AESO Energy Storage Integration Discussion Paper

AESO Energy Storage Integration Discussion Paper
AltaLink Investment Limited Partnership (AILP) Comments
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On May 13 , 2014 the AESO released a paper titled “Energy Storage Integration”. The Discussion Paper
intends to summarize the main issues raised in the AESO‟s June 2013 Issue Paper, to explore the options
proposed by market participants through the Work Group convened by the AESO in the Fall of 2013 and to
solicit further comments from stakeholders.
AILP has initiated a System Access Service Request with the AESO and is currently developing a Battery
Energy Storage (BES) project (AESO project #1415). As such, AILP will be directly impacted by the resolution
of the issues and options outlined in the AESO Discussion Paper.
AILP‟s comments are primarily focused on modern BES and other fast response technologies such as flywheels
that have unique characteristics (i.e. fast response, precision in following directives etc.) and offer significant
benefits to both system operators and customers as evidenced by other jurisdictions that have made changes to
enable BES participation.
The AESO‟s Discussion Paper appears to propose an approach that is predicated on the continuation of existing
products, requirements, standards, rules and tariffs that were developed for the current operation of the electric
system and for existing generation technologies. Forcing BES technologies to participate under the existing
framework is not fair, as such an approach disregards BES‟s unique characteristics; is not efficient, as such an
approach will result in sub-optimized technology configuration and prevent both the system operator and
customers from realizing the benefits of integrating new technologies with unique characteristics. Disregarding
these potential benefits creates barriers to BES participation in the market and results in lost opportunities for the
AESO to create a more efficient and competitive market on behalf of customers and all market participants.
Discussion Paper – Priority Issues
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3.1.1 Developing Technical Requirements for the Connection and Operation of Battery Facilities
AILP is concerned that the approach the AESO is taking to the development of BES facility technical
requirements for connection and operation will place unnecessary and onerous obligations on developers. AILP
believes that that AESO has basically ignored important comments and suggestions from market participants
through the consultation process. For example, BES technologies have unique capabilities and characteristics,
in comparison to traditional generators, such as the ability to provide both real power and reactive power,
dynamic VAR support similar to STATCOM (operation at zero power factor), and frequency response services.
Given these unique characterisitcs, the requirements for BES participation in the operating reserve market
should not necessarily be the same as those for traditional generators. .
AILP observes that the AESO intends to “Develop technical requirements similar to those of generation and wind
facilities for battery facilities, regardless of whether the battery facilities are in a discharging mode or a charging
mode” (Page 6, the Discussion Paper). In essence, the AESO intends to treat battery storage as any other
generator in defining the technical requirements for connection and operation. AILP also observes that the
AESO is taking a contrary position with respect to tariff treatment.
3.1.2 The Approach of Specifying Technical Requirements for the Connection and Operation of Other
Types of Energy Storage facilities
The AESO is interested in stakeholder feedback on the identified approach of specifying technical requirements
for the connection and operation of other types of ES facilities.
AILP has no concern with the AESO‟s process for developing technical requirements for connection and
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operation of other types of energy storage facilities. However, as noted above, AILP is concerned that the
approach AESO is taking will place unnecessary and onerous obligations on developers as the approach does
not recognize the unique technical capabilities and characteristics of BES and other modern energy storage
technologies
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3.2.1.1 Legislative Requirements
The Discussion Paper states that “A class of system access service is identified by the service provided to
market participants exhibiting common characteristics. Different classes of system access service therefore
reflect services provided with different characteristics.” (Page 7, the Discussion Paper). As further outlined in
comments below, AILP is of the view that a different class of system access service is warranted for BES as the
nature of services BES provides, and the transmission access required to enable them, are very different than
traditional load and generation. Many jurisdictions outside of Alberta have recognized the uniqueness of BES
and created a separate class of system access service for BES.
