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Smooth deployment of clean energy comes up against power market policy limits

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Smooth deployment of clean energy comes up against power market policy limits

Seventeen months ago, the Federal Energy Regulatory Commission promised “a new day” for a wide range of consumer energy products: rooftop solar, controllable thermostats and water heaters, electric vehicles and generators. relief that could compete with power plants in energy markets.

the historical order creating a rule for distributed energy resources – small-scale electricity generation or storage technologies – was crucial for grid operators to manage ever-increasing amounts of renewable energy while coping with extreme weather events and threats of cyberattacks, supporters said.

But now FERC is evaluating proposals that could reduce the rule’s scope and possibly its full potential to ensure a smooth transition to a zero-carbon grid.

Network operators’ proposals to comply with the order will “go off the rails,” said Jon Wellinghoff, a former FERC chairman who is now chief regulatory officer at Voltus, a San Francisco-based company that aggregates distributed energy resources. . In December, Voltus asked FERC to call a conference and discuss key issues, including whether it was ceding too much authority to state regulators.

“We see monopolistic and anti-competitive forces from generators, transmission owners and distribution utilities trying to build barriers into compliance plans” to distributed energy resources, Wellinghoff said.

The rule has sparked a regulatory tussle that is bubbling in wider debates over a carbon-free power grid, energy experts say. Indeed, federal and state regulators rub shoulders on matters of electricity policy: FERC guarantees a fair and reasonable wholesale electricity market, while the states oversee the retail market and local distribution utilities.

Later this month, FERC will meet with state utility regulators in Washington to discuss ways to reduce transmission line bottlenecks that threaten renewable energy development.

“It Could Get Messy”

FERC’s wholesale market rule encourages states and utilities to appeal, challenge or test the legal limits of this relationship, said Caileen Gamache, a partner at Norton Rose Fulbright US LLP in Houston and Washington, DC

“One of the trickiest issues with this order is the threading of the jurisdictional needle, and I think that could get messy in the compliance filings,” said Gamache, who represents developers of solar, storage, and energy projects. and other distributed energies.

“It could be a long, heartbreaking road between here and there,” she said.

It’s already a journey.

In 2016, the United States Supreme Court upheld the right of demand response to participate as an energy commodity in wholesale markets. In a 6-2 decision, the court dismissed the power plant owners’ concerns and found that FERC could regulate the wholesale market even if it indirectly affected retail market conditions.

The decision set the stage for FERC to open the markets even further.

Hiding in plain sight

The role of consumer energy products in the wider electricity grid has long been a thorny regulatory and technical issue. Traditional electricity generation and delivery are ubiquitous, as evidenced by smokestacks, long-distance transmission towers, and neighborhood power lines and transformers.

The rising popularity and falling cost of smart home appliances, the Internet of Things, rooftop solar, and demand response – where customers are paid to reduce their consumption – are changing the electrical system .

Distributed resources “may hide in plain sight in our homes, businesses and communities across the country,” said then-Republican FERC Chairman Neil Chatterjee, announcing the 2020 order. “But their power is powerful.”

Total capacity in the United States could reach 387 gigawatts by 2025 thanks to the growing popularity of electric vehicles, residential energy efficiency, rooftop and community solar installations, Mackenzie Wood projects. That’s more than a third of the total capacity of U.S. power plants in 2020, according to the Department of Energy.

Distributed resources “are coming whether regulators like it or not,” said Kenneth Schisler, senior vice president of regulatory affairs for CPower Energy Management, a Baltimore-based distributed energy resource aggregator for the commercial and industrial sector.

“Where’s the Tension”

By opening up the wholesale market, FERC rightly wants to make these products broader network resources, said Schisler, who previously chaired the Maryland state utility commission. The wholesale electricity market involves generation plants selling to utilities, which then sell directly to consumers in the retail market.

Pooled together, resources can stabilize the grid, allowing seamless connection of more renewable generators that rely on the sun and wind, said Jeff Dennis, chief executive and general counsel for Advanced Energy Economy, a Washington-based trade association that advocates for distributed energy resources.

Electric vehicles can play this scenario. When electric vehicles are off the road, plugged in and fully charged, they can return battery power to the grid, Dennis said.

School bus depots, during the school day or at night, could distribute power during periods of cloud cover or light winds or could back up the system during an outage caused by a storm.

“The question is how much do utilities go beyond reliability and security in order to control or manage the market,” Dennis said. “I think that’s where the tension lies.”

Limit the scope

Regional network operators want to limit the geographic scope of aggregated resources in the market and impose metering and data reporting requirements that proponents say are cumbersome and unnecessary.

Electricity distribution utilities – which operate in the electricity retail market overseen by state officials – also want flexibility, citing their legal responsibility to maintain the security and reliability of local networks, network operators say.

This month, PJM Interconnection LLC, the nation’s largest grid operator, proposed limiting distributed power aggregations to a single pricing node. These are tiny geographies that count more than 10,000 on the operator’s footprint, which tracks the flow of electricity to 65 million people in 13 states and Washington, D.C.

That would force companies to struggle to pool enough resources for the market, especially in rural areas, Schisler and others said.

PJM has also committed to giving utilities 60 days to review the proposed consolidations. PJM would retain the final say on the matter — a provision that could lead to federal and state clashes, Gamache said.

In the North East, ISO New England Inc. has proposed giving distribution utilities the complicated issue of metering and crediting the power of multiple devices that sit behind a customer’s meter.

A FERC spokesperson declined to say whether it would approve Voltus’ request to convene a technical conference.

Cooperation needed

PJM declined to comment and ISO-NE did not respond to a request for comment. Trade groups representing utilities and state commissioners did not respond to requests for comment.

The Electric Power Supply Association, a trade group of power producers that challenged the response to the request in the 2016 Supreme Court case, declined to comment.

“It won’t succeed without utility cooperation,” Katherine Hamilton, executive director of the Advanced Energy Management Alliance, a Washington-based trade association representing distributed energy resource providers that counts Walmart and Google among its members.

“Utilities need to be able to come to the table and not just say, ‘Oh, that’s not going to work’ and veto it,” Hamilton said.