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PJM’s final DER aggregation proposal raises a couple of issues

PJM’s final DER aggregation proposal raises a couple of issues
PJM control room (Courtesy: PJM)

PJM’s FERC Order 2222 proposal is almost close to being done. Back in March, FERC had asked PJM to work on issues including a definition for an Electric Distribution Company (EDC) and take ownership of disputes concerning the tariff. FERC also asked PJM to explain its rationale for multi-nodal aggregation and specify whether non-net energy metering resources are allowed to provide wholesale market services.

After convening bi-monthly stakeholder meetings from May through July, PJM put together a thoughtful response but fell short of addressing two topics that are critical to aggregators. On the multi-nodal aggregation, even though PJM now says multi-nodal is technically feasible, it imposes a limit of 167 MW per aggregation. On the NEM front, PJM tied non-NEM resource participation to an EDC account number. None of these changes auger well for aggregators and DER providers. Hence, multiple protests have been filed at FERC. It remains to be seen when FERC will act on PJM’s September proposal because PJM now says it needs 2 years to stand up the registration process and make software changes to get ready for 2222 implementation.

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Background

PJM filed its initial compliance proposal to meet the requirements of FERC Order 2222 on February 1, 2022. FERC finally acted on that initial proposal on March 1, 2023, more than a year later. FERC has yet to act on both MISO and SPP proposals submitted in April 2022. When FERC accepted parts of PJM’s initial proposal, FERC was clear on aspects that needed modifications. PJM had asked for an extension to meet with FERC’s March 1 directive, and the due date was set for September 1.

In putting together this September 1 proposal, PJM had brought stakeholders together since April. At first, PJM had scheduled a limited set of stakeholder meetings, meeting only once per month. However, additional meetings were added to the PJM meeting calendar after receiving feedback. Overall, PJM ran a fair, transparent stakeholder process, allowing sufficient time for stakeholders with diverse business interests to discuss their proposals. The Electric Distribution Companies wrote position papers on each major topic PJM was required to comply with in this latest proposal.

FERC’s direction to PJM

After PJM filed its initial proposal in February 2022, based on data requests to PJM, PJM responses, and stakeholder comments, FERC asked PJM to revise its proposal on more than 20 topics. Before discussing the three major topics of multi-nodal aggregation, Net Energy Metering (NEM) resources co-location and the effective date, it is worth noting that the less controversial topics were related to the definition of Electric Distribution Company (FERC asked PJM to include a definition), dispute resolution (FERC asked PJM to resolve disputes concerning its tariff), operational coordination and EDC overrides (FERC asked PJM to spell out the protocols during an operating day and state that EDC can override the PJM dispatch).

Single Nodal Versus Multi-Nodal – Stakeholders express concerns with the 167 MW limit

The ability to aggregate multiple distributed energy resources at a single node is at the heart of FERC Order 2222. These “locational requirements” must be as geographically broad as technically feasible was the direction in Order 2222.

Even though FERC specified the minimum aggregation size at 100 kW, it is still a barrier for aggregators to bundle all less than 10 kW resources at a single node to meet that 100 kW requirement. Hence, aggregators need the flexibility to aggregate across multiple nodes. However, PJM said multi-nodal aggregation is infeasible in its initial proposal. FERC directed PJM to explain its rationale as to why it cannot do multi-nodal aggregation in its March order.

To respond to FERC’s direction, PJM devised a criterion to allow multi-nodal aggregation but on a limited basis. PJM calls individual DERs Component DERs to differentiate those from an aggregation. One of the restrictions for multi-nodal aggregation is that those Component DERs should not be greater than 0.1 MW. Another restriction is that the total capability of the aggregation across multiple nodes should not exceed 167 MW.

DER providers are unhappy with these restrictions because California ISO (CAISO) has shown that multi-nodal aggregation is possible in their Load Aggregation Point (LAP) model. New York ISO (NYISO) also allows multi-nodal aggregation by specifying transmission nodes where aggregations are possible without restriction. To be clear, PJM allows zonal aggregation in capacity and ancillary services markets. It is the energy market we are concerned about for DERs. A resource that wishes to participate only in capacity and ancillary services markets will not have this restriction.

The Advanced Energy Management Alliance (AEMA), in their protest at FERC on this multi-nodal aggregation pointed to flaws in PJM’s price separation analysis and stated that PJM is unnecessarily complicating the issue and making multi-nodal technically infeasible by restricting aggregations to 167 MW. What is surprising to me as a former MISO staffer is that PJM, with its experience in demand response programs and their participation in capacity markets, as well as the fact that most PJM states allow aggregators (called Curtailment Service Providers), is unwilling to find a technical solution to this multi-nodal aggregation problem. As a multi-state grid operator, PJM is missing out on leading its peers on this Order 2222 requirement.

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NEM resources co-located with non-NEM resources participating in PJM markets – Stakeholders state it is too restrictive

PJM deserves much credit for its intent to tackle the NEM topic in its proposal, compared to MISO and SPP proposals. In its Order 2222, FERC allows DERs that participate in one or more retail programs to participate in the wholesale markets. FERC allows DERs to provide multiple services in wholesale markets like PJM. And FERC directed operators like PJM to narrowly design retail DERs participation in wholesale markets to avoid double counting. NEM programs were the most complex topic to avoid double counting. MISO and SPP proposals gloss over the complexity of NEM programs and punt their requirements to state regulatory authorities even though the compliance burden is on the grid operators.

To peel the NEM topic one layer at a time, the reader must understand that FERC agreed with some PJM state commissions that their NEM rate includes compensation for wholesale market services such as ancillary services. However, FERC found PJM’s proposal was unclear on non-NEM resources that are “co-located” at the same premise as a NEM resource and whether PJM’s proposal allows those non-NEM resources to provide wholesale services.

PJM made its proposal even more restrictive to address FERC’s March requirement, said AEMA, Advanced Energy United (AEU), Solar Energy Industries Association (SEIA), and Tesla. Under PJM’s September proposal, all non-NEM resources co-located with NEM resources are excluded from participating in PJM markets unless those resources are tied to an EDC account number and have a separate meter. For PJM, the unique EDC account number is tied to the single point of interconnection with the distribution system. Multiple stakeholders commented on the technical feasibility of “device-level” metering and how a non-NEM resource, like a Tesla Powerwall residential battery, could participate in providing synchronized reserves, which is an ancillary service, without the need for a separate meter or an EDC account number.

The effective date is now up in the air

Unlike MISO, which set 2030 for the implementation date FERC has not approved yet, PJM initially set 2026 for implementing FERC Order 2222 requirements. But that date is now in jeopardy, given PJM’s capacity market turbulence. While stakeholders have come to expect some delays from grid operators on implementing FERC orders, if PJM pushes implementing Order 2222 requirements beyond 2026, I am sure DER providers will vehemently protest at FERC, and FERC might agree with aggregators since Order 2222 was issued in September 2020.

Pushing an implementation date beyond six years after the order was issued would only work in favor of the utilities. As MISO’s Electric Storage Resource implementation has shown, the MISO market benefited from implementing FERC Order 841 sooner than MISO’s request to delay until the new market platform was ready in 2026. Hence FERC must act before the end of the year on PJM’s September proposal.