Alternative Aggregated DER Participation Methods for US Grids Are Still Needed

Customers across multiple business segments are continuing to adopt distributed energy resources (DER) in the US to achieve cost savings, enhanced resilience, and lower emissions. When aggregated, and intelligently managed and dispatched, these DER can be valuable sources of flexibility for grid operators. Federal Energy Regulatory Commission (FERC) Order Number 2222, issued in September 2020, requires the six regional wholesale market operators under FERC jurisdiction to develop new market frameworks to incorporate aggregated DER. The order’s intent was to induce wholesale market participation for aggregated DER portfolios such that they would be compensated for providing grid services, essentially allowing them to compete alongside traditional generation sources.

In the years since the order’s issuance, however, challenges have remained for aggregated DER looking to participate in wholesale markets. These challenges stem from regional variations in market operator compliance plans and existing state-level regulations. To unlock the full value of aggregated DER, alternative methods of providing grid services are still required. However, FERC Order 2222 represents a good first step for advancing wholesale electricity markets in the US, as it has gotten the conversation started around incorporating aggregated DER into bulk power grid operations.

This Guidehouse Insights thought leadership paper discusses DER adoption in the US as well as the grid service potential of aggregated DER portfolios. It also outlines the goal of FERC Order 2222 along with some of the barriers for aggregated DER wholesale market participation created by current market operator compliance plans. The report then provides commentary on alternative grid participation methods for aggregated DER and recommendations for key stakeholders moving forward.