UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION. ) ISO New England Inc. ) Docket No. ER Regulation Market Changes ) )

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1 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION ) ISO New England Inc. ) Docket No. ER Regulation Market Changes ) ) MOTION TO INTERVENE AND PROTEST OF THE ENERGY STORAGE ASSOCIATION Pursuant to Rules 212 and 214 of the Rules of Practice and Procedure of the Federal Energy Regulatory Commission ( FERC or the Commission ), 18 C.F.R and 18 C.F.R and the Commission s Combined Notice of Filings #1 dated March 20, 2014, the Energy Storage Association ( ESA ) hereby submits its Motion to Intervene in the abovecaptioned matter and its Protest of ISO New England Inc.'s ("ISO-NE") proposed tariff for Regulation Market Changes. As explained below, ISO-NE's proposed tariff fails to incorporate the dispatch method that was tested and implemented successfully for advanced storage resources during ISO-NE s five year Alternative Technology Regulation Pilot Program ( Pilot Program ). As a result, ISO- NE has created unjust and unreasonable barriers to entry to ISO-NE s regulation market for batteries and flywheels. If approved, the tariffs will preclude alternative storage technologies from participating in the regulation market on a comparable basis with other regulation providers. Despite the successful Pilot Program, ISO-NE is proposing to revert back to a dispatch method that only accommodates the operational characteristics of traditional generator resources, as if the Pilot Program never existed. Such a proposal, particularly when there are over 130 MW of batteries and flywheels providing frequency regulation on the US power grid v1 1

2 today, is simply beyond comprehension and lacks common sense. Furthermore, it is discriminatory, unjust and unreasonable. I. COMMUNICATIONS Communications and correspondence related to this filing should be directed as follows: Andrew O. Kaplan Brown Rudnick LLP One Financial Center Boston, MA Tel: Fax: Katherine Hamilton Policy Director Energy Storage Association 1155 Fifteenth St. NW, Suite 500 Washington, DC 2000 Tel: Fax: Judith Judson McQueeney Consultant 933 Great Pond Road North Andover, MA Tel: Fax: II. INTERVENTION The ESA is a national trade association that was established over 20 years ago to foster development and commercialization of electricity storage technologies. ESA members represent a diverse group of entities, including manufacturers, developers and operators of energy storage technologies that provide fast-responding, environmentally-friendly Regulation service to the nation's grids and internationally and now seek to operate commercially in ISO-NE v1 2

3 Accordingly, ESA has a direct and substantial interest in this proceeding and in FERC s decision in this docket. Moreover, as no other party to this proceeding can adequately represent ESA s interests, it is in the public interest to allow intervention in this docket. Thus, ESA respectfully requests that it be allowed to intervene as a party. III. COMMENTS A. ISO-NE s proposed tariff changes are not just and reasonable as they result in discriminatory treatment for limited energy storage resources and unduly preferential treatment for traditional generation resources. 1. Background on ISO-NE s Alternative Resource Regulation Pilot Program. In Order No , the Commission amended the pro forma Open Access Transmission Tariff (OATT) to permit Regulation and Frequency Response to be provided by generating units as well as other non-generation resources. On May 7, 2008, the Commission accepted a modified filing submitted by ISO-NE and NEPOOL, among others, in compliance with the directives of Order No In its Order, the Commission found that ISO-NE would not fully comply with Order No. 890 until revisions were made to the ISO-NE OATT permitting non-generation resources to provide Regulation and Frequency Response service. In response to this directive, on August 5, 2008, ISO-NE and NEPOOL submitted tariff revisions establishing a Pilot Program designed to permit Market Participants with resources incorporating new, alternative technologies to provide and be paid for regulation services on a trial basis. The intent of the Pilot Program was to evaluate the manner in which such alternative technologies provide regulation services and to implement further revisions to the market rules and operating procedures - based on a firm technical basis - so that alternative technologies could 1 Preventing Undue Discrimination and Preference in Transmission Service, Order No. 890, 72 Fed. Reg (Mar. 15, 2007), FERC Stats. & Regs. 31,241 (2007), order on reh'g, Order No. 890-A, 73 Fed. Reg (Jan. 16, 2008), FERC Stats. & Regs. 31,261 (2007), order on reh g, Order No. 890-B, 123 FERC 61,299 (2008), order on reh g, Order No. 890-C, 126 FERC 61,228 (2009), order on reh g, Order No. 890-D, 129 FERC 61,126 (2009). 2 ISO New England Inc., 123 FERC 61,133 (2008) v1 3

