FERC, CFTC, and State Energy Law Developments

For years, the US electric power industry has witnessed a steady uptick in the total capacity of deployed energy storage resources. Part of that growth is attributable to more favorable economics for storage projects, a trend that is set to continue in the coming years—a recent study by Bloomberg NEF forecasted that the global energy storage industry will see $620 billion in new investments by 2040. While the development of stationary batteries is expected to be outpaced by other storage applications, such as electric vehicles, the study also suggests that rapidly sliding capital costs for battery systems will be advantageous for utility-scale projects.

A new market registration option is among the changes SPP is likely to propose in next month’s mandatory compliance filing.

We reported last week on steps that ISO New England has taken to finalize tariff revisions to meet the directives of Order No. 841, the Federal Energy Regulatory Commission’s (FERC or Commission) final rule on electric storage participation in Independent System Operator (ISO) and Regional Transmission Organization (RTO) markets. Order No. 841 requires RTOs and ISOs to submit proposed models that permit electric storage resources to participate in organized capacity, energy, and ancillary service markets by December 3, 2018 (read a more comprehensive overview of the final rule here). At the end of October, Southwest Power Pool, Inc. (SPP) moved closer towards meeting that goal when its board approved tariff revisions developed in response to FERC’s Order No. 841 directives, which should represent new opportunities for some of the 2.5 GW of pending electric storage resources in SPP’s generator interconnection queue.

Revisions aim to build on framework designed originally for pumped-storage hydro facilities and bring region closer to Order No. 841 compliance.

Earlier this year, the Federal Energy Regulatory Commission (FERC or Commission) issued Electric Storage Participation in Markets Operated by Regional Transmission Organizations and Independent System Operators (Order No. 841), a final rule amending FERC’s regulations to facilitate participation of electric storage resources in the capacity, energy, and ancillary service markets operated by regional transmission organizations (RTOs) and independent system operators (ISOs). As we reported previously, Order No. 841 requires RTOs and ISOs to devise an electric storage resource participation model that meets certain general criteria. The RTOs/ISOs must file the tariff revisions directed by Order No. 841 by December 3, 2018, and implement those changes, if approved, by December 3, 2019.

The August 2018 enactment of the Foreign Investment Risk Review Modernization Act (FIRRMA) came after more than two years of debate over the appropriate scope of jurisdiction for the Committee on Foreign Investment in the United States (CFIUS). Much has already been written about FIRRMA and its potentially ambitious reach, as well as about the interest by certain parties, including members of Congress, to keep CFIUS away from some transactions. The result was a law that amended a number of provisions defining CFIUS jurisdiction, both expanding and narrowing key parts of the Committee’s reach. The pilot program is focused on certain specific types of transactions, without regard to the country of the acquiring entity, that CFIUS can review under FIRRMA, including transactions involving “Nuclear Electric Power Generation;” “Petrochemical Manufacturing;” “Power, Distribution and Specialty Transformer Manufacturing;” “Storage Battery Manufacturing;” and “Turbine and Turbine Generator Set Units Manufacturing.”

Read the LawFlash.

The Federal Energy Regulatory Commission issued a final rule revising the Large Generator Interconnection Procedures and Large Generator Interconnection Agreement. The changes are intended to provide increased certainty and additional interconnection service options to generation interconnection customers, while also enhancing the information available for interconnection decisionmaking. Transmission providers will be required to submit compliance filings. Read the full LawFlash.

The renewable energy industry, now designated as a technology and innovation-related area of special concern to the protection of the US industrial and scientific base, is one of seven sectors that the United States Trade Representative recently identified as being of significant national security concern.

Foreign acquisitions and investments in the renewable energy industry, including wind, solar, and hydroelectric power, have been targeted for additional scrutiny by the Trump administration in the voluminous report issued March 22 by the White House Office of the United States Trade Representative (USTR). The USTR’s primary concern in its investigation was with acquisitions and investments related to technology transfer, intellectual property, and innovation in seven industry sectors that it specifically identified as being of significant national security concern. Renewable energy is one of the seven sectors highlighted for increased scrutiny, through expanded reviews of certain types of deals by the Committee on Foreign Investment in the United States (CFIUS). While the USTR report focused on Chinese acquisitions and investments, the identification of renewable energy as one of the seven main industry sectors of concern means that acquisitions and investments by entities in other foreign nations may also be subject to heightened scrutiny by CFIUS. This Morgan Lewis LawFlash by our CFIUS Group summarizes the USTR report and provides links to the report and to the Presidential Memorandum also issued March 22, directing certain actions in furtherance of the USTR’s recommendations.

