UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION

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1 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION ) Market Implications of Frequency Response ) and Frequency Bias Setting Requirements ) Docket No. AD ) COMMENTS OF THE ELECTRICITY STORAGE ASSOCIATION The Energy Storage Association d/b/a Electricity Storage Association ( ESA ), on behalf of its Advocacy Council, 1 appreciates the opportunity to submit comments on the Notice of Requests for Comments in the above-captioned matter wherein the Federal Energy Regulatory Commission ( FERC or the Commission ) is evaluating the potential market and commercial implications of the Reliability Standard BAL As detailed below, energy storage technologies are readily available to provide effective frequency response to the grid pursuant to the requirements outlined in BAL-003 once modifications are made to market rules that will, among other things, ensure that frequency response providers are appropriately compensated for their services. I. COMMUNICATIONS Communications and correspondence related to this filing should be directed to its attorney and staff as follows: Andrew O. Kaplan Brown Rudnick LLP One Financial Center Boston, MA Tel: The ESA s Advocacy Council engages in legislative, regulatory, and policy advocacy efforts on behalf of its members and the ESA. The Advocacy Council members include energy storage entities that use batteries, flywheels, compressed air and have firsthand industry knowledge of the challenges that must be overcome to successfully finance and operate commercial-scale energy storage facilities. Advocacy Council Members include: A123 Systems, Inc.( A 123 ); AES Energy Storage ( AES ); Aquion Energy; Beacon Power, LLC; East Penn Manufacturing Co., Inc.; FIAMM; NextEra Energy; S&C Electric Company; Saft America Inc.; and Temporal Power v3 1

2 Fax: Judith Judson McQueeney Chair, Electricity Storage Association Advocacy Council Customized Energy Solutions 933 Great Pond Road North Andover, MA Tel: Katherine Hamilton Policy Director Electricity Storage Association th Street, NW, Suite 500 Washington, DC Tel: II. ABOUT THE ELECTRICITY STORAGE ASSOCIATION AND ITS ADVOCACY COUNCIL The ESA is an international trade association that was established over 20 years ago to foster development and commercialization of electricity storage technologies. Since then its mission has been the promotion, development and commercialization of competitive and reliable energy storage delivery systems for use by electricity suppliers and their customers. ESA members represent a diverse group of entities, including electric utilities, energy service companies, independent power producers, technology developers involved with advanced batteries, flywheels, compressed air energy storage, pumped hydro, supercapacitors and component suppliers, such as power conversion systems. ESA s members also include researchers who are committed to advancing the state-of-the-art in energy storage solutions. The ESA s Advocacy Council engages in regulatory, legislative and policy advocacy efforts on behalf of the ESA and includes among its membership, leaders in the energy storage marketplace. The Advocacy Council member companies have firsthand knowledge of the regulatory challenges that need to be overcome to finance and operate commercial-scale energy v3 2

3 storage facilities and are working to promote the development and commercialization of competitive and reliable electricity storage systems within the United States. III. COMMENTS A. The Operational Characteristics of Energy Storage Technologies Make Energy Storage An Excellent Resource to Provide Frequency Response The following characteristics of energy storage supports the use of these technologies for frequency response on the electric grid: 1. Energy Storage has a High Speed of Response. NERC has identified the need for higher speed primary frequency response on the grid. 2 NERC states that the reduction of inertia on the grid drives a need for higher speed response to frequency excursions. If the slope of the frequency decline is steeper, it is necessary for highspeed injection of energy to arrest the decline in order to prevent the excursion from being too deep. Failure to arrest the decline in frequency can initiate disconnection of power plant equipment to prevent it from being damaged, which could lead to wide-spread blackouts. Energy storage technologies can respond to local frequency changes in less than one (1) second. This fast response capability, coupled with storage technologies state-of-the-art electronic control, enable energy storage resources to provide extremely fast accurate responses to frequency deviations, which alleviates one of the key concerns raised by NERC in its petition. The data from the Duke Energy/Xtreme Power 36 MW/24MWh battery project located in Notrees, TX (Figure 1) demonstrates the high speed response capability of an energy storage resource responding to frequency. As demonstrated, when frequency drops below Hz in ERCOT, the energy storage resource responds automatically within 0.5 seconds. 2 NERC petition, Exhibit F, at v3 3

