Seventeen months ago, the Federal Energy Regulatory Commission promised “a new day” for a wide array of consumer energy products: rooftop solar, controllable thermostats and water heaters, electric vehicles, and backup generators that could compete with power plants in the energy markets.
The landmark order creating a rule for distributed energy resources—small-scale power generation or storage technologies—was crucial for grid operators to manage increasingly large amounts of renewable energy while facing extreme weather events and cyberattack threats, supporters said.
But now, FERC is weighing proposals that could curtail the rule’s reach and possibly its full potential to ensure a smooth transition to zero-carbon grid.
Grid operators’ proposals to comply with the order are going “off the rails,” said Jon Wellinghoff, a former FERC chairman who is now chief regulatory officer at Voltus, a San Francisco-based company that aggregates distributed energy resources. In December, Voltus asked FERC to convene a conference and hash out major issues, including whether it’s ceding too much authority to state regulators.
“We’re seeing monopoly, anti-competitive forces from generators, transmission owners and distribution utilities that are trying to incorporate into compliance plans barriers” to distributed energy resources, Wellinghoff said.
The rule prompted a regulatory tug-of-war that bubbles up in broader debates over a carbon-free power grid, energy experts say. That’s because federal and state regulators bump elbows on matters of electric policy: FERC ensures a just and reasonable wholesale power market, while states oversee the retail market and local distribution utilities.
Later this month, FERC will sit down with state utility regulators in Washington to discuss ways to ease transmission line bottlenecks that threaten renewable energy development.
‘It Might Get Messy’
FERC’s wholesale market rule is fodder for states and utilities to appeal, challenge, or test the legal bounds of that relationship, said Caileen Gamache, a partner at Norton Rose Fulbright US LLP in Houston and Washington, D.C.
“One of the stickiest issues in this order is around the threading of the jurisdictional needle, and I think it might get messy in the compliance filings,” said Gamache, who represents solar, storage, and other distributed energy project developers.
“It might be a long road with some heartache between here and there,” she said.
It’s already been a journey.
The U.S. Supreme Court in 2016 upheld the right of demand response to participate as an energy product in wholesale markets. In a 6-2 decision, the court overruled concerns from power plant owners and found FERC could regulate the wholesale market even when it has indirect consequences on retail market conditions.
The ruling set the stage for FERC to open up the markets even more.
Hiding in Plain Sight
The role of customer-facing energy products on the broader power grid has long been a thorny regulatory and technical question. Traditional power generation and delivery is ubiquitous, seen in smokestacks, long-haul transmission towers and neighborhood power lines and transformers.
The rising popularity and falling costs of smart home appliances, the internet of things, rooftop solar, and demand response—when customers are paid to drop consumption—put a twist on the power system.
Distributed resources “can hide in plain sight in our homes, businesses, and communities across the nation,” said Neil Chatterjee, then the Republican FERC chairman, announcing the 2020 order. “But their power is mighty.”
Total U.S. capacity could reach as much as 387 …….