2013 Reports

Federal Regulatory Barriers to Grid-Deployed Energy Storage

Meyer, Andrew H.

The Federal Energy Regulatory Commission (“FERC” or “the Commission”) regulates the rates, terms, and conditions of interstate transmission and interstate wholesale energy transactions. While states regulate local distribution facilities and retail sales, substantially all electricity ultimately delivered to consumers in the United States passes through FERC’s jurisdiction. Depending on the circumstance, an energy storage device might behave like any of the traditional grid classifications: generation, transmission, distribution, and even load. These multifaceted operational characteristics, which make energy storage so useful, also confound regulatory rules and categories tailored to the more rigid operational characteristics of legacy technologies. Consequently, storage cannot compete on a level playing field with traditional resources in FERC-jurisdictional markets. This federal regulatory lag impedes the commercialization of technologies that the federal government itself supports with billions of dollars in funding, while obstructing the success of state policies promoting storage and renewable energy resources. Laudably, FERC has proactively addressed some particular barriers to storage, which this Article will discuss, but many significant barriers remain. Part I introduces energy storage, particularly its history, its operational uses, and its benefits. Part II introduces federal electricity regulation, and analyzes various FERC-jurisdictional opportunities and barriers to energy storage. It also highlights recent FERC actions that proactively address or incidentally impact energy storage resources. Finally, Part III proposes actions FERC should take to remedy identified barriers. In particular, it argues that FERC is required under the Federal Power Act (“FPA”) to eliminate unjust, unreasonable, and unduly discriminatory barriers to energy storage in organized wholesale markets and resource adequacy planning processes. It then argues that the Commission should clarify its policies for classifying storage devices, without arbitrarily limiting storage resources from maximally benefiting the grid by performing multiple functions. Finally, it argues that energy storage resources should be considered comparably alongside traditional resources in transmission planning processes.