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NYISO's distributed energy compliance plan draws fire at FERC

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Sunset over midtown Manhattan, New York.
Source: Michael Orso/Getty Creative via Getty Images

The New York ISO's attempt to integrate aggregations of distributed energy resources into its wholesale power markets has exposed a range of thorny issues surrounding a landmark Federal Energy Regulatory Commission rule.

Order 2222, issued in September 2020, requires FERC-jurisdictional grid operators to clear market barriers to aggregations of distributed energy resources, or DERs, such as small-scale solar arrays, residential batteries, and electric vehicles. FERC reasoned that combinations of those types of behind-the-meter resources can provide crucial reliability benefits and other services to the grid as the U.S. continues to shift to more variable renewable energy resources.

NYISO was already a leader in DER integration when Order 2222 was issued, having won FERC's approval in January 2020 for a separate program that established an aggregation DER participation model. The grid operator is projecting behind-the-meter solar installations and nonsolar distributed generation in the state will roughly double over the next three decades as the state strives to have 70% of its electricity generated by renewable resources by 2030 and achieve a 100% clean power grid by 2040.

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In a July 19 compliance filing (ER21-2460), NYISO detailed its plan for revising its existing DER program to align with Order 2222's requirements. In doing so, the grid operator said it planned to deploy new software to implement its DER aggregation participation model in the fourth quarter of 2022. However, the filing was met with multiple protests by state agencies, clean energy groups, transmission owners and others.

Energy efficiency concerns

Advanced Energy Economy, the Natural Resources Defense Council, and the City of New York filed a joint protest — endorsed by 48 additional organizations — to NYISO's bid to exclude energy efficiency resources from participating in its capacity market as part of DER aggregations.

NYISO already bars energy efficiency resources from supply-side capacity market participation because those resources cannot be dispatched when called upon. But energy efficiency resources in New York help customers reduce demand and, as a result, reduce the region's capacity needs.

Noting that Order 2222's definition of DER aggregations explicitly included energy efficiency resources, the clean energy advocates argued that the order, therefore, prohibits the uniform exclusion of energy efficiency resources on the supply side of NYISO's capacity market. They also noted that energy efficiency resources in the PJM Interconnection have been allowed to participate in the 13-state grid operator's capacity market on the supply side for over a decade.

The groups also noted that Order 2222 prohibits the double-counting of the same service provided at both the retail and wholesale level but allows resources within DER aggregations to provide one service at one level and a different service at another.

"While it is critical that specific [energy efficiency] savings are not double-counted ... it is common for some portion of the total amount of [energy efficiency] that supports resource adequacy to be reflected on the supply side and some on the demand side," the coalition said. "Indeed, under supply-side models, rigorous accounting guidelines are established to ensure that savings are reflected on only one side of the market and to ensure that the 'baseline' against which [energy efficiency] savings are measured is properly set."

Energy efficiency resources will be crucial in helping New York reach its 70%-renewables-by-2030 goal because that target is based on the level of end-use energy, the groups added. NYISO is projecting energy efficiency-related peak demand reductions in the summer to jump by a factor of 12 by 2030 and a factor of 21 by midcentury compared to current levels.

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Advanced Energy Economy and the Natural Resources Defense Council filed a separate protest addressing nearly a dozen additional concerns, including NYISO's approach to heterogeneous DER aggregations.

Under NYISO's proposal, an aggregation may only qualify to offer ancillary services that all resources within the aggregation are qualified to provide. But that would violate Order 2222 by precluding aggregations such as those comprising behind-the-meter solar and behind-the-meter storage from providing all of the services they are actually capable of providing, the groups asserted.

'Substantially similar' language at issue

The NYISO's compliance plan drew a separate protest by the New York State Public Service Commission, New York State Energy Research and Development Authority, New York Power Authority, the City of New York, and the New York Battery and Energy Storage Technology Consortium.

That coalition took particular aim at proposed tariff language prohibiting a DER resource participating in a retail program from "providing the same or substantially similar service" in the grid operator's wholesale markets.

"The potential treatment under the NYISO tariff language of the resources participating in these ostensibly 'substantially similar' retail programs evidences the overbreadth of the NYISO's proposal, which goes far beyond Order 2222's market restriction of a resource that is 'included in a retail program to reduce a utility's or other load-serving entity's obligations to purchase services from" FERC-jurisdictional wholesale markets, the parties said.

New York transmission owners highlighted several additional concerns with the proposal.

Order 2222 exempts smaller utilities that distributed four million MWh or less of electricity unless the relevant electric retail regulatory authority allows customers served by those utilities to participate in DER aggregations.

But under the NYISO's proposal, DER customers served by utilities that distributed more than four million MWh in the previous fiscal year but less than that the next would automatically become unenrolled in DER aggregations after Dec. 31 unless the relevant authority authorized customers to participate.

"Such a result is unreasonable, and it also would be unworkable because no one will know at the stroke of midnight on Dec. 31 whether such a utility has distributed four million MWh in the year ending at that moment," the transmission owners maintained.