Correction: The headline of this story has been updated to reflect the correct FERC order number
Regional transmission organizations and independent system operators are making progress to integrate distributed energy resources, or DERs, into wholesale markets but face a host of “open questions” regarding technology, process and timing, panelists said Wednesday at the American Council on Renewable Energy’s Grid Forum.
In a landmark 2020 decision, Order 2222, FERC directed RTOs and ISOs to remove barriers to DER aggregations participating in wholesale power markets. The aggregated resources can include rooftop solar, energy storage, electric vehicle chargers and other technologies.
Since then, grid operators have been developing implementation plans but they are on different timelines. New York ISO, for instance, is hoping to be fully compliant by 2026 while other regional operators are on track for 2029, said Mike DeSocio, founder and CEO of Luminary Energy, a new consulting firm focused on wholesale markets.
“Normally ISOs and RTOs have somewhere between 500 and maybe 1,000 employees. They're not designed to deal with every customer and consumer on the grid,” said DeSocio, who until recently worked with NYISO, overseeing its market design group. “There's challenges with that technology-wise, and there's challenges with it process- and administration-wise.”
But despite the challenges, there is an opportunity to deploy DERs quickly, “especially if the incentives are right,” DeSocio said.
Technology is a major issue challenge to implementing Order 2222, said Karen Wayland CEO of GridWise Alliance. The group represents utilities, grid operators and other stakeholders, and is preparing to release a white paper on the investments that will be necessary to ensure DER aggregations can help maintain grid reliability.
“Both the RTOs and the utilities, and likely third-party aggregators, are going to need a suite of technologies that allow them the visibility, the controls and the market signals to really connect customers to the wholesale market,” Wayland said.
GridWise Alliance’s white paper, which is expected to be released in the coming weeks, will help utilities make the case to regulators for digital technologies such as voltage optimization, submetering solutions, smart inverters, advanced communications and field area networks that are necessary to aggregate DERs, she said.
“You cannot do this without an advanced meter,” Wayland said. But “we know that when utilities come before commissions or their boards to look for approvals for investments, they have to make the case for these investments. And we are seeing a lot of our member utilities have trouble getting advanced metering infrastructure approved through the rate case.”
Even with the technology in place, DER aggregation still presents risks associated with rate and program design and revenue opportunities, said Kelli Joseph, vice president of electricity markets and policy credit risk at Fifth Third Bank.
“In order to enable some of these assets to provide load shifting or to actually provide some of the benefits that everybody talks about, it requires entirely new rate design,” Joseph said. However, “we are financing [projects] under existing rate designs today.”
Joseph’s work with the regional bank entails understanding the credit risks of investments being made in the energy sector.
“I have concerns about the incentives to remain in some of these contracts ... especially for individual consumers who can opt out at any point,” Joseph said. The potential benefits of aggregated DERs are clear, “but from a financial perspective, from an investor who's putting money into these projects, you have to understand that there are a lot of risks.”