4 Figure 1. Example of Frequency Response from Energy Storage Project in ERCOT Figure 2 provides a second example of storage responding directly and near instantaneously to grid frequency. Figure 2 shows Xtreme Power s 10MW KWP2 project on Maui with MECO (Maui Electric Co-op) responding in less than one second to a frequency droop event v3 4

5 Figure 2. Example of Frequency Response from Energy Storage Project in Hawaii In these examples, both storage resources provide full response in 0.5 seconds, which is typical of most storage technologies and much faster than conventional governor control set to respond to frequency. For turbine-generators, the automatic response is initiated by governor control opening or closing the valves to regulate the amount of steam/water going through the turbines. Though resources are expected to respond to frequency deviation within seconds of any event, such process often takes time limiting the generators ability to respond instantaneously. On the other hand, energy storage resources are controlled electronically, rather than mechanically. Energy storage resources can therefore respond to frequency deviations faster, significantly shortening the time to arrest the drifting frequency and reduce the deviation from initial frequency. The fast response provided by storage can aid in arresting rapid frequency v3 5

6 decline on the system, which can assist in preventing the frequency nadir from encroaching on the first step of Under Frequency Load Shedding. 2. Energy Storage technology is a viable, commercially proven source of frequency response for the grid. Energy storage can supply synthetic governor response to arrest frequency deviations. The immediacy of the response is normally limited only by the electronic controls used to activate the desired response. Synthetic response, when it can be supplied immediately without significant time delay, has a higher reliability value because it requires less inertial response to achieve smaller arrested frequency deviations. 3 Energy storage technologies have been providing frequency response to the grid for at least a decade. For example, completed in December 2003, SAFT s battery energy storage system (BESS) has been providing frequency response for the Golden Valley Electric Association (GVEA) in Fairbanks, Alaska. It can provide 27 megawatts of power for 15 minutes. The BESS has prevented over 1.7 million outages by responding instantly to lowfrequency events, triggered when the frequency drops below 59.6Hz, on the GVEA network, thus providing synthetic inertia to this very remote and isolated grid. (See Figure 3.) 3 NERC Frequency Response Standard Background Document, at v3 6

7 Figure 3. Outages prevented by Saft s BESS responding to low-frequency in Alaska Year Total number of outages covered* Avg. Number of prevented outages per meter Less than one * Outages covered include both local generation and transmission outages and outages due to loss of power from Anchorage via the Intertie. Since 2009, AES/A123 Systems has been operating a 12-MW battery energy storage system ( BESS ) in northern Chile, offloading the primary frequency control obligation of a thermal generator. The Independent Economic Dispatch Center (CDEC) of the Northern Chilean Interconnected Grid (SING) requires generators to reserve 3% to 5% of their capacity for frequency response, or Control Primario de Frecuencia (CPF). If the grid frequency drifts beyond a deadband around 50hz, generators must respond to correct the excursion. In 2009, CDEC-SING approved the BESS to offload the generator CPF reserve obligation. The system operates autonomously using local control and monitoring. The BESS has enabled the generation station to increase power output and provide more reliable response to frequency deviations. The BESS responds to both under-frequency and over-frequency events by charging or discharging, as necessary. Experience has shown that there was an increase in generator output and greater consistency of frequency response after the BESS was installed in November Gross generator output increased from approximately 253 MW to 267 MW. The typical CPF response increased from approximately 6 MW to nearly 12 MW. Due to the excellent v3 7

8 performance of the 12MW system, the generator owner has installed an additional 20MW system near a separate 500MW generator, also in SING. 3. Energy Storage technology can alleviate Light Load Issues. In NERC s Frequency Response Initiative Report, NERC states that [s]ustainability of primary frequency response becomes more important during light-load conditions when there are generally fewer frequency-responsive generators online. 4 When the inertia on the system is lower, a similar resource MW loss creates a much steeper and deeper frequency excursion. Energy storage technologies are ideally suited to provide frequency response in light load conditions, which often occurs at night. Storage can be on-line and available to provide frequency response during all hours, 24 x 7, to respond to reliability issues. Additionally, storage can provide frequency response around a 0 MW setpoint, and thus can provide frequency response without exacerbating minimum generation issues. With energy storage on the system, operators will not need to ramp up operating units in off-peak hours, or bring on additional generation to provide needed frequency response. 4. Energy Storage technologies can assist with early withdrawal of primary frequency response before secondary frequency response is activated. FERC has identified concerns that the proposed Reliability Standard BAL will not adequately address the reliability issue associated with the withdrawal of primary frequency response prior to activation of secondary frequency response. 5 The premature withdrawal of primary frequency response absent activation of resources providing secondary frequency response may lead to under-frequency load shed and possible cascading outages. 6 4 NERC Petition, Exhibit F, at Frequency Response and Frequency Bias Setting Reliability Standard Notice of Proposed Rulemaking, Docket No. RM NERC Petition, Exhibit F, at v3 8

