When the Federal Energy Regulatory Commission (FERC) issued Order 2222 on September 17th, few people other than industry insiders paid much attention. Due to the complex nature of the subject matter, it is not surprising that most people missed this landmark decision which could change the way our electricity grids operate for decades to come.
FERC Order 2222 is designed to allow distributed energy resources (DERs) to play a new and meaningful role in how grid operators balance our power grids. DERs are generally considered small energy resources located either behind customer meters or along the distribution system itself. These resources can include rooftop solar panels, back-up generation, demand response capabilities, energy storage and even energy efficiency resources. Individually, most DERs are too small to meet the minimum size and performance requirements to be considered an energy resource by most grid operators. However, FERC Order 2222 allows multiple DERs to be aggregated together and treated as if they were one larger resource thus allowing them to participate in organized power markets.
Many believe this is the electricity grid of the future. Having more localized energy resources in high population density areas will help alleviate congestion on electricity grids. Markets like California, which are relying more and more on intermittent renewable generation, may benefit substantially by quickly being able to leverage existing distributed resources. Additionally, the potential revenue that can be obtained from participating in energy, ancillary and capacity markets should also help spur new investment in both existing DER technology as well the development of new technologies.
While the potential benefits of Order 2222 have created quite a bit of buzz within the electricity industry, it will take some time before these benefits can be fully realized. FERC has required grid operators to implement the order by proposing changes to their tariffs within 270 days of the order taking effect. FERC will then need to review and act on the proposals which almost certainly will require some additional work on the part of each grid operator.
While a significant amount of work needs to be done before Order 2222 can be fully implemented, it is yet another major change to an industry that, until recently, has largely operated the same way for over fifty years. While the emergence of cost-effective renewable energy may have been the first new technology development to begin transforming our electricity grids, Order 2222 will add even more momentum towards reshaping the future of how we produce electricity.