4 participate in the regulation market under terms and conditions comparable to other Market Participants. Furthermore, ISO-NE agreed in its filing to submit quarterly reports on the program, recognizing that full compliance the May 7, 2008 order will require the ISO to work diligently to implement the Market Rule Changes, the Pilot Program and the market rule revisions that result from the Pilot Program. (emphasis added). On September 15, 2009, the Commission accepted, by delegated letter order, tariff revisions allowing the provision of regulation by non-generating resources and instituting the Pilot Program. 3 In a subsequent order on the pilot program to extend the eligibility deadline for participation, the Commission reiterated the purpose of the program was to accommodate the unique characteristics of alternative technologies and remove barriers that may preclude alternative technologies from participating in the regulation market on a comparable basis with other regulation providers Advanced Energy Storage Participation in the Pilot Program and Lessons Learned. The Pilot Program began on November 18, 2008, with ESA member company, Beacon Power providing 1 MW of regulation using its flywheel technology. 5 As per the Pilot Program rules, Beacon Power progressed through two phases of operation. The first phase was an initial test period which was done in collaboration with ISO-NE to test alternative control strategies and to identify the operating parameters that balance system reliability, system-wide costs of regulation and the economic performance 3 ISO New England Inc., Docket No. ER (Sept. 15, 2009) (unpublished letter order). 4 FERC order accepting Tariff Revisions, December 10, Docket No. ER Since November 18, 2008 Beacon Power has participated in the pilot program with various amounts of flywheels, ranging up to 3 MWs v1 4

5 of the resource. 6 The second phase which, per the pilot program rules, is intended to approximate how the facility would operate in the competitive Regulation market 7 began in mid During the first phase, ISO-NE dispatched the flywheel using a signal that simulated one sent to a fast-ramping generator resource. While this signal took advantage of the flywheels capability to respond with its full output in under one four-second AGC dispatch interval, it quickly became clear that that the energy bias or drift in the regulation signal was not workable for limited energy storage resources because it did not take into account the inherent operating characteristics of a limited storage resource. Based on these results and the work being done in other ISOs (see discussion below) to integrate limited energy storage resources, ISO-NE worked with Beacon Power to develop a dispatch mechanism that recognized that although the flywheel could not continuously generate energy, it could continuously supply regulation if the ISO took into account its state-of-charge ("SOC"), or its stored energy level, in the dispatch. Namely, when a storage resource is at 50% SOC it can provide regulation around a 0 MW basepoint by either injecting or withdrawing energy. When that storage resource is empty, it can provide regulation like a demand response resource around a negative base-point by varying its consumption of energy. And, when a storage is full, it can provide regulation just like a Generator, around a positive base-point and varying its injection of energy. Thus, a flywheel 6 ISO-NE Tariff, Section III, Market Rule I, Appendix J Alternative Technologies Regulation Pilot Program III.J.1. Purpose, iv. For each participating Resource, identify the preferred operating parameters that balance system reliability, system-wide costs of regulation service, and the economic performance of the Resource. 7 ISO-NE Tariff, Section III, Market Rule I, Appendix J Alternative Technologies Regulation Pilot Program III.J.7. Program Design and Management: The participation of each Resource in the pilot program will progress through two phases. During the first phase, various regulation dispatch parameters will be adjusted by the ISO in collaboration with the participant to achieve a balance between benefits provided to the Regulation market as identified by the ISO and profitable operation of the Resource as identified by the Participant. The ISO will initially send automatic generation control setpoints to each pilot program participant and will observe and monitor the Resource s ability to perform in accordance with the performance specifications provided by the participant. When the ISO and the participant agree that the adjusted dispatch parameters achieve the desired balance, the Resource will enter the second phase of operations which continues through the end of the pilot program. Operation during the second phase is intended to approximate how the facility would operate in the competitive Regulation market. Further adjustments to dispatch parameters during the second phase are permitted, but are expected to be less frequent v1 5

