4Q 2022

FERC Order 2222 Implementation Plans Create Risks, Challenges, and Opportunities for Market Players

In 2020, FERC issued Order 2222 with the intent of opening the regional transmission organizations (RTOs)/ independent system operators (ISOs) wholesale markets to aggregations of distributed energy and demand response resources, which would vastly expand the tools system operators can employ to balance an increasingly dynamic transmission grid. Many of the details have yet to be resolved.

Even fully implemented, Order 2222 may have only limited impact on development of distributed renewable energy resources that are eligible for utility net metering programs, where their excess generation can fetch retail prices. The effectiveness of Order 2222 also may hinge on whether FERC rescinds the opt-out authority it granted states in Order 719 to bar demand response (DR) aggregations from wholesale markets, as 13 states currently do. But, by blurring the distinctions between wholesale and retail markets and forcing RTOs, ISOs, state regulators, and distribution utilities to coordinate on integrating distributed energy resources (DER) and aggregated DR into wholesale markets, Order 2222 has the potential to compel harmonization between retail and wholesale markets and speed the adoption of network innovations. All stakeholders are poised to benefit from this integration, though DER OEMs and software vendors providing distributed energy resource management systems (DERMS) in particular should see a windfall.

This Guidehouse Insights report analyzes outstanding issues that could impact how Order 2222 is implemented—and ultimately, whether the order effectively integrates DER into wholesale power markets—forecasting the impact on various market sectors. The report also presents some unique business models and potential growth opportunities for some stakeholders suggested by the proposed implementation of Order 2222.

Pages 14
Tables | Charts | Figures 1
  • How effective will FERC Order 2222 (FERC 2222) be at opening wholesale power markets to DER aggregations?
  • What is Order 719 opt-out authority and how important is it to the success of Order 2222?
  • What market issues are driving integration of DER in wholesale energy, capacity, and ancillary service markets?
  • What market impediments limit the effectiveness of FERC 2222?
  • What opportunities for market innovation arise from Order 2222 implementation?
  • Who is likely to benefit the most from Order 2222’s implementation?
  • Distributed energy resource aggregators (DERA)
  • Distributed energy resource (DER) OEMs and software vendors
  • Renewable energy project developers
  • Equity investors in renewable energy projects
  • Demand response (DR) advocates
  • System operators
  • State and local utility regulators
  • Utility executives and their regulatory affairs staff
  • Federal energy regulators




Fully Implemented, Order 2222 Could Open New Markets to DER and Create New Growth Opportunities for Stakeholders

Implementation Challenges Could Undermine Order 2222’s Ability to Integrate DER into Wholesale Markets

Order 2222’s Effectiveness May Hinge on Whether FERC Rescinds Order 719’s Opt-out Provision

Order 2222-a Clarified Order 719’s Opt-out Provision

Order 2222-b Rescinded Order 2222-a

The Vote on the Opt-out Provision Could be Close

Rescinding Opt-out Authority Encourages Harmonization of Markets

West Virginia and Vermont Demonstrate Success with Market Harmonization

West Virginia and Vermont Demonstrate the Value of Market Harmonization

Over-the-Horizon Outlook: How Order 2222 Implementation Impacts Key Stakeholders

Aggregators of DR Resources

Benefits of Order 2222 May Rest on the Fate of Opt-out Authority

Aggregators of Distributed Generation Resources

Utility Net Metering Programs May Inadvertently Limit Participation in Wholesale Energy Markets

DER OEMs and Software Vendors

Complexity of Implementation Means a Windfall, Particularly if FERC Rescinds Opt-out Authority


Greater Grid Balancing Resources and Market Harmonization Outweigh Added Burdens

Transmission-Level Stakeholders

Order 2222 Means More Load-Balancing Options and Faster Adoption of Innovations

Renewable Energy Project Developers

Order 2222 Implementation Suggests a Way to Bypass the Transmission Interconnection Queue

FERC’s Efforts to Clear the Interconnection Backlog Is Likely to Take Years

Unique Business Model Aggregates Assets No Longer Eligible for Utility Net Metering Programs

Municipal Governments and Other Owners of Large EV Fleets

Order 2222 Paves the Way for Interconnected EVs—Like School Buses and Other Municipal Fleets—to Generate Revenue While Enhancing Grid Flexibility

  • Relative Support for DERAs by RTO/ISO and State
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