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FERC, CFTC, and State Energy Law Developments

During its January open meeting, FERC issued an order directing independent system operators (ISOs) and regional transmission organizations (RTOs) to submit informational reports regarding co-located generation resources. The order focuses on so-called “hybrid resources,” which is a term that refers generally to sets of co-located resources sharing a single point of interconnection that can be separately dispatchable or modeled and dispatched as a single integrated resource. The forthcoming reports could shed light on the manner in which hybrid resources are, or could be, participating in wholesale markets as well as the hurdles to such participation.

Today, hybrid resources typically comprise a conventional generation resource (e.g., a gas-fired plant) and an electric storage resource (e.g., a grid-scale lithium ion battery). Improvements to battery technology and cost reductions have contributed to the growing prevalence of hybrid resources, prompting grid operators to adapt market designs and tariff rules that were originally designed for more conventional resources that did not present the same complex operational challenges as hybrid resources.

In light of those ongoing efforts, the Commission has directed grid operators to provide informational reports on the following four categories of issues related to the integration of hybrid resources in wholesale markets:

  1. Terminology. Grid operators will need to explain whether hybrid resources are formally defined in their tariffs and market processes, and if not, how those resources are categorized and the manner in which they participate in wholesale markets.
  2. Interconnection. The Commission is seeking details on the interconnection process for both a hybrid resource newly entering the interconnection queue and a resource adding a storage component to an existing interconnection request. These scenarios present unique challenges to the administration of interconnection queues, particularly in regions that do not have clearly defined tariff provisions or business practices addressing hybrid resource interconnection. To address this gap, FERC has directed the grid operators to explain the interconnection request requirements specific to hybrid resources, how they model hybrid resources for reliability and market participation, and how they would treat a request for the addition of storage to an existing interconnection request.
  3. Market participation. Along the same lines of the inquiry into market participation barriers that led to the storage-focused Order No. 841, the Commission has directed grid operators to describe how hybrid resources are currently participating in wholesale energy, ancillary services, and capacity markets. The informational reports must identify the services that hybrid resources are eligible to provide and how modeling and bidding are accomplished for such resources. If no such modeling and bidding provisions exist, grid operators are directed to explain whether and how hybrid resources have participated in markets to date.
  4. Capacity valuation. The unique operating characteristics of hybrid resources and the multiple grid benefits they can provide have raised the question of whether those resources require custom methodologies to determine their capacity values and market contributions. FERC has directed the grid operators to explain how the capacity value of hybrid resources is currently determined in their markets and any proposals that are currently under consideration.

The ISO and RTO reports are due by July 19, 2021, and public comments responding to those reports are due by August 18, 2021.

Utilities and project developers alike should evaluate the ISO and RTO responses and consider participating in this proceeding. The Commission declined to direct specific changes in recognition of the fact that ISOs and RTOs are still adapting to the changing nature of the grid and the increase in hybrid resources. However, it is possible the Commission could later determine that a formal rulemaking is needed to institute further market reforms, as it has done in recent years to remove market participation barriers for electric storage resources (Order No. 841) and distributed energy resource aggregators (Order No. 2222).