6 always has the ability to provide regulation as long as the ISO sets its base point to the mid-point of its available operating range. In April 2009, ISO-NE began allowing the Beacon Power resource to telemeter its operating range to the ISO every five minutes so that ISO-NE could adjust the dispatch signal to account for the available operating range, which resulted in Beacon Power successfully providing regulation to ISO-NE for the past five years. FERC noted ISO-NE s dispatch mechanism in Order 755 at P184, stating that some RTOs and ISOs have implemented changes to their markets that serve to mitigate the impact of drift on energy storage devices. For example, MISO and NYISO have developed market provisions that manage the charge state of energy storage devices, while ISO-NE allows energy storage devices to update their bids more frequently. (emphasis added) Furthermore, data from Beacon Power s flywheel pilot project was used by the Commission to explain the need for changes to the Regulation compensation mechanism, which was the basis of FERC Order 755. The graph below, which was attached as Appendix A to the NOPR 8, shows actual data from Beacon Power s flywheel resource in the ISO-NE Pilot Program on May , after ISO-NE began adjusting the dispatch based on Beacon Power s state of charge. The flywheel follows the Regulation signal precisely, due in part to ISO-NE adjusting the signal based on Beacon s telemetered operating limits. This can be seen at times 12:21-12:30 and 12:51-12:57 when the Regulation limits were adjusted. Even with this dispatch method, the flywheel provided more Regulation service, in terms of ACE correction (area under the curve, measured in MWhs) and mileage (sum of movement of resource, measured in MWmiles) than a generator with a 5 minute ramp rate, shown by the red line. The flywheel provided 8 Notice of Proposed Rulemaking, Frequency Regulation Compensation in the Organized Wholesale Power Markets, Docket Nos. RM and AD , February 17, Appendix A v1 6

7 0.48 MWh of ACE correction and 25 MW-miles while the generator provided 0.11 MWh of net ACE correction and 8 MW-miles. By taking into account advanced storage resource operating characteristics (i.e. it does not generate energy and instead provides regulation by both injecting and withdrawing electricity) batteries and flywheels can provide continuous regulation. If the storage is dispatched like a generator (i.e. assuming it has the ability to generate energy continuously and ignoring that it can also modify its withdrawals of energy) then the storage is dispatched a signal that it cannot follow even though it has the ability to still provide regulation to the system. Dispatching a storage resource using an assumption that is generator, as ISO-NE is proposing to do by changing the AGC dispatch method so that all resources are dispatched using the same dispatch method, is inefficient and discriminatory because it provides comparable treatment to only those resources that have the operational characteristics of a generator v1 7

8 MW Under ISO-NE s proposed tariff, advanced storage resources will not be able to update their operating parameters and will be required to follow the generator dispatch signal that was shown during the first six months of the pilot program to result in inefficient use of these resources. 3. Example of the Issue with ISO-NE s Proposed Dispatch Mechanism On March 20, 2014, ISO-NE posted data on its website on the dispatch signal that will be used for all resources. 9 The graph below shows a storage resource responding to the sample AGC signal. Without the ability to manage the SOC, which will be the case if the proposed tariff goes into effect, the storage resource fades (fills up or runs out of energy) several times during the hour, shown by the blue line diverging from the black line and shaded in grey. 1.0 Data Showing 1 MW Storage Resource in ISO-NE Regulation Market Under Proposed Rules Minutes ACE Corrected by Storage AGC Response According to the ISO-NE planned Regulation Performance Monitoring rules, whenever a resource s response deviates from its expected dispatch by a great enough amount (the specific 9 Data posted on March 20, 2014 to v1 8

9 MW amount has yet to be published), the resource will receive a 0 score for the rest of the hour. 10 This means that for the above hour, the storage resource would not be paid for regulation after minute 43 even though it has the ability to continue to provide regulation as shown in the next graph. Even worse, there could be some hours when a storage resource would lose its payment for the hour right at the start of the hour. With such a high risk of losing payment, ISO-NE s proposed dispatch method creates a barrier to entry for all limited energy storage resources. However, as shown in the graph below, if the dispatch signal developed in the Pilot Program continues (which takes into account the operating characteristics of storage resources and their SOC), this issue can be eliminated. The graph below shows how the storage resource will provide continuous regulation service if allowed to continue to telemeter is available operating range to the ISO so that its SOC is taken into account in the dispatch. 1.0 Data Showing 1 MW Storage Resource in ISO-NE Regulation Market Under Pilot Dispatch Minutes ACE Corrected by Storage AGC Response 10 Page 13 of Regulation Performance Monitor file posted on March 28, 2014 to v1 9

