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February 22, 2018
Brattle Study: FERC Order Sets Course for 50,000 MW U.S. Storage Market

Brattle economists released a study today examining the current state and potential future growth of the U.S. market for electricity storage.  The study finds that storage market potential could grow to 50,000 MW over the next decade if storage costs continue to decline and state regulatory policies build on the recently-issued FERC Order 841 to remove barriers that prevent storage resources from realizing multiple value streams.

The Brattle study estimates that at least half of the total value that storage can provide would be achievable in wholesale electricity markets, with the remainder accruing at the transmission and distribution (T&D) and customer level.  FERC’s order is an important step in unlocking the value in wholesale energy, ancillary services, and capacity markets.  However, to fully realize the value of electricity storage, including benefits related to reduced T&D costs and reduced customer outages, the FERC wholesale market reforms will have to be matched with similar efforts at the state regulatory level.  The Brattle study shows that combining the FERC policy with state-level initiatives that enable storage to capture all available value streams will likely increase its market potential by three to five times compared to a future that limits storage to capturing only wholesale market benefits.

Despite the potential benefits, the authors note that storage still faces economic, regulatory, and market barriers that limit its market potential. The Brattle study points out that several important questions still need to be addressed to facilitate the best use of storage on the power system.  These questions include: How much further will costs decrease?  How do we operate storage resources to provide environmental value?  To what extent can storage reduce the inefficiencies of cycling traditional generating plants?  How can storage provide value to retail customers while simultaneously participating in wholesale power markets and avoiding double counting of the same benefits?  What is the best blend of competitive and regulated storage applications?  How should storage be considered in state and utility resource planning efforts?  The answers to these questions will differ across regional markets and states, and answering them will require significant regulatory processes, similar to those currently underway in California and New York. 

“There are important, but narrow, applications in which storage is already cost effective today,” stated Judy Chang, a Brattle principal and co-author of the study.  “We are not quite there yet, but as costs decline further, storage will be transformative for the power industry.  Across various jurisdictions, project developers, utilities, and policymakers are engaging in regulatory processes to address the puzzle of how to best integrate storage resources where they can effectively and efficiently improve the functions of the power grid.” 

The study, “Getting to 50 GW? The Role of FERC Order 841, RTOs, States, and Utilities in Unlocking Storage’s Potential,” is authored by Brattle Principals Judy Chang and Johannes Pfeifenberger, Senior Associate Pablo Ruiz, Associate Roger Lueken, and Policy & Marketing Associate Heidi Bishop.  It is available for download using the link below.