3.2.1.2 Commission Decisions
AILP agrees with the AESO that “….rates should demonstrate provision of appropriate price signals that reflect
all costs and benefits and fairness, objectivity, and equity that avoids undue discrimination….” (Page 8, the
Discussion Paper). AILP respectfully submits that the positions the AESO has taken regarding tariff treatment
for energy storage (Sections 2.2.2.1 to 3.2.2.3) do not reflect all costs and benefits, is not fair and objective, and
results in undue discrimination.
3.2.2.1 Do Energy Storage Facilities Require a New Class of System Access Service?
What unique aspects of the nature and characteristics of ES facilities would require a separate class of system
access service?
BES facilities have a set of unique characteristics compared to traditional generation or end-use load, which
requires a separate class of system access services. BES facilities are neither loads nor generators. BES
facilities do not consume energy to create an end-use product nor do they produce energy by converting fuel
into electricity. Rather, they store (charge) or release (discharge) energy in order to either provide ancillary
services (reliability products), or to shift energy from times of relative surplus to times of relative shortage. When
providing ancillary services, BES facilities are capable of almost instantaneous response, making them ideally
suited for providing frequency response services such as frequency regulation, spinning and supplemental
reserves and load shed service for imports. Whether providing highly available and controllable fast-response
ancillary services that improve transmission performance (ACE) and facilitate the connection of additional nondispatchable renewable generation to the grid, or simply shifting energy from times of surplus to shortage, BES
facilities can provide a service that has many benefits for electric system operators and consumers.
The current ISO DTS tariff attempts to recover transmission costs through cost causation. BES facilities relieve
stress on the system versus adding stress by providing a reliability service. BES facilities may defer or remove
the need for transmission facilities to be built thus requiring fewer costs to be invested into the system. BES
facilities do not require transmission to be built for their connection to the system (except for their local
interconnection cost which will be paid for by the BES developer). Therefore, BES facilities do not seem to fit
into the DTS rate structure.
Generators must pay a Generating Unit Owner‟s Contribution based on capacity and on the location of the
generator. These contributions are refunded annually to the generating owner if certain performance criteria are
met. BES facilities are providing benefits to generating units such as wind that could be located in areas where
the locational contribution is higher than average. Paying a contribution when BES facilities are providing net
benefits to the system does not make sense.
The ISO Tariff does not reflect the unique and desirable characteristics of BES facilities noted above. Instead of
trying to have BES facilities fit into the current ISO tariff rate classes, the ISO should develop a separate class of
system access service that recognizes the unique operational characteristics and benefits of BES facilities.
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AILP recommends three categories within the storage tariff that will recognize the uniqueness of BES facilities:
(1) energy storage facilities that provide ancillary services only; (2) energy storage facilities that participate in the
energy market; and, (3) energy storage facilities that do both (1) and (2) above.
During the separate periods when electricity is delivered from and supplied to the transmission system by ES
facilities, how are the costs caused on the transmission system different from the costs caused by other load and
generation facilities, respectively?
See comments above. Battery energy storage systems are not really consuming or producing electricity (other
than small losses), rather they are simply charging and discharging in order to either provide ancillary services
(reliability products), or to shift energy from times of relative surplus to times of relative shortage. In both cases
they are providing a service that is beneficial to the electric system and thereby consumers. It may be necessary
to develop a separate class of system access service that recognizes these benefits.
3.2.2.2 Should Energy Storage Facilities be Treated Solely as Generators?
The AESO is interested in stakeholder feedback regarding its conclusion that it is inappropriate to solely apply
Rate STS to ES facilities.
The AESO‟s position is based on an argument that US jurisdictions are different and the rationale for treating
energy storage facilities as generators (i.e. STS) does not make sense in Alberta. The AESO‟s position seems
to hinge on arguments such as:
 Loads and generators share the cost of transmission in the US whereas loads and exporters pay for
transmission in AB;
 Energy storage facilities receive electricity so treating them like generators is arbitrary and/or unfair; and,
 The exchange of electricity with BES is generally treated as wholesale transactions to establish FERC’s
jurisdiction over those transactions.
