Commentators responding to FERC docket #ER22-962 recognize that PJM is restricting a significant number of DERs from participating wholesale markets by imposing a must offer requirement on net energy-metered distributed energy resources. However, FERC allows resources for both wholesale and retail programs.
PJM’s restrictions are too narrow compared to what NYISO and ISO-NE have for FERC Order 2222. While the focus is on net energy metered solar and storage, other DER technologies wouldn’t be able to participate in PJM markets without FERC’s intervention.
Comments are due by April 1, 20,22
What are “must-offer” requirements?
At most grid operators, there is an energy and a capability market. There are also operating reserves in ancillary markets. PJM has a real-time and day-ahead energy market, as well as a 3-year ahead capacity market. If a resource is available in the capacity market it is obliged (capacity obligations) to offer the capacity (must-offer). This requirement applies to all ISOs that have a capacity market. SPP, CAISO, ERCOT, and ERCOT have no capacity markets.
PJM’s DER Capacity Aggregation Resource has a must-offer requirement
PJM proposed a new resource, the DER Capacity Aggregation Resources, to comply with FERC Order 2222.
PJM says this in the FERC filing, “‘DER Capacity Aggregation Resource’ shall mean one or more DER Aggregation Resource that participates in the Reliability Pricing Model, capable of satisfying a minimum capacity market offer of 100 kW, or is otherwise treated as capacity in PJM’s markets, such as through a Fixed Resource Requirement Capacity Plan, for the 2026/2027 Delivery Year and all subsequent Delivery Years.”
And PJM confirms that these DER Capacity Aggregation Resources have the “must-offer” requirement in this sentence, “DER Capacity Aggregation Resources that have a capacity commitment in PJM will be subject to the following requirements: (1) Day-ahead Energy Market must-offer requirement,” which is the issue that most DER providers have.
Why is the DER must-offer requirement a problem?
If DERs offer into the capacity market auction and are selected, they must offer in the day-ahead energy market – that is the issue for DERs. This requirement is a problem for Net Energy Metering DERs and other non-NEM resource.
PJM effectively blocks aggregation of these NEM DER resources to participate in the capacity market for their “injecting” energy because of this must-offer requirement in the day-ahead energy market. Consider a rooftop solar owner selling excess power to the grid before FERC order 2222 under their state NEM policies. If these small rooftop solar plants meet the minimum size requirement, Order 2222 allows for aggregation.
The NEM DER will only be able to participate in PJM’s ancillary services market because if it clears in PJM’s capacity market, it must offer into the day-ahead energy market, leading to double compensation. That could be an issue for solar, which is only an injecting resource, but that’s not an issue for energy storage which can inject and curtail in discharging and charging modes of operation.
PJM’s reasoning for the must-offer requirement for NEM DERs
PJM states that NEM DERs can be compensated twice, without a must-offer condition. NEM DERs can sell excess wholesale energy to their grid and receive compensation. NEM DERs are allowed to offer the same amount of energy as capacity for double compensation in the RPM Auction. Hence PJM proposed, “Component DER that participate in a net energy metering retail program may only participate with grid injections in the PJM ancillary services markets, and may not participate in PJM energy or capacity markets.”
PJM requested that the electric distributor company confirm to PJM, and not the NYISO aggregatorself-attestation. This will ensure that there is no duplicative compensation and that the DER does not violate any state-set retail price provisions.
What does FERC Order 222 mean?
The Federal Energy Regulatory Commission (FERC), anticipated this double-counting issue with Order 2222 at paragraphs 159-164. In paragraph 161, FERC states that “it is appropriate for RTOs/ISOs to place restrictions on the RTO/ISO market participation of distributed energy resources through aggregations after determining whether a distributed energy resource that is proposing to participate in a distributed energy resource aggregation is (1) registered to provide the same services either individually or as part of another RTO/ISO market participant; or (2) included in a retail program to reduce a utility’s or other load-serving entity’s obligations to purchase services from the RTO/ISO market.”
FERC suggested that PJM could impose limitations on DER aggregations in order to ensure that DERs do not receive twice the compensation for providing the same service. But PJM’s restrictions are too narrow for all NEM DERs, including storage, compared to NYISO and ISO-NE.
Why does FERC allow wholesale tariff DERs to provide retail services?
FERC devotes six paragraphs to double-counting issues in Order 2222. This is because FERC received extensive comments from the Notice of Proposed Rulemaking prior to the order being issued. Double counting isn’t a problem that only NEM solar has to face. It can also be a problem with energy storage.
Several commentators pointed out in the NOPR proceeding (docket #2RM16-223) that DERs can offer wholesale and retail services. For example, Advanced Microgrid Solutions noted, “larger battery installations are capable of providing capacity, energy, and ancillary services to the wholesale market in flexible and varying configurations – A battery can simultaneously deliver voltage optimization and energy, or be used for host customer peak shaving while delivering capacity to the grid.”.
The American Petroleum Institute commented, “a storage facility used to manage distribution system congestion during the local network peak, may also be allowed to buy and sell energy in the wholesale market. In cases where this is allowed, participation parameters need to be well-defined and tracked to ensure that retail and wholesale activities remain distinct.”
How do other ISOs navigate this NEM issue
NYISO requests aggregators to attest that DERs in their aggregation do not provide the same service in retail tariff prior to registering in wholesale markets. Additionally, NYISO is also working on a matrix to guide DER providers on this double-counting issue as indicated in their November 19, 2021 response to FERC: “The service matrix developed by the NYISO and Distribution Utilities will assist Aggregators in identifying incompatible services and programs.”
In the ISO-NE Forward Capacity Market (FCM), net injecting energy such as rooftop solar participates as a “Generating Resource Capacity” model if the resource is front-of-the-meter and as a “Demand Capacity Resource” model if the resource is behind-the-meter. NEM DER does not exist at ISO-NE and NYISO.
Distributed energy resources should not be prevented from participating in wholesale energy, capacity and ancillary service markets by Net Energy Metering provisions on their retail side.