FERC may open up markets for Distributed Energy Resources and storage

“FERC has already taken some steps to open power markets to DERs. For instance, a couple of years ago it issued Order 745, which said that RTOs have to treat demand-response aggregators the same way they treat power plants. (That order was quite controversial; it went all the way to the Supreme Court, which ruled in favor of FERC.)”

“Last week, however, FERC went further, proposing a new rule that would represent a huge step forward for DERs.

The details are somewhat technical, but here’s the short version.

For every different kind of source that participates in energy markets, RTOs develop a “participation model,” which FERC defines as “a set of tariff provisions that accommodate the participation of resources with particular physical and operational characteristics.”

That’s a complicated way of saying that every source participates in markets based on rules designed for that source.

The new rule is in two parts. The first part instructs RTOs to come up with a participation model for electricity storage. The second instructs them to come up with a participation model for DERs.

FERC is telling all the RTOs that they have to allow distributed energy into their markets.

Part of doing that means recognizing the different value streams (“unique attributes”) that these resources provide the grid. Different DERs provide a wide range of different energy services. There’s electricity, of course, but there’s also frequency regulation, capacity, storage, demand response, and more. (You don’t need to know what all these are; suffice to say, they help make the grid more stable and resilient.)”

“Some RTOs are ahead of the game on this. CAISO, in California, already has special tariffs set up for “Non-Generator Resources.” But in other regions of the country, markets for distributed energy and storage have been hampered by lack of structured access to larger markets.

This rule is going to open that up. It could help kick of a fundamental shift in the way power markets work. Where a few large generators now dominate, soon there may be hundreds, thousands of resources of every size and nature bidding into those markets. Rather than relying on physical scale, DERs will rely on intelligence, on smart, responsive software that links them together and gives them virtual scale. It’s going to be fascinating.

The proposed rule now enters a 60-day comment period, after which it will be scrapped, amended, or issued as an Order.”