AILP respectfully disagrees with the AESO‟s position and the arguments the AESO used in supporting its
position. In the US, almost every ISO has identified energy storage as a unique class of grid participant and
applied technical requirements and attributes similar to those of generators. FERC rulings explicitly recognize
that energy used to charge flywheel and battery storage facilities should not be treated as load as it is “converted
and stored, rather than consumed”.
Generators must pay a Generating Unit Owner‟s Contribution based on capacity and on the location of the
generator. These contributions are refunded annually to the generating owner if certain performance criteria are
met. BES facilities are providing benefits to generating units such as wind that could be located in areas where
the locational contribution is higher than average. Paying a contribution when BES facilities are providing net
benefits to the system does not make sense.
If an exception is to be made for BES facilities not to pay a contribution, then there should be a separate rate
class developed to reflect the unique characteristics of BES facilities.
3.2.2.3 Are the Existing ISO Rates Appropriate for Energy Storage Facilities?
How are ES facilities similar to, or different from, dual-use facilities such that the application of Rates DTS and
STS may or may not be appropriate?
How are the costs caused on the transmission system during periods of withdrawal by ES facilities similar to, or
different from, the costs caused by other loads on the transmission system, especially loads at dual-use
facilities?
Could ES facilities utilize Rate DOS as currently structured and, if so, how?
No. First the DOS rate will need to apply to BES facilities without the requirement to be receiving access service
under Rate DTS. Second, there will need to be a maximum DOS contracted capacity for each BES facility. Third,
there should either be a one time or yearly fee.
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AILP submits that the fundamental principle in guiding tariff treatment should include: (1) recognition that BES
creates substantial benefits; and, (2) BES is a grid reliability and efficiency tool - it does not consume electricity
to produce commercial and industrial products.
What are the characteristics of ES facilities that would support modifications of existing rates?
See ALP comments in section 3.2.2.1.
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3.3.2 Reduce Minimum Unit Size Requirements for the Provision of OR Products
If the AESO‟s review indicates that reducing the size requirements for facilities providing OR may have negative
implications to system characteristics, such as frequency responses, perhaps beyond a certain threshold of
participation, should the AESO set a „procurement cap‟ on smaller-sized resources to minimize the potential for
negative impacts? Why or why not?
AESO studies should review the requirements for Regulating Reserve (RR), Spinning Reserve (SR),
Supplemental Reserve (SUP) and Load Shed Service for Imports (LSSi) both independently and collectively.
It is AILP‟s understanding that the current rationale for 15, 10, 5 and 1 MW minimum sizes respectively for these
services has not been demonstrated or documented clearly. While the AESO has identified possible concerns
such as droop, it has not identified any of the possible technical or economic benefits of incorporating new
technologies or achieving greater diversity among providers of these services.
AILP suggests that AESO make the study scope, objectives and intended outcomes available for stakeholders
to review. AILP also believes that there may be some benefit in considering a broader service that can address
frequency response requirements across SR, SUP and LSSi. An objective and comprehensive study should
include possible solutions such as BES that are small in size but can respond quickly and precisely.
It is AILP‟s understanding that every US ISO has adopted very low minimum size requirements for OR services
provided by Limited Energy Resources (e.g. ranging from 100 kW to 1 MW for Frequency Regulation).
3.3.3 Shorten the Continuous Real Power Requirement
Do you agree with the AESO‟s assessment that resources that can only provide RR by maintaining net zeroenergy may not be able to perform the full service that is provided by the current RR product? Why or why not?
