# Electric Storage Participation in Markets Operated by Regional Transmission Organizations and Independent System Operators > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2018-03708 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** March 6, 2018 - **Citation:** 83 FR 9580 ## Text DEPARTMENT OF ENERGY Federal Energy Regulatory Commission 18 CFR Part 35 [Docket Nos. RM16-23-000; AD16-20-000; Order No. 841] Electric Storage Participation in Markets Operated by Regional Transmission Organizations and Independent System Operators AGENCY: Federal Energy Regulatory Commission, Department of Energy. ACTION: Final rule. SUMMARY: The Federal Energy Regulatory Commission (Commission) is amending its regulations under the Federal Power Act (FPA) to remove barriers to the participation of electric storage resources in the capacity, energy, and ancillary service markets operated by Regional Transmission Organizations (RTO) and Independent System Operators (ISO) (RTO/ISO markets). DATES: This rule will become effective June 4, 2018. FOR FURTHER INFORMATION CONTACT: Michael Herbert (Technical Information), Office of Energy Policy and Innovation, Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, (202) 502-8929, michael.herbert@ferc.gov . Heidi Nielsen (Legal Information), Office of the General Counsel, Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, (202) 502-8435, heidi.nielsen@ferc.gov . SUPPLEMENTARY INFORMATION: This rule requires each RTO and ISO to revise its tariff to establish a participation model consisting of market rules that, recognizing the physical and operational characteristics of electric storage resources, facilitates their participation in the RTO/ISO markets. The participation model must (1) ensure that a resource using the participation model is eligible to provide all capacity, energy, and ancillary services that the resource is technically capable of providing in the RTO/ISO markets; (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 that govern when a resource can set the wholesale price; (3) account for the physical and operational characteristics of electric storage resources through bidding parameters or other means; and (4) establish a minimum size requirement for participation in the RTO/ISO markets that does not exceed 100 kW. Additionally, each RTO/ISO must specify that the sale of electric energy from the RTO/ISO markets to an electric storage resource that the resource then resells back to those markets must be at the wholesale locational marginal price. We are taking this action pursuant to our legal authority under section 206 of the FPA to ensure that RTO/ISO tariffs are just and reasonable. In the Notice of Proposed Rulemaking (NOPR), the Commission also proposed reforms related to distributed energy resource aggregations. While we continue to believe that removing barriers to distributed energy resource aggregations in the RTO/ISO markets is important, we have determined that more information is needed with respect to those proposals; therefore, we will not take final action on the proposed distributed energy resource aggregation reforms in this proceeding. Instead, the Commission will continue to explore the proposed distributed energy resource aggregation reforms under Docket No. RM18-9-000. To that end, concurrent with this Final Rule, a Notice of Technical Conference is being issued in Docket No. RM18-9-000 with questions related to the participation of distributed energy resource aggregations in the RTO/ISO markets so that we can gather additional information to help us determine what action to take on the distributed energy resource aggregation reforms proposed in the NOPR. All comments filed in response to the NOPR in this proceeding will be incorporated by reference into Docket No. RM18-9-000, and any further comments regarding the proposed distributed energy resource aggregation reforms, including comments regarding the technical conference, should be filed henceforth in Docket No. RM18-9-000. Order No. 841 Final Rule Table of Contents Paragraph Nos. I. Introduction 1 II. Background 7 III. Need for Reform 10 1. Comments 13 2. Commission Determination 19 IV. Discussion 22 A. Definition of Electric Storage Resource 22 1. NOPR Proposal 22 2. Comments 23 3. Commission Determination 29 B. Creation of a Participation Model for Electric Storage Resources 37 1. Participation Model for Electric Storage Resources 37 a. NOPR Proposal 37 b. Comments 38 c. Commission Determination 51 2. Qualification Criteria for the Participation Model for Electric Storage Resources 57 a. NOPR Proposal 57 b. Comments 58 c. Commission Determination 61 3. Relationship Between Electric Storage Resource Participation Model and Existing Market Rules 66 a. NOPR Proposal 66 b. Comments 67 c. Commission Determination 68 C. Eligibility of Electric Storage Resources To Participate in the RTO/ISO Markets 70 1. Eligibility To Provide All Capacity, Energy, and Ancillary Services 70 a. NOPR Proposal 70 b. Comments 71 c. Commission Determination 76 2. Ability To De-Rate Capacity To Meet Minimum Run-Time Requirements 82 a. NOPR Proposal 82 b. Comments 83 c. Commission Determination 94 3. Energy Schedule Requirement for Provision of Ancillary Services 102 a. NOPR Request for Comments 102 b. Comments 104 c. Commission Determination 119 4. NERC Definitions 121 a. NOPR Request for Comment 121 b. Comments 122 c. Commission Determination 126 D. Participation in the RTO/ISO Markets as Supply and Demand 127 1. Eligibility To Participate as a Wholesale Seller and Wholesale Buyer 127 a. NOPR Proposal 127 b. Comments 129 i. Wholesale Seller/Wholesale Buyer 129 ii. Dispatchability 136 iii. Limitations on Price Setting 138 c. Commission Determination 142 2. Mechanisms To Prevent Conflicting Dispatch Instructions 151 a. NOPR Request for Comments 151 b. Comments 152 c. Commission Determination 162 3. Make-Whole Payments 166 a. NOPR Request for Comments 166 b. Comments 167 c. Commission Determination 174 E. Physical and Operational Characteristics of Electric Storage Resources 180 1. Requirement To Incorporate Bidding Parameters as Part of the Electric Storage Resource Participation Model 180 a. NOPR Proposal 180 b. Comments 181 c. Commission Determination 189 2. State of Charge, Upper and Lower Charge Limits, and Maximum Charge and Discharge Rates 195 a. NOPR Proposal 195 b. Comments 196 i. State of Charge 197 ii. Upper and Lower Charge Limit 208 iii. Maximum Energy Charge and Discharge Rate 209 c. Commission Determination 211 3. Minimum Charge Time, Maximum Charge Time, Minimum Run Time, and Maximum Run Time 217 a. NOPR Proposal 217 b. Comments 218 c. Commission Determination 220 4. Additional Physical and Operational Characteristics 225 a. Comments 225 b. Commission Determination 229 5. Summary of Physical and Operational Characteristics of Electric Storage Resources 236 F. State of Charge Management 237 1. NOPR Proposal 237 2. Comments 238 3. Commission Determination 251 G. Minimum Size Requirement 258 1. NOPR Proposal 258 2. Comments 259 3. Commission Determination 270 H. Energy Used To Charge Electric Storage Resources 277 1. Price for Charging Energy 277 a. NOPR Proposal 277 b. Comments 278 c. Commission Determination 294 2. Metering and Accounting Practices for Charging Energy 303 a. NOPR Proposal 303 b. Comments 304 c. Commission Determination 322 I. Issues Outside the Scope of This Final Rule 329 1. Comments 329 2. Commission Determination 331 V. Compliance Requirements 332 A. NOPR Proposal 332 B. Comments 335 C. Commission Determination 348 VI. Information Collection Statement 351 VII. Environmental Analysis 355 VIII. Regulatory Flexibility Act Certification 356 IX. Document Availability 361 X. Effective Date and Congressional Notification 364 Regulatory Text Appendix A: Abbreviated Names of Commenters Order No. 841 Final Rule (Issued February 15, 2018) I. Introduction 1. In this Final Rule, the Federal Energy Regulatory Commission (Commission) is adopting reforms to remove barriers to the participation of electric storage resources 1 in the Regional Transmission Organization and Independent System Operator markets (RTO/ISO markets). 2 For the reasons discussed below, we find that existing RTO/ISO market rules are unjust and unreasonable in light of barriers that they present to the participation of electric storage resources in the RTO/ISO markets, thereby reducing competition and failing to ensure just and reasonable rates. To help ensure that the RTO/ISO markets produce just and reasonable rates, pursuant to the Commission's legal authority under Federal Power Act (FPA) section 206, 3 the Commission modifies section 35.28 of its regulations 4 to require each RTO/ISO to revise its tariff to establish market rules that, recognizing the physical and operational characteristics of electric storage resources, facilitate their participation in the RTO/ISO markets, as discussed further below. 1 We define an electric storage resource as a resource capable of receiving electric energy from the grid and storing it for later injection of electric energy back to the grid. See infra PP 29-36. 2 For purposes of this Final Rule, we define RTO/ISO markets as the capacity, energy, and ancillary services markets operated by the RTOs and ISOs. We note that, in the Notice of Proposed Rulemaking (NOPR) in this proceeding, the Commission used “organized wholesale electric markets” and included that term in the proposed regulatory text. See Electric Storage Participation in Markets Operated by Regional Transmission Organizations and Independent System Operators, Notice of Proposed Rulemaking, FERC Stats. & Regs. ¶ 32,718 (2016). We find that using “RTO/ISO markets” is sufficient to describe the markets at issue in this Final Rule and therefore will no longer use “organized wholesale electric markets” here or include that term in the regulatory text. 3 16 U.S.C. 824e (2012). 4 18 CFR 35.28 (2017). 2. As the Commission explained in the NOPR, barriers to the participation of new technologies, such as many types of electric storage resources, in the RTO/ISO markets can emerge when the rules governing participation in those markets are designed for traditional resources and in effect limit the services that emerging technologies can provide. 5 For instance, electric storage resources in MISO that want to sell services other than frequency regulation would not have bidding parameters for electric storage resources available to them and it is unclear if or how they would be eligible to purchase energy from the MISO market. 6 Where such conditions exist, resources that are technically capable of providing services are precluded from competing with resources that are already participating in the RTO/ISO markets. This restriction on competition can reduce the efficiency of the RTO/ISO markets, potentially leading an RTO/ISO to dispatch more expensive resources to meet its system needs. By removing barriers to the participation of electric storage resources in the RTO/ISO markets, our actions in this Final Rule will enhance competition and, in turn, help to ensure that the RTO/ISO markets produce just and reasonable rates. Furthermore, due to electric storage resources' unique physical and operational characteristics—including their ability to both inject energy into the grid and receive energy from it—our actions here will help support the resilience of the bulk power system. 5 See NOPR at P 2. 6 See MISO Data Request Response, Docket No. AD16-20-000, at 14, 17 (filed May 16, 2016) (MISO Data Request Response). 3. To address barriers to the participation of electric storage resources in the RTO/ISO markets, in this Final Rule, we require each RTO/ISO to revise its tariff to establish a participation model consisting of market rules that, recognizing the physical and operational characteristics of electric storage resources, facilitates their participation in the RTO/ISO markets. The RTOs/ISOs generally have a set of tariff provisions that apply to all market participants. In addition, the RTOs/ISOs create tariff provisions for specific types of resources when those resources have unique physical and operational characteristics or other attributes that warrant distinctive treatment from other market participants. 7 These distinct tariff provisions that are created for a particular type of resource are what we refer to in this Final Rule as a participation model. Accordingly, the participation model for electric storage resources that we require in this Final Rule is a set of tariff provisions that will help facilitate the participation of electric storage resources in the RTO/ISO markets. 7 As examples of RTO/ISO participation models, we point to Non-Generator Resources in CAISO, Alternative Technology Regulation Resources in ISO-NE, Generation Resources in MISO, Energy Limited Resources in NYISO, Economic Load Response resources in PJM, and Variable Energy Resources in SPP. See CAISO Data Request Response, Docket No. AD16-20-000, at 2 (filed May 16, 2016) (CAISO Data Request Response); ISO-NE Data Request Response, Docket No. AD16-20-000, at 3 (filed May 16, 2016) (ISO-NE Data Request Response); MISO Data Request Response at 4; NYISO Data Request Response, Docket No. AD16-20-000, at 2-3 (filed May 16, 2016) (NYISO Data Request Response); PJM Data Request Response, Docket No. AD16-20-000, at 5 (PJM Data Request Response); SPP Data Request Response, Docket No. AD16-20-000, at 3 (filed May 16, 2016) (SPP Data Request Response). 4. For each RTO/ISO, the tariff provisions for the participation model for electric storage resources must (1) ensure that a resource using the participation model for electric storage resources is eligible to provide all capacity, energy, and ancillary services that it is technically capable of providing in the RTO/ISO markets; (2) ensure that a resource using the participation model for electric storage resources can be dispatched and can set the wholesale market clearing price as both a wholesale seller and wholesale buyer consistent with existing market rules that govern when a resource can set the wholesale price; (3) account for the physical and operational characteristics of electric storage resources through bidding parameters or other means; and (4) establish a minimum size requirement for participation in the RTO/ISO markets that does not exceed 100 kW. Additionally, each RTO/ISO must specify that the sale of electric energy from the RTO/ISO markets to an electric storage resource that the resource then resells back to those markets must be at the wholesale locational marginal price (LMP). 5. In the NOPR, the Commission also proposed reforms related to distributed energy resource aggregations. 