FERC Order 2222 and DER Aggregation

Issued by the Federal Energy Regulatory Commission (FERC) in 2020, Order No. 2222 is a landmark rule aimed at removing barriers and enabling Distributed Energy Resources (DERs) to participate in the wholesale electricity markets operated by Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs).

DERs encompass a range of resources located on the distribution system or behind the customer meter, including:

  • Demand Response (DR)
  • Energy Storage (Batteries)
  • Distributed Generation (e.g., rooftop solar, small generators)
  • Electric Vehicles (EVs) and charging equipment (as flexible load or storage)
  • Energy Efficiency

What Does Order 2222 Require?

The core requirement of Order 2222 is that RTOs/ISOs must revise their tariffs to allow DERs to provide all wholesale services they are technically capable of providing, both individually and, crucially, through aggregation.

Key aspects include:

  • Market Access for Aggregations: RTOs/ISOs must establish rules allowing aggregators to combine multiple smaller DERs (potentially of different types) into a single bidding entity that can participate in energy, capacity, and ancillary service markets.
  • Lowering Minimum Size Requirements: The order generally pushes for lower minimum size requirements (e.g., 100 kW or lower) for DER aggregations to participate in markets, making it easier for smaller resources to contribute.
  • Addressing Technical Hurdles: RTOs/ISOs must address issues related to location, telemetry, metering, and coordination between the wholesale market and the local distribution utility to facilitate DER participation.
  • Non-Discriminatory Treatment: Market rules should not unduly discriminate against DERs compared to traditional large-scale resources.

Implications for C&I Demand Response

Order 2222 is expected to significantly enhance opportunities for C&I DR participation:
  • Easier Aggregation: Makes it simpler for aggregators to combine smaller C&I loads, potentially below previous thresholds, increasing the pool of eligible participants.
  • Mixed Resource Aggregation: Allows aggregators to create portfolios combining C&I DR with other DERs at the site (like batteries or solar) or with resources from other customers, potentially optimizing participation across multiple market services (value stacking).
  • "One-Stop Shop" Offerings: C&I customers may see more integrated offers from aggregators managing their entire DER portfolio (load, storage, generation) for maximum market revenue.
  • Increased Competition & Innovation: By lowering barriers, the order encourages more companies (including tech firms) to enter the DR/DER aggregation space, potentially leading to better services and technology.
  • Standardization Pressure: Pushes RTOs/ISOs towards more consistent rules for DER participation, although regional differences will remain.

Implementation Status & Challenges

  • RTOs/ISOs (PJM, MISO, ISO-NE, NYISO, CAISO, SPP) have submitted compliance plans to FERC, outlining how they will implement the order. Implementation is ongoing and timelines vary.
  • NYISO was an early mover with its DER participation model allowing co-mingled resource aggregation.
  • PJM and ISO-NE are actively developing their compliance frameworks.
  • Coordination between the RTO/ISO and the local distribution utility remains a key challenge, especially regarding visibility and control of resources on the distribution grid.
  • State Opt-Outs (Order 719 Legacy): Order 2222 preserved the ability (from FERC Order 719) for relevant state/local regulatory authorities to prohibit *retail* customers' DR from being bid into wholesale markets by aggregators if the state runs its own DR programs. Some states, particularly in MISO and SPP, have exercised this, limiting independent aggregator activity for certain customer classes. This remains a point of contention.

While ERCOT is not FERC-jurisdictional and thus not directly subject to Order 2222, Texas regulators and ERCOT are exploring similar concepts for integrating smaller, distributed resources, partly driven by reliability concerns.

Overall, FERC Order 2222 represents a major policy shift favoring the integration of DERs, including C&I Demand Response, into wholesale markets, paving the way for increased participation and value stacking opportunities in the coming years.