A recent Federal Energy Regulatory Commission order will force state regulators and electric grid operators to start thinking about distributed energy resources as a solution instead of a problem to solve, industry experts said Jan. 13.
FERC's Order 2222, issued in September 2020, has already started to shift the discussion around distributed energy resources, or DERs, in important ways, said independent energy analyst Lorenzo Kristov during a virtual event hosted by the R Street Institute.
"Almost everything in the regulatory space sees DERs as a problem to be solved and not as a resource that can help accomplish states' goals," asserted Kristov, who previously worked at the California ISO as a principal in market design and infrastructure policy.
However, Order 2222 has started to "change that conversation," Kristov said. "It says, 'Let's grapple with these so-called problems that DERs create and figure out ways to make it work.'"
Specifically, the rule requires the nation's regional transmission organizations and independent system operators to develop rules that allow DER aggregators to bundle small-scale resources together and register those aggregations for wholesale market participation. The order encompasses resources such as rooftop solar panels, residential batteries, electric vehicles and industrial demand response.
Aggregators positioned to benefit from the regulation could include any company offering load management services to consumers, said R Street Associate Fellow Chris Villarreal, who cited leading rooftop solar and residential battery installer Sunrun Inc. as one example.
Unlike FERC's landmark demand response rule, Order 2222 did not include a broad opt-out provision for states. However, the order did include a minor exemption for smaller utilities that distributed 4 million MWhs or less in the previous fiscal year.
While RTOs and ISOs have largely been tasked with crafting their own rules to comply with the rule, Villarreal maintained that state regulators also have a crucial role to play given that the order requires grid operators to work with states to agree on the data requirements necessary for DER aggregations to safely participate in wholesale markets.
"Especially in the Midwest, which has limited experience with retail choice or figuring out these information flows between nonutility providers, there's a lot of education and work that needs to take place with the state commissions," Villarreal said.
Panelists were reluctant to give specific estimates for market impacts, but Advanced Energy Economy Director Caitlin Marquis said DER aggregations could prove especially attractive to states seeking to rely less on gas-fired peaking generators.
DER aggregations can provide "services without creating emissions, but then also a lot of them are very flexible so they're able to ensure that we're balancing the grid without relying on more polluting options," Marquis said.
Initial compliance filings for Order 2222 are due July 19.