8 While we continue to believe removing barriers to distributed energy resource aggregations in the RTO/ISO markets is important, we have determined that more information is needed with respect to those proposals; therefore, we will not take final action on the proposed distributed energy resource aggregation reforms in this proceeding. 9 Instead, the Commission will continue to explore the proposed distributed energy resource aggregation reforms under Docket No. RM18-9-000. To that end, concurrent with this Final Rule, a Notice of Technical Conference is being issued in Docket No. RM18-9-000 with questions related to the participation of distributed energy resource aggregations in the RTO/ISO markets so that we can gather additional information to help us determine what action to take on the distributed energy resource aggregation reforms proposed in the NOPR. 10 All comments filed in response to the NOPR in this proceeding will be incorporated by reference into Docket No. RM18-9-000, and any further comments regarding the proposed distributed energy resource aggregation reforms, including comments regarding the technical conference, should be filed henceforth in Docket No. RM18-9-000. 11 8 See NOPR at PP 1-16, 103-158. 9 We clarify that the reforms adopted here regarding electric storage resources represent final agency action subject to rehearing and appeal. 10 Notice of Technical Conference, Docket No. RM18-9-000 (Feb. 15, 2018). 11 Further comments regarding the proposed distributed energy resource aggregation reforms should no longer be filed in Docket No. RM16-23-000. 6. As discussed further below, each RTO/ISO must file the tariff changes needed to implement the requirements of this Final Rule within 270 days of the publication date of this Final Rule in the Federal Register . We will allow each RTO/ISO a further 365 days from that date to implement the tariff provisions. II. Background 7. Electric storage resources have unique physical and operational characteristics, namely their ability to both inject energy to the grid and receive energy from it. Certain electric storage resources, such as pumped-hydro resources, 12 have been participating in the RTO/ISO markets for many years, and, as the RTOs/ISOs have gained experience with these resources, the RTOs/ISOs have found new ways to facilitate the participation of pumped-hydro resources. 13 More recently, other types of electric storage resources, such as batteries and flywheels, are participating in the RTO/ISO markets. 14 12 Pumped-hydro storage projects move water between two reservoirs located at different elevations ( i.e., an upper and lower reservoir) to store energy and generate electricity. See https://www.ferc.gov/industries/hydropower/gen-info/licensing/pump-storage.asp. 13 See, e.g., ISO New England Inc., Docket Nos. ER16-954-000 and ER16-954-001 (2016) (delegated letter order). 14 Midwest Indep. Trans. Sys. Operator, Inc., 129 FERC ¶ 61,303 (2009); NYISO Services Tariff, section 2.12 (defining “Limited Energy Storage Resource” as “[a] Generator authorized to offer Regulation Service only and characterized by limited Energy storage, that is, the inability to sustain continuous operation at maximum Energy withdrawal or maximum Energy injection for a minimum period of one hour”); PJM Operating Agreement, Schedule 1, section 1.3 (defining an “Energy Storage Resource” as “[a] flywheel or battery storage facility solely used for short term storage and injection of energy at a later time to participate in the PJM energy and/or ancillary services markets as a Market Seller.”) 8. As the capabilities of electric storage resources improve and their costs decline to the point that they may be competitive with existing resources, 15 the Commission has become concerned that these resources face barriers that limit their participation in the RTO/ISO markets. To further examine this issue, the Commission hosted a panel to discuss electric storage resources at its November 19, 2015 open meeting. Subsequently, on April 11, 2016, Commission staff issued data requests to each of the six RTOs/ISOs seeking information about the rules in the RTO/ISO markets that affect the participation of electric storage resources. 16 Concurrently, Commission staff issued a request for comments, seeking information from interested persons on whether barriers exist to the participation of electric storage resources in the RTO/ISO markets that may potentially lead to unjust and unreasonable wholesale rates. In addition to the responses from the RTOs/ISOs, Commission staff received 44 comments. 15 See, e.g., Lazard's Levelized Cost of Storage Analysis—Version 3.0 (Nov. 2017), available at https://www.lazard.com/media/450338/lazard-levelized-cost-of-storage-version-30.pdf. 16 Specifically, Commission staff requested information related to (1) the eligibility of electric storage resources to participate in the capacity, energy, and ancillary service markets in the RTOs/ISOs; (2) the technical qualification and performance requirements for market participants; (3) the bidding parameters for different types of resources; (4) opportunities for distribution-level and aggregated electric storage resources to participate in the RTO/ISO markets; (5) the treatment of electric storage resources when they are receiving electricity for later injection to the grid; and (6) any forthcoming rule changes or other stakeholder initiatives that may affect the participation of electric storage resources in the RTO/ISO markets. 9. On November 17, 2016, the Commission issued the NOPR in this proceeding, proposing to amend its regulations under the FPA to remove barriers to the participation of electric storage resources in the RTO/ISO markets. The Commission received 109 comments on the NOPR proposals from a diverse set of stakeholders. 17 17 See Appendix A for a list of entities that submitted comments and the shortened names used throughout this Final Rule to describe those entities. III. Need for Reform 10. In the NOPR, the Commission stated that its proposal in this proceeding is a continuation of efforts pursuant to its authority under the FPA to ensure that the RTO/ISO tariffs and market rules produce just and reasonable rates, terms and conditions of service. 18 Specifically, the Commission noted that it has observed that market rules designed for traditional resources can create barriers to entry for emerging technologies. The Commission explained that it was proposing to require the RTOs/ISOs to address barriers to the participation of electric storage resources in the RTO/ISO markets. 19 18 See NOPR at P 9 (citing Integration of Variable Energy Resources, Order No. 764, FERC Stats. & Regs. ¶ 31,331, order on reh'g, Order No. 764-A, 141 FERC ¶ 61,232 (2012), order on reh'g, Order No. 764-B, 144 FERC ¶ 61,222 (2013); Wholesale Competition in Regions with Organized Electric Markets, Order No. 719, FERC Stats. & Regs. ¶ 31,281 (2008), order on reh'g, Order No. 719-A, FERC Stats. & Regs. ¶ 31,292 (2009), order on reh'g, Order No. 719-B, 129 FERC ¶ 61,252 (2009)). 19 See id. P 10. 11. The Commission acknowledged in the NOPR that electric storage resources are already providing energy and ancillary services in some RTO/ISO markets. 20 However, the Commission explained that these resources must often use existing participation models designed for traditional generation or load resources that do not recognize electric storage resources' unique physical and operational characteristics and their capability to provide capacity, energy, and ancillary services in the RTO/ISO markets. 21 Even where the RTOs/ISOs have established distinct participation models for electric storage resources, the Commission stated that those models limit the services that electric storage resources may provide 22 or are designed for electric storage resources with very specific characteristics (such as pumped-hydro facilities or resources with a maximum run-time that is less than one hour). The Commission also noted that existing RTO/ISO tariffs generally limit smaller electric storage resources to participating in the RTO/ISO markets as demand response resources, which can restrict these electric storage resources' ability to employ their full operational range, prohibit them from injecting power onto the grid, and preclude them from providing certain services that they are technically capable of providing (such as operating reserves). 20 See id. P 11. 21 See id. PP 11-12. 22 See id. P 11 (citing Midwest Indep. Trans. Sys. Operator, Inc., 129 FERC ¶ 61,303 at PP 40, 64; MISO FERC Electric Tariff, section 1.S (Stored Energy Resources); NYISO Services Tariff, section 2.12 (defining Limited Energy Storage Resource as a “Generator authorized to offer Regulation Service only and characterized by limited Energy storage, that is, the inability to sustain continuous operation at maximum Energy withdrawal or maximum Energy injection for a minimum period of one hour.”)). The Commission noted that NYISO limits Limited Energy Storage Resources to providing regulation service only and Demand Side Resources and Generators that can sustain operation for longer than one hour are not eligible to be Limited Energy Storage Resources. Id. (citing NYISO Data Request Response at 3-4). 12. Thus, the Commission preliminarily found that current tariffs that do not recognize the operational characteristics of electric storage resources limit the participation of electric storage resources in the RTO/ISO markets and result in inefficient use of these resources. 23 As a result, the Commission stated that the RTOs/ISOs may not efficiently dispatch resources, including electric storage resources, thereby reducing competition in the RTO/ISO markets. The Commission stated that limiting the services an electric storage resource is eligible to provide and limiting the efficiency with which it is dispatched to provide services could also inhibit developers' incentives to design their electric storage resources to provide all capacity, energy, and ancillary services that these resources could otherwise provide, further reducing competition in the RTO/ISO markets. The Commission stated that effective integration of electric storage resources into the RTO/ISO markets would enhance competition and, in turn, help to ensure that these markets produce just and reasonable rates. 23 See id. P 12. 1. Comments 13. In response to the NOPR, commenters elaborate on the degree to which, and how, existing RTO/ISO market rules pose barriers to the participation of electric storage resources in the RTO/ISO markets and the impact of those barriers. 24 For example, Advanced Energy Economy and GridWise state that RTO/ISO tariffs often lack participation models that allow for participation by advanced energy technologies, apply unnecessary and burdensome technical requirements originally developed for traditional generation technologies, or impose performance requirements that arbitrarily exclude advanced technologies. 24 See Advanced Energy Economy Comments at 14-15; GridWise Comments at 3. 14. Alevo, Eagle Crest, Massachusetts State Entities, and NYISO Indicated Transmission Owners claim that RTO/ISO market rules hinder the full participation of electric storage resources by failing to recognize these resources' unique operating characteristics and requiring them to use market rules designed for other types of resources, such as generation. 25 For example, Massachusetts State Entities explain that, in ISO-NE, electric storage resources have to use participation models for pumped-hydro resources, which do not take advantage of the flexibility of newer electric storage technologies. 25 See Alevo Comments at 4-6; Eagle Crest Comments at 5; Massachusetts State Entities Comments at 13-14; NYISO Indicated Transmission Owners Comments at 3. 15. A few commenters emphasize that making market rules technology neutral will remove barriers to entry for electric storage resources. For example, several commenters argue that market design should be technology neutral to ensure equal access to markets 26 and to reduce long-term investment risk associated with developing electric storage resources. 27 Microgrid Resources Coalition shares the Commission's concerns that the varying participation models among RTOs/ISOs limit market opportunities for new technologies. 28 26 See AES Companies Comments at 14; Alevo Comments at 7-8; EEI Comments at 6-7; Efficient Holdings Comments at 2, 5; ELCON Comments at 2-4; GridWise Comments at 3; Tesla/SolarCity Comments at 10-11. 27 See Massachusetts State Entities Comments at 9. 28 See Microgrid Resources Coalition Comments at 2. 16. While commenters addressed concerns with specific aspects of the NOPR proposals, most commenters, including the RTOs/ISOs, generally agree that the Commission should act to remove barriers to the participation of electric storage resources in the RTO/ISO markets. 29 Further, commenters state that allowing electric storage resources to fully participate in the RTO/ISO markets could create more reliable and resilient electric markets and could provide energy security, fuel diversity, and valuable fast-responding capability to the RTO/ISO markets. 30 CAISO explains that there is no reason to exclude an electric storage resource from providing an existing wholesale electric service if that resource has the technical capabilities required to do so. 31 29 See, e.g., Advanced Energy Economy Comments at 1, 3-6, 8-17; American Petroleum Institute Comments at 2; APPA/NRECA Comments at 1-2; EEI Comments at 2-4; EPRI Comments at 2; EPSA/PJM Power Providers Comments at 3, 6-9, 11-12; Energy Storage Association Comments at 3-5; IRC Comments at 2; NARUC Comments at 3; National Hydropower Association Comments at 2-4; TAPS Comments at 1. 30 See, e.g., IRC Comments at 2; ISO-NE Comments at 1, 4; NYISO Comments at 2; SPP Comments at 1-2. 31 See CAISO Comments at 3. 17. Some commenters note that implementation of the reforms proposed in the NOPR could improve competition and/or efficiency in the RTO/ISO markets and provide other system benefits. 32 More specifically, Energy Storage Association contends that the benefits from participation of electric storage resources in the RTO/ISO markets include avoided capacity payments, lower peak prices, reduced need for traditional generators to cycle, facilitating effective ramp management, avoiding generator start-up and shut-down costs, and absorbing over-generation. Dominion argues that recognizing the characteristics of electric storage resources can lead to more efficient dispatch and utilization of resources. In addition, City of New York, Energy Storage Association, NYISO, Sunrun, and Tesla/SolarCity suggest that the NOPR reforms will lead to lower costs for consumers, 33 while Silicon Valley Leadership Group and Starwood Energy state that use of electric storage resources will reduce greenhouse gas emissions. 34 Institute for Policy Integrity explains that new storage technologies can reduce dependence on expensive transmission infrastructure. 