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FERC Empowers DER Aggregators

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The powerful Federal Energy Regulatory Commission (FERC) is opening wholesale markets to Distributed Energy Resources (DER). Up till now small-scale energy producers were unable to access the large grid networks. FERC's landmark Order 2222 enables DER aggregators to compete in all regional organized wholesale electric markets. This bold action empowers new technologies to come online and participate on a level playing field, further enhancing competition, encouraging innovation and driving down costs for consumers.

These resources may be on the distribution system, or a distribution subsystem or behind a customer meter. They range from electric storage and intermittent generation to distributed generation, demand response, energy efficiency, thermal storage and electric vehicles and their charging equipment.

The new rule enables these resources to participate in the regional organized wholesale capacity, energy and ancillary services markets alongside traditional resources. Multiple DERs can aggregate to satisfy minimum size and performance requirements that they might not meet individually.

This is a big step forward for DERs and shows that FERC is moving to accommodate these “non-traditional” energy providers within the generation and distribution network.

FERC Chairman Neil Chatterjee said, “By relying on simple market principles and unleashing the power of innovation, this order [2222] will allow us to build a smarter, more dynamic grid that can help America keep pace with our ever-evolving energy demands. I am honored to be at the helm of the agency as we bring this critical rule across the finish line and continue to navigate our nation’s energy transition.”

Under the new rule, regional grid operators must revise their tariffs to establish DER aggregators as a type of market participant, which would allow them to register their resources under one or more participation models that accommodate the physical and operational characteristics of those resources.

This ruling builds on the previous Order 841, which DC Circuit Court’s recently affirmed FERC’s exclusive jurisdiction over wholesale markets and the criteria for participation in them. It also opened the gates for energy storage operators to compete in the wholesale power market. Order 2222 builds on this and ensures that DERs can participate in regional electricity markets.

The final rule will be enacted 90 days after publication in the Federal Register. Within 270 days of the effective date, grid operators must submit to FERC a compliance filing and a plan for timely implementation of the mechanism for allowing DERs to contribute to the energy mix.

This has been described as a “Game Changer” for DERs – they will now be able to participate alongside traditional power sources in regional wholesale energy markets. New technologies and business models that were sidelined will now have an opportunity to grow.

FERC’s Order 2222 removes regulatory barriers to aggregation of distributed resources in wholesale electricity markets, and is the next step forward for energy storage and other distributed energy resources.

Kelly Speakes-Backman, CEO of the Energy Storage Association (ESA), said“Energy storage is increasingly located on local electric grids, in households and businesses, and is often integrated with distributed generation and controllable loads,” Speakes-Backman said. “Enabling these flexible resources to participate together as ‘virtual power plants’ in wholesale markets is a victory for enhancing grid reliability, enabling a more resilient grid, and lowering costs for consumers.”

This is good news for DERs, and energy storage in particular. Global energy storage capacity could amount to 741 GWh by the end of the decade, representing a 31% compound annual growth rate, research from consultants Wood Mackenzie has found. The U.S. is well placed and might make up nearly half of that. The average cost of lithium-ion battery cells is expected to fall during that time-frame, according to IHS Markit, moving below $100 per kWh in the next three years and potentially reaching as far down $73 per kWh by the end of the 2020s.

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Julian Jackson's picture

Thank Julian for the Post!

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