MISO’s energy storage model increases the market revenues for Minnesota energy storage

February 18, 2022
This summer, MISO will turn on the anticipated storage market model switch. It has been a long journey for storage companies and renewable developers to address climate change with battery technology. With so many twists and turns for storage at MISO, it is important that CEEM members not lose heart. CEEM and its members should become active at MISO stakeholder meetings and voice their concerns for additional aggregation market opportunities.

This summer, the Midcontinent Independent System Operator (MISO) will turn on the anticipated storage market model switch. It has been a long journey for storage companies and renewable developers to address climate change with battery technology. With so many twists and turns for storage at MISO, it is important that CEEM members not lose heart. CEEM and its members should become active at MISO stakeholder meetings and voice their concerns for additional aggregation market opportunities.

The Distributed Energy Resources Task Force at MISO is a good opportunity for clean energy businesses to increase their involvement. Minnesota’s Public Utilities Commission (PUC) Assistant Executive Secretary Tricia DeBleeckere chairs that task force, and Xcel’s Diane Watkins is the Vice-Chair.

Distributed storage, when aggregated with distributed solar, has to wait until 2030 to participate in MISO markets. Meanwhile, storage greater than 100 kW can start participating in June 2022 once they register with MISO.

FERC Definitions for ESR and DERA

In Federal Energy Regulatory Commission (FERC) Order 841, an Electric Storage Resource (ESR) is defined as “A resource capable of receiving electric energy from the grid and storing it for later injection of electric energy back to the grid.” By that definition, any resource, including batteries, Electric Vehicle (EV) charging equipment, qualifies as an ESR. FERC did state that “ESRs located on the interstate transmission system, on a distribution system, or behind the meter” fall under this definition.

In FERC Order 2222, the Distributed Energy Resource Aggregation (DERA) is defined as “any resource located on the distribution system, any subsystem thereof or behind a customer meter.” Hence by this definition, any resource on the distribution system can participate in MISO markets when they meet that 100 kW size threshold.

The history of energy storage at MISO

So, what brought us to MISO market implementation for Electric Storage Resource (ESR) in the summer of 2022? It started in December 2009 with FERC approval of Stored Energy Resource (SER.)

We can go back to Beacon Power, a Massachusetts-based flywheel manufacturer. Beacon’s flywheel provided a service called regulating reserves. When frequency varies from 60 Hertz, bad things happen to the electric grid, so the grid needs someone to respond to variation in that frequency deviation. Conventional generating units have an Automatic Generation Control (AGC), and they respond to these frequency deviations in seconds without even being asked.

What does this have to do with Beacon’s flywheels? Beacon convinced MISO that there is a market need for this “stored energy” to address frequency regulation. Hence MISO asked its regulator, the Federal Energy Regulatory Commission (FERC), and FERC approved a model in December 2009 for this stored energy called Stored Energy Resource (SER).

Stored Energy Resource (SER) and Indianapolis Power & Light complaint at FERC in late 2016

The energy storage saga at MISO started with SER, and remember that SER only addressed one need – regulating reserves. So, what about other grid needs? Indianapolis Power & Light (IPL), now AES Indiana, went to FERC in October 2016 and complained that MISO was not compensating IPL’s Harding Street battery for providing primary frequency response.

So, what is this Primary Frequency Response (PFR)? One grid operator defined PFR as, “first stage of frequency control and is the response of generator governors and loads to arrest locally detected changes in frequency. Primary frequency response is automatic, is not driven by any centralized system, and begins within seconds after the frequency changes, rather than minutes.”

AES Indiana’s 20 MW battery operation starting date falls between Xcel’s Luverne 7.2 MWh battery (started in February 2008) and Michigan utility Consumers Energy’s Parkview 1 MW battery (started in September 2018). Both Luverne and Parkview batteries are SERs operating at MISO, but the Harding Street battery was interconnected as a generator. This latter point of battery interconnection as a generator is significant because until AES Indiana battery was operational, SER was the only option for batteries to interconnect at MISO, and they could provide only one service, regulating reserves. That didn’t make economic sense to a big company like AES Indiana.

Here is a snapshot of the current SERs energy price in March 2021.

MISO Pricing Chart

Stored Energy Resource Type II became effective March 2018

Let us get back to the IPL complaint at FERC. FERC rejected IPL complaint that MISO was not paying for frequency response but accepted IPL’s argument that MISO should be providing a market for all the grid services that electric storage could provide, not just regulating reserves. Hence MISO proposed and FERC accepted Stored Energy Resource Type II (SER Type II) in March 2018.

Meanwhile, FERC started its Notice of Proposed Rulemaking (NOPR) in November 2016, ensuring all ISOs like MISO have a market participation model that provides equal opportunities for these new battery technologies just like any market resource.

MISO tried to delay Order 841 – Electric Storage Resource

FERC took stakeholder comments in storage NOPR from all ISOs, including MISO, and ordered Order 841 for Electric Storage Resource (ESR) effective May 16, 2018. MISO and other ISOs had to comply with this Order 841 because they fall under FERC jurisdiction, not Minnesota Public Utilities Commission (PUC) jurisdiction.