35 Commenters also argue that electric storage resources can improve grid “resiliency” in the event of a significant weather emergency. 36 32 See, e.g., Dominion Comments at 4-5; Energy Storage Association Comments at 4 (citing Massachusetts Department of Energy Resources, State-of-Charge: Massachusetts Energy Storage Initiative Study (Sept. 2016), available at http://www.mass.gov/eea/docs/doer/state-of-charge-report.pdf ); Imperial Irrigation District Comments at 6; IRC Comments at 2; ISO-NE Comments at 1; Starwood Energy Comments at 3; TechNet Comments at 1; Telsa/SolarCity Comments at 1. 33 See City of New York Comments at 4; Energy Storage Association Comments at 4; NYISO Comments at 2; Sunrun Comments at 1; Tesla/SolarCity Comments at 2, 5. 34 See Silicon Valley Leadership Group Comments at 1; Starwood Energy Comments at 3. 35 See Institute for Policy Integrity Comments at 3. 36 See Advanced Energy Economy Comments at 3; Institute for Policy Integrity Comments at 3; IRC Comments at 2; Massachusetts State Entities Comments at 17; SPP Comments at 2. 18. EPSA/PJM Power Providers argue that, because there are many unanswered questions (such as the cost of software changes), the Commission should not develop generic requirements for the RTOs/ISOs in a final rule without a clear record that such specification will not constrain any particular region. 37 37 EPSA/PJM Power Providers Comments at 12-13. 2. Commission Determination 19. For the reasons discussed below, we find that existing RTO/ISO market rules are unjust and unreasonable in light of barriers that they present to the participation of electric storage resources in the RTO/ISO markets, thereby reducing competition and failing to ensure just and reasonable rates. Specifically, RTO/ISO market rules that limit the services that electric storage resources are technically capable of providing may create barriers to the participation of electric storage resources in the RTO/ISO markets. Barriers also exist in the RTOs/ISOs that have already adopted market rules that provide for the participation of electric storage resources because these participation models were often designed for electric storage resources with very specific characteristics (such as pumped-hydro resources or other electric storage resources with a maximum run-time that is less than one hour), thus limiting electric storage resources from providing the full range of services they are technically capable of providing. 20. These barriers adversely affect competition in the RTO/ISO markets by limiting the participation of resources that are technically capable of providing services in those markets. Moreover, these barriers reduce competition and market efficiency by inhibiting developers' incentives to design their electric storage resources to provide all capacity, energy, and ancillary services that these resources could otherwise provide. We find that better integration of electric storage resources into the RTO/ISO markets is necessary to enhance competition and, in turn, help to ensure that these markets produce just and reasonable rates. Accordingly, as discussed further below, we require each RTO/ISO to revise its tariffs to remove barriers to the participation of electric storage resources in the RTO/ISO markets. 21. While we agree with EPSA/PJM Power Providers that it is necessary to provide each RTO/ISO with flexibility in the manner it incorporates certain aspects of these reforms into its tariff as explained below, we find that the record in this proceeding provides sufficient basis for requiring the generic requirements discussed herein. IV. Discussion A. Definition of Electric Storage Resource 1. NOPR Proposal 22. For the purpose of defining the set of resources for which an RTO/ISO must create a participation model, in the NOPR, the Commission proposed to define an electric storage resource as “a resource capable of receiving electric energy from the grid and storing it for later injection of electricity back to the grid regardless of where the resource is located on the electrical system.” 38 The Commission stated that these resources include all types of electric storage technologies, regardless of their size, storage medium ( e.g., batteries, flywheels, compressed air, pumped-hydro, etc.), or whether the resource is located on the interstate grid or on a distribution system. 38 See NOPR at P 10. 2. Comments 23. The comments received on the proposed definition of electric storage resources generally ask the Commission to modify or clarify the definition but disagree on how the Commission should do so. Some commenters ask the Commission to modify or clarify the definition of electric storage resource to broaden its application. For example, they raise concerns with how the Commission's proposed definition treats behind-the-meter resources. First, Energy Storage Association argues that the NOPR definition only applies to resources connected directly to the transmission or distribution system and, therefore, asks the Commission to extend these reforms to behind-the-meter electric storage resources that net inject energy to the grid. 39 Second, some commenters ask that the Commission extend the NOPR reforms to behind-the-meter resources that do not inject power back to the grid. 40 Advanced Microgrid Solutions and Stem note that the definition of an electric storage resource in the NOPR implies that all such resources will inject electricity back to the grid. However, Advanced Microgrid Solutions and Stem argue that behind-the-meter electric storage resources can provide value to the grid even when they do not inject electricity to the grid. Advanced Microgrid Solutions and Stem thus ask the Commission to clarify that behind-the-meter electric storage resources that do not inject electricity back to the grid can use the participation model for electric storage resources to participate in the RTO/ISO markets. 39 See Energy Storage Association Comments at 7, 21-22. 40 See Advanced Energy Economy Comments at 18-20; Advanced Microgrid Solutions Comments at 10; Stem Comments at 6. 24. Advanced Energy Economy expresses a related concern, arguing that the Commission's proposed definition of an electric storage resource does not capture all energy storage technologies, such as thermal and kinetic storage; storage co-located with generation resources (including variable resources) on the transmission grid; and other types of technologies that can perform an energy storage function but may not physically export electricity to the wholesale grid. Advanced Energy Economy suggests that the Commission remedy this concern by revising the definition of an electric storage resource to include all storage technologies that are capable of converting electric energy into stored energy and later supplying electric energy (either back to the grid or to a host customer or site). 25. In contrast, other commenters recommend that the Commission narrow its proposed definition of an electric storage resource. 41 Robert Borlick urges the Commission to limit the application of its proposed reforms to those electric storage resources that directly connect to transmission systems controlled by RTOs/ISOs, citing potential adverse impacts of distribution-interconnected resources on power systems. Xcel Energy Services also suggests that the proposed reforms should apply only to electric storage resources connected to the transmission system. While TAPS strongly supports facilitating the participation of transmission-interconnected storage and believes that distribution-interconnected storage could yield benefits to the RTO/ISO markets, it cautions that distribution-interconnected storage should comply with distribution utility tariffs and rates for delivery of energy between the transmission system and the resource's point of interconnection to the distribution system (including provisions related to losses and other terms and conditions of service), both for the resource's sales to the RTO/ISO markets and the resource's purchases of energy from the RTO/ISO markets. 42 41 See Robert Borlick Comments at 2; Xcel Energy Services Comments at 3-4. 42 See TAPS Comments at 28-29. 26. Several commenters address the implications of the proposed definition for state and federal jurisdiction. Connecticut State Entities state that they welcome the Commission's efforts to fully provide resources access to wholesale electric markets without changing existing state and federal jurisdiction. 43 Some commenters express concerns regarding the jurisdictional implications of including electric storage resources connected at the distribution level in the definition of an electric storage resource. 44 NARUC asserts that state authority must remain intact under any final rule. Organization of MISO States supports the NOPR on the condition that state and other regulatory jurisdiction is maintained. APPA/NRECA, Maryland and New Jersey Commissions, MISO Transmission Owners, and NYISO Indicated Transmission Owners state that RTO/ISO market rules and Commission policy must maintain the ability of state and local authorities to regulate existing and future electric storage resources that interconnect at the distribution level or behind a customer meter and provide retail- or distribution-level services without the Commission considering such action as a barrier to participation in wholesale markets. This request includes Commission confirmation of state jurisdiction over matters such as distribution system design, interconnection to the distribution system, distribution system operations, distribution power quality, the ability of electric storage resources to participate in programs at the distribution level, and distribution system costs. APPA/NRECA believe that the NOPR confines the proposed reforms to the RTO/ISO markets and urge the Commission to reject requests to expand the scope of this final rule beyond that limited scope. 43 See Connecticut State Entities Comments at 7. 44 See APPA/NRECA Comments at 3-4; Maryland and New Jersey Commissions Comments at 3; Massachusetts State Entities Comments at 9; MISO Transmission Owners Comments at 6; NARUC Comments at 4; NYISO Indicated Transmission Owners Comments at 4; Organization of MISO States Comments at 1-2. 27. DTE Electric/Consumers Energy and MISO Transmission Owners assert that the Commission should allow states to decide whether electric storage resources in their state that are located on the distribution system or behind a retail meter are permitted to participate in the RTO/ISO markets through the electric storage resource participation model proposed in the NOPR. 45 Massachusetts Municipal Electric asks the Commission to clarify that its proposed reforms will enable, but not compel, electric storage resources located behind the meter to participate in the RTO/ISO markets. 46 45 See DTE Electric/Consumers Energy Comments at 7; MISO Transmission Owners Comments at 4, 7. 46 See Massachusetts Municipal Electric Comments at 2. 28. In contrast, Genbright argues that the Commission must not only assert primary jurisdiction over electric storage resources' sales of services in the RTO/ISO markets but also ensure that RTOs/ISOs do not rely on ad hoc interpretations of retail rules and regulations to erect barriers to the participation of electric storage resources in those markets. 47 47 See Genbright Comments at 3-4. 3. Commission Determination 29. Consistent with the NOPR proposal, in this Final Rule, we revise section 35.38(b) of the Commission's regulations to define an electric storage resource as “a resource capable of receiving electric energy from the grid and storing it for later injection of electric energy back to the grid.” We find that removing the phrase “regardless of where the resource is located on the electrical system” from the NOPR proposal and instead clarifying where an electric storage resources may be located does not change the applicability of the definition and will also provide a more adaptable definition for other Commission actions. 48 We clarify that this definition is intended to cover electric storage resources capable of receiving electric energy from the grid and storing it for later injection of electric energy back to the grid, regardless of their storage medium ( e.g., batteries, flywheels, compressed air, and pumped-hydro). Additionally, consistent with the NOPR proposal, we clarify that electric storage resources located on the interstate transmission system, on a distribution system, or behind the meter fall under this definition, subject to the additional clarifications provided below. By including all electric storage technologies, and by allowing resources that are interconnected to the transmission system, distribution system, or behind the meter to use the participation model for electric storage resources, we are ensuring that the market rules will not be designed for any particular electric storage technology. 48 See, e.g., Essential Reliability Services and the Evolving Bulk-Power System—Primary Frequency Response, Order No. 842, 162 FERC ¶ 61,128 (2018), Notice of Proposed Rulemaking, FERC Stats. & Regs. ¶ 32,718 (2016); Notice of Inquiry, FERC Stats. & Regs. ¶ 35,576. 30. We observe that an electric storage resource that injects electric energy back to the grid for purposes of participating in an RTO/ISO market engages in a sale of electric energy at wholesale in interstate commerce. 49 As a result, such an electric storage resource must fulfill certain responsibilities set forth in the FPA and the Commission's rules and regulations. 50 49 We note that injections of electric energy back to the grid do not necessarily trigger the Commission's jurisdiction. See Sun Edison LLC, 129 FERC ¶ 61,146 (2009), reh'g granted on other grounds, 131 FERC ¶ 61,213 (2010) (the Commission's jurisdiction would arise only when a facility operating under a state net metering program produces more power than it consumes over the relevant netting period); MidAmerican Energy Co., 94 FERC ¶ 61,340 (2001). 50 Examples of such responsibilities include filing rates under FPA section 205 (potentially including obtaining market-based rate authority); submitting FPA sections 203 and 204 filings related to corporate mergers and other activities; and fulfilling FPA section 301 accounting obligations and FPA section 305(b) interlocking directorate obligations. See 16 U.S.C. 824b, 824c, 824d, 825, 825d(b). 31. We disagree with commenters who assert that the definition of an electric storage resource should be limited to those electric storage resources that are interconnected to the transmission system. Electric storage resources interconnected to the distribution system are already participating in the RTO/ISO markets, 51 and they should continue to be able to do so. Such a limitation also would be inconsistent with the participation of other types of resources because various types of traditional generation and demand-side resources that are not connected directly to the transmission system currently participate in the RTO/ISO markets. 