- 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?
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
Key Questions Addressed
Who Needs This Report
- 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
Table Of Contents
Spark
Context
Recommendations
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
DUs
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
List of Charts and Figures
- Relative Support for DERAs by RTO/ISO and State
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