It seems so easy: Bundle distributed energy – rooftop and community solar photovoltaic arrays, storage, small hydro, landfill gas, and energy efficiency – and sell it as generation in competitive wholesale markets.
It’s not so easy after all, as this week’s two-day technical conference at the Federal Energy Regulatory Commission established beyond a doubt. The two full days were filled with swirling and competing notions about difficult questions of how to aggregate distributed energy resources (DERs) so they can compete in the wholesale markets FERC regulates.
The conference grew out of FERC’s 2016 notice of proposed rulemaking, “Electric Storage Participation in Markets Operated by Regional Transmission Organizations and Independent System Operators”, and its final rule, issued at the same time as the notice of the technical conference. In the conference notice, the commission said it is “taking no further action in Docket No. RM16-23-000 regarding the proposed DER aggregation reforms. Instead, the Commission will continue to explore the proposed distributed energy resource aggregation reforms….”
The topics laid out in FERC’s February 15 notice of the technical conference gave a true flavor of the daunting task. Among them:
* How to price and dispatch DERs. Will nodal or zonal aggregation work best. How will DERs affect modeling and dispatch software, communications, and other tools needed to accomplish successful economic dispatch
* How would wholesale markets’ aggregation of DERs affect state and local retail regulation, particularly since some distributed resources, such as rooftop solar, are “behind the meter” and already participating in retail markets in states and regions covered by FERC’s wholesale markets?
* Are the experiences of single-state wholesale markets (California ISO, ISO-New York) useful or not in understanding aggregating DERs in multi-state markets?
* How can these complex transactions get coordinated among the ISOs, the states, and individual distribution utilities?
* Will DERs even want to participate in an aggregated wholesale market, given the small size of the resources and the costs of participation?
These are just some of the vexing issues that confronted the technical conference, and it is safe to say that nothing conclusive arose from the meeting other than a head-scratching acknowledgement that this is hard work.
Perhaps the best background on the thorny issue of DERs in FERC-ruled markets came in an April 10 (the first day of the technical conference) paper by Ari Peskoe, director of the Electricity Law Initiative at Harvard Law School’s Environment and Energy Law Program, written for the University of Pennsylvania’s Kleinman Center for Energy Policy.
In a paper covering modern electricity developments – Power Over the Twenty-First Century Electric Grid – Peskoe writes about the uncertainties complicating DER regulation. “Sales of energy and services by DERs are generally regulated by PUCs,” he notes. “DERs have historically accounted for a relatively small portion of the total power market, and wholesale markets could ignore their impact. Recent growth and the prospect of continued technological improvements are leading FERC to rethink its role. Whether FERC seeks to displace or complement state DER programs is an outstanding question.”
Peskoe argues that FERC’s moves on DERs are potentially risky. He says, “Any move by FERC will be controversial. FERC’s jurisdiction over wholesale sales in interstate commerce has covered energy sales from large-scale plants that transfer power through the interstate transmission system to utilities that distribute that power to consumers. Under this top-down model, FERC’s authority did not reach down into utility distribution systems that were regulated exclusively by PUCs. FERC’s regulation of demand response starting in the early 2000s breached this bygone bright line and provides a model for how FERC is approaching expanding its regulation of DERs.”
Ultimately, says Peskoe, “A sustainable regulatory framework for DERs should allow owners, utilities, and RTOs to capture the full value of these resources. DERs can deliver services across the entire electric system and reduce ratepayer-owners’ utility bills. Unlocking DERs’ full value will require coordination across the FERC-PUC jurisdictional line. FERC can facilitate this coordination while allowing states to continue administering DER programs.”
Clearly there is more to come from FERC and elsewhere on these DER issues.
— Kennedy Maize