10 MW With the pilot program dispatch, the storage follows its signal 100% accurately and is paid for the entire hour, although it is paid for a lower amount of capacity in the last part of the hour to account for its reduced operating range. (It is important to note that when the operating range is adjusted so is the corresponding amount of capacity payment.) This results in comparable payment for comparable service. Moreover, when the performance of the storage resource is compared to a generator with a five minute ramp rate (the ISO takes into account the ramp limitations of generators in its dispatch), as shown below, the flywheel with its adjusted operating range, provides more overall Regulation Service than the generator, as shown in the graph. The graph below shows simulated 1 MW Regulation capacity from a generator, shown by the red line, responding to the same AGC signal. 1.0 Data Showing 1 MW Storage Resource Under Pilot Dispatch and 1 MW of Regulation Capacity from a Generator Minutes ACE Corrected by Storage ACE Corrected by Generator Storage Response Gen Response v1 10

11 The dispatch mechanism developed and successfully used in the Pilot for five years provides the firm technical basis to maintain this dispatch method. Similarly, stopping this dispatch method despite the information learned in the Pilot has no firm technical basis. In addition, the lessons learned in the Pilot provided the ISO and stakeholders with a high level of confidence that any market changes proposed [based on the Pilot results] will be appropriate and beneficial and will ultimately work as intended, so continuing the dispatch method developed for advanced storage will be appropriate and beneficial and will work as intended. Therefore, ISO-NE s proposed change to the AGC that would result in all resources being dispatched using the same dispatch method as generators, rather than two different methods as originally planned 11 is inappropriate, not beneficial to the ISO or stakeholders, and will result in non-comparable treatment of resources. 4. ISO-NE has confirmed the benefit of using variable regulation limits in its dispatch of storage. In its filing to the Commission in November 2009, the ISO stated Beacon s participation in the Pilot, along with the variable regulation limits has been helpful to learning how to incorporate flywheels into the New England market. ISO-NE stated [T]o be sure, Beacon s participation in the Pilot Program in general, and its use of the variable regulation limits algorithm in particular, has been very helpful to the ISO in evaluating how to incorporate this type of technology into the New England markets infrastructure. At the November 9, 2010 NEPOOL Markets Committee meeting ISO-NE discussed the benefits of using variable operating limits for storage, as shown in the following slide presented at the meeting. 11 Transmittal letter, page v1 11

12 Moreover, ISO-NE stated in its original Order 755 compliance filing that it would keep the same dispatch method when the pilot ended: The existing AGC dispatch systems used for generation and non-generation resources will be retained. 12 ISO-NE s last minute dispatch change on the eve of the implementation of its Order 755 market creates an unreasonable barrier to entry to limited energy storage resources, such that we respectfully request the Commission to reject ISO-NE s proposed tariff changes. B. ISO-NE s plan to make all resources follow the same signal as is used for generators is not consistent with FERC precedence. In those ISO/RTO markets that have implemented FERC Order 755, the Commission has approved tariffs to integrate limited energy storage resources into the regulation market by accounting for their operational characteristics in the regulation dispatch signal. FERC has consistently found that this results in comparable treatment for storage resources and generators. 12 ISO-NE April 30, filing, ER , page v1 12

13 For example, on May 15, 2009 FERC approved the New York Independent System Operator s ( NYISO ) Proposed Tariff Revisions to Integrate Energy Storage Devices into the NYISO-Administered Regulation Service Market. 13 In its filing, NYISO proposed changes to its scheduling, operations and settlements system, which included provisions to manage the charge state of energy storage devices on a 5 minute basis by adjusting upper and lower Regulation limits, in order to take advantage of the benefits of Limited Energy Storage Resources ("LESRs") in a manner that treats them comparably to other generation facilities, and without impacting the NYISO's ability to meet all existing reliability criteria. In its decision approving NYISO's implementation of tariffs to integrate energy storage into the Regulation market, FERC stated that energy storage will benefit NYISO's markets by providing them with a new source of regulation service with unique operational characteristics that enable very fast responses to needs for regulation. FERC further stated that NYISO's proposed tariff revisions further the Commission's goal of improving competition by allowing non-generating regulation service providers to participate in organized markets on comparable terms as generation resources. Similarly, in 2008 and 2009, FERC approved a comprehensive set of tariff changes by the Midwest ISO ( MISO ) to remove all barriers to energy storage in its ancillary services market, including the creation of a new Stored Energy Resource ("SER") asset category, creating new bidding parameters for SERs, a new dispatch method for SERs, which includes managing SOC on a 5 minute basis by adjusting upper and lower Regulation limits, and eliminating the requirement to provide 60 minutes of continuous energy. In its ruling 14, the Commission stated, We expect that the proposed tariff revisions will allow the fly-wheel technology to participate in 13 FERC Order accepting Tariff Revisions, Docket Nos. ER , ER FERC Order on Compliance filing and Stored Energy Resources Proposal, MISO, December 31, Docket No. ER v1 13

