FERC's distributed energy order will require advanced planning, says new report

State utility commissions and electric distribution companies should take proactive steps to support the participation of distributed energy resources in wholesale power markets, according to a new report.

The report, released Jan. 25 by the Energy Systems Integration Group, or ESIG, laid out key recommendations for implementing a September 2020 rule issued by the Federal Energy Regulatory Commission — Order 2222 — that requires regional grid operators to develop participation models for aggregations of distributed energy resources, or DERs.

DER aggregations are combinations of small-scale generating resources that could include rooftop solar arrays, residential battery systems and electric vehicles, as well as customer demand response that reacts to price signals.

In opening wholesale power markets to DER aggregations, FERC recognized that they are capable of providing important services to regional energy, capacity and ancillary services markets as the U.S. continues to shift to a cleaner grid.

DER aggregators such as Sunrun Inc., which sells rooftop solar panels and residential battery systems, are expected to benefit from Order 2222 by being able to bid DER aggregations directly into wholesale power markets.

The California ISO and New York ISO have already submitted compliance filings for Order 2222, while the nation's multistate grid operators are taking longer. The PJM Interconnection LLC and ISO New England are set to file their plans in early February, and the Midcontinent ISO and Southwest Power Pool Inc. have been granted extensions until the spring.

Key recommendations

ESIG's report is the product of a 10-month consultative process with a DER task force featuring experts from regional grid operators, utilities, technology providers and regulators.

"What came out of this report was that in the near term, it's less about new infrastructure investments — controls, monitoring and communication systems — and more about the processes," Priya Sreedharan, a program director at GridLab who chaired ESIG's DER task force, said in an interview.

The growth of DERs on the U.S. electric grid could present a major long-term challenge for system operators, but the transition can start with "small, no-regrets steps and evolve over time," the report said.

The authors specifically recommended four near-term steps utility commissions and electric distribution companies can take as FERC-jurisdictional grid operators continue to craft market participation models.

First, regulators should develop or improve existing DER interconnection processes, the report said. That should involve clarifying distribution override procedures for times when system conditions are stressed. Regulators and utilities will also need to establish DER performance parameters and create new DER databases, according to the report.

Second, regulators must develop transparent processes for DER aggregation reviews. Those processes should also be distinct from interconnection processes for individual DERs, the report recommended.

Third, commissions and utilities should develop new ways to communicate distribution outages and constraints to DER aggregators, the report said. And fourth, they must also create transparent, nondiscriminatory processes for overriding regional grid operators' scheduling and dispatch of DERs when necessary.

In some cases, DER aggregators could implement a "soft override" when system information is shared in advance, Sreedharan said. That would avoid the need for "hard overrides" that could create their own reliability problems.

"Having this kind of information shared in advance would allow the aggregator to be able to adjust the performance of that aggregation based on the needs of the distribution network," Sreedharan said.

Sreedharan noted that electric distribution companies could also leverage existing communication pathways used to control demand response resources. Widespread adoption of a new smart inverter standard, known as IEEE 1547-2018, would also boost DER penetration, Sreedharan said. The standard enables DER-connected smart inverters to autonomously respond to grid conditions and help maintain network reliability.

The ESIG report also called for a broader national dialogue on DER integration that enables states to learn from one another as the number of DERs grows. California, for example, is a national leader in rooftop solar generation. But CAISO's DER participation model, which FERC approved in 2016, still had no users as of the report's publication.

"I would argue that having this kind of dialogue helps both the leading entities as well as those that are a bit further behind," Sreedharan said.

The ESIG report is the first in a three-part series. A second report will examine open networks initiatives already underway in the United Kingdom and Australia, and a third will look at how a similar initiative in the U.S. might be implemented.