DOE’s Quadrennial Energy Review: Implications for Electricity Storage, Federal Resource Agency Approvals, and Grid Service Valuation/Ratemaking

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The U.S. Department of Energy (DOE) has released the first Quadrennial Energy Review (Review), a document offering a variety of proposals designed to modernize the nation's energy infrastructure. The Review, released on April 21, was produced in response to a January 2014 Presidential Memorandum, which directed analysis of the nation’s energy infrastructure to address the system’s age and capacity, as well as to assess challenges posed by climate change, cyberthreats, and physical threats.

Beyond an array of DOE grant-making and research and development, the Review includes initiatives that have implications for electricity storage, approvals of energy infrastructure projects by federal resource and land-managing agencies, and for the valuation of grid services and associated ratemaking. A significant, unfolding initiative in each of those areas is summarized below:

Electricity Storage Benefits

Electricity storage is highlighted in the Review as enabling expansion of renewable energy and reducing the need for transmission investment. In support of this technology, DOE plans to conduct regional and state analyses of storage deployment to produce a common framework for evaluation of benefits of storage and grid flexibility, and to develop an associated strategy for enabling their implementation. This effort bears watching.

Funding To Expedite Federal Agency Permits and Approvals

Electric transmission, gas pipeline, and similar projects, especially in the West where the federal government manages vast tracts of public lands, often require permits and approvals issued by multiple federal resource and land-management agencies. The Review urges Congress to adopt the Administration’s FY 2016 budget proposal to allow additional federal agencies to accept funds from project developers to expedite the federal permitting and review process. Although the proposal may be geared to increasing agency staff levels, the funding could also be used to hire consultants to conduct needed studies. Regional transmission organizations (RTOs) currently use developer funding to study interconnection requests, often utilizing consultants.

Grid Services Valuation/Ratemaking

DOE proposes to develop frameworks (with stakeholder input) to: (i) value grid services and incorporate this valuation into grid operations and planning; (ii) define characteristics of a “reliable, affordable and environmentally sustainable electricity system;” and (iii) create approaches for developing pricing mechanisms to account for these characteristics. The Review asserts that the frameworks could be useful in ratemaking by the Federal Energy Regulatory Commission (FERC) and state utility commissions, in market rule formulation by RTOs, and in utility operations and planning. DOE will necessarily refine further the scope and methodology for this initiative. Accordingly, providers of new technologies, demand response, and storage, as well as RTOs and utilities, will want to monitor developments closely.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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