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  • Writer's pictureCorey L. Wilson

Distributed Energy Scores Big Win in US Wholesale Markets with FERC Order 2222

Updated: Nov 28, 2023

The Federal Energy Regulatory Commission (FERC) on September 17, 2020, issued Order 2222, its much anticipated ruling that paves the way for aggregated distributed energy resources (DERs) to compete alongside traditional power plants and other grid resources in wholesale markets.

The landmark ruling was heralded in a commission news release as important to “help usher in the electric grid of the future” by removing “the barriers preventing distributed energy resources from competing on a level playing field in the organized capacity, energy and ancillary services markets run by regional grid operators.”

Previous FERC Order 841 in 2018 opened wholesale markets to distributed energy resources in general, but Order 2222 will now enable these resources to be bundled together into a single bidding entity, opening new possibilities and competitive opportunities.

What’s Included in FERC Order 2222

FERC’s expansive ruling opens the door to a wide array of technologies to participate. Aggregate resources can be located on a utility’s distribution system (or a subsystem) or on-site behind a customer’s meter.

Bundled technologies can include energy storage systems (ESS), on-site renewables, energy efficiency, distributed and backup generators, electric vehicles and their charging equipment, and other energy systems common in microgrids. There is no practical limitation on the number of distributed technologies that can be networked together in this manner, and combinations of generation and load modulation can be deployed simultaneously into one unified market offering.

Most notably, this new rule allows several distributed resources to aggregate to satisfy minimum size and performance requirements that they might not be able to attain individually, meaning aggregation can open access to any and all DERs located in competitive markets.

Order 2222 upholds previous determinations that allow resources connected to the distribution grid to serve both retail and wholesale markets, but also directs grid operators to include “narrowly designed restrictions” necessary to prevent double counting of services.

A Multi-Billion Dollar Opportunity Awaits

Microgrids are integral to initiatives that aim to strengthen the economy, save lives during natural disasters, and make our energy supply more sustainable and our electrical power more secure. Microgrids increasing support more reliable, efficient and safe power for critical infrastructure.

Local utilities will also still maintain jurisdiction over interconnection of distributed resources to the electric grid, whether or not the resource intends to participate in retail activities. These types of local utility considerations will help prevent legal challenges that bogged down previous proceedings on demand response and energy storage.

The different regional wholesale markets oversee hundreds of millions of dollars in energy transactions every day, and FERC’s ruling will open the door for DERs to access those competitive opportunities.

Previous FERC orders allowing for grid-tied energy storage systems to access limited market opportunities (like frequency response) caused a bit of a battery gold rush in early mover markets like the PJM Interconnection. New wholesale revenue opportunities combined with declining costs and increasing retail value could spur new deployments and accelerate the already burgeoning DER sector.

While the specifics of each market’s implementation plans are still months away, FERC Order 2222 is a major win for the DER industry and will have a significant impact on how distributed resources are designed, operated, and compensated for years to come.

Article is courtesy of Matt Roberts at Microgrid Knowledge published September 18, 2020.

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