Sunshine on my shoulder makes me happy: Energy Storage Getting Some Light
October 17, 2011 Leave a comment
Check out this blog at IDC Energy Insights as well!
A Sunshine Memo was issued by the Federal Energy Regulatory Commission (FERC) on Thursday, October 13, moments after I met with Commissioner Norris and Chairman Wellinghoff with the Electricity Storage Association Advocacy Council. This memo listed a multitude of possible final rulemakings, one of which will set a new course for the energy storage industry. The Notice of Proposed Rulemaking on Frequency Regulation Compensation may sound esoteric and niche-y but this rule will provide the opening the energy storage industry needs to begin its “game changing” role on the grid that has been touted for years. It looks as if, after subsequent meetings with Commissioners Moeller and LaFleur (Commissioner Spitzer will be leaving the agency shortly), there will be unanimous support from all Commissioners on the final rule.
So, what’s the big deal? This rule will begin to set out the structure for paying for performance rather than simply capacity on the grid. For those technologies that can perform quickly (as in seconds rather than minutes), this rule will allow for the true value of frequency regulation of the grid to be captured and compensated. It won’t be enough to simply be a plant spinning while waiting to fire up; it will need to actually come on and perform nearly instantly to get paid. Energy storage technologies are resource neutral, having their charge come from any generation source; they help everyone on the grid—from nuclear to natural gas to baseload coal to renewables. Energy storage can function as transmission or generation but is really neither; it is its own category. And that is what FERC is about to recognize.
A year ago, the U.S. energy storage industry figured it was about two years ahead of China; today is looks like that gap has closed to six months. These technologies are invented and produced here in the U.S. We are in a position of, once scaled, being able to export energy storage products to countries with high renewable penetration like Germany and Spain. It is critical that our regulatory and legislative constructs incentivize these technologies so we maintain that lead. These projects are shovel-ready; banks are simply awaiting market certainty to let loose their private investments.
Getting the energy market rules right through FERC is the start. Once energy storage is paid for the reliability, flexibility, competition, efficiency and zero emissions it provides the electric grid, it will be able to expand to becoming an integral part of generation, transmission and distribution planning. As those benefits are monetized, state regulators will be empowered to evaluate energy storage as well and understand how important those technologies will be as utilities modernize the grid and seek to improve reliability in an era of increasing complexity and consumer engagement.
This is, in fact, an appropriate role for government—putting the structures in place that can create a market for U.S. innovation to thrive. FERC has taken bold action to make economically sensible rules to value energy storage; now Congress and the states can take those next steps to moving our electric grid into the 21st century—with energy storage.