PJM, Stakeholders Consider Alternatives to 10-Hour Capacity Rule for Storage

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PJM is engaging stakeholders to help shape an initial brief due March 11 to the Federal Energy Regulatory Commission regarding how much power energy storage resources can offer into the Capacity Market.

The first of two special sessions of the Market Implementation Committee (MIC) was held Thursday, Jan. 30. The second is set for Feb. 24. Stakeholders also will get a chance to weigh in on the topic at the Feb. 5 MIC meeting, where Andrew Levitt, Senior Business Solution Architect for Applied Innovation, is scheduled to present an update.

The subject stems from FERC’s Oct. 17 ruling accepting PJM’s compliance filing in regard to Order 841. Issued in early 2018, Order 841 aims to remove barriers to the participation of energy storage resources (ESRs) in the capacity, energy and ancillary services markets of all independent system operators and regional transmission organizations under FERC’s jurisdiction.

How to Establish ESR Capacity Capability?

Levitt said a notable amount of ESRs came into PJM’s interconnection queue in 2019. Energy storage resources in the queue total 6,000 MW, with 4,000 MW of that seeking the firm injection rights needed to offer into the capacity market. Battery storage projects have been proposed throughout PJM, with a concentration in Virginia and New Jersey.

In its October ruling, FERC initiated a paper hearing to investigate whether PJM’s provisions for establishing the capability of ESRs in the capacity market are unjust and unreasonable. Currently, PJM employs a “10-hour rule” for duration-limited resources in the capacity market. Under this rule, a resource’s “capability” for the purposes of the capacity market is calculated by the power output it can provide for 10 continuous hours.

PJM is engaging with stakeholders to explore potential alternative methods to the status quo for ESRs. In December, PJM invited stakeholders to submit proposals by Jan. 31. It has received three: one suggesting a four-hour rule, and two recommending the use of effective load-carrying capability (ELCC) analysis.

ELCC is an established method used to evaluate the capability of resources that cannot run at their full output around the clock. The method simulates load and generation for each hour of a hypothetical year. It assesses whether or not generation or storage resources are able to meet the needs of consumers in a particular hour. It then compares a resource mix scenario of duration-limited resources with one of unlimited resources. The result reflects the reliability value of a limited resource compared with a similarly sized unlimited resource. This takes into account the reality that load-carrying capability tends to decrease as more limited-duration resources are deployed.

The rules will have an impact on a storage resource’s ability to earn money in the capacity market. For instance, under PJM’s current 10-hour requirement, a 100 MW resource rated at 400 megawatt hours (MWh) is considered to be able to produce 40 MW for 10 continuous hours. That resource can therefore offer 40 MW to the capacity market.

The four-hour rule would regard that same 100 MW, 400 MWh resource as being able to produce 100 MW for four continuous hours, thus allowing the resource to offer its full 100 MW to the capacity market.

An ELCC analysis could show, for example, that the 100 MW, 400 MWh resource has an 80 percent ELCC, or 80 MW capacity, while maintaining reliability. That represents a more favorable economic solution initially for ESRs than the 10-hour rule. However, the ELCC for such a resource could fall if more such resources are deployed, which would present a financial tradeoff.

Regarding solution options, a four-hour rule – as is used by NYISO, MISO and SPP – probably is not adequate for PJM’s needs, Levitt said. NYISO agrees, having proposed a recently approved replacement rule for limited duration resources that is based on an ELCC analysis. The ELCC method, Levitt added, “has a lot of promise here.”

“It seems the most accurate from an engineering point of view. It avoids arbitrary calculations,” Levitt said, adding that it’s the same framework being evaluated by PJM to measure wind and solar resources, which increasingly are partnering with storage.

Discussion Could Continue Past March 11

PJM could file a brief with FERC stating that it is engaging stakeholders in the development of an ELCC method, will work on the details with stakeholders and will return with a final proposal at a specified time, Levitt said. That final proposal could be either a fully developed ELCC method or the status quo if an ELCC method is not found to be workable.

“Our strong preference is to be able to sustain a stakeholder discussion after the March 11 deadline,” Levitt said. “But we do need to work within the confines of what FERC has given us.”

Since the timeframe is tight, PJM invites feedback between meetings at ESR@pjm.com. With approval of the proposers, stakeholder proposal materials will be posted to the issue tracking page.