“The ruling by the Federal Energy Regulatory Commission (FERC) is set to shake up the energy networks centered around large scale power plants and create a level playing field for the owners of distributed energy resources (DERs), enabling them to compete for hundreds of millions of dollars exchanged in energy markets every day,” said Wayne Muncaster, VP North America at GridBeyond
On September 17th, FERC passed Order 2222: a regulation that requires all regional transmission organizations (RTOs) and independent system operators (ISOs) to enable DERs, such as energy storage, EV charging networks, on-site load, renewables and backup generators, as well as other energy systems common in microgrids, access to competing in the energy, capacity and ancillary services markets.
The Commission found it was “unjust and unreasonable” to create barriers for DERs participation and agreed that DERs aggregators should be allowed to bundle an unlimited number of technologies of different types and sizes such as load, generation, and energy storage, into unified units deployed into one market offering. Consequently, by partnering with an aggregator, even small DERs will be able to compete in the energy markets and provide support to the grid, in exchange for significant financial rewards.
“Although some markets, such as ERCOT in Texas, already have fairly developed rules for DER participation, FERC’s order applies to grid operators across the US,” commented Leah Layton, Market Development Manager at GridBeyond, the intelligent energy technology and DERs Management (DERM) platform provider.
“Each RTO and ISO now has around a year to define the implementation plan for this new policy across their markets. We can expect different grid operators to introduce different sets of rules and tariffs based on their respective requirements. Ultimately, the outcome should remain the same: Energy markets that are open, fair, and technologically agnostic.”
Decentralization driven through innovation
Wood Mackenzie estimates that more than 380 GW of DERs could be added to the US’s power grids within the next four years, representing an increase of over 630% from the 65 GW available today. The transition into a more decentralized network, with greater participation of DER’s, is more financially viable than the installation of new large-scale generation, such as gas or nuclear plants on the network. This will lead to lower prices for the end-users and increased efficiencies for ISOs and RTOs, the latter of which will gain greater visibility on the volumes and types of behind-the-meter assets, making it easier for them to predict any new demand patterns.
FERC’s decision to open the markets to DERs providers will stimulate innovation and give a green light to energy technology developers, aligning with the strategy of other advanced energy markets such as those in the UK and Ireland. “Greater competition and market openness are essential to the development of new energy technologies and services needed to advance clean energy transition”, says Wayne Muncaster. “This is something we at GridBeyond, have built a business strategy around for many years now, and one of the main reasons behind the decision to expand our operations into the US market earlier this year.”
GridBeyond works with C&I businesses, utilities, generators, distributors and the transmission and grid operation networks to enhance their financial outcomes and increase operational resilience by connecting DERs with market opportunities. After becoming a market leader in Europe, at the beginning of 2020, the company launched operations in the U.S., starting from the liberalized energy markets: Electricity Reliability Council of Texas (ERCOT) and PJM Interconnection, with plans to expand into further territories over the coming months.
“Anything that expands freedom around DERs participation in the market is beneficial, not only for the large energy users who can monetize their energy flexibility, but also for advancing the adoption of innovative technological solutions by the grid operators and utilities, said Wayne Muncaster. “AI and machine-driven technologies lead to better returns on investment, more accurate forecasting, strengthened resilience, and greater efficiencies”.
“We see FERC’s ruling as validation of our long-term vision of digitally integrated energy markets driven by digitally integrated distributed assets and the confirmation of our strategic decision to enter the US market. We are looking forward to supporting the development of a truly equal, participative, technologically agnostic and cost-saving energy marketplace.”
Challenges and future
Currently, the entry regulations for DERs and the limitations on their involvement vary from market to market. In August, during the grid emergency in California, DERs played a critical part in limiting rolling blackouts while supporting the network’s recovery. The crisis has not only proven DERs are an effective and financially viable way of supporting grid balancing, but also restarted the discussion about the existing market barriers for flexibility providers. Many of those who responded to California ISO (CAISO) and the state’s utilities call for help with managing the network outage claimed they were capable of delivering far greater volumes of flexibility if the appropriate market rules allowing them to do so were in place.
“Undoubtedly, FERC’s ruling eases the barriers for energy consumers to become prosumers. Businesses with DER assets, whether those are behind-the-meter batteries, load assets or renewable generation such as solar panels, will be able to assess the market not only in terms of using energy, but also by generating, storing and trading energy. As the volume of DERs connected to the electricity grid will increase, so the gird operators’ options to balance the system, making it more resilient to any future outages”, commented Wayne Muncaster.
“Order 2222 indicates that the future of the energy markets lies in accessibility for all and digitalization. It is an important step forward for the whole energy industry; however, much more needs to be done to create a truly level playing field with equal opportunities for all market participants”, says Wayne Muncaster, pointing to the capacity market regulations as an example of the area requiring further review and more forward-thinking policymaking.