Canary Media detailed how U.S. grid operators are planning to open up their energy markets to distributed energy, quoting AEE's Jeff Dennis on FERC Order 2222 and initial implementation plans and Caitlin Marquis on baseline erosion. Read snippets below and the full article here. 

The future of the power grid lies in tapping the gigawatts of capacity coming from distributed energy resources such as rooftop solar, home batteries, electric vehicles and energy-smart devices — DERs for short. Ultimately, this will radically reconfigure how the U.S. electricity grid works. But getting there will be a long and complicated process...

Supporters of distributed energy cheered the decision’s potential to unlock the value of a class of energy assets that are expected to grow to hundreds of gigawatts of scale over the coming decade. Let these distributed assets earn money for the grid services they can provide, the argument goes, and they’ll become a key tool for balancing the variable wind and solar power, electric vehicles and heating systems needed to decarbonize the grid. 

Bar that access, these supporters warn, and we’ll miss out on the opportunity to get the most communal value out of DERs. These resources are going to be deployed either way because many states’ policies support them and customers want them. ​“They’ll still be developed, but they won’t be able to deliver services in the wholesale market to bring down costs to consumers, bring down prices, provide reliability and resiliency benefits, and all the other things that DERs can do,” Jeff Dennis, managing director and general counsel at the Advanced Energy Economy industry group, said in a February interview...

Mixing and matching different technologies

NYISO’s Order 2222 compliance filing calls for different market structures for load-reducing DERs like smart thermostats or controllable loads on the one hand, and assets like batteries or generators that can actively inject power into the grid on the other, Rauscher explained in an interview...

Advanced Energy Economy’s Jeff Dennis pointed out in an October tweet that FERC’s initial response to NYISO’s compliance filing focused on this potential shortcoming; the commission asked the grid operator to ​“please explain how [its] proposal would not present a barrier to the formation of heterogeneous aggregations.”...

Trying to solve the "baseline erosion" problem

That’s an inherently fuzzy metric subject to all kinds of assumptions, and it has caused major disputes in DER-rich markets such as California. But it becomes particularly problematic when it’s applied to resources that grid operators actually want to be in use more frequently, said Caitlin Marquis, a director at Advanced Energy Economy who’s been studying ISO New England’s Order 2222 compliance process.

“The concept of a baseline is that you have some steady baseline performance, and then you have some event where you’re deviating” from the norm, Marquis said in a February interview. But if the resource is ​“dispatched multiple times per week, that baseline becomes normalized and becomes relatively useless” — a process known as ​“baseline erosion,” she said...

Dennis of AEE agreed that PJM is on the right track on this issue. AEE’s member companies — which include major tech companies with an appetite for clean energy including Amazon, Google and Microsoft along with some of the country’s biggest DER providers — view PJM’s proposal ​“as a step forward,” he said. ​“They do think it opens new opportunities,” unlike the plan from ISO New England.

What's the right size for grid aggregations? 

Still, PJM’s plan does have some drawbacks, Dennis said. One that’s been highlighted by AEE and other stakeholders such as the Advanced Energy Management Alliance trade group is its proposal to limit aggregations to a relatively small geographic area, by requiring any grouping of DERs to bid together at a single ​“pricing node” on its transmission network. 

These pricing nodes — the locations on the transmission grid where wholesale energy prices are determined — range from large to small in terms of how many electricity customers they serve, he said. But about half of PJM’s pricing nodes supply less than 7 megawatts of demand each, which is too small to support aggregations ​“at sizes that would make economic sense,” he said. 

What’s more, customers served by those nodes wouldn’t be able to join aggregations elsewhere in PJM’s territory, preventing them from participating in the market opportunities Order 2222 is designed to create, Dennis said.

On this front, CAISO’s proposal is actually better than PJM’s, according to Dennis, since CAISO allows aggregations at a much larger scale: the two dozen sub-load aggregation points, or sub-LAPs, that the state’s grid is broken into. Those grid regions serve an average of 1 gigawatt of load apiece, making for a much more open field of play for aggregators, he said...

Dealing with the double counting problem

AEE’s Dennis also cited examples of what he described as misapplications of the double-counting concept. For example, some grid operators are proposing to prohibit DERs that earn net-metering compensation from utilities — a category that includes many rooftop-solar-connected batteries in states such as California — from participating in wholesale energy markets, he said...

But it’s not clear that the money earned by customers for feeding their excess solar generation to the grid represents a direct one-for-one equivalent to the value that solar-charged batteries could provide stressed-out transmission networks by reducing household grid demand or feeding power to the grid at times of peak demand, he said. A blanket ban against any participation of those resources might not only be unfair but also restrict a major class of resources in the country’s fastest-growing DER markets, according to Dennis...

Dennis noted that the Order 2222 compliance filings submitted so far have yet to lay out many specifics on how grid operators might interact with utilities in reviewing and registering DERs for wholesale market participation. 

“There are still ambiguities about how that process would work, how transparent it will be and what the dispute resolution process will work like,” he said. ​“That’s an item that FERC will need to pay particular attention to. […] This is an area where jurisdiction overlaps.”