In 2020, the Federal Energy Regulatory Commission (FERC) issued Order 2222 with the intent of opening regional transmission organization (RTO)/independent system operator (ISO) wholesale markets to aggregations of distributed energy and demand response resources (DER). Doing so would vastly expand the tools system operators can use to balance the transmission grid. Order 2222 also meant properly valuing energy storage and DER, which would incentivize more systems to be installed.
We reported in Demand and Response in our Q3 issue that the implementation of FERC 2222 is not exactly going smoothly.
“We don’t think FERC 2222 compliance filings have met the spirit of the 2222 order, nor do we think they’ve met the letter of it either,” [Chris] Rauscher [with Sunrun] says. “We’ll see what FERC does in the final decision but 2222 was meant to open up these markets for DER aggregations of all types and these filings do not do that.
A new report from Guidehouse Insights provides a comprehensive analysis of FERC Order 2222 implementation plans. One big obstacle noted in the report is the ability for states to opt-out from demand response wholesale market aggregations, something FERC authorized in Order 716.
FERC is considering whether to rescind this opt-out authority as it becomes more and more apparent that it could undermine efforts to create a more innovative bulk power market.
Guidehouse Insights says stakeholders should explore ways to harmonize RTO/ISO compliance plans and reduce regional disparities in distributed energy resources (DER) deployment and integration, including adopting standardized wholesale market participation models developed by the North American Energy Standards Board (NAESB).
“These implementation gaps present serious challenges for the stakeholders most likely to benefit from the order’s blurring of the distinction between retail and wholesale markets,” says Christopher Cooper, senior research analyst with Guidehouse Insights. “But they also reveal some interesting business models and surprising growth opportunities for market players prepared to outwit the regulatory complexity.”
Analysis of these filings reveals wide disparities in the scope and speed these RTOs/ISOs intend to adopt the market reforms Order 2222 directed. Coupled with market incentives keeping distributed generation (DG) in retail power markets, these disparities could stunt the effectiveness of Order 2222 at integrating distributed energy resources into wholesale markets, according to the report.
The report, FERC Order 2222: RTO Compliance Plans Reveal Regional Disparities in Distributed Energy Integration, summarizes every RTO/ISO Order 2222 compliance filing and FERC’s responses, to date. It analyzes outstanding issues that could impact how Order 2222 is implemented and whether the order effectively integrates distributed energy resources into wholesale power markets; it also assesses the risk and consequences of particular outcomes.
Guidehouse Insights provides research, data, and benchmarking services for today’s rapidly changing and highly regulated industries. The team’s research methodology combines supply-side industry analysis, end-user primary research, and demand assessment, paired with a deep examination of technology trends, to provide a comprehensive view of emerging resilient infrastructure systems.
— Solar Builder magazine