51 See, e.g., PJM Interconnection LLC, 149 FERC ¶ 61,185 (2014), order on reh'g, 151 FERC ¶ 61,231 (2015). 32. Some commenters argue that the Commission should broaden its definition of an electric storage resource to apply to behind-the-meter resources that do not inject electricity onto the grid. We decline to do so. Through this Final Rule, we seek to ensure that RTO/ISO market rules account for the unique physical and operational characteristic of electric storage resources, namely their bidirectional capability to both inject energy to the grid and receive energy from it. Expanding the definition of an electric storage resource to include behind-the-meter resources that do not inject electric energy onto the grid would not advance this purpose because they would not be injecting electric energy back to the grid. In addition, we have previously found that behind-the-meter resources that do not inject electric energy onto the grid are considered demand response. 52 There are existing participation models for demand response that already have well-established rules that are in some cases unique to demand response and we do not want the requirements of this Final Rule to disrupt or otherwise conflict with those rules. 53 52 See ISO New England Inc., 138 FERC ¶ 61,042, at PP 76-86, reh'g denied, 139 FERC ¶ 61,116, at PP 10-12, 26-31 (2012). 53 Participation by demand response resources in an RTO/ISO market does not involve a sale of electric energy at wholesale in interstate commerce. See EnergyConnect, Inc., 130 FERC ¶ 61,031, at P 30 (2010); see also FERC v. Elec. Power Supply Ass'n, 136 S.Ct. 760 (2016) (RTO/ISO rules governing participation of demand response resources in the RTO/ISO markets are practices that directly affect rates in those markets.). 33. We also clarify that, by “capable of . . . later injection of electric energy back to the grid,” we mean that the electric storage resource is both physically designed and configured to inject electric energy back onto the grid and, as relevant, is contractually permitted to do so ( e.g., per the interconnection agreement between an electric storage resource that is interconnected on a distribution system or behind-the-meter with the distribution utility to which it is interconnected). Consequently, the definition of an electric storage resource excludes a resource that is either (1) physically incapable of injecting electric energy back onto the grid due to its design or configuration or (2) contractually barred from injecting electric energy back onto the grid. 34. While we decline in this Final Rule to expand the definition of an electric storage resource to include behind-the-meter resources that do not inject electric energy onto the grid, we note that the definition in this Final Rule establishes the minimum set of resources that each RTO/ISO must consider when developing an electric storage resource participation model to comply with this Final Rule. It does not preclude any RTO/ISO from proposing a broader definition for electric storage resources through a separate FPA section 205 filing. 54 54 See 16 U.S.C. 824d. We acknowledge that the definition of an electric storage resource that we adopt in this Final Rule may differ from existing, Commission-accepted practices. For example, in CAISO, a stand-alone electric storage resource or an aggregation of behind-the-meter electric storage resources that cannot or does not inject electric energy back to the grid is able to use CAISO's participation model for electric storage resources (the Non-Generator Resource model). See California Indep. Sys. Operator Corp., 132 FERC ¶ 61,211 (2010). This Final Rule does not require each RTO/ISO to limit the applicability of its existing participation models to electric storage resources as they are defined in this Final Rule or prevent them from arguing on compliance why its Commission-accepted tariff complies with the requirements of this Final Rule. 35. Further, this Final Rule requires each RTO/ISO to implement market rules applicable to electric storage resources, as defined herein, that voluntarily seek to participate in the RTO/ISO markets; this Final Rule does not require electric storage resources to participate in those markets. The Commission has exclusive jurisdiction over the wholesale markets and the criteria for participation in those markets, including the wholesale market rules for participation of resources connected at or below distribution-level voltages. 55 We also understand that numerous resources connected to the distribution system participate in the RTO/ISO markets today. 56 Under these circumstances, we are not persuaded to grant the MISO Transmission Owners' and DTE Electric/Consumers Energy's request that the Commission allow states to decide whether electric storage resources in their state that are located behind a retail meter or on the distribution system are permitted to participate in the RTO/ISO markets through the electric storage resource participation model. 55 See FERC v. Elec. Power Supply Ass'n, 136 S.Ct. 760 (2016); see also Advanced Energy Economy, 161 FERC ¶ 61,245, at P 59-60 (2017). 56 See, e.g., Southern California Edison Co., Docket No. ER10-1356-000 (2010) (accepting Southern California Edison's Wholesale Distribution Access Tariff); PJM Interconnection, L.L.C., Docket No. ER11-3148-000 (2011) (delegated letter order) (accepting Wholesale Market Participation Agreement among PJM, CleanLight Power, L.L.C. and Public Service Electric and Gas Company); PJM Manual 14C, § 1.3 (discussing requirements of Wholesale Market Participation Agreements). 36. That said, we emphasize the ongoing, vital role of the states with respect to the development and operation of electric storage resources. Such state responsibilities include, among other things, retail services and matters related to the distribution system, including design, operations, power quality, reliability, and system costs. We add that nothing in this Final Rule is intended to affect or implicate the responsibilities of distribution utilities to maintain the safety and the reliability of the distribution system or their use of electric storage resources on their systems. B. Creation of a Participation Model for Electric Storage Resources 1. Participation Model for Electric Storage Resources a. NOPR Proposal 37. In the NOPR, the Commission proposed to require each RTO/ISO to revise its tariff to include a participation model consisting of market rules that, recognizing the physical and operational characteristics of electric storage resources, facilitates their participation in RTO/ISO markets. 57 The Commission further proposed that the electric storage resource participation model satisfy certain requirements to accommodate the physical and operational characteristics of electric storage resources. 58 57 See NOPR at P 26. 58 See id. P 28. b. Comments 38. Many commenters support the Commission's proposal to require each RTO/ISO to create a participation model for electric storage resources. 59 These commenters agree that there is a need to recognize the physical, technical and operational characteristics of electric storage resources, 60 remove artificial barriers to electric storage resource participation in the RTO/ISO markets, 61 and allow electric storage resources to be adequately and fairly compensated for the services they provide. 62 Commenters argue that these reforms will provide system and consumer benefits 63 (including increased competition and lower costs to consumers, 64 efficiency, 65 and system reliability benefits 66 ) and will improve air quality. 67 59 See, e.g., Advanced Microgrid Solutions Comments at 3; AES Companies Comments at 5, 14; Brookfield Renewable Comments at 2; CAISO Comments at 3-4; EEI Comments at 3-4; Energy Storage Association Comments at 1, 4-5; EPSA/PJM Power Providers Comments at 4, 11; Massachusetts State Entities Comments at 13-14; NYISO Comments at 5. 60 See, e.g., Advanced Energy Economy Comments at 22-24; AES Companies Comments at 3; APPA/NRECA Comments at 11; CAISO Comments at 3; City of New York Comments at 3; Research Scientists Comments at 2. 61 See, e.g., City of New York Comments at 3; Energy Storage Association Comments at 5; Exelon Comments at 4; NYISO Indicated Transmission Owners Comments at 2-3. 62 See, e.g., Dominion Comments at 4-5; Massachusetts Municipal Electric Comments at 2; NYISO Indicated Transmission Owners Comments at 2-3. 63 See, e.g., Alevo Comments at 4-6; NESCOE Comments at 3; Ohio Commission Comments at 4. 64 See, e.g., Beacon Power Comments at 2, 6; City of New York Comments at 3-4; EPRI Comments at 2; NESCOE Comments at 3; Union of Concerned Scientists Comments at 7. 65 See EPRI Comments at 8-9; NESCOE Comments at 5. 66 See, e.g., EPRI Comments at 2; Institute for Policy Integrity Comments at 4; NESCOE Comments at 5. 67 See City of New York Comments at 3-4. 39. Some commenters, however, condition their support for the Commission's proposed electric storage resource participation model. 68 For example, EEI expresses support contingent on the proposed participation model ensuring adequate reliability, not causing undue discrimination to other market participants, and addressing cost allocation and double recovery. Similarly, Exelon emphasizes that the Commission should avoid approving tariff changes that may have a detrimental effect on reliability, safety, or markets. Xcel Energy Services supports the participation model if it is feasible and cost-effective. According to EPSA/PJM Power Providers, any initiatives or rules to facilitate participation of electric storage resources in the RTO/ISO markets must be compatible with, and support, the extensive system of conventional resources that make up the backbone of the bulk power system and implementation of a participation model for electric storage resources must preserve efficient operational and investment signals for all resources. 68 See, e.g., EEI Comments at 4-6; EPSA/PJM Power Providers Comments at 3-4; Exelon Comments at 5-6, 12; Xcel Energy Services Comments at 14-15. 40. Whether or not they support the Commission's proposal to require each RTO/ISO to establish a participation model for electric storage resources, many commenters caution against granting undue preference in the markets to electric storage resources. 69 For example, Independent Energy Producers Association argues that the electric storage resource participation model should impose comparable performance obligations (such as penalties for non-performance, schedule deviations, and replacement obligations) to those required of other resources participating in the RTO/ISO markets. Similarly, several commenters contend that the Commission should focus on the technical requirements of the electric system and remain neutral about how or from which technology services are provided. 70 For example, Massachusetts State Entities urge the Commission to ensure that participation is not limited based on type, vintage, ownership, business model, or other criteria unrelated to how well a particular resource satisfies the physical and operational parameters of a defined electric market or service. 69 See, e.g., Avangrid Comments at 5; EEI Comments at 5; ELCON Comments at 3; EPSA/PJM Power Providers Comments at 4, 7-8; Exelon Comments at 2, 12; Independent Energy Producers Association Comments at 4; New York Utility Intervention Unit Comments at 3. 70 See, e.g., American Petroleum Institute Comments at 2-4; EEI Comments at 6-7; EPSA/PJM Power Providers Comments at 7-8; Massachusetts State Entities Comments at 8-9; MISO Transmission Owners Comments at 7; PJM Market Monitor Comments at 2-3, 4-5. 41. Commenters also address whether the Commission should provide regional flexibility for each RTO/ISO to comply with the rule by proposing requirements that accommodate electric storage resources that comport to their unique circumstances. Several commenters contend that regional flexibility is appropriate, with EEI, EPSA/PJM Power Providers, and Exelon noting that the proposed electric storage resource participation model provides such flexibility. 71 Connecticut State Entities suggest that the Commission should create threshold standards for all RTOs/ISOs but allow regional variations for cost allocation and rate design. 72 71 See, e.g., APPA/NRECA Comments at 11; EEI Comments at 4; EPSA/PJM Power Providers Comments at 11-12; Exelon Comments at 2; NESCOE Comments at 2-3, 9. 72 See Connecticut State Entities Comments at 6. 42. Other commenters argue that the Commission should defer to the RTOs/ISOs to develop the detailed participation rules that take into account the unique needs of each market. 73 73 See, e.g., Duke Energy Comments at 3; ISO-NE Comments at 10-14; MISO Comments at 2; National Hydropower Association Comments at 4. 43. For example, ISO-NE urges the Commission to avoid a one-size-fits-all approach. Specifically, ISO-NE is concerned that (1) the focus on participation models and market participant types rather than on services is inconsistent with its core market design objective of technology neutrality and (2) the rulemaking could require ISO-NE to fundamentally change this technology-neutral approach to the detriment of its markets. ISO-NE argues that adopting participation models could allow resource owners to engage in participation model “shopping,” a form of tariff rule arbitrage. 44. Given these concerns, ISO-NE asks the Commission to provide only general guidance to RTOs/ISOs, requiring them to (1) examine the requirements associated with providing each wholesale service in their markets and (2) assess whether and how to revise those requirements to better accommodate the participation of electric storage resources. ISO-NE also asks the Commission to clarify that RTOs/ISOs are not required to adopt a specific participation model construct but instead may propose to incorporate the participation of electric storage resources in their markets in a manner consistent with the RTO's/ISO's existing market constructs. 45. Similarly, while NESCOE supports the intent of the NOPR, it observes that further information is required on whether each RTO/ISO could modify its existing participation model(s) to address any barrier to the participation of electric storage resources in the RTO/ISO markets, rather than being required to create a new participation model. 74 TeMix also questions the need for a new participation model for electric storage resources, arguing that such a participation model will only add to the complexity of the RTO/ISO markets. 