Too soon to predict FERC Order 2222’s effect on reaching net-zero, panelists say
It has been more than a month since the Federal Energy Regulatory Commission (FERC) issued its Order 2222 allowing distributed energy resources (DERs) into the wholesale electricity market, but the dust still needs to settle before utilities will know its true impact on the goal of net-zero electricity, participants in a panel discussion said this week.
Order 2222 has been termed a landmark decision by FERC that could create some headaches for the nation’s regulated utilities while also creating a path for a host of renewable-energy sources to play a larger role in supplying electricity to the overall grid. But, as has often been the case in the transition to net-zero generation, fitting DERs into the nation’s power mix in a way that makes technical and economic sense will require some patience and fine tuning.
“It’s not going to be exclusively a challenge or an opportunity,” said Rich Barone, vice president of Advanced Energy Transformation with TRC, a Connecticut engineering and consulting firm. “There is a lot to be ironed out with 2222, but I will find it very interesting to see how it’s going to be unpacked,” he said during the webinar sponsored by Greentech Media.
Order 2222 was approved by the FERC commissioners on Sept. 17 and was quickly described by Chairman Neil Chatterjee as breaking “new ground towards creating the grid of the future by knocking down barriers to entry for emerging technologies.” It was also given landmark status by industry observers and climate-change advocates who saw it as a key step toward the goal of eliminating carbon emissions from the grid and even lowering consumers’ electric bills.
Specifically, Order 2222 allows DER aggregators to compete in regional wholesale power markets with electricity generated by usually small-scale storage and thermal generation and through “behind-the-meter” means, such as residential solar power and parked electric vehicles. Regional grid operators, FERC said, will be required to adjust their tariffs in order to codify a role as a type of market participant, a step that promises to keep utility attorneys and state regulators busy as they work out the devilish details in what is already a highly sophisticated regulatory and financial environment.
“How do you differentiate and prioritize the utilization of distributed assets for aggregation to a wholesale market versus contributing and delivering on maybe locational needs and determining what is the delta and arbitrage between those economic opportunities?” Barone said. “There is a lot in the challenge domain as the market structures begin to unfold and things will be happening in parallel, so there will be more to be seen in the next few years.”
Using alternative energy sources to power microgrids or other highly localized uses is a relatively simple process when compared to carving out a niche in highly competitive, multi-state wholesale markets. Creating a scenario in which DERs can turn a profit could be easier said than done, according to Todd Headlee, director of Customer Energy Solutions at Dominion Energy.
“When you dig deeper into what the realm of possibility is, states that have net metering, like we do here in Virginia, it is going to be rare for behind-the-meter solar to reach the clearing prices for PJM, the market that we are involved in, so I don’t think FERC 2222 is going to have a big impact there,” Headlee said. “It could have a more near-term impact by enabling smaller storage aggregators to enter our market, so that’s something we are definitely keeping the pulse of and how we can participate in it as the market evolves.”
At the same time, FERC will likely not be the final word on how Order 2222 plays out. Utility regulators at the state level will also be weighing in and will be responsive to their own state’s energy mix as well as popular and public opinions on how the race to net-zero power is managed and how it will affect ratepayers. “I don’t think for any particular utility, the answer is going to be the same,” said Sachin Gupta, TRC’s vice president of Sales for Digital Grid Solutions. “They are going to have to deal with the challenges and regulation from their own local PUCs. “There are a lot of utilities that are going through this and they are understanding what the impact is and what they are actually allowed to do.”
In the meantime, the utility industry is still an early leader in the race to net-zero as individual companies craft their own strategies and deadlines for slashing their carbon footprints. The targets aren’t plucked out of the air in the name of expediency or public relations. They are drafted with a close eye on their own fuel mixes, including DERs, and with input from customers, political leadership and other external stakeholders.
There are also technical challenges, particularly developing the IT infrastructure that will manage the variable flows of DER power on to the delicately balanced grid while maintaining reliability and an acceptable regime for tariffs, rates and customer costs.
Ryan Kiley, executive director of Product Development for Consumers Energy, told the virtual audience that the task involved maintaining a cooperative relationship with all of their stakeholders and devising a plan that is economically practical even as the multiple vital technologies driving DERs are still evolving. “In addition to the challenges and opportunities and questions,” he said, “it’s about the ability keep marching forward and not let solving all of those issues in advance get in the way of overall progress.”
