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NYISO’s Flawed Plan Threatens to Slow Energy Storage

The market for energy storage is poised for rapid growth in New York, but progress could be stymied. A flawed plan from NYISO, the state’s electricity grid operator, threatens to slow the integration of these promising new technologies into the market. The Sustainable FERC Project, Natural Resources Defense Council, Earthjustice, and other groups filed a protest to NYISO’s plan with the Federal Energy Regulatory Commission (FERC) today, urging the nation’s grid regulator to order NYISO to revise its proposal to ensure energy storage resources can participate on even footing in its markets.

 

There are many types of energy storage resources, such as batteries, fuel cells, vehicle-to-grid programs, and flywheels.

NYISO: The State of Storage (December 2017)

With the costs of energy storage technologies like large batteries rapidly falling and their vast potential becoming clear, FERC has made it a top priority for grid operators to update their market rules to eliminate barriers that prevent storage companies from selling their many valuable grid services to utilities and other large energy users. These barriers can slow technological innovation, reduce competition, and increase prices. Markets run by the nation’s regional grid operators were originally set up with power plants and not energy storage resources in mind. Due to operational differences between the technologies, it can be hard for energy storage resources to efficiently participate in those markets.

In February 2018, FERC issued a landmark order (known in the industry as “Order 841”, discussed here) requiring the country’s several regional grid operators to eliminate their market barriers for energy storage resources. Meanwhile, states like New York have taken complementary action to jumpstart the energy storage industry. For example, the New York Public Service Commission (PSC) recently announced a target of 3000 Megawatts of energy storage by 2030, issuing an order that established the regulatory groundwork for a suite of policies designed to galvanize the market. But NYISO’s failure to adequately implement Order 841 now threatens to hinder the state’s plan.

Our coalition is challenging NYISO’s faulty proposal, urging FERC to order NYISO to improve it in three critical areas:

1. NYISO proposes to bar storage resources from selling services to both the transmission and distribution systems

One of the advantages of energy storage is that it can provide benefits both to the bulk transmission system (large power lines akin to highways that send energy from power plants to local substations) and the distribution system (local poles and wires sending power to customers like homes and businesses). As discussed here, states regulate the distribution system and retail service (sales to end-use customers), while FERC regulates the transmission system. FERC also regulates wholesale sales (sales from large energy suppliers to utilities). In New York, wholesale and transmission service is controlled by NYISO.  Because some energy storage resources have a business model that is reliant on selling both types of services (wholesale/transmission and retail/distribution), it is important for NYISO’s rules to facilitate that dual role.

Unfortunately, NYISO’s plan bars storage resources that sell state-regulated services from also selling services in NYISO’s markets. NYISO suggests that it may establish rules to allow a single storage resource to sell both types of services at some undefined time in the future, but doesn’t say when that might happen, if ever. As we explain in our filing, NYISO’s prohibition violates FERC’s Order 841 and must be remedied. We also point out that NYISO’s proposal is illegal because it unfairly discriminates against energy storage resources. In contrast, demand response resources, which help the grid by reducing power demand at times like hot summer days when the system is most stressed, are able to sell into both FERC- and New York State-regulated markets (as discussed here).

2. NYISO proposes burdensome and unnecessary market monitoring rules

FERC’s Order 841 specifically directed grid operators to remove market barriers to energy storage resources, but NYISO tucked rule changes into its plan that do the opposite. NYISO has proposed to review sales offers from small energy storage resources under two megawatts to ensure that they are economically competitive. (NYISO’s current rules already apply such review to bigger energy storage resources.) This review procedure, known in the region as “buyer-side mitigation,” was originally intended to prevent market manipulation. While applying such a review process to energy storage resources may seem reasonable at first glance, there are significant red flags.  

First, we don’t know how NYISO will apply the rules. Applying buyer-side mitigation to energy storage resources in New York could inhibit the state’s efforts to jumpstart the energy storage market through state incentives by potentially blocking resources supported by state programs from selling in NYISO’s markets. Additionally, the review process itself is very burdensome, introducing costs and delays that could harm small resource owners. NYISO’s proposal also runs contrary to a previous FERC order that exempted demand response resources from the review process, because there is no risk that small resources will manipulate market prices. (Two megawatts is a very small amount of power as compared to most power plants, which are generally hundreds of megawatts or larger.) NYISO’s proposal to apply review to energy storage resources under two megawatts must be rejected as outside the scope of and contrary to FERC’s directions in Order 841.

