Dynapower Storage

A 250-kW Dynapower behind-the-meter energy storage system.

Federal energy regulators are trying to find a way for behind-the-meter storage resources to sell into both wholesale and retail electricity markets in California, but figuring out the methodology is proving to be a thorny problem.

The Federal Energy Regulatory Commission is refereeing the debate between the California Independent System Operator and storage developers, having declared in its landmark Order No. 841 that there is no reason behind-the-meter storage shouldn't be able to participate in both wholesale and retail markets. CAISO, which operates the wholesale market, is working to comply with Order 841, but found that its latest compliance filing only got partial approval in a FERC decision on July 17 [ER19-468].

One issue is "double-counting," whereby a behind-the-meter storage resource faces a fee from the local utility and also from CAISO for energy to charge the resource with electricity that comes from the grid. Storage developer Cobia Capital Management told FERC in a filing earlier this year that it has possibly developed the first behind-the-meter "non-generator resource" that is a CAISO-metered entity, and that CAISO's latest compliance filing suffers from the double-counting problem.

CAISO's latest Order No. 841 compliance filing to FERC states that it will not settle in the market the storage resource's charging energy, if the resource obtains from the local distribution utility a letter stating that the utility is unwilling or unable to adjust the BTM customer's bill for the charging energy. Cobia and other commenters have said that obtaining such a letter is potentially difficult and unworkable. But FERC was not convinced by Cobia's arguments.

"Cobia contends that obtaining this letter is unduly burdensome on small behind-the-meter electric storage resources, and that this portion of the Tariff should be rewritten such that the default assumption is that the utility distribution company or retail utility will continue to charge for electricity as it has always done," FERC said.

"Cobia has provided no evidence for its claim that requiring electric storage resources to obtain such a letter is unduly burdensome," FERC said. "However, we note that this provision only applies to [non-generator resources], and therefore does not apply to all electric storage resources, as required by the Commission's directive in the First Compliance Order."

So, FERC accepted in part CAISO's latest compliance filing, and said that within 90 days it must submit an additional filing to make clear that this provision applies to the wholesale charging activities of all electric storage resources. FERC has specified that only storage resources 100 kW and larger can participate in wholesale markets.

FERC also said it was unclear whether CAISO's metering and accounting practices allow for simultaneous participation in both retail and wholesale markets, and the commission did not find that CAISO complied with Order No. 841's provision that storage should not be charged both wholesale and retail rates for the same charging energy.

In its protests of CAISO's proposals, Cobia also said the technology does not exist for another CAISO proposed solution—having revenue-quality meters installed and programmed to exclude any retail meter data.

According to Cobia, for storage that never discharges an amount that exceeds host load, the power would always flow through the retail meter of the host utility, then through a CAISO meter. The CAISO meter would not have visibility into the host utility meter and cannot exclude any retail meter data, as CAISO proposes. Cobia proposed that energy flowing through the CAISO meter not be billed at CAISO rates, but CAISO rejected that request and said it is up to the storage resource to figure out how to address that problem with the retail provider.

FERC in Order No. 841 rejected arguments that storage should have to choose whether to participate in either wholesale or retail markets, because of the complexity of the metering and accounting practices that would have to be developed. FERC found that it's possible for storage resources selling retail services to be technically capable of providing wholesale services, and that it would adversely affect competition if those resources were excluded from participation.

As Order No. 841 compliance develops more complexities, it will be interesting to see how FERC makes sure that ISOs and regional transmission organizations stick to its original mandate that behind-the-meter storage can operate in wholesale and retail markets, which creates a jurisdictional split between federal and state oversight.

FERC said that ISOs and RTOs can work with local distribution utilities and state regulators to develop the accounting and metering issues. That appears to be exactly what will have to happen for the issue to be resolved, and for CAISO's approach to behind-the-meter storage to gain federal approval.