This means making sure there the exact amount of electricity is being generated across the region as is demanded by consumers at that very moment.  Line losses and the constraints of each local transmission and distribution system add complication.  If the grid gets out of balance, problems arise with the electricity's frequency and power quality.  In the worst case, failure can lead to cascading blackout, and safety can be at issue.

Historically, the balancing act has involved sending coordinated dispatch instructions to generators and demand response resources.  Rules typically guide the grid operator in telling individual generating units to operate at specific levels. For example, flows through hydroelectric turbines can be varied, or fuel can be added to boilers or combustion turbines at a faster or slower rate.  Through careful management, these conventional generation resources have been used to balance supply and demand, providing services known as frequency response and frequency regulation.

Though it is partly automated and well-practiced, this conventional resource dispatch process does take some time to take effect.  Energy storage technologies such as flywheels, and batteries can not only provide frequency regulation, but can engage and ramp up much faster than conventional resources can.  These faster-ramping resources could provide the grid relief in real time, as opposed to ramping up more slowly like conventional generation.

In most US markets, providers of efficient fast-ramping frequency regulation have been compensated the same as when conventional units provide regulation service, even when using fast-ramping resources is more efficient.  At times this has meant that conventional resources have been dispatched when fast-ramping ones would have been lower-cost (and less polluting).  For these reasons, this October the Federal Energy Regulatory Commission found that the current frequency regulation compensation practices "result in rates that are unjust, unreasonable, and unduly discriminatory or preferential."

In Order No. 755, FERC issued a final rule requiring the grid operators in organized markets to compensate frequency regulation resources based on the actual service they provide.  Under Order 755 (123 page PDF), this must include separate payments for capacity (the marginal unit’s opportunity costs of being available) and for your actual performance.

Winners under Order 755 include providers of fast-ramping frequency response.  These could include developers and operators of flywheel energy storage companies like Beacon Power, battery storage facilities, and compressed air energy storage, and other resources still in the conceptual phase.  Winners also include energy consumers in the markets affected by Order 755, who should benefit from lower costs through improved operational and economic efficiency.