On October 14, 2020, the Alberta Electric System Operator (AESO)
announced plans for an upcoming Fast Frequency Response (FFR)
Technology Pilot project.1 The FFR Pilot is currently in
its initial design phase and is expected to be implemented in 2021.
The announcement presents a unique opportunity for energy storage
assets in the province and comes as a welcome boost to energy
storage proponents and related technology providers in Alberta, who
currently face significant hurdles to develop projects.
This Update includes information about the opportunity, current
challenges facing energy storage proponents and related
considerations.
What is Fast Frequency Response?
FFR is a fast-acting transmission reliability service that
ensures a sufficient amount of energy is injected to the grid to
arrest frequency excursions, maintain frequency stability, and
allow frequency recovery back to nominal following an imbalance
between generation and load.2 The AESO is particularly
concerned with the impacts on the transmission system arising from
potential temporary losses of imports from neighbouring grids
interconnected to Alberta, which can arise (and has arisen) from
outages on the British Columbia or Montana tie lines.3
FFR is designed to prevent under frequency load shedding in the
event of a significant drop in frequency – in other words, to
prevent outages for electricity consumers.4
The term “fast” is relative to each interconnected
system.5 To constitute FFR, the AESO requires a response
from providers within 12 cycles (0.2 seconds) when a system
frequency of 59.5 Hz is detected.
FFR service assets
The FFR Pilot procurement opportunity is targeted at any new
technology that is capable of meeting the AESO’s technical FFR
requirements. Proponents must demonstrate and validate technical
capability. Examples of power assets that can provide FFR
include:
- Fast-responding energy storage, such as:
- Fast-responding controls from batteries
- Fast-responding controls from solar photo-voltaic cells
- Synchronous machine inertial response
- Traditional turbine-governor response
- Wind turbine generator controls which extract additional power
from the rotational energy6
Overview of the FFR Pilot and timeline
The FFR Pilot is seeking between 20-40 megawatts (MW) of FFR
capability from one to three service providers procured through an
open process. The AESO indicated that the opportunity will be
limited to “new technologies,” suggesting the emphasis
will be on facilities designed specifically to provide grid support
and that traditional generation projects will not be eligible.
Information gathered throughout the FFR Pilot will be publicly
disseminated and will inform the long-term FFR design as well as
the AESO’s Energy Storage Road Map, which could ultimately lead
to further opportunities for FFR service providers.
In addition to providing FFR services, it is anticipated that
providers will be able to participate in the energy and operating
reserve markets. This will require alignment between the AESO, the
service provider and the Market Surveillance Administrator. If
permitted, participation in those existing markets could provide
material additional revenue streams to FFR service providers in
addition to the compensation paid specifically for FFR services,
offsetting the costs of FFR services and saving the AESO (and,
ultimately, power consumers) costs. This may allow projects that
are currently not considered economically viable based on existing
market opportunities to become viable with the additional reliable
revenue source provided through the FFR Pilot.
While the FFR Pilot is still in its infancy, the AESO
anticipates completion of its initial design phase as well as
stakeholder and MSA engagement in early 2021. The implementation
phase is expected to begin thereafter, likely including procurement
through a Request for Information or similar process. Following the
execution of commercial agreements between the AESO and the
proponent(s), the FFR Pilot is expected to last between 12 and 18
months, commencing in late 2021 or 2022.7 It is not yet
known whether the term of the AESO FFR procurement contract will be
longer than 12 to 18 months.
Further details regarding this opportunity are expected early
next year.
The rise and stumble of energy storage in Alberta
Utility-scale battery storage and battery-connected generation
facilities (such as solar and wind facilities) are likely to be
well-suited to the AESO’s FFR needs. The Government of Alberta
has defined “energy storage” as any technology or process
that is capable of using electricity as an input, storing the
energy for a period of time and then discharging electricity as an
output.8
Although growing in popularity and attention, energy storage
assets currently face a variety of challenges and risks in the
Alberta market, many of which were identified by the AESO in its
Energy Storage Roadmap released last year. At its core,
the issue arises from the fact that energy storage projects are not
contemplated by the current legislation, regulations, tariffs or
system rules. This has led the AESO to develop the Energy
Storage Roadmap to facilitate the integration of energy
storage technologies into Alberta’s electricity market, enable
energy storage to participate in a reliable and fair, efficient and
openly competitive manner, and to ensure consistency in principles
and approach to energy storage across the AESO.9 Under
the current regulatory framework, energy storage facilities are
generally treated as power plants or generating units,10
although they face (and present) unique challenges not faced by
traditional conventional or renewable generation sources.
While there are some technical hurdles, most of the challenges
are regulatory and, consequently, financial. Specifically, energy
storage has yet to find a sure place within the existing tariff and
market structures, often precluding proponents (and financers) from
achieving the requisite level of income certainty needed to make
significant capital investments. Much of this uncertainty arises
from the current treatment of energy storage assets under the
AESO’s tariff, which dictates the costs energy storage assets
must pay to connect to the grid. While the tariff structure is
evolving and the AESO has indicated its intention to amend the
tariff to accommodate the unique aspects of energy storage
(recognizing that it is neither pure load nor pure generation) at
some time in the future, in many instances and under the current
framework, transmission costs are prohibitive. Uncertainty with
respect to if or how this framework will change therefore presents
a significant hurdle to the energy storage sector of the industry,
and it is unlikely that these issues will be resolved soon.
