As far as federal energy regulatory policy announcements go, it’s rare for the FERC commissioner to issue major public comments on federal regulation. Then again, FERC Order 2222 is not just any order; upon its release in September 2020, Commissioner Neil Chatterjee called it “a landmark, foundational rule that paves the way for the grid of tomorrow.”
Why is this such an exciting development in the energy world? The order requires Independent System Operators (ISOs) to allow Distributed Energy Resources (DERs) to compete within their wholesale energy markets alongside traditional, large – scale resources, typically fossil fuel plants.
Commissioner Chatterjee went on to say, “By relying on simple market principles and unleashing the power of innovation, this order will allow us to build a smarter, more dynamic grid that can help America keep pace with our ever-evolving energy demands.” The smart grid policies he referred to are part of an effort by FERC to prevent or alleviate events similar to that of the February 2021 Texas energy crisis.
For reference, a DER is any energy resource interconnected to the grid which is providing energy in some capacity at the distribution level. DERs include residential and small commercial solar, electric vehicle chargers, cogeneration, and even smart water heaters and air conditioning units that can return energy to the grid when not running under full capacity.
For current owners of residential and small commercial solar systems, this order will allow them to partner with energy aggregators who will soon be allowed to sell their energy to the open market. These energy markets include those beyond the electric utility currently serving . In short, FERC 2222 means new revenue streams for DER owners, including solar energy owners.
The order is designed to provide several benefits to the grid, including improved flexibility and resilience, while simultaneously opening the door to more competition from DERs. This new competition will lower overall energy costs for consumers and support innovation in energy markets.
The energy community is currently in somewhat of a holding pattern for this order to take effect. By the summer of 2022, the ISOs have been requested to create participation models for which DERs can begin to register as wholesale energy participants within their ISO territories.
More information is still to come on this exciting federal energy policy development. In particular, FERC and the ISOs need to determine the rates DERs will be paid under the new tariffs once they officially enter the wholesale market. Once this is accomplished, solar system owners and Power Purchase Agreement (PPA) providers will have a clear understanding of the long – term added revenue and savings available to them.
Inovateus will be paying close attention to the on-going development over the next year, and keep our customers informed about how FERC Order 2222 will make solar even more cost effective.
By: Tim Powers, Research and Policy Associate