So, MISO filed with FERC a compliance plan to comply with Order 841 on December 3, 2018, and asked FERC for an implementation date of December 3, 2019. This December 2019 date, as first proposed, is important because MISO changed its mind after MISO and FERC went back and forth and later changed with FERC approval that implementation date to June 6, 2022.

It is water under the bridge now, but MISO changed its mind again at FERC and asked for March 1, 2025 implementation date in March 2021. FERC rejected that; hence MISO is going live with the ESR participation model on June 6, 2022. That Stored Energy Resource Type II will be retired because it is no longer needed. This ESR model provides all market access opportunities for storage.

The current storage landscape – MISO’s storage in the queue grew 30 times!

The grid operator MISO has come a long way since Beacon Power knocked on its doors in 2009.

Before jumping into distributed storage opportunities in FERC Order 2222 issued on September 17, 2020, it is worth noting that MISO’s generator interconnection queue is bursting at the seams with much renewable energy, including transmission connected storage, in anticipation of this June 2022 market start date.

MISO has 15,000 MW of storage in the queue waiting to interconnect as of September 2021. To put this in perspective, MISO only had 500 MW active in the queue in February 2019. So, in 30 months – MISO’s storage in the queue grew 30 times! All because of FERC Order 841 and its opportunities for energy storage. So, while elections have consequences – FERC orders also have consequences.

Any storage above 100 kW can participate at MISO

Any electric storage resource above 100 kW can participate in MISO markets starting June 2022. If a resource can inject energy and withdraw energy at a market node on the MISO transmission system, it can participate in the market. That resource must be registered with the MISO market registration process.

Thanks to FERC, one additional benefit is that if MISO dispatched storage to charge energy based on a grid emergency, then the storage is exempt from MISO transmission charges. This exemption works only for storage participating as an ESR at MISO.

Storage can participate in MISO’s Planning Resource Auction

Minnesota utilities can offer storage as part of the Fixed Resource Adequacy Plan (FRAP) to meet MISO’s planning reserve margin requirement in next year’s capacity auction. If storage is part of the utility Integrated Resource Plan (IRP), utilities can point to storage in their IRP, called FRAP.

In the last 2021/22 MISO capacity auction, more than 20,000 MW was offered, including FRAP. 14,000 MW was cleared in the auction at $5 per MW per day in the Minnesota zone. So, Minnesota utilities could offer storage in future auctions at MISO.

Storage As a Transmission Only Asset (SATOA)

In addition to working with FERC mandated Order 841 and responding to IPL complaint to treat storage as a market resource, MISO started working with transmission stakeholders to treat storage as a transmission asset. Those stakeholder discussions resulted in splitting storage attributed as a transmission-only asset (hence SATOA) and a transmission asset that could provide market services. The former SATOA was approved by FERC and became effective on August 11, 2020. MISO is still working on the latter.

The future storage landscape at MISO and what it means for clean energy businesses

What does the MISO storage model do for our members? As the grid includes more renewable energy resources, there is a common understanding that grid needs would evolve. And that evolution or transformation means the need for frequency regulation and frequency response will increase in the future.

Hence new technologies will be able to meet that need, like batteries! Batteries are short-duration storage measured in 2/4/6 hours increments. Long-duration storage, in 12/24/36 hours, will be needed if we continue down the path of reducing harmful emissions and rely more on carbon-free resources that are inverter-based.

The future electric grid will include prosumers who produce their energy and send their excess energy back to the grid for payment. This “net metering” is already happening with solar energy.

Oh! MISO DEAR (Distributed Energy Aggregated Resource) – long road ahead

What is FERC Order 2222, and how is it different than Order 841 for storage?

Under current MISO rules, market participants cannot aggregate storage with solar or storage with demand response. They have to bid separately. Utility-scale solar must be bid as Dispatchable Intermittent Resource (DIR), and storage must bid as ESR. With Order 2222, aggregators and electric distribution utilities can aggregate this distributed solar plus storage and bid into MISO’s markets and get paid for the services they offer.

That market participation model for aggregation is called Distributed Energy Aggregated Resource (DEAR) at MISO. A DEAR can be a 100 kW storage or 100 kW solar or aggregation of 50 kW solar plus 50 kW storage. This DEAR discussion is happening at MISO’s Distributed Energy Resources Task Force. MN PUC’s Tricia DeBleeckere chairs this task force.

Like FERC Order 841, MISO has the wiggle room to propose an implementation date that works for MISO. But MISO has proposed a 2030 date that is causing stakeholder frustration because distributed solar will have to wait until 2030 to aggregate with storage/EV charging/demand response when they could individually participate in the market now.

It remains to be seen what FERC says to this MISO proposed implementation date. But for now, distributed storage and utility-scale storage can participate in MISO markets starting June 2022. That is a fact.

Rao K HeadshotThis blog post was authored by Rao Konidena – an industry expert with special expertise in electricity policymaking and US energy markets. His company, Rakon Energy LLC, is an independent consulting firm focused on providing policy and testimony support, business development and training in wholesale energy markets.

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