The Federal Energy Regulatory Commission should defer to retail regulatory authorities on whether or not distributed energy resources should participate in wholesale aggregation programs and put aside the idea that successful DER participation in the wholesale markets would be best achieved by dictating a uniform approach for regional transmission organization and independent system operator DER aggregation programs.
Those were two of several key messages that the American Public Power Association delivered to FERC in comments filed at the agency on June 26 [Docket No. RM18-9].
The Association filing was made in response to an April 27 Commission notice inviting comments following an April 10-11 technical conference on DER aggregation issues.
The Commission is considering rules aimed at removing existing barriers to the participation of aggregated distributed energy resources in RTO and ISO markets. The Association, while generally supporting the Commission’s goal, cautioned that FERC must distinguish between undue barriers to distributed energy resource participation and legitimate operational, reliability, and regulatory concerns.
In its comments, the Association said that the technical conference further highlighted challenges associated with aggregated DER participation in the RTO and ISO markets, including:
- Potential adverse impacts on distribution system operations;
- Developing and implementing processes for appropriate coordination between distribution utilities, state and local regulators, RTOs/ISOs, and DERs;
- Modeling difficulties for the distribution system;
- The mechanics of aggregating numerous small DER assets;
- Increased costs and security and privacy concerns related to upgraded metering and communications infrastructure;
- More complicated billing and settlement processes; and
- The complexities of determining whether a DER is being double-compensated for selling the same service into different markets.
“Many of these challenges would be particularly daunting for small utilities, which constitute the overwhelming majority of public power systems in the United States,” the Association pointed out.
Moreover, the technical conference illustrated that RTOs and ISOs, state regulators, distribution utilities, DER providers, and other stakeholders largely are just beginning to grapple with the implications of increased DER penetration in RTO/ISO markets, the public power group said.
“And although the challenges associated with aggregated DER participation in wholesale markets are fairly evident, the demand for, and potential benefits from, such aggregation programs remain uncertain.”
The Association said that the April 27 notice raises numerous important questions concerning the participation of aggregated DER in RTO/ISO markets. “That so many details remain to be worked out at this stage of the rulemaking strongly indicates that the Commission should adopt a flexible approach to DER aggregation in wholesale markets that accommodates different regional, state, and local circumstances.”
The Commission “should set aside the notion, discussed at the technical conference, that successful DER participation in the wholesale markets would be best achieved by dictating a uniform approach for RTO and ISO DER aggregation programs. Given the volume of questions that remain, the importance of regional differences, and the lack of any consensus best practices, flexibility is of the utmost importance.”
The Association said it is important that FERC strike a balance between facilitating DER participation and ensuring safe, secure, and reliable service on distribution systems at rates that are reasonable for all grid users. “Accordingly, the Commission should not adopt rules that promote aggregated DER participation in RTO/ISO markets without providing adequate safeguards, including a central role for state and local regulators.”
Recommendations
The Association made several recommendations in order to help ensure that the operational, reliability, and regulatory challenges associated with aggregated DER participation in the RTO/ISO markets are adequately addressed.
For example, the Association said FERC should recognize the right of the relevant electric retail regulatory authority (RERRA) to determine if DERs located behind the meter or on the distribution system may participate in RTO/ISO DER aggregation programs, similar to the Commission’s Order Nos. 719 and 719-A opt-out/opt-in framework applicable to demand response aggregation in RTO/ISO markets.
If FERC does not adopt a RERRA opt-out/opt-in framework applicable to all aggregated DER participation in RTO/ISO markets, the Commission should, at a minimum, adopt an opt-out mechanism for small distribution utilities, the Association said.
The Association also said that in any final rule facilitating the participation of aggregated DER in RTO/ISO markets, the Commission “should be explicit that nothing in the rule preempts or otherwise limits the ability of state and local regulators to adopt rules or tariffs, and to set rates to recover and allocate the costs associated with facilitating wholesale market participation by aggregated DERs.”
Moreover, FERC should adhere to the proposal in its original Notice of Proposed Rulemaking (NOPR) issued in 2016 not to permit DERs that are participating in a state retail compensation program to participate in the wholesale market as part of a DER aggregation.
In addition, the Association said that electric distribution companies, with the supervision of the RERRA, “should play a strong role in coordinating any DER participation in an aggregation, including the right to review and approve or deny the participation of individual DER assets in a DER aggregation.”
And distribution utilities should be able to override RTO/ISO dispatch instructions for DERs located on their distribution systems to resolve or avoid distribution reliability or operational issues, the public power group went on to argue.
FERC cleared path for energy storage participation in markets
FERC in February voted to remove barriers to the participation of electric storage resources in the capacity, energy and ancillary services markets operated by RTOs and ISOs.
At the same time, the commission said it would convene a technical conference that would be used to gather additional information to help determine what action to take on DER aggregation reforms proposed in the NOPR issued in late 2016, as well as discuss other technical considerations for the bulk power system related to DERs. These matters were addressed at the April 10-11 conference.
At the technical conference, the Commission heard from a wide range of power industry participants, including Paul Zummo, the Association’s director of policy research and analysis and Christopher Norton, director of market regulatory affairs at American Municipal Power.