14 the Midwest ISO regulating reserve market as Stored Resources on a comparable basis to other resources that provide regulating reserves. At the California Independent System Operator ( CAISO ), FERC approved the use of Regulation Energy Management wherein the ISO manages the SOC of storage resources providing service in the ISO s Regulation Up and Down markets. 15 In its Order, the Commission stated, [W]e find that the implementation of regulation energy management reduces the barriers preventing comparable treatment of non-generator resources in CAISO s ancillary services markets, consistent with Order No In such a way, regulation energy management allows non-generator resources to participate more fully in CAISO s regulation market consistent with the continuous energy requirements. Lastly, in 2009, based on the results of a pilot project with a battery resource, PJM created a new Regulation signal specifically designed for limited energy storage resources referred to as the RegD signal to complement the traditional regulation signal, referred to as the RegA signal. PJM found that the RegD signal has fast ramping characteristic and a short period for energy neutrality that aligns well with many new regulation technologies and some traditional resources. 16 PJM commissioned KEMA to do a study on the two signals to understand the operational relationship between fast-following and traditional regulating resources using PJM s new regulation control signals. The study results demonstrate that the use of fast-following resources, in conjunction with traditional regulating resources, provided more accurate control of ACE, which will allow PJM to maintain similar CPS1 scores achieved today while reducing the total amount of regulation capacity required FERC Order Accepting Proposed Tariff Revisions, November 30, 2011, Docket No. ER PJM Transmittal Letter, Docket No. ER Id v1 14

15 C. ISO-NE s proposed tariff changes are not just and reasonable for ratepayers. ISO-NE ratepayers have funded the Pilot Program for over five years. It is unjust and unreasonable to not incorporate the lessons learned from the Pilot Program after ratepayers have funded this program for so long. Furthermore, requiring all resources to operate like generators will limit the diversity of supply and potential increased competition that comes from enabling non-generator participation in the market. As noted in FERC Order 755, the use of fast, accurate storage resources has the potential to reduce the amount of regulation resources and lower costs for ratepayers. Therefore, ISO-NE s proposal which creates unreasonable barriers to entry to fast, accurate storage resources is not just and reasonable for ratepayers. Moreover, as shown in the table below, ESA s member companies are providing over 130 MWs of frequency regulation service on the US power grid today. Facility (Location) Developer/Owner Technology COD MW Beacon Tyngsboro (MA) Beacon Power Flywheel Beacon 2008 Up to 3 Stephentown Spindle Beacon Power Flywheel Beacon (NY) Laurel Mountain AES Battery A Hazle Spindle (PA) Beacon Power Flywheel - Beacon Kahuku (HI) First Wind Battery Xtreme East Penn (PA) East Penn/Ecoult Battery Ecoult Notrees (TX) Duke Battery Xtreme Tait (OH) AES Battery These projects have demonstrated the capability of advanced storage resources, all of which have under one hour of storage duration, to provide fast, accurate regulation service to the power grid. With such demonstrated capability, there is simply no good technical basis to limit the ability of short duration flywheels and batteries to provide regulation in ISO-NE. Therefore, we respectfully request FERC to reject ISO New England s proposed tariff filing and specifically ISO New England s proposed dispatch method v1 15

16 IV. CONCLUSION For the reasons set forth above, ESA respectfully requests that the Commission reject ISO-NE's proposed tariff and mandate that ISO-NE refile tariffs that use the dispatch methods originally planned by ISO-NE. Respectfully submitted, THE ENERGY STORAGE ASSOCIATION By its attorney, Dated: April 10, 2014 Andrew O. Kaplan BROWN RUDNICK LLP One Financial Place Boston, MA Telephone: Fax: v1 16

17 CERTIFICATE OF SERVICE I, Patricia A. Muse, hereby certify that the foregoing Motion to Intervene and Comments were served via electronic mail to the service list. Dated in Boston, MA this 10th day of April, Patricia A. Muse, Legal Executive Assistant BROWN RUDNICK LLP One Financial Center Boston, MA Phone: v1 17