Great Implications

Could FERC’s decision boost energy storage?

Laura_Sanchez_Editor

It was unanimous. Every member of the Federal Energy Regulatory Commission (FERC) voted last week to deny a Department of Energy’s (DOE) proposal to restructure pricing.

The tariff structure, the DOE explained, would help power companies recover costs at generation plants with long-term fuel supplies. These subsidies were needed, it argued, to support grid resiliency in the face of a declining number of coal and nuclear power plants.

However, FERC responded that the 90-day fuel reserve specification would make the subsidies apply only to coal and nuclear generation plants—plants that are struggling to remain competitive in today’s energy markets. And in rejecting the proposal, FERC cited a lack of proof that current market rules are “unjust and unreasonable” under Section 206 of the Federal Power Act.

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It was a powerful statement. But I think that the larger implications of this decision are especially noteworthy. And I’m not alone. By denying coal subsidies, a number of energy industry professionals feel that federal regulators may help advance energy storage technology and its role in supporting renewable energy.

Renewables are becoming increasingly cost effective.  “Numerous key markets have reached an inflection point where renewables will have become the cheapest form of new power generation by 2020, a dynamic we see spreading to nearly every country we cover,” Morgan Stanley analyst Stephen Byrd wrote.

Not only are prices falling, but in an effort to best serve customers, an increasing number of utilities are turning to cleaner, more cost-effective energy forms. Solar panel prices have fallen 30% in the last year and are projected to continue to decrease along with wind power costs, making these renewable energy sources more competitive in energy markets.

“Utilities with deregulated power plants, which must compete to sell power, generally will experience greater upside if they are leaders in renewable energy development, and additional downside if they own large fleets of fossil and nuclear power plants in competitive markets with cheap renewable energy,” explains Byrd.

And an increasing number of private companies and state governments are working together to create economies of scale. Tesla Inc. and Southern California Edison, for example, have partnered to deploy Powerpacks in utility-scale projects for grid support. Symbiotic relationships such as this may lay the foundation for renewables and energy storage. Supportive policy will drive them forward.

What are your impressions? Do you think that FERC’s decision will boost the development of energy storage technology? DE_bug_web

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