The power market fix we’ve been waiting for . . .

Last week, the Federal Energy Regulatory Commission (FERC) held a two-day technical conference to discuss distributed energy resources in wholesale markets. This rich discussion stemmed from FERC’s recent adoption of Order 841, which directs regional markets to come up with rules for energy storage to participate in markets, but stops short of supporting other distributed energy resources in markets (presentations are available online).  But could it be that last week’s discussion missed the best possible solution?

Guest author Mark Ahlstrom provides a creative solution that just might be the power market fix we’ve all been waiting for.  We are having so much trouble making the markets work for the wave of new grid technologies upon us – but maybe that is because we set up the markets with a limited view of future options.

We trade energy, capacity, and ancillary services that are based on the most basic capabilities of our oldest generators. What if, instead, we started with the most capable universal resource we can imagine, one that can provide, absorb and store energy at will, and then define real resources by how they differ from this idealized resource? All of a sudden, other kinds of resources fit much more easily into one model, whether they are storage plants, conventional generators, renewable generators, demand response resources, DERs, or unique combinations and aggregations that we haven’t even thought of yet.

Below, Mark Ahlstrom, president of the Energy Systems Integration Group, lays out how this concept could enable markets to support a broader suite of affordable, reliable and clean technologies that are already upon us, and support the grid’s continued modernization.

A version of this article appeared in Greentech Media on May 1, 2018

The power market fix we’ve been waiting for . . .

By Mark Ahlstrom

Wholesale electricity markets are opening up to new resources, stretching the limits of how power markets optimize and dispatch resources on the grid. Demand response, storage, renewables, and distributed generation don’t look like conventional generators, and so their properties and capabilities don’t map well onto the existing system, which was designed for fuel-fired generators.

New characteristics must be added to create a new “participation model” and market software must be modified for almost every new technology, requiring a complicated and slow process before the new technology can fully participate and contribute its valuable capabilities to the system.

This is a barrier to innovation – if we have to patch the existing framework every time a new resource comes along that doesn’t fit the classic fuel-fired generator mold, it can take years to develop and implement a new participation model for those resources. FERC’s axiom of non-discriminatory access encourages the entry of new resources, yet the system itself creates an uphill climb for innovators to enter the market.

A new FERC order, while ostensibly addressing energy storage resources, actually provides an important opportunity to create a universal data model for all grid resources. The traditional way of looking at generators and loads is no longer sufficient. We should take advantage of this opportunity.

Storage as a universal participation model

FERC Order 841 requires electricity markets to create an energy storage participation model that allows a resource to:

“Provide all capacity, energy, and ancillary services that the resource is technically capable of providing in the RTO/ISO markets, …be dispatched and set the wholesale market clearing price as both a wholesale seller and wholesale buyer, …and account for the physical and operational characteristics through bidding parameters or other means.”

If done correctly, this participation model should become the “universal participation model” we need for all resources – generators, loads, and even some transmission. Without it, our markets and systems will become increasingly convoluted and unable to deal effectively with the resources that we are already building today, and even more so with what we will come up with next.

Even today, solar-plus-storage plants, aggregated virtual power plants, or even gas-plus-storage plants face uncertainty about how to offer into the market in a way that offers all of the capabilities to the market. So what good is the next great idea if the market system can’t use it?

First, what is a participation model?  The RTOs/ISOs have general tariff provisions that apply to all market participants. In addition, the RTOs/ISOs create tariff provisions for specific types of resources when those resources have unique physical and operational characteristics or other attributes that warrant distinctive treatment. These distinct tariff provisions created for a particular type of resource are participation models.

To reduce barriers to innovation, we need to flip this on its head. FERC’s definition suggests that participation models are created as an exception to the general tariff case, and the general case is essentially assumed to be a conventional generation resource, such as a traditional thermal power plant. But in the case of electric storage resources such as battery storage systems, the resource is more capable than the general case, albeit with some differences.

For example, from the grid operator’s viewpoint, a conventional thermal generator is either online (and injecting some limited range of power) or it is offline, and the decision to get it online must be made well in advance. New resources like solar and solar can be started or ramped almost at will, and battery storage takes the next step of being both a generator and a load resource with tremendous flexibility.