9 Storage not only provides primary frequency response, but can be configured so as not to prematurely withdraw frequency response, and seamlessly provide secondary frequency response (frequency regulation). 5. Energy Storage can provide bi-directional Frequency Response. Energy storage can provide responses to both under and over frequency conditions. This is a distinct advantage over other resources, such as many demand-side load resources that can shed load, but not necessarily increase it, and renewable resources, that can back down output, but not necessarily increase output. The bi-directional capability of storage technologies provides grid operators greater ability to manage post-event oscillations as the grid is recovering from a large disturbance. 6. Energy Storage is modular, which provides additional reliability benefits. Energy storage technologies are inherently modular which means they can be distributed around the grid to provide greater levels of reliability. The ability to provide distributed local response to frequency makes it less likely to be limited by congestion and ensures islanded portions of the grid maintain frequency response B. Compensation mechanisms need to be developed for the provision of Frequency Response. As discussed above, energy storage technologies are viable technologies ideally suited to provide frequency response. Therefore, FERC should consider developing compensation mechanisms should be developed to enable these resources to be developed to provide this service. 1. Problem with relying on traditional generator governor response for frequency response and the need for additional resources v3 9

10 NERC has identified in its petition the need for new sources of frequency response. In the Frequency Response Initiative Report 7, NERC shows the results of a survey on generator governor response. In the survey, NERC discovered that 13% to 38% of the resources did not respond to frequency deviation and that 17% to 20% were responding in the opposite direction of the expected response. Thus, in spite of the governor control in place, these units were either not helping or aggravating the frequency deviation of the interconnection. Such responses highlight the fact that even if governor control is in place for most generating resources, the generating resources might not be able to respond correctly to mitigate frequency deviation because of the energy scheduling or that the resources are already at their maximum capacity. Thus, while generators can and do provide frequency response, it may not be reliable or adequate. If a Balancing Authority ( BA ) estimates the available Frequency Response by looking only at the governor control of its resources, it might have an erroneous understanding of the amount available, particularly because, as FERC has pointed out, the proposed Standard imposes no obligation on the generating resources to provide Frequency Response. Compensation for frequency response will enable Balancing Authorities to obtain needed frequency response by both encouraging better response from existing resources and enabling new resources to be developed to provide this service where there is a deficiency. 2. There are costs to providing frequency response. As NERC has identified in its petition, there are costs for both supply-side and demandside resources to provide frequency response. 8 Such costs include: Capacity Opportunity Cost the costs, including opportunity costs, associated with reserving capacity to provide Frequency Response. These costs exist for both traditional generators and storage resources. 7 NERC petition, Exhibit F, at NERC petition Exhibit D at v3 10

11 Fuel Cost The cost of fuel used to provide the Frequency Response. The costs for fuel to provide Frequency Response can result in energy costs significantly different from the system marginal energy cost, both higher and lower. This is the case when Frequency Response is provided by resources that are not at the system marginal cost. The fuel cost for storage resources is the electricity lost in the conversion of storing and later injecting electricity back to the grid. Energy Efficiency Penalty Costs the costs associated with the loss in efficiency when the resource is operated in a mode that supports the delivery of Frequency Response. This cost is usually in the form of additional fuel use to provide the same amount of energy. An example is the difference between operating a steam turbine in valve control mode with an active governor and sliding pressure mode with valves wide open and no active governor control except for over speed. This cost is incurred for all of the energy provided by the resource, not just the energy provided for Frequency Response. There may be additional energy costs associated with a load providing Frequency Response from loss in efficiency of their process when load is reduced. Capacity Efficiency Penalty Costs the costs associated with any reduction in capacity resulting from the loss of capacity associated with the loss in energy efficiency. When efficiency is lost, capacity may be lost at the same time because of limitations in the amount of input energy that can be provided to the resource. Maintenance Costs the operation of the resource in a manner necessary to provide Frequency Response may result in increases in the maintenance costs associated with the resource. Emissions Costs the additional costs incurred to manage any additional emissions that result when the resource is providing Frequency Response or stands ready to provide Frequency Response. Storage does not have any direct emissions costs but this is a real cost for traditional generators. NERC and FERC have both identified a need to require each Balancing Authority to maintain a minimum level of Frequency Response capability on their system in order to maintain grid reliability. Given the establishment of a mandate, which must therefore be met by resources (either supply or demand) that incur cost to provide this service, it is just and reasonable that resources be compensated for providing frequency response. In addition, it is prudent to compensate resources for providing frequency response as it is a service that ensures reliability and prevents outages and blackouts, which can have very high costs for ratepayers v3 11

