Energy Storage in Wholesale Markets: Microgrids as Big Batteries?

Feb. 21, 2017
Comments have poured into the Federal Energy Regulatory Commission (FERC) in recent weeks on proposed rules that would boost energy storage in wholesale markets and open new opportunity for microgrids.

Comments have poured into the Federal Energy Regulatory Commission (FERC) in recent weeks on proposed rules that industry players say would boost energy storage in wholesale markets and open new opportunity for microgrids.

Issued in November, the FERC Notice of Proposed Rulemaking (NOPR) attempts to smooth the way for energy storage to transact in six regional wholesale markets that span much of the U.S. The proposal (RM-16-23) also gives distributed energy aggregators wholesale market inroads.

As is customary, FERC has called on stakeholders to comment on the ideas before it puts them into effect. More than 100 companies, utilities, organizations and state agencies have weighed in.

The interest isn’t surprising. Ted Ko, policy director at Stem, says the proposal has monumental significance.

“It is probably the most significant thing at the federal level ever in terms of the rules changing for our business model,” said Ko. Stem aggregates energy storage so that it can participate in energy markets. The company’s mission is to build and operate a digitally connected energy storage network.

Under the FERC proposal, such aggregations could at last get the chance to compete against the power plants that now dominate the wholesale markets.

“It is finally going to make the different wholesale markets around the country adjust their rules to accommodate what energy storage is capable of doing,” Ko said in a recent interview.

Existing rules were designed long before the rise of energy storage and microgrids. Hence, they accommodate the sale of energy, capacity and ancillary services by large, centralized generators, but not small distributed energy resources (DERs) and energy storage in wholesale markets.

Identify new microgrid opportunities by attending Microgrid 2017, Nov. 6-8, in Boston.

Fledgling energy storage technologies have been limited largely to providing frequency regulation on the wholesale level. But they can do much more: “We’re just looking for the rules to catch up and accommodate what we can do,” Ko said.

FERC’s new rule also would allow other distributed energy resources – beyond just storage — to aggregate into fleets and sell into the wholesale markets. This means possible national expansion of California-style aggregation programs and virtual power plant concepts.

Microgrids as big batteries on the grid

Ko said that new aggregation rules could be “extremely valuable to microgrids.” A microgrid could end up looking “like a big battery to the wholesale markets,” which would open up various revenue streams for microgrids.

This fits with growing perception that microgrids are far more than just islanded, back-up generation, useful during power outages, according to Ko. Ninety-nine percent of the time a microgrid is grid-connected and ready to transact through intelligent software and controls.

The Microgrid Resources Coalition, which also filed comments before FERC, said that it is encouraged by the principles the commission articulated in the NOPR. At the same time the advocacy organization is concerned that FERC “has not yet come to grips with the promise and complexity of aggregations.”

Among other things, MRC points out that “microgrids are highly flexible integrated aggregations that are capable of providing a wide variety of services to the grid at both the wholesale and distribution levels.”

Microgrids are “the local building blocks of the grid of the future,” MRC wrote. “The path to energy resiliency and security lies through creation of an interlocking web of local controlled aggregations that integrate with and support one another and the larger grid in flexible configurations.”

Microgrids are “the local building blocks of the grid of the future,” MRC wrote.

The time is right to construct this kind of grid of grids, given that the U.S. transmission and distribution system is aging and undergoing repair and replacement. But for a grid of grids to emerge, microgrids and aggregations “must be able to compete on a level playing field with other resources,” MRC said.

To that end, the organization called for FERC to institute a non-discriminatory participation model that addresses “the widely adaptable characteristics of microgrids and offers true open access to markets.”

FERC is the process of reviewing comments filed in response to the NOPR. It is unclear when the commission will issue a final rule, particularly since the voting body is currently down to two commissioners.

Join MRC, Microgrid Knowledge and the International District Energy Association at Microgrid 2017, Nov. 6-8, in Boston.

About the Author

Elisa Wood | Editor-in-Chief

Elisa Wood is the editor and founder of She is co-founder and former editor of Microgrid Knowledge.

Exploring the Potential of Community Microgrids Through Three Innovative Case Studies

April 8, 2024
Community microgrids represent a burgeoning solution to meet the energy needs of localized areas and regions. These microgrids are clusters of interconnected energy resources,...

Get the full report

Energy Modeling: An Essential Step in Microgrid Projects

Learn how energy modeling can be used to determine the best energy mix for your microgrid, as well as determine how big it needs to be to achieve your project goals.