Dive Brief:

• The Markets and Reliability committee at PJM Interconnection last week approved an Effective Load-Carrying Capability (ELCC) package in response to the Federal Energy Regulatory Commission's order on how regional transmission organizations value energy storage in wholesale power markets.
• Energy storage operators can look forward to the fair value and predictability they need to enter the Mid-Atlantic market, Energy Storage Association (ESA) CEO Kelly Speakes-Backman said in a statement reacting to the committee's action.
• PJM's independent market monitor disagreed with the committee's decision and had argued against ELCC approval. The scheme was neither adequately modeled nor well understood, according to the market monitor.

Dive Insight:

The Markets and Reliability Committee's approval of the ELCC package advances PJM's actions on energy storage in response to FERC directives to review how the resource's value is determined in the grid operator's capacity market.

"PJM is pleased that stakeholders were able to achieve greater than two-thirds consensus on a package of changes to implement the ELCC approach to establishing the capacity value of intermittent resources," a PJM spokesperson said in an email.

ELCC is a detailed calculation of a resource's reliability value.

"We were very critical of ELCC," Joseph Bowring, independent market monitor for PJM, said, "We do not believe it is appropriate to put ELCC into place right now. It makes sense to think about ELCC, but it should be done analytically."

As currently approved, ELCC "shifts risks from investors to customers and that’s inappropriate," he continued.

"This set of rules does a better job of embracing the advanced energy resources that are coming onto the grid, which will make more resources available to grid operators," said Elizabeth Watson, senior director of policy and market design at clean energy holding company Modern Energy.

"This decision will change the way PJM values limited duration resources like energy storage and intermittent resources, including renewables, in the capacity market, closing the gap between the potential value that advance energy resources can provide to the grid and what they’re able to provide under existing rules," she continued.

Last week’s action opens the door for storage operators to PJM’s capacity market, Jason Burwen, vice president of policy for ESA, said in an email. "The approach approved by PJM’s stakeholders would finally create that ‘reliability-agnostic’ valuation of energy storage, determining the contribution that storage of differing durations makes to system reliability in a manner that allows a more apples-to-apples comparison to fuel-based generation and other resources," he said.

"Today, yet another regulatory barrier to energy storage deployment was removed, following directives from FERC to re-examine how the value of storage is determined in PJM’s capacity market," ESA CEO Speakes-Backman said in a statement.

There still will need to be state regulatory changes to enable participation of energy storage operations in local markets, according to Burwen. "Updates to interconnection regulations, permitting or other regulations at the state level can further remove barriers to storage that might ultimately participate in wholesale markets," he said. "We’ll also need to watch for any new state barriers on distributed storage participation."

PJM’s action could offer a model for other regional transmission organizations (RTOs) and independent system operators (ISOs), according to Burwen.

"To date, energy storage has been viewed in RTO/ISO markets as having a low contribution to reliability — despite the fact that regulated utilities in numerous states have procured storage for system reliability," he said.

PJM will need to take additional steps toward the deployment of distributed resource plus storage projects, according to Burwen. "As integrated hybrid storage-plus-generation resources connect to the grid, PJM will need to update its rules to clarify the interconnection and market participation rules for those resources," he said.

After the committee's approval of the ELCC package, PJM's technical staff now must develop detailed tariff rules for implementation before any submission can be made to FERC. The submission deadline is October 30.