Moreover, government-run electricity generation procurement
programs in Alberta have not provided incentives or attributed
value to energy storage to date, and indeed storage assets were
expressly excluded from the AESO’s Renewable Energy
Program.11 In contrast, energy storage has had success
in other Canadian jurisdictions, such as in Ontario, where the
system operator in that province has successfully run multiple
rounds of energy storage-specific procurements, resulting in the
procurement and construction of dozens of megawatts of (mostly
battery) energy storage capacity.12 In addition, in our
experience, standalone storage assets have not been the subject of
significant bilateral procurement discussions in Alberta, with
storage generally only receiving favourable attention in the
private power purchase space as part of a “hybrid” wind-
or solar-plus-storage arrangement.
While the Alberta government has not run specific procurement
programs targeting energy storage, we note it has allocated some
funds through Emissions Reduction Alberta for energy storage.
TransAlta Renewables announced earlier this month that its 10 MW
WindCharger battery storage project began commercial operation as
the first utility-scale, lithium-ion energy storage project in
Alberta utilizing Tesla Megapack technology, with 50% of the $14.5
million capital cost of such project funded through such government
support.
It is thus no surprise that the FFR Pilot – which provides a
clear indication of the long-term viability and import of FFR
services in Alberta – has been seen as a welcome boost to energy
storage proponents and related technology providers in Alberta.
A comment on non-wires solutions
In its consideration of long-term market participation for
energy storage facilities, the AESO has acknowledged that energy
storage can serve a number of on-grid purposes including energy
price arbitrage, congestion relief and the provision of ancillary
services.13 Therefore, in addition to simply storing and
supplying electricity, energy storage assets have the potential to
act as an alternative to traditional transmission infrastructure.
This concept is referred to as “storage as a transmission
alternative” or “SATA.”
However, the legal footing for the AESO to use and implement
transmission alternatives – also referred to as “non-wires
solutions” – is, at best, opaque. Under Alberta’s
Transmission Regulation,14 the AESO is required
to design, govern and direct the construction of sufficient
transmission facilities so that, under normal operating conditions,
all anticipated in-merit electricity can be dispatched
“without constraint” – i.e., without transmission
congestion getting in the way.
As the Alberta Utilities Commission (AUC) has routinely
clarified, a non-wires solution is only permissible under s. 15(3)
of the Transmission Regulation where there is limited load
growth potential or where a non-wires solution is required
“for a specified limited period of time” to ensure
reliable service due to a shorter lead time.15 The AESO
has expressed the opinion that legislative change to broaden and
align the permitted use of non-wires solutions may be appropriate
to fully enable the reliability of services and to optimize and
defer the need for distribution or transmission
infrastructure.16 In other words, legislative amendments
may be required for the full range of uses of energy storage assets
and technology to be realized.
While FFR – which is not aimed at reducing congestion, per
se – may fall outside the restrictions imposed by the
Transmission Regulation, it is certainly getting closer to
the line relative to the use of storage as a generation source.
Until the issues presented by this legislative regime are resolved,
the potential uses of energy storage as alternatives to
conventional wires assets cannot likely be fully realized in the
province.
Footnotes
1 AESO, Joint Stakeholder Engagement Session on
Energy Storage and Distributed Energy Resources (DER),
PowerPoint presentation, October 14, 2020 (online) [PDF] [AESO PowerPoint], slide 30-32;
AESO, Joint Stakeholder Engagement Session on Energy Storage
and Distributed Energy Resources (DER), Audio recording,
October 14, 2020 (online), at 0:29:44.
2 NERC Inverter-Based Resource Performance Task Force,
Fast Frequency Response Concepts and Bulk Power System
Reliability Needs, March 2020 (online) [PDF] [NERC Task Force], at 7-9; AESO
PowerPoint, at slide 30.
3 AESO PowerPoint, at slide 30.
4 This situation is currently managed through the Load
Shed Service for imports (LSSi), which is comprised of load
customers that agree to be quickly taken offline following sudden
loss of imports. AESO, Load Shed Service for imports, AESO website.
5 NERC Task Force, at 8.
6 NERC Task Force, at 7.
7 NERC Task Force, at 7.
8 AESO, Energy Storage Roadmap, August 2019 (online) [PDF], at 6.
9 Energy Storage Roadmap, at 5, 7-8.
10 Ibid.; AESO, Information Document -
Energy Storage Guide ID #2020-013, June 2020 (online) [PDF], at 2; AUC Decision
25205-D01-2020, TERIC Power Ltd, April 6, 2020 (online) [PDF], at paras 21-27, in which a
battery facility was determined to be a “power plant” as
defined under s. 1(1)(k) the Hydro and Electric Energy
Act, RSA 2000 c H-16.
11 AESO, REP Round 1 FAQ (online) [PDF], at 3; AESO, REP Rounds 2 and 3
FAQ (online) [PDF], at 3, question 15.
12 Independent Electric System Operator, Energy
Procurement Programs and Contracts: Energy Storage Procurement at
the IESO (online).
13 AESO, Long-Term Energy Storage Market
Participation Options Paper, October, 2020 (online) [PDF], at 10.
14 Transmission Regulation, Alta Reg
86-2007.
15 Alberta Utilities Commission, Decision 22274-D01-2018,
Alberta Electric System Operator, Provost to Edgerton and
Nilrem to Vermilion Transmission System Reinforcement Need
Identification Document, January 12, 2018 (online) [PDF], at para 24; Alberta Utilities
Commission, Decision 23393-D01-2019, Alberta Electric System
Operator and AltaLink Management Ltd., February 14, 2019
(online), at para 125,
16 AESO Response in Proceeding 24116, Distribution
System Inquiry, Exhibit 24116-X0518, at PDF 40
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