75 TeMix instead proposes that the Commission encourage reform of retail energy and distribution tariffs and require the RTOs/ISOs to frequently post wholesale bids and offers at the retail/wholesale interface to better allow retail customers to respond to the wholesale price of electricity. 74 See NESCOE Comments at 2, 5. 75 See TeMix Comments at 2-3, 4-5. 46. Some commenters request that the Commission establish detailed requirements for a participation model for electric storage resources. 76 For example, Energy Storage Association argues that prescriptive requirements for the proposed electric storage resource participation model are necessary to ensure that the participation model is adequately defined. Starwood Energy requests that the Commission require uniform participation models across all of the RTOs/ISOs to ensure that all electric storage resources have the same opportunity to fully participate in the RTO/ISO markets, including the capacity markets, regardless of the region in which they are located. EPRI suggests that the definition of a participation model include, in addition to a set of tariff provisions, the set of software provisions required to represent the physical and operational characteristics of the particular resource. 77 76 See Energy Storage Association Comments at 8; Starwood Energy Comments at 7. 77 See EPRI Comments at 2-3. 47. Several commenters suggest that the participation model for electric storage resources should account for the physical and operational differences among electric storage technologies because different electric storage resources (such as pumped-hydro) have different operating characteristics, provide different services, and are not intended to serve the same roles within the electric grid. 78 EPRI suggests that, given the current form of the day-ahead and real-time energy markets, there may need to be two participation models for electric storage resources. 79 EPRI explains that one participation model would be for resources whose transition time from charge to discharge, or vice versa, exceeds the market interval ( e.g., pumped-hydro and compressed-air) with the operational mode of these resources determined by the RTO's/ISO's security constrained unit commitment model. EPRI further explains that the second participation model would be for resources that transition from charge to discharge, or vice versa, within the market interval ( e.g., batteries and flywheels). EPRI states that it is likely these resources can be online and responsive at zero power output, and therefore do not need to be committed to a particular mode of operation, and can be dispatched as an injector or withdrawer of power. 78 See, e.g., Brookfield Renewable Comments at 3; Dominion Comments at 4-5; DTE Electric/Consumers Energy Comments at 4-5; National Hydropower Association Comments at 4; NYPA Comments at 5; San Diego Water Comments at 12-13, 15. 79 See EPRI Comments at 7-8. 48. Other commenters discuss the need to distinguish between electric storage resources based on their point of interconnection with the grid. 80 Organization of MISO States recommends that electric storage resource participation models differentiate between transmission-interconnected electric storage resources and distribution-interconnected electric storage resources due to the interplay and potential overlap between wholesale and retail rates for energy use of retail customers. Stem suggests that, in developing their electric storage resource participation models, RTOs/ISOs should distinguish between behind-the-meter and front-of-the-meter electric storage resources, as well as single site and aggregated resources, to ensure that each resource is being used to its full technical capabilities and behind-the-meter resources are not precluded from the most efficient use cases. 80 See Organization of MISO States Comments at 3; Stem Comments at 2-3; TeMix Comments at 3. 49. Two RTOs/ISOs request clarifications with respect to the Commission's proposal to require them to establish a participation model for electric storage resources. 81 ISO-NE and PJM want to ensure that the requirement that they establish a participation model for electric storage resources does not preclude electric storage resources participating in their markets from using other participation models (such as demand response or Alternative Technology Regulation Resource). PJM also argues that its current rules for electric storage resources should be carried forward because it allows electric storage resources to provide all services that they are capable of providing in a manner comparable to generation resources of similar size and with similar operational characteristics. 81 See ISO-NE Comments at 29-30; PJM Comments at 6, 9, 11. 50. Finally, several commenters share information on existing RTO/ISO initiatives to remove barriers to the participation of electric storage resources in their markets. 82 California Commission notes that, in CAISO, most of the NOPR proposals are either already in place or under development. 83 Stem suggests that CAISO's current models, while incomplete, are the best place to start when designing a participation model for electric storage resources. 84 82 See, e.g., NYISO Comments at 4; MISO Comments at 3. 83 See California Commission Comments at 3. 84 See Stem Comments at 2-3. c. Commission Determination 51. In this Final Rule, we adopt the NOPR proposal and add section 35.28(g)(9)(i) to the Commission's regulations to require each RTO/ISO to revise its tariff to include a participation model consisting of market rules that, recognizing the physical and operational characteristics of electric storage resources, facilitates their participation in the RTO/ISO markets. We find that requiring each RTO/ISO to create a participation model that recognizes the unique characteristics of electric storage resources will help eliminate barriers to their participation in the RTO/ISO markets, which will enhance competition and, in turn, help to ensure that these markets produce just and reasonable rates. 52. In response to concerns that the creation of a participation model for electric storage resources may undermine market designs that are based on services provided rather than resource type, we find that this Final Rule does not preclude an RTO/ISO from structuring its markets based on the technical requirements that a resource must meet to provide needed services. It simply requires that each RTO/ISO establish a participation model that ensures eligibility to participate in the RTO/ISO markets in a way that recognizes the physical and operational characteristics of electric storage resources. As such, this Final Rule does not grant undue preference to electric storage resources as a group or to specific electric storage technologies; rather, it removes barriers to their participation, enhancing competition among all resources that are technically capable of providing wholesale services. As noted above, resources that use the participation model required by this Final Rule must fulfill certain responsibilities set forth in the FPA and the Commission's rules and regulations. 85 Additionally, resources that use this participation model will be compensated for the wholesale services they provide in the same manner as other resources that provide these services. 85 See supra P 30. 53. With respect to commenters' arguments concerning regional flexibility in implementation, we find that this Final Rule strikes the appropriate balance between allowing each RTO/ISO to adopt market rules that complement its unique market design and providing sufficiently detailed requirements to ensure that each RTO/ISO eliminates barriers to electric storage resource participation in its markets. Specifically, this Final Rule does not adopt prescriptive, uniform market rules to which each RTO/ISO must adhere. Instead, the regulations establish minimum requirements (for, among other things, bidding parameters and resource size) that each RTO/ISO must meet when proposing market rules to comply with this Final Rule, permitting each RTO/ISO to propose market rules that comply with these minimum requirements in the way that best suits its individual market design. 86 We therefore decline to adopt additional or more prescriptive requirements for the participation model at this time. 86 For example, we acknowledge that it may be necessary in some markets to create market rules that differentiate between electric storage resources interconnected to the grid at different points ( i.e., at the transmission system, the distribution system, or behind-the-meter). Such differences could include different metering and accounting practices for certain electric storage resources, as discussed in the Metering and Accounting Practices for Charging Energy section. See infra P 322. 54. We are not convinced that separate participation models are necessary for different types of electric storage resources ( e.g., slower, faster, or aggregated) because we believe that the physical differences between electric storage resources can be represented by complying with the requirements for bidding parameters that are discussed below and that a single participation model can be designed to be flexible enough to accommodate any type of electric storage resource. However, to the extent an RTO/ISO seeks to include in its tariff additional market rules that accommodate electric storage resources with specific physical and operational characteristics, the RTO/ISO may propose such revisions to its tariff through a separate FPA section 205 filing. 87 87 See 16 U.S.C. 824d. 55. We agree with CAISO that electric storage resources currently participate in the RTO/ISO markets in a variety of ways and may use a variety of existing participation models. We clarify that, where an RTO/ISO already has a separate participation model that electric storage resources may use (such as participation models for pumped-hydro resources or demand response), we are not requiring the RTO/ISO to consolidate that participation model with the participation model for electric storage resources required by this Final Rule. However, to the extent an RTO/ISO modifies existing participation models to comply with this Final Rule, it must ensure that those resulting participation models are available for all types of electric storage resources and comply with all of the other requirements set forth in this Final Rule. 56. While the participation model for electric storage resources should be designed to facilitate the participation of all types of electric storage technologies, we do not require all electric storage resources to use that participation model. To that end, we clarify that this Final Rule does not preclude electric storage resources from continuing to participate in demand response programs, as Alternative Technology Regulation Resources in ISO-NE, or under other participation models in any RTO/ISO in which they are eligible to participate. However, we clarify that, under section 35.28(g)(9) of the Commission's regulations, section 35.28(g)(9)(i) applies to resources using the participation model for electric storage resources and section 35.28(g)(9)(ii) applies to all electric storage resources that fall under the definition established in this Final Rule. Therefore, electric storage resources that may elect not to use the participation model for electric storage resources would still be able to pay the wholesale LMP for the electric energy they purchase from the RTO/ISO markets and then resell back to those markets. 2. Qualification Criteria for the Participation Model for Electric Storage Resources a. NOPR Proposal 57. To ensure that the proposed participation model for electric storage resources will facilitate the participation of both existing and future electric storage resource technologies in the RTO/ISO markets, the Commission proposed that each RTO/ISO define the criteria in its tariff that a resource must meet to qualify to use the participation model for electric storage resources ( i.e., qualification criteria). 88 The Commission stated that these qualification criteria must be based on the physical and operational attributes of electric storage resources, must not limit participation to any particular type of electric storage resource or other technology, and must ensure that the RTO/ISO is able to dispatch a resource in a way that recognizes its physical constraints and optimizes its benefits to the RTO/ISO. The Commission invited comment on whether it should establish qualification criteria that each RTO/ISO must adopt and, if so, what specific criteria the Commission should require. The Commission explained that it was not proposing to limit the use of the electric storage resource participation model to electric storage resources as defined in the NOPR, acknowledging that there may be other types of resources whose physical and operational characteristics could qualify under the proposed participation model. 89 88 See NOPR at P 29. 89 See id. P 30. b. Comments 58. While several commenters support providing each RTO/ISO with flexibility to propose appropriate qualification criteria on compliance with this Final Rule, 90 a few commenters suggest that the Commission require each RTO/ISO to propose qualification criteria that meet certain standards. 91 For example, Exelon, Imperial Irrigation District, and Magnum assert that qualification criteria should not limit participation to certain types of electric storage resources. Imperial Irrigation District argues that the qualification criteria for a resource to use the electric storage resource participation model should not be more specific than the physical and operational attributes cited in the NOPR ( i.e., the ability to both charge and discharge energy). EPRI states that, if an RTO/ISO adopts two different participation models for electric storage resources, one for slower responding resources and one for faster responding resources, then that RTO/ISO may need to establish different qualification criteria for each electric storage resource participation model. 90 See, e.g., AES Companies Comments at 15-16; Bonneville Comments at 4; CAISO Comments at 4-5; MISO Comments at 9-10; NESCOE Comments at 9; PG&E Comments at 7; SoCal Edison Comments at 15-16. 91 See, e.g., EPRI Comments at 7-8; Exelon Comments at 4; Imperial Irrigation District Comments at 6-7; Magnum Comments at 8. 59. Both MISO and SPP point to existing qualification criteria for providing certain services in their markets that they argue should apply to resources that use the electric storage resource participation model to provide those services. 