By Amanda Durish Cook

WASHINGTON — The opening panel of FERC’s technical conference on energy storage last week featured a discussion on whether storage can be a versatile transmission asset or will be limited to “niche applications.”

Exelon Senior Vice President of Wholesale Markets and Transmission Policy Mike Kormos said storage can change the way transmission planners develop solutions for thermal and voltage overloads because batteries can respond instantaneously to the loss of a transmission line that would cause a reliability violation.

“We operate everything in what we call pre-contingency. We start moving generation, we start spending money before the actual contingency happens because we need a certain amount of time to make sure it happens,” said Kormos, a long-time PJM executive who joined Exelon earlier this year. “The battery can basically respond immediately, and that’s a very unique transmission opportunity that exists for batteries that a lot of other potential infrastructure investments don’t bring us.”

Kiran Kumaraswamy, market development director at AES Energy Storage, agreed, saying batteries can provide “targeted transmission relief” in a matter of months, not years, and can delay expensive transmission upgrades.

Ed Tatum, American Municipal Power’s vice president of transmission, said that FERC Order 890 admitted that storage cannot provide the same level of reliability and availability as transmission. He said the industry would have to set minimum levels of charge requirements if storage is used. However, Tatum added, the industry “could clearly use more imagination in transmission planning.”

‘Niche Applications’ Only

PJM’s Senior Director of System Planning Paul McGlynn was skeptical, saying using storage post-contingency to respond to reliability problems seemed like a “remedial action scheme.”

He said storage devices have only have “niche applications” as a transmission asset. Beyond voltage and thermal issues, there are only “a couple of other categories,” including resolving short-circuit issues and stability remediation, that PJM would consider a transmission asset.

PJM currently has more than 300 MW of storage, including batteries and flywheels, all of which are compensated through the RTO’s ancillary services markets.

“The circumstances where an electric storage resource could be considered as a transmission asset would be rare and highly location-specific,” the RTO said in its written testimony. “The commission … should not let the technology drive the compensation model but instead allow these resources to realize their potential through the market by offering services that they are capable of providing.”

It said storage could be a cost-effective “last resort” in highly constrained areas of PJM’s system where construction of new generation or transmission may not be possible, adding the resource should be permitted to participate in competitive solicitations under Order 1000.

“If they are both more effective and cost-efficient than a traditional transmission solution (and where the proposal does not carry with it significant technology risk), they could serve as the appropriate solution for inclusion in the [Regional Transmission Expansion Plan] to either defer or displace a competing transmission solution,” PJM said.

But “given the current maturity of battery technology,” PJM said storage is “far more likely” to be limited in the near-term to low-voltage solutions that would be submitted by transmission owners and thus not open to competition.

CAISO also expressed skepticism that storage will have a big role in transmission, saying that although it has studied storage projects as potential reliability solutions in its transmission planning, its “experience reflects that electric storage has more effectively fit within the framework of market resources providing local capacity rather than as transmission assets.”

PJM also raised some operational concerns, saying a battery installed as a non-transmission alternative to address an N-1 reliability violation would need time to recharge between injections, particularly in the winter when there are two peak loads daily. “The applicability of storage to contingencies involving networked portions of the grid should not be ruled out, but could involve much greater complexities related to operational and availability requirements,” it said.

Who’s in Control?

AMP’s Tatum said if a battery is going to serve a transmission function, it should be under the control of the transmission provider. “If we’re going to have something out there that is a low-cost, more effective solution than actually throwing traditional wires in the air, we need to think about it and treat it in the same way,” he said.

Kormos said resource owners might hand over “state-of-the-charge” management — determining when a battery recharges and injects — to RTOs. “If its primary purpose is to avoid a transmission problem, whatever criteria that violation is, I think we should handle it like any other transmission asset at that point in that it is turned over to the ISO/RTO,” he said.

But CAISO said in its written comments that it “prefers that operation of these resources occur through the CAISO’s energy and ancillary services market processes rather than the CAISO controlling the operation of a resource outside of its market processes.”

“This approach ensures that system resources or resources within a transmission-constrained area operate together to meet grid reliability needs and enables the resource to participate most broadly in providing value to the market,” the ISO said.

Compensation and Cost Allocation

One of the questions raised by FERC staff in calling the conference was how storage should be compensated and its costs allocated.

Raja Sundararajan, vice president of regulatory services at ‎American Electric Power, said storage that provides transmission services could be compensated for their ancillary services through a separate commercial contract to ensure transmission ratepayers are not paying for them.

Tatum warned that compensating storage with more than one revenue stream could result in “trying to serve two masters.”

“It’s kind of hard to … have one foot in the competitive world and one in the regulated world,” he said.

Tom Kaslow, director of market design and policy for FirstLight Power Resources, said his company “finds it difficult to separate the transmission support functions into what might be classically called transmission equipment functions.”

Although storage can perform a wholesale transmission function, “this single aspect of service does not warrant compensation as a transmission asset,” Kaslow said in his written testimony. “All electric storage resources should participate on a level playing field in the wholesale competitive market.”

Kaslow questioned why a storage resource would be solely dedicated to transmission use when additional efficiencies could be provided. “We want [compensation] done in a way that makes sure there isn’t disruption to the other market revenues that other storage resources are going to rely on,” he added.

FirstLight owns 1,400 MW of generation in Connecticut and Massachusetts, 1,200 MW of which are pumped storage.

“Currently, our facilities can provide performance well beyond what [competitive wholesale] markets define as a minimum level of performance. We can come online, the whole station, within 10 minutes; we can provide single-unit response and much shorter time frames,” he said. He suggested an entirely new “very fast reserve” product compensation rate, similar to a payment category in use in the U.K.

However, he said using a regulated payment for compensation could have the unintended consequence of causing barriers to further investment “if you are not part of whatever RTO planning exercise identifies your storage resource.”

PJM suggested allowing storage resources to have any market revenues deducted from the costs of the resource included in transmission rates. “In this way, the resource would not simply lie unused in those hours when it otherwise could provide energy or ancillary services. Transmission ratepayers could then receive the value of those market revenues as an offset to the entity’s revenue requirement,” PJM said.

To prevent transmission owners from becoming market participants and potentially violating corporate separation rules and FERC’s Standards of Conduct, PJM said storage assets could be housed in a separate company, which would have a contract for reliability-based services with the transmission owner.

Test Cases

PJM said the commission will need to provide guidance on issues such as defining undue discrimination and designing compensation models that avoid distorting markets. “In order for the commission to address these issues in an informed way, the industry may need to present specific situations that planning authorities and ultimately the commission can use as ‘test cases’ to help further develop future policy,” the RTO said.