The Battle for a Cleaner Grid
Earlier this fall, the Federal Energy Regulatory Commission (FERC), the agency charged with overseeing the wholesale markets of electricity, issued Order 2222, a ruling poised to enable “behind-the-meter” resources, like solar panels, electric vehicles, and battery technology, to play a larger role in powering our electric grids. Prior to the ruling, these behind-the-meter sources, also referred to as distributed energy resources, or DERs, didn’t individually satisfy the minimum size and performance criteria required to service wholesale electricity needs that traditional forms of power generation, like goal or gas-powered plants, could. Under Order 2222, FERC enabled hundreds of gigawatts’ worth of DERs to aggregate and form virtual power plants in order to meet requisite requirements to participate. Beyond carving out space for cleaner forms of energy to compete on the electric grid, the order will enhance grid reliability, spur innovation, and reduce consumer electric costs - a win for everyone. While a cleaner grid is on the horizon, progress may prove to be slow; a slew of challenges, from the legal to the technical, could stall the transition.
FERC has a history of successfully defending itself in court battles that upheld their authority over states to set the rules for how DERs can compete in wholesale energy markets. By asking grid operators to ensure DERs can sufficiently engage as market participants, Order 2222 had the effect of expanding FERC’s authority over the retail side of the electric grid. Moreover, the ruling allows small utilities, including short-staffed electric co-ops, to have the ability to choose whether or not they participate. Industry groups argue this is unfair to customers, and if the past is any indicator, legal challenges are likely to spring forth.
Beyond potential litigation, allowing DERs to access wholesale markets will require significant upgrades and investments in our electric grid systems. Some parts of the country, especially California, have transformative potential, while some don’t. Upgrades to the grid and technology to manage the new behind-the-meter resources responding to energy demand will take time, potentially limiting the level of transformation.
Ultimately, whether or not all this work creates economic opportunity for DERs remains to be seen. Lower economic activity and higher unemployment due to the coronavirus will decrease both consumer disposable income and business investment, which will likely have an impact on DERs in general. Regardless, FERC’s effort to beef up U.S. wholesale markets by substantively allowing clean, behind-the-meter resources to participate was seen as a groundbreaking measure. The transition to the electric grid of the future is within reach, but like any bold stride towards progress, new hurdles could slow the process.