Starting with the most general and idealized conceptual resource as the general case, then turning off or adjust the parameters of this idealized model would be more logical, otherwise we are constantly working to extend a hodgepodge of tacked-on exceptions. Unavoidable implementation delays are inherently discriminatory to new innovation and RTOs are constantly operating in catch-up mode, with ongoing prodding from new entrants and from FERC.

In fact, if RTOs do their job as FERC is requesting, all other generation and load resources can be represented within the generalized storage participation model required by Order 841. The storage participation model, perhaps with slight “idealization” in its design, becomes the universal model that can be used, simply by changing appropriate parameters, for all other resources.

Getting to a universal data model

Several major descriptor categories are needed in this universal data model, allowing a resource to represent its various capacities, ranges, rates, limits, operating constraints, and operating interactions. For example, the capacity of a storage resource may be its nameplate value as either a generator or a load, and it may be able to vary real power continuously and rapidly through the full range, but it may be energy limited. A more traditional resource may have a limited operating range, perhaps with discontinuities across its range of possible power values, but it may be able to sustain a longer duration.

Today’s bidding parameters for conventional generators identify operating constraints such as ramp rates and minimum times for starting, running, restarting, and so forth. The universal model must thoughtfully generalize these operating interactions to describe the capabilities for providing reliability services and ancillary services, whether or not the resource must currently be providing or absorbing real energy in order to provide the services, and the speed of such services under normal and emergency circumstances. Some of this information is static, while other parts are dynamic based on current conditions. But as a whole, the data model and associated price curves would fully represent the resource’s offer to the market in a way that is truly comparable and objective across all resources.

Designing the universal data model will not be easy. It’s complicated, and it will require our smartest and most experienced data architects to get it right. Each category contains dozens of descriptors and parameters, some of them quite complex – but it is paramount and possible.

Anyone with a software background knows why this is so important: Get the data model wrong and software has limited capabilities and it is an expensive nightmare to code and maintain. But get the data model right, and you have tremendous capabilities with flexible and elegant code. Data definitions literally change the way that we solve problems. The data model affects what you can do and how you think about it.

What do we get for adopting a universal data model?

A well-designed universal data model would improve our market systems and commitment/dispatch systems in the long run. If all resources are viewed as subsets of a flexible, idealized model rather than as tacked-on additions to a less flexible model, the next generations of our systems can be more elegant and more capable. It should also improve our ability to think about solutions to our power system needs, because it becomes easier to see how our available building blocks can fit together.

For example,

  • We will realize that we have hundreds of ways to respond to ramps and maintain system balance and reserves.
  • When we need faster frequency response, we can identify all resources that can provide it and understand any interactions.
  • For planning, because we can see both the current capabilities for all the resources and conceivably also know which of them have capabilities that can be adjusted, our planning process can be smarter about using what we have or building something new.

Finally, this universal model could work for more than loads and generators and storage; it could also work for high voltage DC (HVDC) transmission. The terminal of a HVDC system is an energy source behind a DC-to-AC converter, just like a large battery storage system. HVDC could participate in the markets using parameters in the universal data model that are like those of a battery storage system, but one that is capable of providing a very long, and potentially infinite, sustained duration.

This creates interesting possibilities for business models and interconnections across market seams. For example, interregional trading could dramatically reduce the costs and risks associated with integrating large amounts of variable renewable energy, and innovative combinations of HVDC transmission with other technologies could participate through the universal model rather than as conventional transmission.

The time has come to rethink our design, so let’s start with the most capable and idealized participation model that we can imagine, and then represent all real-world resources as subsets of that idealized case. A flexible battery storage resource is arguably the closest example to that idealized resource that we have today. Other generators and loads can be represented by varying the parameters in this data model.

This model’s elegance could change the way that we think about our resources, and it would allow us to operate our markets in a technology-neutral, economic, and nondiscriminatory way. Done right, it would largely eliminate the need for new programming (or new FERC orders like Order 841) when emerging technologies or novel combinations of technologies emerge.

FERC is requiring the RTOs to develop a new model for electric storage resources, but we should take advantage of this chance to rethink how we look at all resources. This is a rare opportunity. Let’s use it.


Mark Ahlstrom is President of the Energy Systems Integration Group, a non-profit engineering, resources and education association that holistically serves the energy industry.