This report summarizes the issues surrounding introducing distributed energy resources (DER) to the wholesale market and recent actions by the Federal Energy Regulatory Commission (FERC) to enable DER to enter the market. The adoption of DERs has been skyrocketing across the U.S. According to a June 2020 report by Wood Mackenzie, the combined capacity of DER will reach 387 GW by 2025, compared to 216 GW in 2015. This growth has largely been driven by consumer demand for technologies such as solar, energy storage, demand response, and electric vehicles. Enabling DERs to participate in the wholesale market can result in increased grid reliability and resilience, more innovation and competition, lower consumer bills, and new revenue opportunities for DERs. However, there are many barriers preventing these technologies from participating in wholesale markets. While there have been regulations in the past to lower the barriers to these technologies by opening markets in general, more action is needed to help energy storage and DERs clear the market.
In an effort to address these concerns, FERC put out a notice of proposed rulemaking (NOPR) that would have addressed the issue with energy storage and DERs. FERC released Order 841 in 2018, which limited the scope to energy storage as it was further along than DERs at the time. With the lessons learned from Order 841, FERC released Order 2222 on September 17, 2020, which paves the way for aggregated DERs to compete alongside traditional power plants and other grid resources in wholesale markets.