Chairman Wellinghoff stressed that ancillary services are broader than energy storage and he made it clear the development of a vibrant ancillary services market is an important element of the Commission’s Notice of Inquiry (NOI). Commissioner Norris issued a statement highlighting the need to make sure regulatory policies and practices do not stunt the growth of energy storage technologies. Citing an EPRI study, Commissioner Norris points out energy storage systems “can move energy through time, providing it when and where it is needed.” This feature carries greater significance as we seek to connect variable renewable energy resources to the electric grid.

Energy storage presents numerous challenges for regulators because electric energy storage is the chameleon of the smart grid. It blends in where needed, able to resemble many smart grid components. It’s generation, it’s transmission, it’s a storage device (just to name a few). So how does the jack-of-all-trades get fairly compensated? Will it be forced to declare a major? Or will it be allowed to hop around the grid, providing assistance as necessary to stabilize the grid, hopefully providing lower prices to customers because of its flexible nature?

The NOI is 44 pages long and there are many questions to be answered as FERC seeks to encourage the development of a robust ancillary services market, as well as electric storage technologies. Below are a few random samples:

• If the Commission retains the requirement of a formal market power study as described in Order No. 888 and Ocean Vista for third party provision of ancillary services to transmission providers, what specific information and tools would be useful to the development of these studies?

• Should the Commission establish a capacity threshold to determine whether an entity has market power so that an entity that owns or controls less than a threshold amount of capacity would be presumed to lack market power in the market for provision of ancillary services? If so, what would be an appropriate level for this threshold?

• Should the cost of new energy storage plant and equipment be recorded within existing utility plant functional classifications (i.e., transmission, distribution, and production) or should a new functional classification be created for energy storage? What are the benefits of one approach over the other? If the Commission were to create a new classification(s), please comment on the specific plant accounts and account instructions that would be created or modified for inclusion in the new asset class.

Comments are due by August 22, 2011.