Dive Brief:

• Removing barriers to wholesale market entry for advanced energy resources like storage could help to grow their U.S. revenues up to $65 billion, according to new research.
• Updating market rules to enable these resources to fully compete would result in "gigawatts of energy and billions of dollars in investment," Advanced Energy Economy (AEE) concluded.
• AEE's newly-released paper points out existing rules that prevent distributed energy resource (DER) participation in wholesale markets, and says the Federal Energy Regulatory Commission must promulgate rules allowing all DERs that can be aggregated to participate in RTO and ISO markets.

Dive Insight:

FERC has been working for years to bring distributed energy resources into wholesale markets and in 2018 directed grid operators to create tariffs for storage market participation that allow the resource to provide multiple electricity market services. Then last month, the regulator asked regional grid operators for more information on how they plan to implement that order.

While some advanced energy resources, like demand response, efficiency and renewables, have gained increasing market share, AEE said others, "including storage and other distributed energy resources, look to break into these markets."

"Even though some advanced energy resources have gained increasing market share in wholesale markets, numerous advanced energy technologies and services still encounter regulatory barriers that prevent them from competing fully in the electricity marketplace," AEE Managing Director Jeff Dennis said in a statement.

AEE told Utility Dive it "estimated the total wholesale market opportunity that advanced energy technologies could reasonably capture over time with market rules that allow their full competition in wholesale markets. This yielded a projected expanded market opportunity through 2040, which translates to $65 billion in present value."

According to the report, barriers include:

• not adequately accounting for the unique attributes of storage;
• grid interconnection obstacles for renewable energy technologies, particularly those paired with storage;
• limiting or prohibiting the participation of energy efficiency resources in PJM's capacity market; and
• requiring distributed energy resources to "provide real-time information to regulators similar to generators ... [which] can be prohibitively expensive and unnecessary."

If these resources were allowed to fully participate, Dennis said it "would result in gigawatts of energy and billions of dollars in investment, and would facilitate the retirement of older, less efficient, higher polluting resources that drive up electricity bills."

There have been successes. AEE's paper, "Wholesale Market Barriers to Advanced Energy – And How to Remove Them," points to eight examples where barriers to entry were removed — such as FERC rules allowing demand response to participate in wholesale markets. 

Last year, the United States demand response market reached $5.19 billion, up 18.9% over 2017 revenues.

On the flip side, AEE's paper concludes current RTO and ISO market rules "do not always accommodate the provision of services by aggregated DERs," and called for regional operators to pass "technology-neutral market rules that eliminate barriers to aggregated DERs providing both wholesale and retail services."