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States and Utilities should not have the opt-out.

Due to COVID-19, the D.C. Circuit of Appeals has delayed hearing from the Federal Energy Regulatory Commission (FERC) on one side and the National Association of Utility Regulatory Commissioners (NARUC) on the other side. This case is a critical precedent-setting case for energy storage. Advanced Energy Economy and Solar Energy Industries Association (SEIA) are on the FERC’s side. Edison Electric Institute (EEI) is on NARUC’s side concerned that FERC usurps utility authority over distribution connected storage.  This Advanced Energy Economy blog[1] gives an excellent background.

Here are three reasons why state and utilities should not “opt-out” of FERC Order 841:

First, microgrids can provide reliability benefits to the transmission system operator if the grid operator knows where they are. Unless the microgrid operator registers with the market, the grid operator will not know where they exist on the system, at what transmission node. This reliability benefit can be as simple as intentional islanding when needed for grid reliability. Market signals can address that “need.”

Second, for a resource dispatched from Minnesota to a need in Michigan, the transmission system network exists. That’s how it works in wholesale markets; both Minnesota and Michigan are in one market, i.e., Midcontinent Independent System Operator (MISO). Why not use the same transmission network for a distributed energy resource located in Minnesota that has paid for the wholesale metering infrastructure and telemetry for a need in Michigan? That is the competition! And with this competition, the retail customer benefits.

Third, if a State has a goal around renewables or a climate policy or resiliency – they depend on the electricity grid to meet that goal. Instead of looking at silos – distribution grid as one silo and transmission grid as another silo – States should view at Transmission and Distribution (T&D) as one grid, one network. This view will enable more choices to implement their goals.

Ultimately the customers realize the benefits of distributed generation. They have their motivations to generate electricity, such as to reduce their energy costs, to rely less on their incumbent utility, to harness renewables, among other reasons. If the States and Utilities continue to block these customers to get on high voltage, i.e., transmission grid, then one day, there won’t be much power flowing on that transmission network! Customers will revolt on why they are paying for transmission fees from their utilities and why their State commissions are increasing utility rates – when they are relying less on the transmission grid? Wouldn’t it be nice for States, Utilities, and FERC to get along and let distributed generation on the transmission grid instead?

If States and Utilities worked together with FERC, they could lay the foundation for “distribution system operators,” because that’s where the power will flow in future – on the distribution system. Someone will be needed to manage those distribution system flows. Working with FERC, and not “opting-out” of Order 841 – state and utilities leverage their current relationships with FERC-jurisdictional transmission system operators and market infrastructure, which they paid for! State and Utilities can then lay the foundation for a distribution system operator. Instead of starting from scratch and leading to higher costs – they (States and Utilities) can provide a solution that’s cost-effective for the customers.

If we all believe in the future that has customer choice, and renewables at both utility-scale and distributed scale, then allowing States and Utilities to “opt-out” of FERC Order 841 sets a bad precedent.