92 MISO notes that, for certain services, a resource must be able to sustain provision of the service for the minimum amount of time ( e.g., contingency reserves have a 90-minute replenishment time and capacity resources must be capable of providing four hours of continuous energy). SPP makes similar arguments, noting that some products like regulation may have shorter output sustainability requirements than other products like energy. 92 See MISO Comments at 9-10; SPP Comments at 4. 60. In addition to qualification criteria, Fluidic argues that RTOs/ISOs should modify their protocols and procedures to include a uniform accrediting process for determining the capacity of an electric storage resource for participation in their markets. 93 93 See Fluidic Comments at 4. c. Commission Determination 61. To implement the new requirement in section 35.28(g)(9)(i) of the Commission's regulations for a participation model for electric storage resources, in this Final Rule, we adopt the NOPR proposal to require each RTO/ISO to define in its tariff the criteria that a resource must meet to use the participation model for electric storage resources ( i.e., qualification criteria). As proposed in the NOPR, these criteria must be based on the physical and operational characteristics of electric storage resources, such as their ability to both receive and inject electric energy, must not limit participation under the electric storage resource participation model to any particular type of electric storage resource or other technology and must ensure that the RTO/ISO is able to dispatch a resource in a way that recognizes its physical and operational characteristics and optimizes its benefits to the RTO/ISO. We find that such criteria are necessary to ensure that the electric storage resource participation model will accommodate both existing and future technologies. 62. Because the qualification criteria must not limit participation to any particular technology and instead will be based on the physical and operational characteristics of electric storage resources, these criteria will allow new electric storage resource technologies to participate in the RTO/ISO markets without the need for additional tariff revisions to explicitly permit their participation. This focus on the physical and operational characteristics of electric storage resources rather than the specific technology in use will remove barriers to entry for existing and future technologies, which will enhance competition in the RTO/ISO markets and, in turn, help to ensure that these markets produce just and reasonable rates. In addition, requiring each RTO/ISO to define in its tariff qualification criteria will provide greater certainty about which resources will be eligible to use the electric storage resource participation model in each RTO/ISO. 63. Also, as proposed in the NOPR, we provide each RTO/ISO with flexibility to propose qualification criteria that best suit its proposed participation model for electric storage resources. We decline to adopt Imperial Irrigation District's suggestion to specify that the qualification criteria for a resource to use the electric storage resource participation model should be limited to the physical and operational characteristics cited in the definition proposed in the NOPR ( i.e., the ability to both charge and discharge energy). We agree that the qualification criteria should not present barriers to the participation of any electric storage resource in the RTO/ISO markets. As long as any qualification criteria that the RTOs/ISOs propose do not create such barriers and are inclusive of, at a minimum, those resources set forth under the definition of electric storage resources in this NOPR, then we do not find that it is necessary to place additional limitations on any qualification criteria that the RTOs/ISOs may propose in response to this Final Rule. 64. In response to Fluidic, we clarify that the qualification criteria should not include a uniform accrediting process to determine the capacity of an electric storage resource. As discussed in the Eligibility to Provide All Capacity, Energy, and Ancillary Services section, 94 we understand that, like all other market participants, resources using the participation model for electric storage resources will be subject to testing procedures to determine their technical ability to provide a particular service and that this testing will be done based on the capacity that the resource wants to offer into the RTO/ISO markets. 94 See infra P 81. 65. With respect to MISO's and SPP's comments, we note that, based on our understanding, the requirements that MISO and SPP characterize as qualification criteria are technical requirements to provide a particular wholesale service. Such technical requirements should not be used as qualification criteria to determine whether a resource may use the participation model for electric storage resources. Rather, MISO and SPP would continue to use these requirements to determine whether individual resources using the participation model for electric storage resources are eligible to provide specific services. 3. Relationship Between Electric Storage Resource Participation Model and Existing Market Rules a. NOPR Proposal 66. In the NOPR, the Commission proposed that each RTO/ISO propose any necessary additions or modifications to its existing tariff provisions to specify: (1) Whether resources that qualify to use the participation model for electric storage resources will participate in the RTO/ISO markets through existing or new market participation agreements; and (2) whether particular existing market rules apply to resources participating under the electric storage resource participation model. 95 95 See NOPR at P 31. b. Comments 67. CAISO supports the NOPR proposal. 96 In contrast, ISO-NE requests that the Commission omit any specific directive about market participation agreements from a final rule. 97 ISO-NE notes that, in New England, all market participants use the same Market Participation Service Agreement regardless of resource type, and it does not interpret the NOPR to preclude its continued use of a single agreement. SPP remains silent as to whether it supports the NOPR proposal but states that it will modify both its tariff and market protocols to accommodate the participation of electric storage resources, noting that it will structure any new rules consistent with SPP balancing authority needs and requirements, while providing as much flexibility and opportunity for the participation of electric storage resources as possible. 98 96 See CAISO Comments at 5. 97 See ISO-NE Comments at 56. 98 See SPP Comments at 5. c. Commission Determination 68. To implement the new requirement in section 35.28(g)(9)(i) of the Commission's regulations for a participation model for electric storage resources, in this Final Rule, we adopt the NOPR proposal to require each RTO/ISO to propose any necessary additions or modifications to its existing tariff provisions to specify: (1) Whether resources that qualify to use the participation model for electric storage resources will participate in the RTO/ISO markets through existing or new market participation agreements and (2) whether particular existing market rules apply to resources participating under the electric storage resource participation model. We find that these requirements are necessary to provide certainty to resources using the electric storage resource participation model about the market rules that will govern their participation in each RTO/ISO market, thus removing barriers to their participation. 69. With respect to ISO-NE's concern that the RTOs/ISOs should not be precluded from using a single market participation agreement for all market participants, we clarify that this Final Rule allows the use of one or more existing agreements so long as the agreement(s) complies with the terms of this Final Rule. C. Eligibility of Electric Storage Resources To Participate in the RTO/ISO Markets 1. Eligibility To Provide All Capacity, Energy, and Ancillary Services a. NOPR Proposal 70. In the NOPR, the Commission proposed to require each RTO/ISO to modify its tariff to establish a participation model consisting of market rules for electric storage resources under which a participating resource is eligible to provide any capacity, energy, and ancillary service that it is technically capable of providing in the RTO/ISO markets. 99 The Commission also proposed that electric storage resources should be eligible, as part of the participation model, to provide services that the RTOs/ISOs do not procure through a market mechanism, such as blackstart service, primary frequency response service, and reactive power service, if they are technically capable. The Commission specified that, where compensation for these services exists, electric storage resources should also receive such compensation commensurate with the service provided. 99 See NOPR at P 48. b. Comments 71. Many commenters generally support the NOPR proposal. 100 In particular, several commenters support the NOPR proposal that electric storage resources, if technically capable, must be eligible to provide services that the RTOs/ISOs do not procure through a market mechanism, such as blackstart service, primary frequency response service, and reactive power service. 101 However, APPA/NRECA suggest that the Commission give each RTO/ISO flexibility to demonstrate on compliance the extent to which an electric storage resource may not be technically capable of providing a given service reliably, efficiently, and cost-effectively. 102 100 See, e.g., Advanced Energy Economy Comments at 23-25; American Petroleum Institute Comments at 3; EEI Comments at 6; Mensah Comments at 2; MISO Comments at 4; National Hydropower Association Comments at 7. 101 See, e.g., Advanced Energy Economy Comments at 29; APPA/NRECA Comments at 12-13; Exelon Comments at 6; National Hydropower Association Comments at 7; Xcel Energy Services Comments at 21. 102 See APPA/NRECA Comments at 13. 72. Several of the RTOs/ISOs explain their ongoing efforts to improve the opportunities for electric storage resources to participate in their markets. 103 MISO states that the NOPR proposal aligns with its tariff, which classifies resources based on their technical capabilities, including any technical limitations that they have. Moreover, MISO states that it is exploring the potential to enhance the opportunities for electric storage resources to participate in its markets, noting, however, that implementing such enhancements may require significant changes to its settlement systems and software. NYISO explains that, to ensure that its market rules are fully accessible to new electric storage technologies, it is working with stakeholders on a comprehensive review and reform of the rules related to electric storage resource participation in its markets. 103 See CAISO Comments at 5-6; MISO Comments at 4-6; NYISO Comments at 5-6; SPP Comments at 7. 73. CAISO points out that electric storage resources participating in CAISO's market have the opportunity to provide energy and ancillary services, including those that CAISO may procure outside of its market processes, if they meet the technical criteria to do so. Likewise, SPP notes that electric storage resources may provide non-market based services such as blackstart service and reactive power service if they meet the relevant technical requirements. 74. While ISO-NE states that it will revise its market rules in compliance with a final rule in this proceeding to eliminate barriers to the participation of electric storage resources in their markets, and SPP states that, prior to the issuance of the NOPR, it was planning to do so, 104 they each request clarification of the NOPR proposal that a resource using the electric storage resource participation model must be eligible to provide any capacity, energy, and ancillary service that it is technically capable of providing. According to ISO-NE, electric storage resources should not receive different treatment than other technology types. ISO-NE and SPP thus ask the Commission to clarify that an electric storage resource must be eligible to provide a service only if it meets the same requisite performance requirements to provide that service that apply to all other resources. 104 See ISO-NE Comments at 14-15; SPP Comments at 3-4, 6-7. 75. Energy Storage Association contends that it is imperative that RTOs/ISOs establish a process for resources to demonstrate that they are technically capable of providing a specific service. 105 Energy Storage Association asserts that such a process must be transparent and documented to create more certainty for new resources and to ensure that all resources that are technically capable of providing a particular service can do so. 105 See Energy Storage Association Comments at 10-11. c. Commission Determination 76. In this Final Rule, we adopt the NOPR proposal and add section 35.28(g)(9)(i)(A) to the Commission's regulations to require each RTO/ISO to establish market rules so that a resource using the participation model for electric storage resources is eligible to provide all capacity, energy, and ancillary services that it is technically capable of providing, including services that the RTOs/ISOs do not procure through an organized market. To provide clarity, we add the phrase “technically capable of providing” to the regulatory text we proposed in the NOPR. To be eligible to provide capacity, energy, and ancillary services, a resource using the participation model for electric storage resources will still need to meet the technical requirements for any of the services that it wants to provide. We recognize that the RTOs/ISOs have ongoing efforts to enhance opportunities for electric storage resources to participate in their markets and encourage each RTO/ISO to build upon these efforts when developing tariff revisions to comply with this Final Rule. 77. In response to ISO-NE, we clarify that each RTO/ISO is required to revise its tariff to allow a resource using the electric storage resource participation model to be eligible to provide a service only if that resource is technically capable of doing so. To the extent that an RTO/ISO has developed a standard set of technical requirements that all resources must meet to provide a given service, those requirements would also apply to a resource using the electric storage resource participation model if it wants to provide that service. 78. In response to ISO-NE and SPP, we clarify that “technically capable” of providing a service means that a resource can meet all of the technical, operational, and/or performance requirements that are necessary to reliably provide that service. For example, these requirements may include a minimum run-time to provide energy or the ability to respond to automatic generation control to provide frequency regulation. While we are clarifying the definition of “technically capable” here, we note that we are not considering in this proceeding the requirements that determine whether resources are technically capable of providing individual wholesale services. 