FERC Rejects DOE Proposal, Highlights Importance of Demand-Side Grid Services

Earlier this week, the Federal Energy Regulatory Commission (FERC) officially rejected a Department of Energy (DOE) Notice of Proposed Rulemaking (NOPR) aimed at providing financial support to baseload coal and nuclear power generators on the grounds of ensuring grid resilience.

In April, US Energy Secretary Rick Perry issued a memo that asserted that the decline of coal and nuclear generation was threatening grid reliability and called on the DOE to conduct a study to determine whether the market was "adequately compensating" these power sources. The DOE study, which was released in August, found that the emergence of cheap natural gas was the main driver of coal and nuclear plant retirements in the US. Perry moved ahead with the NOPR in September, which aimed to implement a tariff mechanism that would provide financial support to power generators that are capable of stockpiling a 90-day supply of fuel on-site—a designation which effectively excludes all generation sources other than nuclear and coal.

In its ruling terminating the NOPR, FERC rejected the notion that baseload generator retirements have threatened grid resilience, citing comments submitted by regional transmission organizations (RTOs) and independent system operators (ISOs). Regardless, FERC was clear that resilience will be an ongoing priority, directing "each RTO and ISO to submit information to the Commission on certain resilience issues and concerns.” Depending on the information received, FERC will decide whether further action is necessary.

Contrary to the generation-centric approach in the original NOPR, concurring statements from FERC Commissioners Richard Glick and Cheryl LaFleur recognized the role that demand response and distributed energy resources will play in the future of the electric grid. More specifically, Commissioner Glick credited demand response as one of the key factors that have "contributed to the resilience of the bulk power system."

Commissioner Cheryl LaFleur urged FERC to "continue to focus its efforts not on slowing the transition from the past but on easing the transition to the future."

"We must continue to guide grid operators in sustaining reliability and resilience within a system that is likely to be cleaner, more dynamic, in some instances more distributed, and deployed by an efficient market for the benefit of customers," she added.

The resilience benefits of a more distributed grid with greater demand-side flexibility have already made themselves clear. For nearly two decades, demand response has been essential to maintaining a reliable power grid even in the face of extreme challenges, preventing outages amid recovery efforts after Hurricane Irma made landfall in Florida, when supply issues cause a grid emergency in California, or when extreme heat puts pressure on the grid in Australia. Meanwhile, the continued evolution of intelligent energy storage, distributed energy resources, and real-time optimal control technologies have enabled large energy users to access financial incentives for providing services back to the grid.

In the past decade, the US power grid has undergone a massive transformation. As FERC, the DOE, and the rest of the industry manages the effects of this shift, these kinds of demand-side management strategies will become an increasingly valuable part of the equation.

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Authored By Greg Geller

Greg is Enel X's Director of Regulatory and Government Affairs.

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