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Frequency Regulation

Not Just for Reliability Anymore

Putting market economics ahead of reliability, the Federal Energy Regulatory Commission (FERC) has told regional transmission organizations (RTOs) and other grid system operators (ISOs) to rethink the prices they pay for the ancillary service known as frequency “regulation.”

In short, FERC wants all power plants to do what they do best — recognizing that some may be well adapted to providing regulation service, but others perhaps not.

Thus, the commission has ruled that when ISOs and RTOs pay power producers to provide frequency regulation, the compensation must reflect not only the capacity that generators set aside for such service, but also must reward generators for (1) the faster ramping rates achievable by newer, more unconventional technologies, (2) the total energy provided (known as “mileage,” which reflects total frequency movement “up” and down”), and (3) the greater accuracy that faster-ramping resources can achieve in responding quickly and precisely to dispatch signals from system operators. (Frequency Regulation Compensation in the Organized Wholesale Power Markets, FERC Order 755, Docket Nos. RM11-7, AD10-11, Oct. 20, 2011, 137 FERC ¶61,064.)


FERC wants all power plants to do what they do best - recognizing that some may be well adapted to providing regulation service, but others perhaps not.

In effect, the decision says that by paying the wrong price for regulation, RTOs and ISOs, have encouraged too many gas-fired turbines and other conventional fossil power plants to supply frequency regulation. Instead, says FERC, they could achieve greater efficiency by relying on faster-ramping resources, such as battery and flywheel storage, or even demand response.

This strategy, FERC explained, would benefit both the newer and the older, more conventional fossil-fired technologies: “[T]he payment to resources is structured to justly compensate resources for the work performed, thus freeing other resources to perform service more in line with their operational characteristics.” Importantly, FERC rejected arguments by the Edison Electric Institute (EEI) that it was giving short shrift to electric system reliability: “EEI contends that [FERC] has not shown that changing the compensation mechanism to increase compensation for faster-ramping resources will result in enhanced reliability … Contrary to EEI’s arguments, the justness and reasonableness of the compensation mechanism directed here does not hinge on a finding that it will improve reliability.”

Batteries and Flywheels

Crucial to FERC’s decision was the evidence supplied by various power producers showing how current RTO pricing methods created unfair results. For example, a power plant with a ramp rate of 1 MW per five minutes would only be able to offer a maximum of 5 MWs of useful capacity over a five-minute dispatch, regardless of plant’s total nameplate capacity (five minutes being the interval at which most RTOs and ISOs dispatch resources for frequency regulation service).

Yet a storage device capable of holding a 20-MW charge and ramp rate of 10 MW per minute could offer its full 20 MW of capacity. Thus, Beacon Energy had provided data showing that its 1-MW energy storage flywheel could provide more than four times as much frequency regulation service to the New England market (0.48 MWh vs. 0.11 MWh) as would a 1-MW resource with