3. NYISO proposes to bar energy storage owners from choosing when to charge and discharge energy into the system

NYISO’s proposal also fails to follow FERC’s instructions to allow energy storage resources to self-manage their state of charge. FERC specified that the owners of energy storage resources must be able to decide when to charge them up or inject power into the grid, rather than forcing them to give up control to the grid operator. NYISO ignored this directive, proposing to require many storage resources to be dispatched according to NYISO’s software algorithm. As FERC explained in Order 841, energy storage resource owners must be able to self-manage their resources’ energy levels “because it allows these resources to optimize their operations.” For example, if a storage resource provides state-regulated services in addition to selling in NYISO’s markets, the resource owner is the only entity able to determine when charging and discharging would be most beneficial.

Further, while a NYISO dispatch algorithm could in theory be a good option for resource owners if it were not required, NYISO’s specific proposal falls short. While NYISO allows fossil generators to specify conditions upon which they can commit to operate (accounting for factors such as start up and shut down costs), it does not allow energy storage resources to include a similar “commitment” parameter in their market offers that would provide instructions to NYISO regarding when to turn them on and off. This restriction exposes energy storage resource owners to operational and financial risk. If NYISO’s dispatch controls caused a resource to frequently charge and discharge in a manner harmful to a battery, for example, the owner could be forced to choose between letting the equipment corrode or paying a financial penalty for failing to follow NYISO’s instructions.

Thus, while we support allowing NYISO-controlled dispatch as an option, we urge FERC to require NYISO to develop dispatch software solution that can adequately handle a “commitment” parameter for energy storage resources that allows them to specify operational constraints.

FERC should require NYISO to improve its proposal

Overall, we are disappointed with NYISO’s proposed plan to facilitate market participation by energy storage resources. NYISO should be a committed partner to New York State in advancing the state’s policies to create a cleaner energy system that fully harnesses the power of promising technologies like energy storage. To further that goal, NYISO should devote more resources to expeditiously develop rules that truly eliminate the barriers for energy storage resources. Fortunately, FERC’s Order 841 requires NYISO to do better. FERC should order NYISO to improve its plan.

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Miles Farmer's picture

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Discussions

Richard Brooks's picture
Richard Brooks on February 8, 2019

It would seem we are both trying to influence changes in wholesale markets, like NYISO, ISO-NE and PJM.  I would be very interested in knowing your thoughts on this Energy Central article: Open Capacity Markets for all to participate

And this article: Properly Valuing Capacity Resources in Wholesale Markets

Transmission Capacity is already successfully administered using an ANSI standard, FERC Regulation called OASIS, setting precendence for a similar approach to create an ANSI standard for Energy Capacity.

I can provide access to the detailed proposal that is under development. Privte message me if you are interested.

Bob Meinetz's picture
Bob Meinetz on February 8, 2019

Miles, why should storage be placed on equal footing with generation? Storage only stores electrical energy generated somewhere else. By itself it's incapable of lighting a single bulb, thus it offers no benefits in reliability.

NYISO, the organization tasked with keeping the lights on in New York, is denying storage a place in capacity markets because considering it a an energy resource (n. "a stock or supply of assets") makes no sense. If the lame, intermittent offerings solar and wind developers bring to the table need storage, let them pay for it. Then, deduct the 20% of all grid energy wasted by storage from solar/wind farm profits.

Richard Brooks's picture
Richard Brooks on February 8, 2019

Bob, in 2009 I co-authored ISO New England's Smart Grid report where I posited (top of page 39), "Theoretically, a PHEV could earn capacity revenues from regulation and spinning reserve services for 21.5 hours each day. " In the internal version of this report I descibed a case where the parking garage of a commuter rail/large subway station (i.e. Alwife station in MA) with significant PHEV presence could help to meet morning ramping requirements and be replenished throughout the day when solar is producing at lower prices.

Battery technology should be valued for it's fast response, up/down ramping cpabilities, but is inappropriate for base loads and has no real value for that purpose, IMO.

Bob Meinetz's picture
Bob Meinetz on February 8, 2019

Richard, the rest of the paragraph on page 39 seems to contradict your claim that "[car] battery technology should be valued for its fast response, up/down ramping capabilities...":

"However, its ability to actually supply and consume energy is severely constrained. Several times throughout the test, the vehicle tested was unable to respond to up or down regulation signals due to battery limitations, which resulted in a failure-to-follow condition. The report contains a recommendation that ISO/RTOs consider implementing a separate 'regulation signal for storage resources' to accommodate such limitations."

