FERC Order 841: Analysis of Actions by Wholesale Market Operators to Incorporate Energy Storage

Energy storage resources (ESRs) provide a host of services to the electric power grid through applications such as energy arbitrage and the storage of variable wind and solar energy. As ESR applications continue to develop, federal and state regulations oversee the growing participation of ESRs in the grid. FERC released Order 841 in 2018 with the goal of ensuring equal access to the wholesale electric power markets for ESRs. Order 841 applies to six RTO/ISOs: MISO, SPP, NYISO, ISO-NE, CAISO, and PJM. Because this order was recently released, there is an absence of in-depth research on the rule changes submitted by these ISO/RTOs. These rule changes will be implemented by 2021, and hence it is important and timely to understand their impact on ESRs.

This report analyzes important market rule changes and their potential impact on ESR participation. Reviewing the tariff filings, we broke down each ISO/RTO into sub-markets (ancillary services, capacity, and energy) and assessed parameters in each sub-market based on their Order 841 compliance and impact on ESRs. Then, we generated market maturity models that demonstrate each ISO/RTO’s ESR status relative to each other on a scale of “Basic”, “Intermediate”, and “Advanced”. Finally, we applied the results of our analysis to case studies to predict the impact of Order 841 on existing ESR projects. We discovered that, generally, ESR projects can more easily participate in the sub-markets of CAISO and PJM, while SPP and ISO-NE present some barriers to participation. However, these barriers are not wholly prohibitive as the less developed wholesale markets present greater potential for ESR growth.

From a high-level perspective, Order 841 grants easier access to the wholesale sub-markets for ESRs, unlocks opportunities for value stacking, and lowers risk for new market entrants by providing clearer market rules. For stakeholders such as utilities and storage developers, our study provides a valuable first step to assessing the relative suitability of ISO/RTOs for ESR development and participation. These stakeholders should pair our market maturity models and case studies with more distinct quantitative modeling and rigorous examination of sub-federal ESR policies and incentives to fully assess the wholesale power markets for energy storage development.