93. Leveling the Market Playing Field for Hybrid Power Plants

Leveling the Market Playing Field for Hybrid Power Plants The Federal Energy Regulatory Commission (FERC) is an independent agency that, among other things, regulates the interstate transmission of electricity. Its ultimate mission is to “Assist consumers in obtaining economically efficient, safe, reliable, and secure energy services at a reasonable cost through appropriate regulatory and market means, and collaborative efforts.” In the past, FERC has issued important orders, including 841 and 2222, which have helped clear the way for more energy storage to be added to the U.S. power grid. However, Chip Cannon, a partner with Akin Gump Strauss Hauer & Feld LLP, who heads the firm’s energy regulation, markets, and enforcements practice, believes the playing field requires further leveling for hybrid plants, that is, facilities pairing solar or wind farms with battery storage. Cannon said few hybrid plants existed on the grid a few years ago, but that is changing quickly. In fact, he said there are 102 GW of solar plus storage and 11 GW of wind plus storage capacity in the interconnection queue at the present time. “We have battery storage resources, typically paired with renewables, that are entering the interconnection queue at a very, very fast clip,” Cannon said as a guest on The POWER Podcast. That has created some challenges for the market. “The queue process has not really been set up for accommodating these hybrid resources, and we really don’t have very much experience for them in the market,” said Cannon. Hybrid plants offer a number of physical and operational traits that benefit the power grid. Solar and wind resources are obviously intermittent, meaning they only produce power when the sun shines and the wind blows. When paired with energy storage, which can be used to either add or remove energy to and from the grid, intermittency problems can be alleviated. The pairing also improves reliability, flexibility, and resiliency, and can help lower costs for consumers. Cannon explained that all of the regional transmission organizations (RTOs) and independent system operators (ISOs), such as PJM, CAISO, and NYISO, establish the “rules of the road” for generators to participate in their energy capacity and ancillary services markets. “But those market rules were not designed to reflect resources that can both take in energy as well as put energy on the grid. So, the concern here right now is that the market designs were simply not set up to accommodate energy storage resources,” Cannon said. While FERC doesn’t have the authority to establish rules that promote energy storage, it can look at the existing market rules to see if they are unduly hindering the ability of certain classes of resources to participate and compete in those markets. Cannon said FERC has held a technical conference regarding hybrid resources, which allowed various stakeholders to provide input. It also directed RTOs and ISOs earlier this year to submit information on how their markets are setup to accommodate hybrid resources. Cannon suggested it will be interesting to see how FERC ultimately addresses the issue. “We’re definitely at an inflection point in the power sector. I think the power sector has been going through an evolution for a couple of decades since FERC started going down the path of competition, and now we’ve got this radically new resource mix,” Cannon said. “I’m of the view, though, that the evolution is really turning into a revolution of the power sector with the speed of technological changes and falling prices. So, there’s a lot of really good stuff out there.”