Challenge to FERC and the Senate: Opening Wholesale Markets to Competition from All Advanced Energy Technologies

Posted by Dylan Reed and Prusha Hasan on Sep 26, 2019 12:02:56 PM


In the advanced energy industry, all eyes are on the incredible shrinking FERC. With now two open seats, the Commission can barely muster a quorum – and not always, as a Trump Administration ethics pledge is keeping Commissioner Richard Glick from participating in important cases. Media outlets have reported that the White House plans to offer a single nomination to fill McIntyre’s seat, a potentially troubling departure from the tradition of pairing Republican and Democratic nominees. In flux as it is, FERC faces a range of pending decisions that could have huge impacts on the nation’s electricity market – and on advanced energy growth. Ultimately, what the advanced energy industry is looking for from FERC Commissioners – those now seated, and new ones to come – is for barriers to competition in wholesale markets to come down.

While FERC’s role is to maintain just and reasonable rates in wholesale markets, AEE has consistently argued that many regulations still give preference to older power sources that limit competition, disadvantage innovative resources, and harm consumers by keeping energy costs higher.  FERC can play a critical role in removing market barriers, as the tools to modernize our electric grid are widely available but regulations have struggled to keep pace. 

To help identify and explain what we mean by market barriers, AEE’s report Wholesale Market Barriers to Advanced Energy - And How to Remove Them provided 21 case studies of barriers to advanced energy. Updating market rules to allow these technologies to fully participate would result in gigawatts of energy and billions of dollars in investment, and would facilitate the retirement of older, less efficient, higher polluting resources that drive up electric bills.  Removing these barriers would be key steps toward growing advanced energy revenue by as much as $65 billion, according to AEE estimates. 

The paper shows how this can be done, pointing to proactive work by FERC and Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs). In 2018, FERC Order 841 allowed energy storage to participate in their markets and compete to provide energy and ancillary services. Studies estimate that this order will lead to 50 GW of energy storage market penetration, increased reliability, and cost savings for consumers. 

RTOs/ISOs have also undertaken policies to remove barriers. Recognizing that new technologies are available that respond more quickly to short-term needs on the grid, PJM created a specific market, known as Regulation D. This new market allowed energy storage and demand response to provide frequency regulation to the grid. This demonstrates that advanced energy technologies can provide valuable wholesale services if given the chance to participate. 

For barriers still remaining, the paper points to other examples, such as DERs not having regulatory certainty for their participation in wholesale markets. While FERC removed such barriers for energy storage in 2018, the Commission elected to obtain more information before finalizing a rule on DERs, holding a technical conference in May 2018. Two and a half years later, FERC has yet to finalize a rule that would open the door for DER in these markets, and recently sought still further information from the RTOs/ISOs, signaling continued delay.

As consumer deployment of DERs continues to rise,  FERC action is necessary to ensure that RTOs/ISOs develop fair market rules allowing them to compete. This will empower businesses and consumers to make their own choices about energy and receive appropriate compensation for their contributions to the grid. Delayed action by FERC is also denying consumers and the broader grid significant of significant benefits, including reduced system costs, improved market competition leading to lower rates, and greater reliability and resilience.

Meanwhile, wholesale market rules in some RTOs/ISOs explicitly prohibit wind and solar from providing certain grid services. For example, MISO bars wind and solar resources with modern inverters from providing ancillary services to the grid. While other RTOs/ISOs do not explicitly prohibit renewable resources from offering services, they do create rules that effectively exclude them. 

Action is needed to widen access for advanced energy in competitive markets. Even hobbled as it is, the three-member FERC needs to get to work, starting with finalizing the long-awaited DER rule.

Just as important, when considering the FERC nominations to come, the Senate needs to keep in mind FERC’s critical role in keeping wholesale markets competitive, for the benefit – and protection – of consumers. Time and again, Congress has affirmed that technology-neutral competition in wholesale power markets is national policy. Competitive markets have proven their worth, producing innovative new products and technologies that improve upon traditional options and save consumers money. Nominees to FERC need to be judged, in part, on their commitment to competitive markets, to  removing barriers to advanced energy in those markets, and to allowing these technologies to compete, in the interest of providing clean, reliable, affordable energy. Otherwise, Americans will be stuck paying for inefficient, outdated technologies.

Download Wholesale Market Barriers

Topics: Federal Policy Update, Wholesale Markets