Batteries Set to Compete Against Generators in Power Markets

U.S. regulators have leveled the playing field for batteries and other forms of energy storage, voting to eliminate market barriers for those technologies.

The Federal Energy Regulatory Commission on Thursday finalized a rule that will let energy storage compete against power plants and other resources in wholesale power markets. Under the rule, technologies such as batteries and flywheel systems can be used by grid operators to dispatch power, set energy prices and offer capacity, energy and ancillary services.

“Our job is not to pick winners and losers,” Chairman Kevin McIntyre said before the vote, adding that the final rule will ensure all resources are allowed to compete fairly. Integrating storage into markets will enhance grid resilience, he said.

Companies including AES Corp. have pushed regulators for years to remove barriers to storage. The commission’s latest move comes more than a year after it first proposed changing market rules to accommodate storage, and after California issued its own rules on the matter.

Even without the federal ruling, batteries are already helping renewables edge out fossil fuels in power markets across the country. In Arizona, First Solar Inc.’s proposal to build a 65-megawatt solar farm with a 50-megawatt battery system beat out bids from power plants burning cheap gas.

cheaper batteries chart

“Market rules are only the first step,” said Yayoi Sekine, an analyst with Bloomberg New Energy Finance. “It doesn’t necessarily make it easier to finance since economics are entirely dependent on how much money it can make in the markets, and there is a lot of volatility there.”

The commission declined to take action on a related matter — the integration of distributed energy resources into power markets. Regulators in 2016 proposed allowing aggregated solar and other technologies to bid their supplies alongside generators. But they concluded Thursday that doing so without further study may pose reliability concerns. The commission will instead hold a technical conference on the matter in April.

Malcolm Woolf, vice president of Advanced Energy Economy, which promotes clean energy, urged the commission to move forward on the matter, saying distributed energy resources “deserve the same opportunity to compete on the basis of price and performance.”

Kelly Speakes-Backman, chief executive officer of the Energy Storage Association, which represents 150 companies primarily associated with battery storage technologies, welcomed the rulemaking.

“With this morning’s unequivocal action, the FERC signaled both a recognition of the value provided by storage today, and more importantly, a clear vision of the role electric storage can play, given a clear pathway to wholesale market participation,” she said in statement.

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