The question being asked is biased to the current AESO RR technical requirements and operating practices. A
better question to ask is whether the current RR technical requirements and operating practices are optimal from
a technical and economic perspective. A number of system operators in North America have developed
methods to capture the benefits of using advanced short duration energy storage resources for their fastresponse capabilities by either creating a separate fast, energy neutral frequency regulation signal (PJM,
ERCOT) or by simply managing the devices energy level, or state-of-charge, so that these devices can
continuously provide fast and accurate frequency regulation service. RR can be differentiated into separate
Frequency Regulation (FR) and Load Following (LF) services in a way that results in both lower costs and better
overall performance. This is because highly available and controllable fast-response assets such as hydro and
certain energy storage devices are very efficient providers of FR (high capacity, high availability, fast-ramping,
limited energy resources with ability to cycle frequently) versus typical thermal (gas and coal) generators that are
better suited to provide LF (high energy, slower ramping resources that are more sensitive to, and adversely
affected by, frequent cycling).
In its recent ruling regarding ISO-NE‟s proposed tariff, FERC explicitly stated that “….there are at least two ways
to allow limited energy resources to participate in a not unduly discriminatory manner: (1) active charge state
management of storage resources that accounts for their availability; and (2) separate AGC signals such as is
used in PJM….Active charge state management is used by the CAISO, MISO and NYISO in order to allow
storage resources to participate in their frequency regulation market on a not unduly discriminatory manner.”
(147 FERC 61, 135 at Page 10-11)
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The PJM Performance Based Regulation Year One Analysis Report, filed with FERC October 14, 2013,
indicates that with 7 percent of resources following the fast regulation signal (mostly new advanced storage
resources), PJM bought 2.6 MW less of slow resources for every 1 MW of fast resource. The same report
indicates that since October 1, 2012, PJM has lowered their regulation volumes 3 separate times while NERC
CPS1 and CPS2 performance has either improved or remained the same.
What impacts may arise from shortening the duration of the continuous real power requirement if other parts of
the current OR market design are unchanged?
For RR – there should not be any impacts if short duration energy storage devices are dispatched based on
state-of-charge in order to provide FR.
For SR, SUP and LSSi – Similar to RR, the contingency resources/services could be differentiated so that a
fraction of the total service is provided by fast-response high availability resources with limited continuous real
power capability (i.e. 15 min). The primary function of these assets would be to arrest the immediate frequency
decline and to provide energy for the first 15 minutes so that the remaining slower response resources can
respond with sustained energy production. Perhaps the simplest way to think of this is that the fast-response
resources perform a similar function to first responders in any emergency/contingency. As the system controller
dispatches up the Energy Market Merit Order and replacement energy is provided by the balance of the fleet
and/or through load reductions, the SR, SUP and LSSi resources are repositioned in preparation for the next
contingency.
3.3.4 Further Differentiate OR Products
What factors should be considered in deciding whether the current OR products should be further differentiated?
The AESO should consider both technical and economic factors as well as all governing legislation and
regulations including FEOC.
What weight should the introduction of a new technology, such as ES, be given in this consideration?
The AESO should consider both technical and economic factors. It is both logical and sensible to conclude that
the integration of new energy storage technologies that are high availability, price insensitive, highly controllable,
and capable of being cycled continuously and ramped quickly will allow the AESO and customers to capture the
same benefits that have been demonstrated in other North American jurisdictions while supporting the
integration of higher levels of renewable, intermittent generation and thereby supporting the Government of
Alberta‟s policy objective of „greening the grid‟.
FERC found that the reforms it proposed in Order 755 would likely result in lower costs of procuring frequency
regulation and reduced energy costs:
 Faster ramping resources are able to provide more frequency regulation service per unit of frequency
regulation capacity
 The system operator should be able to achieve the same frequency regulation performance (ACE) from
a smaller volume of frequency regulation capacity, thereby reducing the total cost of frequency
regulation
 As fast response resources displace slower ramping resources, the generators that are replaced can
operate at full capacity at their preferred operating point which improves heat rate and reduce wear and
tear
 Having additional generating capacity available to participate in the energy market at lower operating
costs should reduce energy costs as well
FERC also found that the addition of high availability, accurate, fast-ramping frequency responsive resources
helps support the integration of higher levels of renewable, intermittent generation. Importantly, these benefits
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have already been demonstrated in a number of US ISOs that have implemented FERC Order 755 including
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PJM , NYISO and ERCOT .