Though I try to keep an open mind regarding the possiblities of V2G storage, I still don't understand how it could ever be practical: 

  1. Lack of response due to inconsistencies in quality/age of car battery packs are consistent with the severe battery limitations described above. Maybe tech will one day deliver us a battery without these limitations. But after personal experience with several traction battery chemistries, I'm skeptical an electrochemical formulation exists which would prove useful for V2G operation.
  2. From the point of a consumer - the idea I might one day return to my car to find the battery drained by the grid, without any warning, would be a deal-breaker.
  3. As I understand it, the purpose of capacity payments to participants in a V2G scheme would be not to assure energy is available, but that battery capacity is available. Wouldn't it be more beneficial to ratepayers to simply buy 10MWh of batteries, vs. making regular payments to ~300 drivers, who may show up at the parking garage or not?
  4. We are assuming this is somehow more environmentally beneficial than having natural gas peakers perform the same function. But if car batteries are storing an NG/coal-heavy grid mix, emissions from resistance losses would likely be worse - a lot worse.
  5. How do ratepayers gain by making capacity payments to both the facility generating the electricity, and the facility/drivers storing it? Shouldn't we make capacity payments to the gift shop of the parking garage too, for encouraging drivers by offering convenient access to snacks and coffee?

 

Richard Brooks's picture
Richard Brooks on February 9, 2019

Thanks Bob. Just to be clear, the observations cited i.e. failing to follow dispatch signals, were from a V2G pilot conducted by PJM in 2008. Considerable technological progress has been made since that time.

The 5 items you list are indeed profound. I especially like the gift shop idea. Here is what I believe batteries can provide to the benefit of all:

1. Emissionless during the "release" of energy - batteries don't generate energy - they can only release it, after it has been stored. And I agree with you - the stored electrons could be from a coal plant or a wind farm; power flow's where it will.

2. They can respond very quickly to dispatch signals, making them very useful at responding to load ramps (up/release energy and down/store energy), using today's technologies, not those used in 2008.

3. Battery Owners should receive capacity payments for their fast response/ramping capabilities not for their promise to "generate power", like other capactiy resources. They should also be paid the appropriate electricity price for released electrons.

Thank you engaing in the conversation and your insights.

Bob Meinetz's picture
Bob Meinetz on February 11, 2019

Richard, some perspective: in California, average afternoon ramp rates on CAISO (the back of the Duck Curve) are on the order of 2.5 GW/hr. It isn't a problem with gas turbine technology, which is more than flexible enough to meet CAISO's needs.

The problem is delivering gas fast enough to generation plants that need fuel. In late summer, with the sun going down and gas generation ramping up at 4 GW/hr, pipelines are incapable of delivering the 2bcf of gas necessary to generate it. Plants literally start running out of fuel, and we get rolling blackouts (the infamous Aliso Canyon gas leak was the result of Sempra trying to stuff too much gas into a reservoir, in hopes of mitigating the problem).

Could storage help? According to the 2018 EIA study U.S. Battery Storage Market Trends, the installed cost of medium-duration battery storage is $1,400/kWh. Replacing gas with storage is out of the question - to install enough batteries to meet even baseload for four hours (80 GWh) would cost $112 billion; more capacity would put its price above California's annual budget. So the best we could hope for is slowing the need for afternoon gas by a tiny sliver each afternoon, then rushing to refill reservoirs and recharge batteries for the next day. Meanwhile, with 20% of stored electricity wasted by bi-directional inversion and resistance losses, our stored, gas-fired electricity assumes an emissions profile no better than clean coal.

    "In lieu of legislative mandate, the predictions of a storage boom are not going to materialize as have been predicted. Utilities can cover load balancing in a reliable fashion with their present power generation fleets. While promising, a utility-scale investment in battery storage is not economically feasible in the current rate structures. A more than 4,000 percent increased investment in high-megawatt storage systems over 8 years is not achievable."

https://www.power-eng.com/articles/2018/04/energy-storage-not-at-tipping-point-thoughts-on-why-and-when.html

It's not NYISO's flawed plan, but the flawed assumption meeting customer demand with intermittent resources alone will ever be feasible.

