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Topic of the Month


Electricity

Pradyumna Bhagwat

Topic of the Month

21.02.2017

The “balancing act” of integrating batteries into the market

Written by Pradyumna Bhagwat The use of fast responding resources such as batteries for balancing services has the potential to improve operational and economic efficiency and […] read more

Electricity

Pradyumna Bhagwat

Topic of the Month

14.02.2017

Batteries: Who will master the jack of all trades?

Written by Pradyumna Bhagwat One of the key debates on the topic of batteries revolves around its ownership. In this context, ownership could be defined, as […] read more

Electricity

Pradyumna Bhagwat

Topic of the Month

7.02.2017

Batteries: The jack of all trades

Written by Pradyumna Bhagwat The EU 2020 energy and climate targets have led to a significant increase in the share of renewable energy sources in the […] read more

Electricity

Leonardo Meeus

Topic of the Month

31.01.2017

My take on distributed electricity storage

Written by Leonardo Meeus The issue with existing batteries is that they suck Here is an abstract from the speech Elon Musk gave in 2015 to […] read more

Electricity

Leonardo Meeus

Topic of the Month

25.01.2017

My take on electric vehicle charging infrastructure debate

Written by Leonardo Meeus At an FSR Regulatory Policy Workshop this month, jointly organised by the transport and energy colleagues, we learned that the electric vehicle […] read more

Electricity

Leonardo Meeus

Topic of the Month

19.01.2017

My take on TSO-DSO Coordination debate

Written by Leonardo Meeus Farewell to fit and forget Distribution grids were referred to as a boring business. “Fit and forget” was the motto. Investments were […] read more

Electricity

Leonardo Meeus

Topic of the Month

11.01.2017

Top 5 nicknames for the EU clean energy package

Written by Leonardo Meeus With a US president that is likely to go backward in the energy transition, we can only applaud the European Commission proposals […] read more

Electricity

Thomas-Olivier Léautier

Topic of the Month

29.11.2016

Transmission pricing

Written by Thomas-Olivier Léautier This FSR topic of the month explores governments’ intervention in four aspects of the power industry. The first two posts have pointed […] read more

Energy Policy

Thomas-Olivier Léautier

Topic of the Month

22.11.2016

Generation mix

Written by Thomas-Olivier Léautier This FSR topic of the month explores governments’ intervention in four aspects of the power industry: (i) generation adequacy, (ii) generation mix, […] read more

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Pradyumna Bhagwat

The “balancing act” of integrating batteries into the market

- Electricity

Written by Pradyumna Bhagwat

The use of fast responding resources such as batteries for balancing services has the potential to improve operational and economic efficiency and thus lower the cost for consumers[1]. However, the current view appears to be that market structures are not yet adapted and would need to be modified in order to encourage flexible technologies such as batteries.

This view has been echoed by ENTSO-E in its position paper,[2] where it mentions the need “for improving the market design to ensure adequate price signal for storage”. The European Parliament resolution of 13 Sep. 2016 on Towards a New Energy Market Design[3] too calls upon the European Commission to adopt a market design structure that rewards flexible and fast reacting resources.

The same holds true in the United States, which nevertheless appears to be ahead of the EU in this aspect. In 2011, the federal energy regulatory commission (FERC O-755[4]) ordered the overhaul of the frequency regulation market[5] as it saw the current system as (negatively) discriminatory towards flexible and fast responding assets. Recently, FERC has proposed further changes to market design in order to facilitate a level playing field for storage technologies.

Examples of market adaptations

Some markets have already been modified to encourage flexible technologies. The three cases presented below illustrate some of the approaches that have been utilized in this regard.

SPECIAL MARKET: In the UK, National Grid created a special market for Enhanced Frequency Response (EFR) to support fast responding assets. During the first auction in 2016, roughly 200MW of batteries were able to clear this market and get contracts for providing the enhanced frequency response services.[6]

MARKET MODIFICATION: In Pennsylvania-New Jersey-Maryland (PJM), after FERC order 755, the frequency response market has been restructured to provide fast responding resource an additional remuneration. [7] In the new market structure, the additional power provided by fast resources as compared to the traditional resources in a given time frame is taken into consideration while calculating payments.[8] This has allowed batteries and even electro-mechanical devices such as flywheels to participate competitively in the market.

TECHNOLOGY SPECIFIC PROCUREMENT: In California, local capacity requirement auctions are organized by the load-serving entities. These auctions can be considered as a type of local level capacity mechanism to ensure reliability. In 2014, while approving South California Edison’s local area requirements, the California Public Service Commission specified the share of different technologies that should be contracted, of which storage was one technology.[9] This resulted in South California-Edison contracting 100MW of batteries. This was part of a solution provided by AES in combination with a CCGT power plant.

The way forward

From these examples it can be observed that there are various possible alternatives to encourage participation of flexible resources in ancillary markets. Whether it is just modification to the current market structures or implementing special markets, the key lies in developing an approach for boosting flexibility that does not favor one technology over another. However, the risk of discrimination, which can either be two similar resources treated differently or two different resources treated in the same way, will always exist. Eventually a familiar question arises: where to draw the line in this grey area of regulation?

 

[1] NOPR, 134 FERC 61,124 at P 31.

[2] https://www.entsoe.eu/publications/position-papers/position-papers archive/Pages/Position%20Papers/position-on-energy-storage-and-storage-services.aspx

[3] http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+REPORT+A8-2016-0214+0+DOC+XML+V0//EN

[4] https://www.ferc.gov/whats-new/comm-meet/2011/102011/E-28.pdf

[5] http://www.pjm.com/~/media/training/nerc-certifications/gen-exam-materials/gof/20160104-regulation-market.ashx

[6] http://www2.nationalgrid.com/Enhanced-Frequency-Response.aspx

[7] http://pjm.com/markets-and-operations/ancillary-services.aspx

[8] http://analysis.energystorageupdate.com/market-outlook/pjm-leads-us-fast-frequency-regulation-market

[9] http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M078/K912/78912194.PDF

 

Read the previous article: Batteries: Who will master the jack of all trades?