Enbala Blog

A New Day Dawns for DERs in U.S. Wholesale Markets

Posted by Bud Vos on Sep 22, 2020 9:00:00 AM

Two years ago, Enbala posted a blog that posed a proverbial 64 dollar question. Noting that “DERs are becoming so entrenched in the daily operations of the grid that it’s tempting to ponder just where their limitations lay,” we then asked, “Can DERs play in utility wholesale markets?”

That day is upon us. Last week the U.S. Federal Energy Regulatory Commission (FERC) voted to more fully open wholesale markets to distributed energy resources. In the words of FERC Chairman Neil Chatterjee, “Order 2222 is a landmark, foundational rule that paves the way for the grid of tomorrow.”


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At Enbala, we couldn’t agree more. When we learned of the decision last week, a collective “hurrah!” emanated from the in-home offices of Enbala employees across the country in a virtual celebration that was a long time in the making. The culmination of many years of dedicated hard work on how best to allow DER aggregations to compete in energy capacity and ancillary services markets, Order 2222 broadens 2018’s FERC Order 841, which set rules for batteries and other energy storage systems to play into wholesale markets. With its much more far-reaching scope, Order 2222 is truly a breakthrough decision — and one that we expect will remove barriers to emerging technologies, increase competition, drive innovation, enhance grid reliability and flexibility, reduce wholesale market costs, and open new doors for consumers and C&I customers alike.

 

While DERs have played a role in U.S. wholesale energy markets for a few years, it has been almost exclusively within the bounds of traditional demand response. The new ruling is a giant step forward in realizing the full potential of DERs, and it’s a big opportunity for companies like ours who are in the business of optimizing and controlling the flexibility inherent in DERs to enable a cleaner and more sustainable energy future. FERC is, in effect, leveling the playing field of the organized capacity, energy and ancillary services markets run by regional grid operators by enabling aggregated DERs to compete alongside traditional power plants and other grid resources.

 

Previous FERC rulings have 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 and removing many of the roadblocks that prevented RTOs/ISOs from fully leveraging DERs to enable a cleaner, decentralized, consumer-centric grid.

 

Chairman Chatterjee had this to say. “This significant and forward-leaning action achieves all of this while staying rooted in a simple, market-based premise: When DERs come together through the power of advanced technologies to form an aggregation, they can — and should —be able to participate in our wholesale markets. And when they do that — when DER aggregations line up and compete with traditional resources to provide all the energy, ancillary services, and capacity that they have to offer — consumers win.”

 

Chatterjee also made several other key points that I’d like to share and highlight.

  • “Because DERs are nimble, more so even than many traditional resources, they can locate where price signals indicate they’re most needed. This can, for instance, help reduce congestion costs, driving down prices for customers. That means smaller energy bills for hardworking families and businesses of all shapes and sizes.” 
  • “Because many DERs have fast response times and can serve multiple functions, they’re able to show up quickly and meet various grid needs as they arise. Bottom line: this means that DERs can help keep the lights on.”
  • Chatterjee also pointed to the value of “unleashing the power of EVs to further drive down costs in our markets and bolster grid resilience” by aggregating them to provide a range of services in our organized energy markets — services like energy and spinning reserves, or even frequency regulation.

There are, of course, complexities that will need to be ironed out as Order 2222 is implemented. Individual ISOs and RTOs must propose a participation path customized to each market’s needs and outline how they will each implement the new FERC order. Market rules need to be formulated that enable DER participation in bulk energy markets while also enabling utilities and state regulators to maintain distribution grid stability and the soundness of retail DER initiatives.  

These complexities will be worked out over the next several months, and the wholesale market as we know it will change for the good of everyone who is a part of the energy value chain. Up until now, we’ve been dipping our toe into the U.S. wholesale market. Now we are ready — and poised — to jump in feet first.  

Topics: Solar, battery storage, DERs, battery energy storage, distributed energy, energy markets, EVs, wholesale utility, FERC Order 2222

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