12 Compensating resources for the cost to provide frequency response can avoid the potentially higher costs incurred by ratepayers due to power outages. C. Potential compensation mechanisms for the provision of frequency response There are several available mechanisms for compensating frequency response, all of which would provide benefits to storage and other eligible resources. 1. Market Mechanisms. FERC could create a market for frequency response. A market would provide price signals to resources to supply frequency response and, if coupled with performance requirements, could provide confidence and transparency to grid operators on the amount of frequency response capability that they have available to their system. Additionally, frequency response is well suited to a similar pay-for-performance compensation mechanism as was directed in FERC Order No Differentiating payments based on the speed and accuracy of response will encourage faster response resources to provide frequency response, thereby improving the reliability of the grid. ERCOT has found that the use of fast response resources can reduce the total amount of frequency response capability that needs to be maintained by the grid. Data included in ERCOT s Future Ancillary Services in ERCOT concept paper released on September 27, 2013 shows that ERCOT could procure less traditional Primary Frequency Response ( PFR ) 9 with the addition of Fast Frequency Response Resources ( FFR ) PFR, as proposed, requires full response in 16 seconds and the ability to maintain output for one hour. 10 FFR, as proposed, requires full response in 0.5 seconds and the ability to maintain output for 10 minutes v3 12

13 Figure 4. Table 2 from ERCOT s Ancillary Service Concept Paper: With the use of fast response frequency resources, ERCOT needs a combined total of 2,800 MW of frequency response capability to maintain system reliability. Without fast frequency response, ERCOT needs 4,480 MW of frequency response capability to maintain system reliability or 60% more. 2. Cost-based Mechanisms. Another compensation method to consider is to allow BAs to provide cost-based compensation, similar to reactive power or voltage support. The cost-based compensation can also have a performance component for difference tiers of frequency response. For example, full response in 5 seconds maintained until 15 seconds, and full response in 15 seconds maintained until 90 seconds, etc. 11, could receive different rates of return or recovery for their service based on the value of the different tiers of performance. Lastly, another option for compensation for storage resources that provide frequency response is allowing the recovery of their costs as a wholesale transmission facility subject to FERC s jurisdiction. Storage facilities do not generate electricity and could be procured to operate only to enhance the reliability of transmission service. Given that there is no openmarket for frequency response today, there are no concerns of cross-subsidization or competitive concerns. This will address the FERC Order No. 693 directive to develop a method of obtaining frequency response, and will improve the overall reliability of the interconnections. 11 Numbers are for example only, the BA would determine the appropriate values v3 13

14 IV. CONCLUSION ESA appreciates the opportunity to provide these comments and recommends that FERC issue rules in accordance with the above recommendations v3 14

15 Respectfully submitted, THE ELECTRICITY STORAGE ASSOCIATION By its attorney, Andrew O. Kaplan BROWN RUDNICK LLP One Financial Place Boston, MA Telephone: Fax: On behalf of the members of its Advocacy Council A123 Systems, Inc. AES Energy Storage Aquion Energy Beacon Power, LLC East Penn Manufacturing Co., Inc. FIAMM NextEra Energy S&C Electric Company Saft America Inc. Temporal Power Dated: October 18, v3 15

16 CERTIFICATE OF SERVICE I, Patricia A. Muse, hereby certify that the foregoing Comments were served via electronic mail to the Service List in the above-captioned matter. Dated in Boston, MA this 18th day of October, Patricia A. Muse, Legal Executive Assistant BROWN RUDNICK LLP One Financial Center Boston, MA Phone: v3 16