Order No. 841

Order No. 841. Issued by the Federal Energy Regulatory Commission (FERC) in 2018, this landmark rule aimed to remove barriers preventing energy storage resources from participating in wholesale electricity markets operated by Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs). It mandated that these grid operators establish market rules recognizing the unique physical and operational characteristics of storage technologies, such as battery storage, pumped-storage hydroelectricity, and flywheel energy storage. The order was a pivotal step in modernizing the North American electric grid to accommodate greater integration of renewable energy sources like wind power and solar power.

Background and Context

The push for Order No. 841 emerged from a rapidly evolving energy landscape shaped by the declining costs of battery technology and ambitious state policies promoting renewable portfolio standards. Prior to its issuance, market rules in regions like PJM Interconnection, the California Independent System Operator (CAISO), and the Midcontinent Independent System Operator (MISO) often excluded or severely limited the participation of storage resources in capacity markets, energy markets, and ancillary services markets. FERC had previously addressed similar issues for demand response in Order No. 745 and for distributed energy resources in Order No. 2222. Technological advancements, championed by companies like Tesla and NextEra Energy, combined with advocacy from groups like the Energy Storage Association, highlighted the need for regulatory reform to ensure grid reliability and efficiency.

Key Provisions

The order required each RTO and ISO to revise its tariffs to establish a participation model for storage resources that met several core criteria. It mandated that resources must be eligible to provide all services they are technically capable of delivering, including frequency regulation and black start capabilities. The rules stipulated a minimum size requirement of 100 kilowatts and required that storage resources be compensated for both charging and discharging activities. Furthermore, it addressed the issue of double-counting of services in capacity markets and required that storage can be dispatched by the market operator and can set the locational marginal price. These provisions were designed to create a level playing field with traditional generation resources like natural-gas-fired power plants and coal-fired power plants.

Implementation and Impact

Compliance filings from entities like the New York Independent System Operator (NYISO) and the Southwest Power Pool (SPP) were submitted in late 2018, with the order becoming fully effective in February 2020. The implementation accelerated the deployment of major storage projects, such as the Moss Landing Energy Storage Facility in California and projects within the Electric Reliability Council of Texas (ERCOT) market. It significantly enhanced grid flexibility, allowing for better integration of variable renewable energy and improving the economic viability of storage investments. The order is widely seen as a catalyst for the growth of the U.S. energy storage industry, influencing subsequent state-level policies in Massachusetts and New Jersey.

Legal and Regulatory Challenges

The order faced legal scrutiny from several groups, including the National Association of Regulatory Utility Commissioners (NARUC) and a coalition of electric utilities, who argued it overstepped FERC's jurisdiction under the Federal Power Act by infringing on state authority over distribution networks. The case, heard by the United States Court of Appeals for the District of Columbia Circuit, resulted in a July 2020 ruling in **American Public Power Association v. FERC** that largely upheld the order. The court affirmed FERC's authority to set rules for wholesale market participation, rejecting arguments that the order improperly regulated behind-the-meter resources on local grids controlled by states.

Related Orders and Developments

Order No. 841 is part of a series of FERC actions aimed at modernizing electricity markets. It directly paved the way for Order No. 2222, which expanded market access to aggregated distributed energy resources. It also relates to earlier efforts like Order No. 1000 on transmission planning and cost allocation. The principles established influenced subsequent proceedings on inverter-based resource reliability and hybrid resource projects. The order's success informed international discussions on market design, observed by regulators in the European Union and the United Kingdom, and remains a foundational text in the transition toward a more decentralized and resilient power grid.

Category:United States federal energy legislation Category:Electric power in the United States Category:2018 in American law