In a landmark rulemaking announced at today’s open meeting, the Federal Energy Regulatory Commission (FERC or Commission) opened participation in organized wholesale markets to electric storage resources. The final rule aims to remove barriers to participation in organized markets, reflecting FERC’s view that existing market participation models can limit the availability of services that resources based on newer technology are capable of providing.

The final rule requires each regional transmission organization (RTO) and independent system operator (ISO) to revise their tariffs to establish a participation model that recognizes the physical and operational characteristics of electric storage resources and facilitates the participation of those resources in the organized markets. FERC staff’s accompanying presentation explained that those participation models must (1) ensure that a resource using the participation model in an organized market is eligible to provide all capacity, energy, and ancillary services that it is technically capable of providing; (2) ensure that a resource using the participation model can be dispatched and can set the wholesale market clearing price as both a wholesale seller and wholesale buyer consistent with existing market rules; (3) account for the physical and operational characteristics of electric storage resources through bidding parameters or other means; and (4) set a minimum size requirement that does not exceed 100 kilowatts. The final rule also requires that the sale of electric energy from the organized markets to an electric storage resource that the resource then resells back to those markets must be at the wholesale locational marginal price. The final rule will take effect 90 days after publication in the Federal Register. RTOs and ISOs will have 270 days after the effective date to submit compliance filings, with an additional 365 days to fully implement the new tariff provisions.

The Kleinman Center for Energy Policy invited energy practice partner Ken Kulak to discuss corporate America’s efforts to deepen their clean energy commitments during a recent episode of podcast Energy Now. During the podcast, Ken discusses increasing corporate commitments to sustainability and strategies for procuring renewable energy, including virtual power purchase agreements.

In the first quarter of 2017, more than 100 stakeholders, including utilities, technology providers, system operators, and state regulators submitted comments on the extensive notice of proposed rulemaking (NOPR) initiated by the Federal Energy Regulatory Commission (FERC) to encourage deployment of energy storage and aggregated distributed energy resources. While there has been no further official action at FERC (perhaps due to a lack of quorum from February 4 to August 9, 2017 and the need for a new commission to reassess priorities), an increasing number of states and utilities continue to advance investments in energy storage technologies:

  • In mid-October, the Washington Utilities and Transportation Commission issued a policy statement directing utilities to consider energy storage in their resource planning and procurement activities. While the statement does not go as far as setting a procurement mandate, it establishes an expectation that utilities will, among other things, model the sub-hourly benefits of a range of different storage technologies and include a storage alternative in their analysis of resource options.
  • Also last month, the Massachusetts Department of Public Utilities launched an investigation of the eligibility of energy storage systems for net metering and the role of net-metered resources in forward capacity markets.

A recent Smart Electric Power Alliance report on US energy storage deployments underscores that energy storage will continue to expand even though the timing and scope of federal regulation remains unknown. According to the report, utilities interconnected more than 200 megawatts (MW) of energy storage to the grid in 2016, bringing the total energy storage in operation nationwide to 622 MW across 2,399 systems. Even more staggering, GTM Research currently forecasts an elevenfold growth in the size of the 2016 market to 2.5 gigawatts (GW) by 2022.

The US Senate has confirmed Kevin McIntyre and Richard Glick to join the Federal Energy Regulatory Commission (FERC), restoring the Commission to a full complement of five commissioners for the first time in over two years. Although FERC has had a quorum for two months, the full complement of commissioners should help the agency work through the backlog of pending proceedings that piled up in the six months that the Commission lacked a quorum. Major actions awaiting Commission action include the Department of Energy’s (DOE’s) notice of proposed rulemaking (NOPR) on generation resiliency, FERC’s 2016 electric storage NOPR, and numerous infrastructure proposals. Given the high speed at which the Commission is considering the DOE resiliency proposal, with an initial ruling due around the end of November, that action could be the first opportunity for the new commissioners to make their mark on a major policy initiative.