The US Grid
The electricity supply chain consists of three main parts: generation, transmission, and distribution. Unlike many other countries that have largely vertical structures, the power market restructuring in the 1990s and 2000s has created a landscape of competitive markets but also preserved some of the regulated markets in the US. In a regulated market, vertically-integrated utilities own generation, transmission and distribution systems; in deregulated competitive markets, these three parts are run separately. Currently, the majority of US electricity load is in the competitive markets.
Balancing authorities (BAs) in competitive markets dispatch electricity to meet electric demands in real time within a certain area. ISOs and RTOs are two kinds of BAs that operate within FERC’s jurisdiction. ISOs and RTOs make decisions independent from other market participants under a principle meant to ensure non-discriminatory access to the electric grid. Currently, there are seven ISO/RTOs operating in the US.
Grid Reliability Services
The majority of the grid in the US transports alternating current (AC) power; the system frequency in the US is set at 60 Hz, which means that the current changes directions 60 cycles per second. An AC grid requires a variety of reliability services due to its physical characteristics. Because the balance of electricity demand and supply is constantly changing, essential reliability services are needed to maintain steady power transmission and avoid damage to generators and equipment. These services, including frequency regulation, reactive power compensation, and ramping and balancing services, are also frequently referred to as ancillary services.
Energy storage facilities can contribute to frequency regulation much quicker than conventional generators, generally within 30 seconds of detecting fluctuations in load. Energy storage systems can also provide these services more efficiently than traditional power generators, which have slower ramp rates and may need to increase or decrease their generation output significantly in order to balance out the grid.
Potential Value Streams for Storage
To make energy storage profitable, FERC believes that it is essential for storage technologies to participate in the wholesale energy market on an equal basis as conventional generator, such as natural gas and coal power plants, that currently provide energy and ancillary services. This may mean being allowed to charge prices for a variety of grid services. For instance, batteries and other storage systems can be charged during a low-price period and discharged when prices go up and peak, which can reduce the system cost of electricity. This process is known as energy arbitrage.