Allison Clements, Senior Attorney, Project for Sustainable FERC Energy Policy, New York
The
Federal Energy Regulatory Commission (FERC) has once again demonstrated
its commitment to removing unfair market barriers standing in the way
of the grid flexibility necessary to incorporate high levels of
renewable energy like wind and solar.
It did so last week by issuing an order clarifying aspects of Order 784. Order 784, which FERC originally issued
last year, tackled the tricky issue of whether and how to allow for
competition in the sale of “ancillary services.” More about these
services in a moment, but first some background -
The Changing Energy Markets’ Landscape
The 2013 Renewable Futures Study
by the National Renewable Energy Laboratory (NREL) predicts that by
2050, 80 percent of the nation’s energy can come from wind and solar,
and other renewable resources. In order to accommodate reliably so much
clean energy, which can be variable due to unexpected weather, the study
also predicts a need for significant, but feasible, increases in system
flexibility. NREL writes that “system flexibility can be increased
using a broad portfolio of supply- and demand-side options and will
likely require technology advances, new operating procedures, evolved
business models, and new market rules.”
The
problem with existing energy market rules, in large part, is that they
were designed around a generation portfolio consisting almost
exclusively of central station, mostly fossil-fueled resources like coal
and oil. Over time, the increasing presence of wind and solar power,
demand response, distributed (onsite) generation and even energy
efficiency have rendered the rules that govern energy markets outdated
and, in some cases, discriminatory. The rules do not contemplate the
operational characteristics of these emerging clean resources. As a
result, these resources cannot compete to provide grid services even
though they can often provide them more effectively and/or cheaper than
traditional generators.
Under former FERC chair Jon Wellinghoff’s
tenure (he left his post last November), FERC issued a series of legacy
orders (including Orders 719, 745, and 755)
that made real progress in addressing these increasingly unjust rules
in wholesale energy, capacity and ancillary service markets. Order 784
and last week’s Order on Clarification represent the most recent of
those orders. So, now back to ancillary services.
The Role of Ancillary Services
Ancillary
services are grid “products” that transmission owners and customers
must supply or procure, in addition to energy, in order to ensure the
reliable delivery of energy. These services keep supply and demand
balanced in all time frames (moment to moment, hour to hour, and
beyond), assure start-up capability after black outs, and ensure
reserves in case of emergency. Historically, coal, oil and nuclear
generation have depended on large amounts of contingency reserves – the
type of ancillary services necessary in case of the unexpected outage of
a large power plant. The integration of renewable energy resources
depends more on ancillary services that balance supply and demand on the
grid when for example, the wind unexpectedly speeds up or slows down
(see Brendan Kirby's time
graph below). It turns out that energy storage and other demand-side
resources can often react faster and switch directions quickly than
large oil, coal or even gas generating units, therefore providing more flexibility to the system.
In
many regions of the country there are no centralized markets for
ancillary services. Transmission owners that are required to supply
these services either self-supply or buy them via contract from another
party. The nature of the bilateral markets in these regions, together
with the nature of FERC’s rules around competition, have made it
difficult for suppliers of energy storage and other demand-side
resources to break into the market.
Order 784’s Reforms
Order
784 intends to break down these barriers by making it easier for energy
storage and other resource owners to obtain the designation of “market
based rate authority” necessary to compete for sales. The rule also
requires all transmission-owning utilities to consider the “speed and
accuracy” of resources providing ancillary services, a change that
should mean good news for fast-acting and flexible energy storage.
Finally, the rule clarifies some utility accounting procedures, making
it easier to deploy and procure energy storage services. Last week’s
Order on Clarification elucidated certain technical aspects of the
rule’s implementation but did nothing to infringe upon the rule’s
intent.
The rule represents a potentially significant contribution
to the facilitation of NREL’s 80 percent renewable energy scenario.
(See more about how we get there here).
Happily, energy storage, demand response, and other demand-side
resources not only help to integrate renewables, but can help avoid
extending the lives of unnecessary marginal generation or building
expensive transmission upgrades. FERC continues to do its part to set
the stage for the transition to a clean and reliable transmission grid.
http://theenergycollective.com/nrdcswitchboard/346136/ferc-affirms-support-removing-market-barriers-energy-storage-other-clean-ener
No comments:
Post a Comment