Storage in PJM is solving grid problems it can’t get paid for

Compared to the breakneck speed of battery deployment in California’s CAISO and Texas’ ERCOT, energy storage in Pennsylvania-New Jersey-Maryland (PJM) is crawling along at a snail’s pace. This slower evolution, however, stems from the regional transmission operator’s (RTO) market structure and institutional design.  

“PJM’s market is built around legacy performance characteristics of conventional generation,” explained Maria Scheller, the vice president of energy markets at ICF, adding that in practice, the market doesn’t fully accommodate storage’s attributes like fast response or bidirectional energy flow, as they don’t map onto what gas generation can provide.  

She told ESS News that storage in PJM also tends to “cannibalize” its own potential revenue stream from arbitrage because assets that reduce price spreads earn less but benefit customers.  

“It’s not possible to monetize those benefits within the PJM market structure,” she said, at least under current rules which create structural mismatches limiting storage’s ability to profit from its full range of grid services.  

Still, some recent reforms like the Ready-to-Respond Interconnection (RRI), Energy Resource Interconnection Service (ERIS) and the Surplus Interconnection Service (SIS) are helping unclog the queue and turn the tide for battery-only projects.  

Though the RRI was a one-time opportunity that sought ready-to-build, low-cost resources that favored traditional generation over storage, the program still resulted in 2.7 GW of new battery assets, Scheller noted.  

ERIS, on the other hand, enables projects to interconnect without firm transmission rights.  

“Merchant storage projects focused on energy arbitrage or ancillary services benefit the most,” Scheller said; these are usually shorter-term projects. But, she explained that projects with an ERIS interconnection can’t participate in PJM’s capacity market, which negatively impacts revenue for longer-duration options. Generally, she said, “it would be difficult to forego capacity revenue for 4+ hour assets.” 

This is a real issue for long-duration storage, she pointed out, as the uncertainty around the value of storage “means that the robustness of revenue modeling is very limited with a major revenue stream at high risk.” 

PJM itself can only do so much; many of the most-needed reforms, like local permitting, are outside of the RTO’s control. In the meantime, aligning speed with certainty will be vital to refining and reforming the process.  

“With the right adjustments, storage can move from being a promising resource to a foundational pillar of grid reliability and flexibility,” Scheller said. 

Integrating seasonal market structures and multi-service frameworks would also help.  

“Seasonal capacity construct[s]…better reflect the real value batteries bring in managing peak demand and supporting grid reliability across different times of year,” she said, pointing out that states like Maryland, Virginia and New Jersey are best-positioned to take the first step. 

“With battery assets now making up the majority of PJM’s interconnection queue, the focus must shift to unlocking value in high-growth zones,” she added.