Richard Brooks's picture
Richard Brooks on February 12, 2019

I agree with you Bob, intermittent resources alone cannot meet demand, 24x7. But couldn’t you say the same about every type of capacity resource? For example, the Natural Gas generators in CA you cited can’t meet demand due to fuel constraints, so they too cannot satisfy demand 24x7, reliably over long periods, under varying conditions, just like intermittent resources. That’s why we need a method to properly value capacity based on characteristics that are important to individual States and for grid reliability. Just like a football team needs “specialists” to serve in different roles to have a successful season, we need the right type of energy resources to perform their specialized feats to meet demand in all the various conditions that may occur, even an eclipse. As we’ve witnessed first-hand in New England, Tom Brady is a skillful quarterback, but don’t press him into trying to be a receiver – it’s just not realistic (and not pretty). IMO, the current capacity markets are unable to meet the challenges of todays realities; a completely new way of thinking is in order. Transmission capacity has been successfully administered for over 10 years with a 24x7 system called OASIS; it’s time to find a 24x7 solution for Energy capacity.

Bob Meinetz's picture
Bob Meinetz on March 7, 2019

Richard, natural gas generators in Southern California were stressed only after the 2013 shutdown of San Onofre Nuclear Generating Station (SONGS), which removed 2.2 billion watts of clean baseload power from Edison's service area. Before 2013, we didn't have massive gas reservoir leaks, we didn't have duck curves. The myth we can power a modern industrial society with renewable energy is solely to blame for reliability problems in Southern California, and pretty much everywhere else in the U.S.

The 2000-2001 electricity crisis in California, with persistent, statewide rolling blackouts, wasn't even a problem of reliability but pricing. California electricity consumers had become captive to out-of-state market manipulation by Enron, forcing electricity rates higher than $1/kWh in some areas. Rather than owe $billions for imported electricity California simply shut down the grid during peak consumption.

Consumer demand for electricity over a wide service area is surprisingly predictable. In France nuclear plants, with some help from imported hydro, follow gentle demand curves all day long (even during an eclipse). It was unpredictable wind and solar farms which upset the apple cart in California.

I've said it before, and I'll say it again: get rid of renewables - toss them on the trash heap. Replace all generation with modern nuclear, and suddenly demand/response, efficiency, OASIS, the duck curve, natural gas supply constraints, storage, fuel security, dirty imports, capacity markets, natural gas prices, and carbon emissions are no longer an issue. And the cost? Building new nuclear plants would be a fraction of the $billions ratepayers are paying now to build solar and wind farms and associated transmission, to subsidize home solar, to pay other states to take our extra electricity when there's too much, and to pay electrical utilities their marked-up price for natural gas. If you have a valid objection to this solution, I'd love to hear it - yours would be the first.

Richard Brooks's picture
Richard Brooks on March 7, 2019

Bob,

I also support increases in the use of nuclear energy as an emissionless generation source. However, nuclear, just like all other generation technologies has some undesireable characteristics, i.e. what to do with all that spent fuel that sits on site for years on end and the fact that an unintended consequence can have disasterous effect, i.e. Chernobyl and Fukushima. Nuclear power really needs a better "fail safe solution" to address public concerns. For a baseline load, reliable energy source, I would agree, nuclear is the best option due to low production cost, reliability and lack of airborne pollutants and green house gases. However, the renewable train has left the station and these resources also have positive and negative characteristics. No toxic air pollutant, but it can have a negative impact on bird populations - especially bats. It's generating capability is dependent on weather and climate conditions meaning it's not very reliable, however it's fuel cost is zero, as compared to fossil and nuclear generators which need to purchase fuel at martket prices.

I just don't think it's practical or prudent to "throw away" an effective and clean generating resource with a zero fuel cost, simply because it has some reliability concerns. I think we need to manage these resources in the same way we have to manage other resources with "constraints", i.e. pumped hydro and run-of-river units. IMO, the integrtion of renewable generation is an operations problem that needs to be managed properly - heck even nuclear stations need to stop an refuel on occasion.

Bob Meinetz's picture
Bob Meinetz on March 16, 2019

Richard, waste/spent fuel storage is a non-issue: 1) It's insignificantly small (all waste from the electricity you'll use in your lifetime would fit inside an empty Coke can 2) Only 5% of the fissile uranium in it has been used, it will be re-used long before it's a storage problem 3) Not one injury or death is attributable to spent fuel in the U.S. 4) Nuclear fuel costs next to nothing for the energy it generates (1 pellet = 1 ton of coal) 5) The renewables train left the station half a century ago, and has since proven itself a critical waste of time and money 6) The fuel cost of renewables is the gas necessary to back it up, and the millions of tons of CO2 emissions it creates 7)  The only deaths at Fukushima were those related to a panicked evacuation 8) Deaths from Chernobyl are dwarfed by U.S. deaths from coal smoke every year.

If people want to put solar panels on their roofs and save some money, fine, but anyone who thinks they offer a solution to climate change has no idea of the scale of our climate problem. The renewables train is going down the wrong track, and there's no more time to waste.

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