Dive Brief:

• Key market reforms could speed energy storage deployment and integration, boost system reliability and mitigate high capacity prices on the PJM Interconnection, Midcontinent Independent System Operator and New York ISO grids, the Brattle Group said Tuesday in a roadmap and analysis prepared for the American Clean Power Association.
• In their Energy Storage Market Design Roadmap, Brattle and ACP recommended changes to PJM rules to make it easier for energy storage to respond to real-time market signals, advised MISO to update its capacity accreditation modeling to unlock storage’s operational flexibility and reliability benefits, and encouraged NYISO to amend its rules to more efficiently match power supply with demand.
• The reforms would help energy storage live up to its potential as the “Swiss Army knife of the electric grid” — contributing to the energy, capacity and ancillary services markets while firming intermittent renewables and improving fossil power plants’ efficiency and cost-effectiveness, Brattle and ACP said.

Dive Insight:

In 2018, the Federal Energy Regulatory Commission ordered regional transmission organizations and independent system operators to allow energy storage resources to participate in wholesale energy, capacity and ancillary services markets.

Grid-connected batteries have since significantly improved grid reliability while reducing pressure on electricity customers in markets that encourage deployment, Brattle and ACP said. On the Electric Reliability Council of Texas grid, for example, an ACP analysis released in December found roughly 5 GW of new storage capacity deployed in 2023 and 2024 saved customers at least $750 million through lower real-time power pricing while avoiding the need for energy conservation appeals during the summer of 2024, Texas’s sixth-hottest on record.

But despite progress in some organized electricity markets, wholesale market designs still revolve around the capabilities and limitations of conventional generation, even as projected load growth, planned thermal generation retirements and ongoing renewables deployments heighten resource adequacy and flexibility needs, Brattle and ACP said.

Due in part to these constraints, energy storage deployment in PJM, MISO and NYISO has lagged leaders like ERCOT and the California ISO, the groups said. At the same time, the share of intermittent renewables is expected to grow in all three regions as electricity demand rises and key states like Michigan, Illinois and Virginia target full power-sector decarbonization by 2040 or 2050, they said. 

Additionally, several states in the study areas have gigawatt-scale storage deployment targets, including New York (6 GW by 2030), Virginia (3.1 GW by 2035 — potentially increasing to 10 GW by 2045 under a bill awaiting the governor’s signature) and Maryland (3 GW by 2033). PJM states have a cumulative storage target of 18 GW, Brattle and ACP said. 

Each region offers clear opportunities for pro-storage market reform, according to the roadmap.

PJM should consider amending its rules to enable energy storage assets’ market bids to reflect the opportunity cost of dispatching energy outside of peak periods, when real-time pricing is higher, Brattle and ACP said. This “opportunity cost bidding” reform would improve storage operators’ revenue clarity while optimizing dispatch and improving system reliability, market efficiency and asset flexibility, they said.

PJM would also benefit from implementing ramping and day-ahead uncertainty products to meet real-time flexibility needs and forecasted net demand, reducing its vulnerability to unexpected changes in supply and demand, Brattle and ACP said.

Likewise, NYISO should accelerate adoption of ramping and uncertainty products, according to the roadmap. Brattle and ACP recommended several enhancements to NYISO’s current day-ahead uncertainty and ramping product design, including raising the day-ahead and ramping operating reserve demand curve maximum values above the current respective $750/MWh and $40/MWh limits, addressing day-ahead availability needs through its proposed 60-minute capability and 4-hour duration reserve product or procurement of additional 30-minute reserves, and including expected ramp in market procurements to avoid out-of-market payments and incentivize flexibility.

For its part, MISO should develop a day-ahead uncertainty product and use its ongoing capacity accreditation reform process to better capture energy storage’s reliability contributions, Brattle and ACP said. Updating its Direct Loss of Load methodology to reflect storage’s ability to reduce the depth of load shed could boost storage capacity accreditation from 36% to 62%, they said.