106 106 To the extent that an RTO/ISO seeks to revise its tariff provisions setting forth the technical requirements for providing any specific wholesale service, the RTO/ISO may propose such revisions to its tariff through a separate FPA section 205 filing. See 16 U.S.C. 824d. 79. We decline to adopt APPA/NRECA's suggestion that the Commission give each RTO/ISO flexibility to demonstrate on compliance the extent to which an electric storage resource may not be technically capable of providing a given service reliably, efficiently, and cost-effectively. Each individual electric storage resource must still meet the technical requirements of providing any specific service, which would be determined by the RTO/ISO on a case-by-case basis. 80. As part of the requirement that each RTO/ISO develop a participation model for electric storage resources that allows electric storage resources to be eligible to provide services in all of its capacity, energy, and ancillary service markets, we also require that such participation model allow electric storage resources to be eligible to provide services that the RTOs/ISOs do not procure through an organized market mechanism (such as blackstart service, primary frequency response service, and reactive power service) if they are technically capable of providing those services. As noted above, we are not requiring each RTO/ISO to revise or revisit the technical requirements or compensation provisions of those markets. 81. We will not require the RTOs/ISOs to establish new processes through which a resource using the participation model for electric storage resources can demonstrate that it is technically capable of providing a specific service in their markets. The RTOs/ISOs already have technical requirements and testing procedures in place to ensure that market participants can provide the particular services that they seek to provide. We expect that these requirements and procedures will apply to resources using the electric storage resource participation model, just as they do to all other resources. However, as part of developing a participation model for electric storage resources, we encourage each RTO/ISO to consider whether any modifications or additions to the existing technical requirements, testing protocols, or other qualification procedures are necessary to facilitate the participation of electric storage resources in its markets. 2. Ability To De-Rate Capacity To Meet Minimum Run-Time Requirements a. NOPR Proposal 82. In the NOPR, the Commission proposed to require each RTO/ISO to revise its tariff to clarify that an electric storage resource may de-rate its capacity to meet minimum run-time requirements to provide capacity or other services. 107 In RTOs/ISOs with capacity markets, the Commission proposed that the de-rated capacity value for electric storage resources be consistent with the quantity of energy that must be offered into the day-ahead energy market for resources with capacity obligations. 107 See NOPR at P 49. b. Comments 83. Many commenters generally support the proposal to require each RTO/ISO to revise its tariff to clarify that an electric storage resource may de-rate its capacity to meet minimum run-time requirements to provide capacity or other services. 108 Additionally, while many commenters either support or do not oppose the NOPR proposal, multiple entities request that the Commission clarify the proposal or raise specific issues about the proposal and its interaction with the RTO/ISO markets. 108 See, e.g., AES Companies Comments at 16; Avangrid Comments at 5; City of New York Comments at 6-7; Energy Storage Association Comments at 8; Minnesota Energy Storage Alliance Comments at 3; MISO Comments at 12; NESCOE Comments at 10-11; NRG Comments at 14-15; R Street Institute Comments at 5; Xcel Energy Services Comments at 21. 84. Multiple commenters raised issues surrounding performance requirements for electric storage resources in the RTO/ISO markets. 109 NRG agrees that the final rule should allow flexibility to de-rate in capacity markets but argues that the Commission should clarify that electric storage resources participating in capacity markets must meet the same performance metrics and criteria as other resources. American Petroleum Institute similarly supports allowing electric storage resources to de-rate to meet their capacity requirements but asserts that this should not affect the ability of these resources to participate in energy and ancillary services markets up to their nominal capacity. American Petroleum Institute also contends that electric storage resources should be subject to the same penalties for non-performance as generators and demand response. 109 See, e.g., AES Companies Comments at 17; American Petroleum Institute Comments at 7-8; NRG Comments at 15. 85. Some entities raise issues about the interaction of the Commission's de-rating proposal with resource obligations. 110 Both Avangrid and EEI seek clarification that the proposal is intended to ensure that the resource's de-rate is consistent with obligations that the resource has in organized wholesale markets. AES Companies note that, because some electric storage resources may only provide wholesale services when there is excess available after serving retail load, their nameplate capacity may not be the same as the capacity available for wholesale services and would need to be reduced by the capacity reserved for providing retail services. Xcel Energy Services agrees that resources must reserve sufficient capacity to meet any applicable capacity obligations, but it also notes that there are regional differences in how capacity obligations are treated ( e.g., CAISO does not “count” storage capacity, while other RTOs/ISOs have a four-hour run-time requirement). 110 See, e.g., Avangrid Comments at 5; EEI Comments at 7; Xcel Energy Services Comments at 21-22. 86. Energy Storage Association raises concerns regarding the Commission's proposal that the de-rated capacity value for an electric storage resource should be consistent with the quantity of energy that must be offered into the day-ahead energy market for resources with capacity obligations. 111 Energy Storage Association asserts that, because some RTOs/ISOs explicitly exempt electric storage resources from a day-ahead energy market must-offer obligation, there would not be a basis for determining a storage resource's capacity value. Instead, Energy Storage Association recommends that RTOs/ISOs assign electric storage resources a capacity value based on the quantity of energy that they can discharge continuously over the minimum run-time set by the RTO/ISO. SPP also supports the ability to de-rate the maximum capacity of an electric storage resource in order to qualify for provision of other products but requests that the Commission find that a storage resource de-rating its capacity to meet minimum run-time requirements is not physical withholding. 112 111 See Energy Storage Association Comments at 8-9. 112 See SPP Comments at 7. 87. Several other commenters consider the interaction between the Commission's de-rating proposal and market power issues. 113 For example, EEI asserts that the RTO/ISO or market monitor would need to verify minimum run-times and parameters to ensure that there is a reasonable basis for the de-rate. Exelon agrees that electric storage resources should be treated the same as generators providing capacity, which can de-rate, and states that the market monitor can investigate a market participant if there is a concern about an exercise of market power. NYISO also raises general concerns about market power issues, asking the Commission to consider the potential market power implications of allowing a resource to hold back energy through its offer, even if its intent is to discharge the energy at a later time. 113 See, e.g., EEI Comments at 7; Exelon Comments at 7; NYISO Comments at 7. 88. Other commenters consider whether electric storage resources need to de-rate in all circumstances. 114 For example, California Energy Storage Alliance asks the Commission to confirm that shorter-duration electric storage resources should be eligible to participate in the markets and provide services, when reasonable, without de-rating. California Energy Storage Alliance argues that each RTO/ISO should make determinations regarding de-rating capacity based on market needs. CAISO contends that the Commission should not require any specific outage rules for electric storage resources and that the general outage management rules that apply to all other resources in individual RTO/ISO markets should also apply to electric storage resources. 114 See, e.g., CAISO Comments at 6; California Energy Storage Alliance Comments at 10-11. 89. EPRI raises concerns about the effectiveness of the Commission's proposal. EPRI asserts that the Commission's de-rating proposal is potentially an improved approximation of an electric storage resource's capacity value. 115 However, EPRI states that the proposal may not be entirely accurate because it assumes that an electric storage resource would contribute less than its maximum capacity to provide energy across the entire four-hour minimum duration required for providing capacity in many RTOs/ISOs. EPRI asserts that, during periods where the RTO/ISO requires maximum capacity, an electric storage resource with a two-hour duration at maximum discharge may exhaust all energy production during the first two hours. EPRI argues that the Commission's proposal also does not guarantee that an electric storage resource will have full energy levels when the maximum capacity period begins. EPRI contends that, where the load typically peaks during just one hour of the highest load days, an electric storage resource with less than the minimum duration requirement of the capacity market may actually be providing greater capacity value than the proposed de-rated value. EPRI asserts that, depending on the ability of an electric storage resource to provide capacity when its duration of energy storage is less than the minimum duration requirement of the capacity market, must-offer rules for the day-ahead energy market must be fairly determined. EPRI adds that the hours which an electric storage resource must bid as an injector of energy per day and how much capacity it must bid for those days must be determined. EPRI adds that those rules should be consistent with other principles of must-offer rules for capacity providers and ensure that they lead to the electric storage resource's ability to perform during critical peak conditions. 115 See EPRI Comments at 12-13. 90. Several commenters consider whether reforms beyond the Commission's proposal are needed. For example, some commenters argue for either exempting electric storage resources from minimum run-time requirements in some circumstances or developing new capacity products with shorter minimum run-time requirements. 116 Alevo argues that the Commission should require each RTO/ISO to have additional capacity market products that better reflect the capabilities of electric storage resources because minimum run-time requirements present a barrier to electric storage resource participation in capacity markets. R Street Institute states that capacity products and performance requirements may not be well-suited to extracting the full economic value of electric storage resources for resource adequacy purposes. R Street Institute states that these rules can create barriers to capacity market participation for electric storage resources but, at the same time, relaxing them too aggressively may raise reliability concerns. R Street Institute further explains that it may be useful for capacity constructs to distinguish between short- and long-duration resource needs. R Street Institute encourages the Commission to seek additional detailed comments on methodologies for electric storage resources to participate in capacity markets, stating that reforms may be best left to individual RTO/ISO compliance filings or individual RTO/ISO proceedings. 116 See, e.g., Alevo Comments at 8; R Street Institute Comments at 5. 91. NextEra asserts that, in most RTOs/ISOs, reserve product commitment requirements systematically discriminate against electric storage resources by restricting their ability to offer their full capacity into the market and that de-rating capacity to meet existing requirements diminishes the value of electric storage resources and arbitrarily restricts competition. 117 In contrast, EPRI contends that each RTO/ISO should perform additional analysis to provide guidance on the amount of capacity that can be relied upon from limited-duration electric storage resources for particular services in each market. 118 117 See NextEra Comments at 7. 118 See EPRI Comments at 12-13. 92. A few commenters address the must-offer requirements that are often associated with a resource's capacity supply obligation. 119 Energy Storage Association argues that electric storage resources should be exempt from, or otherwise allowed to manage, must-offer obligations. Advanced Energy Economy argues that must-offer requirements fail to account for the physical and operational characteristics of electric storage resources and arbitrarily exclude them from providing wholesale services that they are technically capable of providing. Advanced Energy Economy asserts that must-offer requirements were developed to prevent the exercise of market power and electric storage resources have no incentive or ability to exercise market power. 119 See, e.g., Advanced Energy Economy Comments at 25-26, 28-29; AES Companies Comments at 16-17; Energy Storage Association Comments at 6, 12. 