March 01, 2016

Energy Storage: The Emerging Legal Framework (And Why It Makes a Difference)

Michael J. Allen

There is broad consensus that energy storage facilities will in the long term add enormous value to the electric grid. Beneficiaries of these facilities include bulk energy services, such as electric energy time shift for variable renewable energy generation resources; ancillary services, such as frequency regulation to address short term fluctuations in supply and demand; transmission and distribution infrastructure, through upgrade deferrals, congestion relief and voltage support; and end-use consumer services, including backup power, demand reduction, and cost savings generally. See, e.g., Paul Denholm et. al., The Value of Energy Storage for Grid Applications, National Renewable Energy Laboratory Technical Report NREL/TP-6A20-58465 (2013 NREL Study) (May 2013), www.nrel.gov/docs/fy13osti/58465.pdf; see also Energy Storage Association, Benefit Categories, http://energystorage.org/energy-storage/energy-storage-benefits/benefit-categories. In the short term, however, the addition of energy storage to the grid raises a host of issues for which there is far less agreement. Who has jurisdiction to regulate energy storage facilities and the services they provide? Who should own and operate energy storage facilities? Who should pay for their capital cost? What is the fair value of the benefits of energy storage, particularly when parties other than utilities own or operate energy storage facilities and supply their benefits to the electric grid? And what costs, if any, do energy storage facilities impose upon the grid?

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