In the summer of 2020, a team of ten experts convened by Advanced Energy Economy and GridLab, with backgrounds working at ISOs/RTOs, technology companies, policy organizations, federal and state regulatory agencies, and independent consultancies met virtually at e-Lab Accelerator to think critically about how to remove barriers to the participation of distributed energy resources (DER) in wholesale markets.

The team developed a consolidated set of principles around eligibility for market participation, communications and metering requirements, performance measurement, and coordination. Midway through the team’s work, when FERC Order 2222 was released, the team focused its discussions on how these principles could support the forthcoming compliance process, and identified a set of recommendations to RTOs/ISOs. This report can serve as a useful contribution to solutions in the near and long term on DER participation in wholesale markets.

Implementation of FERC’s Order 2222 requires transmission and distribution system coordination, which will require active engagement from state utility regulators. With that in mind, Advanced Energy Economy and GridLab convened distribution utilities and AEE members for eight months in 2021 to build consensus around key distribution system issues to facilitate DER participation in wholesale markets. The focus areas of the discussion included interconnection and aggregation review; communications, controls, and coordination; dual participation; and investment recovery and cost causation.

This report, released in January 2022, discusses strategies to help educate state regulatory commissions and utilities, inform FERC and RTO/ISO processes, and support state policies that increase DER value. The recommendations in the report range from emphasizing the importance of leveraging existing tools and processes to support DER integration (versus, for example, assuming new distribution controls and monitoring infrastructure will be needed at the early phases of implementation); the importance of aligning new requirements and investments to support Order 2222 implementation with existing services, and scaling as participation increases; and the importance of dedicated forums to examine distribution system issues.

DERs can provide a range of benefits for electricity systems and customers. However, realizing these benefits will require enhancements to distribution system operations as well as closer coordination between distribution and transmission systems. Without coordination, electricity systems risk being exposed to inefficient capital spending and operational challenges, leading to unnecessarily high costs and potentially lower reliability.

This report, released in January 2022, is the first in a series of three reports by ESIG on DER integration into electric power systems. It examines the changes in regulation, market rules, planning, and operating practices needed to improve DER participation in U.S. wholesale markets and operations. The report focuses on nearer-term implementation of FERC’s Order 2222, its implications for electricity distribution systems, and the broader gaps related to DER integration in wholesale markets and distribution systems. GridLab chaired the task force of this important effort and provided funding support.