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How Market Barriers Prevent Advanced Energy Participation in Wholesale Markets

Posted by Monique Hanis on May 23, 2019



New report provides 21 case studies of market rules that thwart new 
technologies — some that have been corrected, many that still stand in the way 
of technology-neutral competition on price and performance

WASHINGTON, D.C., May 23, 2019 — Wholesale electricity markets should be technology-neutral, allowing all resources to compete on price and performance. Many market rules are outdated, however, having been designed with older technologies in mind. Such rules can prevent new technologies from selling their services on the open market, which stifles innovation and keeps our electricity system from being modernized for higher performance.

In a new paper, Wholesale Market Barriers to Advanced Energy – And How to Remove Them, national business group Advanced Energy Economy (AEE) has collected 21 case studies of barriers to advanced energy in these markets. The first set of case studies showcases successes in removing or preventing barriers to market entry and participation by advanced energy technologies. These case studies show how proactive policies from the Federal Energy Regulatory Commission (FERC) and focused efforts by grid operators – Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) – and stakeholders can eliminate barriers to market entry and unlock energy technology innovation in the provision of services on the grid. The second set of case studies draws attention to some of the barriers for advanced energy technologies and services that remain, impeding competition and imposing unnecessary costs on electricity customers.

“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,” said Jeff Dennis, Managing Director and General Counsel at Advanced Energy Economy. “Updating market rules to allow these technologies to fully participate 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.”

As one example of success, the paper points to FERC finalizing Order No. 841 in February 2018 to require that wholesale electricity markets enable energy storage to compete to provide all energy, capacity, and ancillary services it can technically provide. For barriers still remaining, the paper notes that some rules require that advanced energy resources, specifically distributed energy resources (DER), provide real-time information to market operators, based on rules for large generators, which could cause reliability concerns if they were to go offline suddenly. Applying this requirement would be prohibitively expensive and unnecessary for smaller-scale DERs when aggregated for market participation. The paper also includes examples of barriers, both corrected and still remaining, in specific RTOs and ISOs.

Intended to provide actionable information to policymakers and businesses on how better designed markets can facilitate entry of innovative energy resources into the market, the case studies were developed through AEE’s direct engagement in wholesale markets and by surveying AEE’s member companies.

“Taken together, these case studies demonstrate that change is possible – and action is necessary to fully capture the economic and reliability benefits of advanced energy technologies,” said Dennis.

About Advanced Energy Economy
Advanced Energy Economy (AEE) is a national association of businesses that are making the energy we use secure, clean, and affordable. Advanced energy encompasses a broad range of products and services that constitute the best available technologies for meeting energy needs today and tomorrow. AEE’s mission is to transform public policy to enable rapid growth of advanced energy businesses. Engaged at the federal level and in more than a dozen states around the country, AEE represents more than 100 companies in the $238 billion U.S. advanced energy industry, which employs 3.5 million U.S. workers. Learn more at www.aee.net and follow the latest industry news @AEEnet.

Topics: Press Releases