FERC 2222 Promises to Enable Scalable Consistent Markets for DERs, But Will It Work?

December 3, 2020

Since its adoption in mid-September, FERC Order No. 2222 has created quite a buzz in the DER community. 

FERC has described the order as "A New Day for Distributed Energy Resources.” 

Their goal is to enable distributed resources "to participate alongside traditional resources in the regional organized wholesale markets through aggregations, opening U.S. organized wholesale markets to new sources of energy and grid services."

FERC 2222 promises to open markets to distributed energy resources with the potential to enable newfound levels of scalability... but will it work?  

As they say, the devil and god are in the details.

The US energy system is primarily controlled at the state and local level, which has been both a bug and a feature. 

Local regulators and aggressive utilities have been the primary drivers enabling the integration of Distributed Energy Resources (DERs). They have also created a fragmented set of rules that complicate market adoption and scale.

FERC 2222 has the potential to create needed consistency across jurisdictions while still leveraging the significant experience of existing regional solutions.

However, there is a concern that the new order could instead intensify jurisdictional conflicts between FERC and state public utility commissions, or conversely, require DER aggregators and project developers to navigate even more complicated regulatory frameworks. 

Recurve believes that the order’s fundamental concept -- which is to open regional transmission organizations (RTOs) to competition and remove barriers that prevent DERs from fully participating in electric energy and capacity markets -- is well-founded.

In particular, the idea of having small DERs competing in RTO markets through aggregators representing a single resource with greater flexibility to provide a variety of products and services mirrors the approach Recurve has taken to enable pay-for-performance demand flexibility across the country.

Source: Jeff Dennis, Advanced Energy Economy summary of FERC Order 2222; text highlights added by Recurve.

At the core of the FERC 2222 order is, of course,  the need to quantify the DER resource impact.  However, the regional authorities must settle the options for metering individual DERs and strategies to avoid double-counting. As has been the case for all demand-side resources operating in procurement markets, robust and auditable measurement must be on par with supply-side resources.

The Recurve Platform is purpose-built to solve this problem by providing a consistent, transparent revenue-grade measurement of demand flexibility at the meter along with the tools to enable auditable calculations that offer confidence to all parties to a transaction. 

Built on open-source methods and code, the Recurve Platform allows parties to agree on transparent and tested measurement that can easily be specified and verified as revenue-grade (having met all the terms of a contract). 

Recurve can provide the full picture of DER impacts on the grid, regardless of the source — for every hour of the year and attributable to either dispatchable events (market signals) or long term contracts (procurement). 

Using EEmeter site-level hourly and locational measurement coupled with GRIDmeter™ population-based comparative analysis, Recurve’s FLEXmetering™ platform provides settlement quality grid impacts, net of exogenous factors suitable for grid integration and market payments.

FLEXmeter™ values are applicable across all DERs in a uniform way that is agnostic to the measure type, enabling what we jokingly refer to as the Unified Field Theory of demand flexibility. Measure all DERs at the meter (where buildings impact the grid) at an hourly level, using transparent revenue-grade verifiable calculations, and attribute the value to the appropriate price signal (harmonizing active demand response and predictable impacts through procurement). 

Let aggregators and technologies compete on a level playing field.

This approach is not aspirational: using existing smart meters and tested open-source code, markets for demand flexibility are being deployed by many of the country’s largest utilities and demand aggregators.

By providing a uniform set of principles for how plentiful and often low-cost DER resources can participate in energy markets, FERC 2222 has every potential to be a game-changer.

How it functions in the real world will depend on many critical regulatory choices, mostly at a state or local level. 

Recurve believes that FERC 2222 is a massive opportunity for market participants and regulators to evolve current bespoke procedures in favor of a more uniform and straightforward approach that can finally enable DER’s to participate in the market at the scale required to decarbonize the grid.

Recurve is particularly enthusiastic about four critical elements of this order: 

1. Expand market access to the aggregation of smaller DERs

Recurve has enabled aggregation of residential resources since its inception and currently supports aggregations for small, medium, and large commercial customers with multiple utility partners. Aggregators have full flexibility to meet customers where they are, bring solutions that meet their needs, and manage risk with transparent, consistent tracking of their performance. The utility or system operator can have confidence that they will only pay for what's delivered. Customers will have access to the best available service and products at the lowest price through market competition. This win-win proposition is the most efficient means of expanding market access to smaller DERs. Read more in this T&D World article.

2. Support a "technology-neutral" approach to enable portfolios of resources representing combined and integrated solutions to reduce and manage load.

Recurve's platform uses transparent, open-source, revenue-grade calculations to quantify the change in consumption at the meter from any combination of devices. Technology-agnostic measurement allows RTO's and ISO's to empower aggregators with maximum flexibility to deliver dependable resources and maintain accountability. Recurve can quantify the short term value of event-based reductions or shifts in consumption (such as demand response) separately from long-term load shaping (such as energy efficiency). Transparent communication of the value in any given region (or sub-geography) underpins market actors' compensation. 

3. Address "double-counting" and "incrementality" directly to build confidence that resources are not compensated more than once for the same service.

The net impact of efficiency and demand response programs on system load is foundational to counterfactual analysis. However, the process of determining this net impact has been plagued by inconsistency leading to a lack of confidence and protracted disputes. Recurve has developed the GRIDmeter™, which utilizes stratified sampling techniques to identify non-participant comparison groups. These groups provide an adjustment for exogenous factors to better isolate avoided energy use on an hourly basis. The GRIDmeter™ methods have proven accurate through empirical testing for both residential and commercial applications. These methods allow market operators to isolate the relative impact of an aggregation of demand-side resources in the wholesale market even when other retail programs are present.  Likewise, resource programs could use this method to isolate their savings impacts from broader wholesale markets. Hence, system planners have a complete picture of incrementality on "either side" of the fence.

4.  Use the existing utility metering infrastructure for settlement.

Recurve's platform enables markets by making standardized open-source methods and code base accessible to all actors. It uses monthly consumption data coupled with sub-metering data (for the whole building) or hourly AMI data. The physical structure is the unit of the asset. By quantifying avoided energy usage at the meter, market operators have a reliable way to understand aggregated resources' impacts. System operators don't have to develop complicated pricing schemes intercepted by devices to enable demand-side resources — they are ready now with a straightforward, flexible market structure. Read more about how demand flexibility is an essential grid resource

Recurve is excited to use our local experience and open-source software solutions to support regional markets for DERs. We hope that FERC 2222 can be a catalyst to expand investment in DERs to create an essential bridge that brings value to both the grid and customers.

The Secret Plan for Decarbonization: How Demand Flexibility Can Save Our Grid

Read our Electricity Journal article to learn how behind the meter flexibility can work as a true grid and climate resource.

Read the articleRead the article

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