Frequency Regulation Compensation in Organized Wholesale Power Markets

Order 771 required Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) to compensate frequency regulation service providers based on actual performance, not just capacity offered. Prior to this order, compensation for frequency regulation was often inadequate and did not reward fast-responding resources. By requiring performance-based, market-rate compensation, FERC created strong financial incentives for batteries, flywheels, and other fast-responding technologies to provide grid stabilization services. Order 771 was foundational for the development of the grid-scale energy storage market in the United States, paving the way for resources like lithium-ion batteries to compete in organized wholesale markets.