93. AES Companies claim that it may be necessary to modify RTO/ISO must-offer requirements to allow electric storage resources to participate in capacity markets while also providing non-dispatched services (such as primary frequency response and voltage control). AES Companies add that most must-offer requirements apply to a capacity resource during all dispatch intervals, even though specific services may only be needed for a set number of hours in a day. c. Commission Determination 94. To implement section 35.28(g)(9)(i)(A) of the Commission's regulations, in this Final Rule, we adopt the NOPR proposal, as modified and clarified below, to require each RTO/ISO to revise its tariff to allow electric storage resources to de-rate their capacity to meet minimum run-time requirements. We find that allowing resources using the participation model for electric storage resources to de-rate their capacity to meet minimum run-time requirements to provide capacity or other services will help to ensure that electric storage resources are eligible to provide all services that they are technically capable of providing by taking into account their physical and operational characteristics, while still maintaining the quality and reliability of services they seek to provide. For example, this requirement would allow a 10MW/20MWh electric storage resource to offer 5MW of capacity into a capacity market with a 4-hour minimum run-time because that is the maximum output that the resource can sustain for the duration of the minimum run-time. Absent the opportunity to de-rate its capacity, the 10MW/20MWh electric storage resource would not be able to participate in that capacity market, despite its ability to reliably provide 5MW of capacity for the duration of the minimum run-time. 95. We also clarify several aspects of the NOPR proposal in response to commenters. In response to NRG, we clarify that this Final Rule does not exempt electric storage resources that participate in RTO/ISO capacity markets from meeting the performance metrics and criteria that apply to all other resources that participate in those markets. In fact, along with other requirements in this Final Rule that require an RTO's/ISO's participation model for electric storage resources to account for the physical and operational characteristics of electric storage resources, 120 allowing electric storage resources to de-rate their capacity to meet minimum run-time requirements should make it possible for energy-limited electric storage resources to satisfy relevant performance metrics in the RTO/ISO markets. In response to American Petroleum Institute, we clarify that this Final Rule does not exempt an electric storage resource that is participating in RTO/ISO capacity markets from any applicable penalties for non-performance. 120 See, e.g., Physical and Operational Characteristics of Electric Storage Resources and State of Charge Management sections, infra PP 189-194, 251-257. 96. In response to SPP, we clarify that an electric storage resource de-rating its capacity to provide capacity or other services is not engaging in physical withholding if it is de-rating to meet minimum run-time requirements. In the case of an electric storage resource that de-rates its capacity to meet minimum run-time requirements, this resource would be de-rating its capacity for true and verifiable technical reasons pertaining to the market rules for providing various services. However, as the Commission has previously explained, physical withholding may include a market participant declaring that an electric facility has been de-rated, forced out of service, or otherwise been made unavailable for technical reasons that are unrelated to physical or legitimate commercial issues or that cannot be verified. 121 Thus, we find that each RTO/ISO may request that its market monitor verify whether an electric storage resource de-rated its capacity to meet a minimum run-time requirement to ensure that these resources are not engaging in physical withholding, as defined by the Commission. 121 See Sw. Power Pool, Inc., 141 FERC ¶ 61,048, at P 451 (2012), order on reh'g, 142 FERC ¶ 61,205 (2013). Other examples of physical withholding that the Commission has identified, which we do not believe apply to de-rating to meet minimum run-time requirements, include: (1) Refusing to provide offers or schedules for an electric facility when it is required to offer into the market when it would otherwise have been in the economic interest to do so without market power; (2) operating a generation resource in real time to produce an output level that is less than dispatch targets; (3) de-rating a transmission facility or interface for technical reasons that are not true or verifiable; (4) operating a transmission facility in a manner that is not economic and that causes a binding transmission constraint or binding reserve zone constraint or local reliability issue; and (5) declaring that the capability of resources to provide energy or operating reserves is reduced for reasons that are not true or verifiable. Id. 97. Additionally, while commenters do not specifically describe any market power concerns outside the context of physical withholding, to the extent that market power concerns arise as a result of electric storage resources de-rating capacity to provide capacity or other services, each RTO/ISO may consider whether it is appropriate to update and/or apply existing market power mitigation processes to electric storage resources to alleviate market power concerns. 98. In response to California Energy Storage Alliance, we agree that electric storage resources may provide services in the RTO/ISO markets without de-rating so long as they meet the requirements to provide the particular service that they seek to provide. We also clarify that this Final Rule does not require any specific outage rules for electric storage resources. 99. Further, upon consideration of the comments, we clarify the part of the NOPR proposal stating that the de-rated capacity value for electric storage resources should be consistent with the quantity of energy that must be offered into the day-ahead energy market for resources with capacity obligations. Several commenters suggest that there may be reasons why the de-rated capacity value for electric storage resources might not be consistent with the quantity of energy that must be offered into the day-ahead energy market. For example, an electric storage resource may choose to de-rate to reflect its capacity interconnection rights; to reserve capacity for providing retail services; or because system operators may need the full capacity of electric storage resources based on real-time system conditions. 122 We find these points compelling. We also agree with Xcel Energy Services that the rules governing must-offer quantities vary between RTOs/ISOs and with Energy Storage Association that where electric storage resources do not have a must-offer obligation the de-rated quantity cannot be tied to such an obligation. We therefore provide each RTO/ISO flexibility either to use its existing rules for must-offer quantities or to modify its existing rules as necessary to reflect the physical and operational characteristics of electric storage resources. However, in response to Avangrid and EEI, we clarify that, if an electric storage resource elects to de-rate its capacity, it must not de-rate its capacity below any capacity obligations it has assumed, such as any applicable must-offer requirement. We also agree with Energy Storage Association that the de-rated quantity should be based on the quantity of energy that an electric storage resource can discharge continuously over the minimum run-time set by the RTO/ISO. 122 See, e.g., AES Companies Comments at 16-17; Avangrid Comments at 5; Energy Storage Association Comments at 8-9; EPRI Comments at 12-13. 100. In response to those commenters suggesting that the RTO/ISO resource adequacy constructs provide accommodations for electric storage resources, we will not require the RTOs/ISOs to make specific changes to minimum run-time or must-offer requirements associated with providing capacity. While we agree with commenters that some of the requirements to participate in the resource adequacy constructs of the RTOs/ISOs may limit the ability of electric storage resources to participate, there is significant variation in how each RTO/ISO approaches resource adequacy. Thus, we do not believe it is appropriate to establish one standard approach to this issue in the RTO/ISO markets. However, we do find that it is important for electric storage resources that can provide value in those resource adequacy constructs to be eligible to participate. Therefore, in the interest of preserving flexibility for the RTOs/ISOs to address this issue given their unique resource adequacy constructs, we require each RTO/ISO to demonstrate on compliance with this Final Rule that its existing market rules provide a means for electric storage resources to provide capacity. If an RTO/ISO does not have existing tariff provisions that enable electric storage resources to provide capacity, such as the RTO/ISO tariff provisions described below, we require the RTO/ISO to propose such rules on compliance with this Final Rule. 101. To provide guidance for this requirement, we note that several of the RTOs/ISOs already have developed rules that allow energy-limited resources to provide capacity. Some of these market rules explicitly facilitate the participation of electric storage resources. For example, NYISO has an Energy Limited Resource model that facilitates the participation of electric storage resources in the capacity market by limiting their commitments to one four-hour interval per day, while CAISO requires that flexible resource adequacy resources be available only during peak hours. Other RTOs/ISOs rely on opportunity costs in incremental energy offer reference levels, allowing for a resource to reflect its energy-limited nature through high offers in the energy market that make it unlikely to be dispatched. For example, ISO-NE's tariff allows opportunity costs included in an incremental energy reference level based on costs associated with complying with emissions limits, water storage limits, and other operating permits that limit production of energy. 123 While some of these market rules may apply to resources using the participation model for electric storage resources, we require each RTO/ISO to demonstrate how such rules are applicable to resources using the participation model for electric storage resources on compliance with this Final Rule. 123 ISO-NE Tariff, Market Rule 1, Appendix A, § III.A.7.5.1. 3. Energy Schedule Requirement for Provision of Ancillary Services a. NOPR Request for Comments 102. In the NOPR, the Commission stated that electric storage resources tend to be capable of faster start-up times and higher ramp rates than traditional synchronous generators and are therefore able to provide ramping, spinning, and regulating reserve services without already being online and running. 124 However, the Commission acknowledged that the RTOs/ISOs that co-optimize energy and ancillary services dispatch and pricing may condition eligibility to provide ancillary services on having an energy schedule. 125 The Commission therefore sought comment on whether the requirement to have an energy schedule to provide ancillary services could be adjusted so that electric storage resources and other technically-capable resources could participate in the ancillary service markets independent of offering energy to the RTO/ISO. 124 See NOPR at P 50. 125 See id. P 51. 103. Specifically, the Commission sought comment on whether dispatch and pricing of energy and ancillary services would be internally consistent if a resource were not required to offer to provide energy in order to offer to provide ancillary services. Further, the Commission sought comment on whether the capability of resources to provide an ancillary service absent an energy schedule can be determined in the regular performance tests that the RTO/ISO conducts and whether a resource's start-up time and ramp capability are generally represented in bidding parameters and would adequately guarantee the resource's ability to provide other services absent energy market participation. Finally, the Commission sought comment on the extent of software changes necessary to factor the elimination of such an energy schedule requirement into the RTO/ISO co-optimization models. b. Comments 104. A number of commenters agree that the RTOs/ISOs should base a market participant's eligibility to provide a particular ancillary service on its ability to provide services when called upon, rather than whether it is online and synchronized to the grid. 126 They argue that the requirement to have an energy schedule to provide ancillary services is no longer technically necessary. For example, Advanced Energy Economy and Efficient Holdings state that electric storage resources are able to provide services such as primary frequency response, even while they are charging and unable to supply energy. Altametric and Energy Storage Association explain that an electric storage resource's start-up time and ramp capability are generally represented in bidding parameters, adequately guaranteeing the resource's ability to provide other services absent energy market participation. Altametric adds that an RTO/ISO can validate a resource's ability to provide ancillary services through its regular performance, while Energy Storage Association, NRG, and Pacific Gas & Electric contend that periodic performance testing is sufficient. Beacon Power notes that regulation resources are already required to undergo performance testing in PJM, with no requirement that they participate in the energy market. 126 See, e.g., Advanced Energy Economy Comments at 26-27; Altametric Comments at 6; Beacon Power Comments at 3-4; Efficient Holdings Comments at 13-14; Energy Storage Association Comments at 10, 12-13; NRG Comments at 15-16; Pacific Gas & Electric Comments at 8. 105. A few commenters address the benefits of removing any requirement to have an energy schedule to provide ancillary services. 127 Specifically, Efficient Holdings, Energy Storage Association, and Magnum argue that removing any such requirement would eliminate a barrier to some electric storage resources' ability to provide ancillary services because they are energy-limited, increasing competition. Similarly, Starwood Energy states that electric storage resources should be allowed to participate in the ancillary service markets regardless of whether they offer energy to the RTO/ISO. 127 See., e.g., Efficient Holdings Comments at 13-14; Energy Storage Association Comments at 12; Magnum Comments at 10; Starwood Energy Comments at 6. 106. Energy Storage Association and Research Scientists opine that it is feasible for RTOs/ISOs to remove any requirement to have an energy schedule to provide ancillary services. 128 Energy Storage Association and Research Scientists argue that, even if an electric storage resource is allowed to provide ancillary services without an energy schedule, dispatch and pricing of energy and ancillary services can be co-optimized and will be internally consistent. However, Research Scientists also note that whether an electric storage resource offers to provide energy may influence market outcomes, as an energy offer represents a resource's opportunity cost of providing ancillary services under the market clearing optimization algorithm. Energy Storage Association adds that, just as some resources currently provide only energy, RTOs/ISOs can manage resources that provide only ancillary services because they will receive enough infor [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2018-03708. Public record. Not legal advice.