New FERC order permits aggregated distributed power sources to take part in wholesale markets
The national Advanced Energy Economy group of companies today welcomed the approval by the Federal Energy Regulatory Commission (FERC) of a long-awaited rule (FERC Regulation No. 2222) instructing Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) to do theirs Open markets to the participation of distributed energy resources (DERs). The vote was 2-1, with Commissioner Danly disagreeing.
Today @FERC approves a historic definitive rule that enables DERs to compete in all electrical wholesale markets. This bold action improves competition, spurs innovation and helps reduce costs for consumers. #energytwitter
– Neil Chatterjee (@FERChatterjee) September 17, 2020
“We welcome FERC for this crucial and long awaited step to open competitive wholesale electricity markets for distributed energy resources. With FERC working on this important rule creation since 2016, we are pleased that FERC has now taken action to remove barriers to these technological innovations in the wholesale markets, ”said Jeff Dennis, Managing Director and General Counsel at AEE. “While we are still scrutinizing the details of the Commission’s decision, it appears that FERC has brought US consumers a welcome and much-needed profit – as Chairman Chatterjee said this morning, ‘When DER aggregations are lined up and with traditional resources Compete to provide all of the energy, ancillary services, and the capacity they have to offer – consumers win. ‘We can’t say more. “
“When this growing base of customer owned and controlled resources is deployed in these markets, it will improve competition, lower prices, give consumers more choice and the flexibility needed to support the reliability and resilience of our power grid,” said Dennis. “This is a boon to American innovation that saves customers money while reducing carbon emissions. By improving the economics of clean, affordable energy resources that customers are already using in ever increasing amounts, new business models are being developed to further increase DER adoption, attract private investments, and create good jobs in the US. “
Below is a statement from Katherine Gensler, VP of Regulatory Affairs at SEIA, on the rule:
“We are pleased that FERC recognizes the critical role that distributed energy resources and DER aggregators play in reliably delivering clean energy to American homes and businesses. Customers choose inexpensive solar and energy storage from various sources. This rule takes into account the trend towards the increasing use of distributed resources and offers network operators the much-needed clarity about how they can use the energy and ancillary services they provide.
“Competition in our electricity markets is a crucial part of our clean energy transformation. This rule will create jobs, boost the local economy and allow the solar industry to supply 20% of US electricity generation by 2030, ”she continued.
Gregory Wetstone, President and CEO of the American Council on Renewable Energy (ACORE), made the following statement:
“Today the Federal Energy Regulatory Commission (FERC) issued Ordinance No. 2222, which rightly removes barriers to the participation of Aggregated Distributed Energy Resources (DERs) in the country’s wholesale energy markets. This arrangement seems to make DERs such as solar and energy storage on the roof available as a tool for expanding the diversity of our country’s energy resource mix. Integrating aggregated DERs will lower consumer costs, increase electrical reliability and unlock the potential for new innovations. We are glad that today’s assignment appears to recognize the tenet that any resource that can provide a defined service should be competitive in the marketplace, and we look forward to examining it further.
“Unfortunately, FERC is working against this principle in the country’s capacity markets by continuing to create barriers to the entry of new technologies in PJM and NYISO through the application of minimum bid price rules. While today’s order for distributed energy resources follows in the forward-looking footsteps of Regulation No. 841 on Energy Storage, no market can be free until arbitrary resource-specific price floors are removed. We therefore encourage FERC to maintain and expand this commitment to free and fair market competition by allowing new technologies to participate fully in national energy capacity markets, ”he continued.
Under the Federal Electricity Act, FERC is responsible for ensuring that competition in the wholesale electricity markets is open and fair, resulting in wholesale electricity prices that are “fair and reasonable and not overly discriminatory or preferred”.
In early 2016, FERC began investigating market barriers for energy storage technologies. At that point, AEE requested FERC to expand the scope of its investigation to include additional advanced energy technologies, particularly distributed energy resources (DERs). On November 17, 2016, FERC, in agreement with AEE, published a Notice of Proposed Regulation (NOPR) proposing to remove barriers to the participation of energy storage and aggregated DERs in organized wholesale electricity markets operated by RTOs and ISOs. On February 15, 2018, FERC issued Regulation No. 841 instructing RTOs / ISOs to remove barriers to the participation of energy storage resources, but chose to seek more information before finalizing a rule on DERs. The docket has been pending since then.
In addition to smaller energy storage resources that are not subject to Order 841, DERs include resources such as solar roofs, electric vehicles, and other technologies that reside in the distribution system or behind the customer’s meter. These resources are individually too small to be able to participate in regional network markets. However, thanks to the advancement of technology and software, companies have been able to consolidate DERs to the extent and functionality that make them a significant, flexible resource that regional network operators can access. Participating in wholesale markets reduces the overall cost of consumers and improves the economics of DER rollout by increasing their usage and deferring investment in other resources. Participation in the wholesale market also opens up new business models that can expand DER production and use in the USA and drive the reduction of CO2 emissions.
Chairman Chatterjee provided a real-life example of how Regulation No. 2222 harnesses the power of electric vehicles: “Let me give you a real-life example of what we are doing today. Think about electric vehicles or electric vehicles for a moment. EEI estimates that there will be nearly 19 million electric vehicles in the US alone by the end of this decade, and that’s on the low end of some of the predictions I’ve seen. For example, when these vehicles are charged in our garages, they represent a significant energy resource that can be managed through aggregations over time using advanced technologies to provide a range of services in our organized energy markets. They could provide energy and spinning reserves or even frequency regulation. By unleashing the power of electric vehicles in this way, we can further reduce costs in our markets and strengthen grid stability. That doesn’t mean anything about the added benefit of reducing emissions that we could see from the increased use of electric vehicles. “
According to the FERC’s Fact Sheet, Ordinance No. 2222 will take effect 90 days after publication in the Federal Register. Network operators must submit declarations of conformity to FERC within 270 days of the effective date. Each compliance filing must propose an implementation plan tailored to its region and explain how the final rule will be implemented in a timely manner. “
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