IEEE Power & Energy Magazine - September/October 2017 - 50

Both FERC and the European Commission support the
implementation of market designs that guarantee energy storage
eligibility to participate in electricity markets.

rate. Similarly, geographic variations in pricing that reflects
network constraints are nearly nonexistent. ESSs deliver
value by arbitraging high- and low-price electricity and alleviating specific constraints in networks; tariffs that do not
reflect the temporal granularity needed to arbitrage prices,
or else the geographic granularity needed to reflect the costs
of congestion stymie the value ESSs can provide.
Furthermore, grid tariffs typically do not incentivize
efficient network utilization. Network tariffs that reflect an
agent's contribution to future network capacity needs could
provide economic signals to ESS owners that may prove
valuable in mitigating the need for these investments; however, the volumetric recovery of network costs-the norm in
most systems today-impedes the ability of ESSs to provide
this value. In general, there should be a shift toward tariffs
that more closely reflect grid costs.

Interference of RES Support Mechanisms
Indirect support for distributed generation (such as nonmarket-based net-energy metering schemes) hinders the market
integration of energy storage devices. Eurelectric describes
nonmarket-based net metering schemes as enabling a consumption meter to "run backwards" when excess electricity
is fed into the grid, thus enabling the user to pay for less than
the actual volume of electricity consumed from the grid.
Several net metering schemes with differing market
impacts exist. One of the most important factors is the length
of the netting period; the longer the netting period, the larger
the cross subsidy. The subsidy is even more significant when
prosumers are allowed to "bank" production credits and
apply them as negative consumption at a later date. In this
case, the net-energy metering scheme allows prosumers to
use the grid as a virtual battery at no cost, hence reducing
incentives to invest in energy storage. However, the inefficient incentives provided by these schemes can be corrected
if the length of the period is reduced up to the point where it
is aligned with the trading interval of the wholesale market,
which provides a basis for valuing the electricity in a marketbased manner.

Summary
In this article, we summarize the key regulatory debates surrounding EES and provide a number of recommendations
and areas for further analysis. In p- articular, we highlight the
need to refocus the debate surrounding storage ownership

ieee power & energy magazine

and operation around sound regulatory and market economics. We discuss the need to update regulatory mechanisms
in capacity, energy, and ancillary services markets to ensure
that market products are open and properly communicate the
value of various system needs such as flexibility. Finally, we
briefly examine the necessary updates to tariff design practices, highlighting myriad ways that current tariff practices
hinder the value that ESSs can provide.

For Further Readings
D. Bhatnagar, A. Currier, J. Hernandez, O. Ma, and B. Kirby,
"Market and policy barriers to energy storage d- eployment,"
Sandia National Laboratories, Rep. SAND2013-7606,
Sept. 2013.
European Commission. (Feb. 2017). Energy storage-
The role of electricity, 2017. Commission Staff Working
Document. [Online]. Available: http://ec.europa.eu/
Federal Energy Regulatory Commission. (Nov. 2016).
Electric storage participation in markets operated by regional transmission organizations and independent system
operators. [Online]. Available: https://www.ferc.gov/
Federal Energy Regulatory Commission. (Jan. 2017).
Utilization of electric storage resources for multiple services
when receiving cost-based rate recovery. [Online]. Available: https://www.ferc.gov/
ICF. (Nov. 2016). Unlocking the hidden (capacity) value
in energy storage. [Online]. Available: https://www.icf.com/
IEA-RETD. (Mar. 2016). Policies for storing renewable
energy-A scoping study of policy considerations for energy storage (RE-STORAGE). [Online]. Available: http://
iea-retd.org/

Biographies
Inés Usera is with Comillas Pontifical University, Madrid,
Spain.
Pablo Rodilla is with Comillas Pontifical University,
Madrid, Spain
Scott Burger is with the Massachusetts Institute of Technology, Cambridge.
Ignacio Herrero is with Comillas Pontifical University,
Madrid, Spain.
Carlos Batlle is with Comillas Pontifical University, Madrid, Spain, and the Massachusetts Institute of Technology,
Cambridge.
p&e

september/october 2017

http://ec.europa.eu/ https://www.ferc.gov/ https://www.ferc.gov/ https://www.icf.com/ http://http:// http://www.iea-retd.org/

Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - September/October 2017