Can Net Energy Metered (NEM) Solar participate in wholesale markets?
- May 5, 2022 2:15 pm GMT
A key question that energy aggregators and distributed energy resource providers are wrestling with is: Can Net Energy Metered (NEM) solar participate in wholesale markets as FERC envisioned in Order 2222? Since all the grid operators have filed their compliance plans for FERC Order 2222.
This question is important because NEM solar is a retail program approved by state utility commissions. But wholesale energy markets fall under Federal Energy Regulatory Commission (FERC) jurisdiction. Demand response programs can participate under both retail and wholesale market constructs. That DR program participation was enabled by FERC Order 719, but states were allowed to either “opt out” or “opt-in” their retail demand response program participation in the wholesale markets. States in the Midcontinent ISO (MISO) except for Illinois opted out. States in PJM have opted in, and as a result, we see many demand responses participating in PJM’s capacity auction.
So, can NEM Solar participate in the MISO and SPP markets?
The answer need not be complicated, but it is. MISO does not mention NEM Solar in its compliance filing for Order 2222. MISO mentions it is up to States and Distribution Utilities to allow programs like NEM Solar to participate in the wholesale market. This issue is also known as “double-counting,” FERC does not want the grid operator to pay NEM Solar twice for the same service.
It would not be paying for the same service if NEM Solar participates in the wholesale energy market from 9 am to 1 pm, for example, and receives retail compensation from 1 pm to 7 pm. Different hour blocks and different revenue streams - what is wrong with that?
And in the case of demand response, MISO conducts a net benefits test that shows DR was beneficial to the grid and would pay DR the prevailing Locational Marginal Price (LMP).
NEM Solar could be compensated similar to demand response. Unfortunately, MISO and Southwest Power Pool (SPP) filings at FERC in dockets ER22-1640 (MISO) and ER22-1697 (SPP) do not shed enough light on this important double counting issue.
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