HomeEnvironment & Climate NewsFederal Energy Regulators Grant New Advantages to Distributed Power Generation
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Federal Energy Regulators Grant New Advantages to Distributed Power Generation

The Federal Energy Regulatory Commission (FERC) imposed a rule which will allow aggregated distributed energy resources to participate in the various region’s “organized” wholesale electricity markets under the control of Independent System Operators (ISO) and Regional Transmission Organizations (RTO).

ISOs and RTOs are organizations formed to coordinate, control, and monitor the operation of the electrical power system both within individual states and among regions of states.

New Advantage for Distributed Generators

Distributed electric power sources impose unique costs on the power system to manage the regularly fluctuating two way flow of electricity. The added costs related to distributed generation resources are typically passed on to electric power users as a whole within a distribution region. In addition, distributed electric power generators receive substantial government support in the form of federal tax credits, and, in many states, net metering mandates which require utilities to purchase excess power generated by a distributed generation source at retails rates, as opposed to wholesale rates traditional power generation sources are paid.

FERC’s September 17, Order No. 2222, bestows a new benefit upon distributed electric power sources by directing RTOs and ISOs to develop rules to allow distributed energy resources to be aggregated, and thus treated as centralized sources of reliable electric power. FERC’s rule broadly defines distributed sources to be aggregated to include, resources like rooftop solar generation, demand response, energy storage—including the potential addition of power stored and delivered from electric car batteries—, and energy conservation. After the rules are finalized, companies with aggregate distributed power can sell the power on wholesale electricity markets, competing directly with traditional centralized power generating stations.

Rule Specifics

Under FERC’s order, ISOs and RTOs must permit any distributed resource or aggregator, with a capacity of 100 kilowatts (kW) or more to participate in the market by ensuring electricity generated by them can be dispatched, identified by source and location, metered, and safely integrated into the transmission system operated by the RTO or ISO. Under the rule, for example, the owner of a single rooftop solar array exceeding the 100 kW minimum size threshold, sell its output on the wholesale market. Alternatively, as technology and software develops, companies could aggregate distributed electric power sources, and once reaching or exceeding the 100 kW threshold, sell the aggregated power on the wholesale markets.

Rule 2222 does not impose a new federal interconnection rule for aggregated power resources but rather requires distributed energy resources to comply with state and local rules governing interconnection for local electrical grids, including directing aggregators to file applications with their relevant ISO or RTO and state regulatory agencies, and show that their power resources meet standards for the safe and reliable operation of the local distribution system they are requesting to connect to.

FERC’s new rule does not apply outside of organized markets under the purview of ISOs or RTOs, for instance, in areas in the Northwestern and Southeastern United States, and parts of West Texas, which have no organization responsible for organizing and maintaining power sales or distribution across the region.

Unless a challenge is filed and taken up, FERC’s rule 2222 will come into effect 60 days after it is published in the Federal Register. The order gives ISOs and RTOs 270 days after publication in the Federal Register to develop rules complying with the order and to submit proposed tariffs which distributed generation aggregators in their respective regions would have to pay for incorporation into the regional electric system.

Vote Not Unanimous

FERC’s new order came only after heated debate, and its approval came on a vote of two commissioners in favor of the rule and one opposed.

Republican Chairman Neil Chatterjee and Democrat Richard Glick voted to approve the measure, and. Republican Commissioner James Danly voted against it.

“Order 2222 is a landmark, foundational rule that paves the way for the grid of tomorrow,” Chatterjee said during the meeting of the three member committee at which the rule was approved. “I am honored to be at the helm of the agency as we bring this critical rule across the finish line and continue to navigate our nation’s energy transition.”

The commission exceeded its jurisdiction, said Danly, continuing, if the benefits of distributed generation are so great, the market would have incorporated them into the system without a government mandate.

“Regardless of the benefits promised by DERs [distributed energy resources], the Commission goes too far in declaring the extent of its own jurisdiction and because the Commission should not encourage resource development by fiat,” Danly said. “If the promises of DERs are what they purport to be, the markets will encourage their development, commission directives are unnecessary to encourage the development of economically-viable resources.”

H. Sterling Burnett, Ph.D. (hsburnett@heartland.org) is the managing editor of Environment & Climate News.


H. Sterling Burnett
H. Sterling Burnett
H. Sterling Burnett, Ph.D. is the director of The Heartland Institute's Robinson Center on Climate and Environmental Policy and the managing editor of Environment & Climate News.


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