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The Long Road to FERC Orders 841/2222 Implementation and the Not-So-Curious case of MISO

Nicholas Schmidt

Introduction

If you are reading this post, there’s a good chance you know what FERC Orders 841 and 2222 are. If so, go ahead and skip down to the next section.

If not, have no fear - from 30,000 feet, FERC Order 841 was a 2018 milestone order that sought to expand market participation for energy storage resources (i.e., batteries). Then FERC Chairman, Neil Chatterjee, called the order, “the single most important act [FERC] could take to ensure a smooth transition to a new clean energy future.” In September 2020, FERC broadened the scope of Order 841 with Order 2222, which served to open the country’s wholesale energy markets to all distributed energy resources (DERs) - e.g., rooftop solar, on-site batteries, cogeneration assets, etc. Chairman Chatterjee called Order 2222 a “landmark, foundational rule” that will help “increase competition and efficiencies in our markets...enhance grid flexibility and reliability attributes…[and] stimulate the kind of innovation that’s needed to keep pace with our ever-evolving energy demands.”

Both orders essentially serve to allow for fair compensation of DERs in our power markets, thereby increasing the financial viability of clean-energy projects, and easing the transition towards a cleaner, more reliable energy grid. Yay!

Here’s the rub - for better or worse, our energy markets are complicated, and changing all of the market rules to accommodate appropriate participation by DERs is no simple task. Regional grid operators, known as regional transmission organizations (RTOs) or independent system operators (ISOs), were initially given 270 days to submit compliance filings for how they intend to implement Order 2222 (the actual deadline being set for July 19, 2021). Several RTOs/ISOs, however, have already formally requested (and received) extensions to the filing deadline - with new compliance filings due in early 2022.

It is generally understood that the full and final implementation of Orders 841 and  2222 will take some time. Maybe a long time. Consider, however, that in December 2020, New York’s regional grid operator, NYISO, felt it was already “mostly in compliance” with Order 2222. NYISO’s approach may not be perfect - they are actively sorting through ways to improve anti-competitive impacts of implementation - but it certainly indicates that some degree of compliance, or attempt at compliance, with Orders 841 and  2222 is reasonably possible in short order.

So what’s the hold-up?

Perhaps this rule changing exercise is woefully complicated so as to require many years of studying and analysis. Or perhaps the expanded participation of DERs in markets directly threatens the old-guard utilities - and they are dragging their feet. Utility petitioners, as well as some state regulators, contested the validity of Order 841 in federal court for over two years.

Kicking the Proverbial Can...

That brings us to the great state of Michigan - the “Wolverine State”, the birthplace of Madonna (who knew?), and home to the best corn producer in the country, Schmidt Farms (our CTO’s family may or may not own Schmidt Farms).

In our view, Michigan’s local and regional energy regulatory bodies are showing a troubling pattern of delaying and stymieing federal efforts to boost DERs.

Order 841

After already securing a substantial extension for Order 841 compliance, in March 2021, Michigan’s regional grid operator, Midcontinent Independent System Operator or “MISO”, requested a further extension for compliance through March 2025(!) - nearly a full three years later than their current extension to June 2022. 

The main justification? To allow them to accelerate the completion of their new software system by one year.

As energy storage advocates pointed out, MISO completely ignored the damage that this extension would cause to energy storage projects and their stakeholders who have reasonably planned around 2022 implementation. Moreover, discussions surrounding FERC Order 841 began in 2016 - MISO has known this was coming for a VERY long time.


Mercifully, on May 17, 2021, FERC formally denied this extension request.

Dual Participation Programs

In April, the Michigan Public Service Commission (MPSC) solicited comments on their implementation of FERC Order 841 - specifically as to whether energy storage projects could/should participate in retail and wholesale markets simultaneously (a question that FERC left to the RTOs/ISOs). Put simply, participation in both markets increases the financial viability of energy storage projects. 

On May 6, 2021, MPSC staff recommended preventing energy storage projects that participate in either the retail or wholesale market from participating in the other market for at least five years(!). Such a policy could be revisited “at a later date as RTOs and states gain more experience with [energy storage project] dual participation and as rules and procedures governing that participation emerge.” Furthermore, they declined to recommend any sort of pilot or interim program addressing dual market participation. The MPSC staff cited “technical complexity” as the key barrier for allowing dual participation.

Guess who also argued against dual participation? Utilities (in this case DTE Energy and Consumers Energy Company) - generally citing complexity and confusion surrounding the implementation of such programs.

In NYISO territory and other RTO/ISO jurisdictions leading the charge, programs (including dual participation) and compliance procedures that supposedly are simply too complicated or confusing to exist for years to come, exist today. Again, they are not perfect - but those market leaders understand that refusing to tackle this issue now merely puts a higher reliance on legacy utility-scale generation (i.e., coal and natural gas). These regulators appreciate that an imperfect interim solution, paired with a concerted, iterative effort towards policy improvement, is better than indeterminately delaying progress for the sake of administrative convenience - and what ultimately amounts to fear.

Michiganders deserve a resilient grid and access to clean energy. They deserve better. Schmidt Farms deserves better.