Dive Brief:

• PJM will not be lowering its 10-hour discharge requirement for storage resources to participate within its capacity market, CEO Andy Ott said at a Politico event on Wednesday.
• Ott said that lowering its standards to two hours, as part of its compliance with Federal Energy Regulatory Commission (FERC) Order 841, would displace demand response resources. "There has to be another way, maybe outside of Order 841," Ott told Utility Dive.
• Ott claimed the regional transmission operator (RTO) has the largest penetration of demand response in the world, at 6% of PJM's total supply. Those resources are being used for peak shaving.

Dive Insight:

PJM filed with FERC a "very comprehensive change" in March to pricing policy in their reserve market, Ott said, in order to best establish how different types of resources, from demand response to storage, can be compensated for providing flexibility to the system. Comments on PJM's proposal were due on Wednesday.

"Shouldn’t FERC's 841 be a big part of that? Obviously, your 841 filing has been pretty roundly criticized as not a serious response to what FERC was trying to do," Sen. Martin Heinrich, D-N.M., told Ott on stage during the Politico event.

Energy storage officials have expressed concerns about the 10-hour discharge requirement within PJM's capacity market, as technological advancements have not yet yielded eight-hour or 10-hour continuous battery duration.

As other energy storage advocates have noted in comments in PJM's Order 841 docket regarding strict minimums for battery storage, "there's an enormous number of business cases" for batteries with shorter capacity, Heinrich said.

Previously, the high duration threshhold for battery storage set by PJM was seen as a direct comparison between the resource and nuclear, coal or gas power plants, which have longer continuous duration. But lowering the storage discharge requirement to two hours would threaten demand response resources instead of gas peakers or baseload power plants, Ott implied in comments on stage and to Utility Dive.

Ott called for "synthetic ramping" that would pair multiple storage systems and individually pay them, bundling them to achieve a higher amount of duration. On stage, he hypothesized about putting a two-hour battery, a four-hour demand response system and a three-hour hydropower system "all together" to collectively provide "synthetic peak shaving."

"Unfortunately, 841 doesn’t allow us to piece that together. We have to work through FERC to get that," he said, circling back to PJM's reserve market filing. 

Ott said one of the biggest values of batteries in PJM's grid is their quick response, making them stronger candidates for participation in the reserve market, as opposed to its forward capacity market. He said batteries would best fit within the RTO's markets by being paid to provide "a very quick response." PJM wants to add several short-term reserve products, which Ott previously discussed with Utility Dive.

"I think the better way to approach it is, in PJM at least, let's look at ways to compensate resources that can provide 'short-term... response,' and that's our reserve market," Ott told Utility Dive.

Despite the RTO's desired work-around of the sweeping federal regulation on energy storage, Order 841 remains a critical piece to storage advocates.

"I think part of this is an engineering problem, but the bigger problem is the cultural problem that exists in utilities because utilities are very good at saying why we don’t do things long after the engineering problems are actually solved," Heinrich said on stage, following Ott's comments comparing battery storage with baseload power plants.