DER aggregation is coming to wholesale markets, but when? | Hogan

On September 17, 2020, the Federal Energy Regulatory Commission (FERC) issued a rule, Order 2222, calling for tariff changes to permit the aggregation of distributed energy resources (DERs) in wholesale markets.  In a unique agreement between former Chairman Neil Chatterjee and Commissioner Richard Glick, the order requires grid operators to revise their tariffs to ensure DER aggregations can participate in the markets, while exempting utilities with a load of 4 million MWh or less from the rule, and providing those entities an option to opt-in.

DERs are typically small-scale, behind-the-meter energy resources — such as rooftop solar panels, battery storage installations, electric vehicles and charging equipment, and energy efficiency assets including home appliances — that have generally not yet had access or opportunity to provide services beyond their immediate proximity.

The numbers and types of DERs are rapidly expanding and will continue to grow in 2022 and beyond.  In fact, utility analysts and reports state that the global annual investments in DERs are expected to increase by 75% by 2030.  The continued falling prices of DERs, ambitious new state and federal policies, and customer demand are contributing factors to the growth of the renewable energy market.  These trends are likely here to stay, and with FERC carving out space in wholesale markets for the aggregation of DERs, a more competitive playing field is expected to create lower prices and more diversity of participation models, ultimately bolstering grid resilience and reliability. 

Below is an overview of what FERC’s aggregation rule in Order 2222 means and the current status of Regional Transmission Organization (RTO) and Independent System Operator (ISO) efforts to implement the Order 2222 framework.  All of the RTOs and ISOs are in the process of developing their implementation plans, but the timelines they are proposing may present a speedbump in enacting the competitive market required by Order 2222.

Overview of FERC Order 2222

The issuance of Order 2222 marked an important moment for DERs and empowers the acceptance of new technologies.  Once the Order 2222 framework is fully implemented, DER aggregators will be able to compete in all regional wholesale electric markets, on the same footing as traditional power plants and other grid resources, which opens the door for distributed energy resource management systems to derive more value from these flexible resources. 

Until this point, wholesale energy markets needed to work through operational and technical constraints prior to establishing a framework for DER aggregations. Order 2222 prompted the implementation of proactive steps to open wholesale markets and instructed RTOs and ISOs to establish provisions in their tariffs to allow DER aggregations to sufficiently engage as market participants. Since the issuance of Order 2222, grid operators have been developing plans to meet the order’s…