Other than the fact that the AESO has a legislated obligation to connect new customers and provide a
reasonable opportunity to participate in the energy and ancillary service markets, AILP would suggest that the
near certainty of creating technical and economic benefits while supporting government policy ought to be
reason enough for AESO to take a positive and proactive approach to integrating new technologies such as
BES.
Would the implementation of Pay-for-Performance require significant OR market redesign?
Not likely, however, it may require some changes to the way these services are settled. Pay-for-performance
could be considered once the technical requirements and operating procedures for differentiated products are
established.
3.3.5 Allow Energy Storage Resources to Provide Intertie Restoration Services
The AESO is interested in stakeholder feedback on its proposed timing for reviewing whether the technical
requirements for LSSi can be made technology neutral.
AESO studies should review the requirements for Regulating Reserve (RR), Spinning Reserve (SR),
Supplemental Reserve (SUP) and Load Shed Service for Imports (LSSi) both independently and collectively.
The AESO should perform these studies as soon as possible as the technical requirements and operating
procedures have not been reviewed with a view to incorporating new technologies, reducing size requirements,
or evaluating the possible benefits to be derived from fast-response, high availability, limited energy storage
devices as noted above.
As a principle, the AESO should always attempt to create technology neutral services that meet the specific
operational requirements. This principle should apply to LSSi as well. The AESO should enable the change
now rather than speculating on the timing of when new technologies will become commercially viable.
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4.1.1 Energy Offer Submission Rules
Should energy offer submission rules apply to short-term energy-limited ES facilities that are unable to sustain
energy for an hour? Why and why not?
Yes, if they are offering into the energy market. BES resources that are dedicated to providing ancillary services
should not be obligated to offer into the energy market. It is AILP‟s view that such a requirement is unduly
discriminatory against an asset that is designed to only provide ancillary services.
Should the lack of energy of ES facilities incapable of sustaining energy for an hour be treated as an AOR? Why
and why not?
Lack of energy should be considered an AOR just as lack of fuel would be an AOR for a gas-fired generator.
What other measures are necessary to preserve merit order stability if ES facilities incapable of sustaining
energy for an hour are allowed to restate energy offers after T-2?
None that AILP is aware of.
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PJM Performance Based Regulation: Year One Analysis Report, filed with FERC October 14, 2013
ESA Comments on Notice of Proposed Rulemaking RM11-7-000 “Frequency Regulation Compensation in
Organized Wholesale Power Markets”
3 ERCOT report to Board on FRRS pilot, August 2013
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4.1.2 Asset Classification
The AESO is interested in stakeholder feedback on the above assessment.
Energy storage devices should be classified so that they can participate in the energy and OR markets.
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5 Next Steps
The AESO is interested in stakeholder comment on the AESO‟s next steps.
Recognizing the significant benefits that BES can bring to system operation and to customers through more
efficient and competitive markets, AILP would like to see the AESO take a much more proactive approach (as
opposed to a defensive or risk-adverse approach) to the integration of energy storage technologies including
BES.
AILP would like to see the AESO place more urgency on facilitating energy storage integration and participation
in the energy and ancillary service markets including in particular:
 Reviewing RR, SR, SUP and LSSi technical requirements:
o Make requirements technology neutral wherever possible;
o Differentiate RR into FR and LF and offer energy neutral SOC dispatch for ES resources
providing FR;
o Differentiate SR, SUP and LSSi into Frequency Response and Energy Replacement
components and allow ES resources to provide Frequency Response service with a 15 minute
continuous energy production requirement; and,
 Review proposed tariff treatment and recognize technical and economic benefit of incorporating ES
resources that are high capacity, high availability, fast-ramping, limited energy resources with ability to
cycle frequently.
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