Electric storage participation in markets operated by regional transmission organizations and independent system operators
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.
R Street Institute asserts that, unless they have a must-offer energy obligation, electric storage resources should not have to submit an energy schedule to participate in ancillary service markets.136 However, R Street Institute contends that, before requiring each RTO/ISO to remove any requirement that a resource must have an energy schedule to provide ancillary services, the Commission should weigh the costs of any software changes necessary to implement such a requirement against its projected benefits.
136 See R Street Institute Comments at 4.
152 See, e.g., Efficient Holdings Comments at 17; Imperial Irrigation District Comments at 10-11; National Hydropower Association Comments at 9; NYPA Comments at 11; R Street Institute Comments at 6; Tesla/SolarCity Comments at 15.
R Street Institute and Research Scientists believe that building logical checks into the market clearing software could avoid this problem.184
184 See R Street Institute Comments at 6; Research Scientists Comments at 8-9.
R Street Institute states that, while the required and optional bidding parameters are reasonable, each RTO/ISO should incorporate the proposed optional bidding parameters in its software only if justified by forward cost/benefit analysis.225
225 See R Street Institute Comments at 5.
R Street Institute posits that economic withholding may be difficult to detect, given that electric storage resources’ offers reflect their opportunity costs (rather than physical marginal costs) and that these resources will likely supply energy when prices are high and the market is most vulnerable to the exercise of market power.296 R Street Institute explains that physical withholding detection will prove challenging due to the complexity and heterogeneity of physical characteristics of electric storage resources. Therefore, R Street Institute asks the Commission to seek comment on how electric storage resources may engage in economic or physical withholding.
296 See R Street Institute Comments at 6.
Other commenters support the concept of a minimum size requirement but have reservations about the 100 kW value that the Commission proposed in the NOPR.310 Eagle Crest agrees that a minimum size requirement is appropriate but takes no position with respect to what that requirement should be. Relatedly, Public Interest Organizations and R Street Institute contend that lowering the minimum size requirement will reduce barriers to the participation of electric storage resources but state that the NOPR proposal does not address the arbitrariness of choosing a particular minimum size. R Street Institute argues that no economic rational justifies the RTOs/ISOs adopting different minimum size requirements. While R Street Institute states that the NOPR correctly identifies the need to balance the benefits of lowering minimum size requirements with the ability of market clearing software to model and dispatch smaller resources, it argues that it is unclear how the NOPR proposal balances these benefits and costs. While the National Hydropower Association notes that it is concerned with market participation limitations based on project size, it believes that the NOPR proposal is compatible with existing and future pumped-hydro resources interconnected to the transmission system.
310 See Eagle Crest Comments at 7; National Hydropower Association Comments at 9, n.9; Public Interest Organizations Comments at 18; R Street Institute Comments at 7.