Voltus presses FERC to end state opt-outs from aggregated retail demand response in wholesale markets

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Live Brief:

  • The Federal Energy Regulatory Commission should end the ability of states to block aggregated demand response from participating in wholesale power markets, a move that could help the Midcontinent grid operator respond to projected capacity shortfalls in its footprint as soon as this summer, according to Voltus, a demand response aggregator.

  • Resolving the pending opt-out question at FERC could remove a barrier to allowing aggregated distributed energy resources to take part in the Midcontinent Independent System Operator’s markets, a change the grid operator is proposing to allow in 2030Voltus told FERC in a Friday filing.

  • “You cannot squeeze more demand response out of traditional demand response programs like interruptible load and commercial, industrial load programs, they’re already hitting their saturation,” Rao Konidena, president of Rakon Energy, a consulting firm, said Tuesday, explaining why retail aggregation could be beneficial. “What we can do is use the technology that is available today … that enables the residential market [to participate] in wholesale markets.”

Live Insight:

Currently, 13 states ban aggregators from bundling retail demand response customers so they can participate in wholesale markets, and a dozen of them are in MISO, which is facing capacity shortfalls, leading the grid operator and the North American Electricity Reliability Corp. to warn its northern and central regions face a heightened risk of rolling blackouts this summer.

“We have a solution. It’s in the form of distributed energy resources that lie fallow, that are in the ground today and simply need a regulatory path to market,” Gregg Dixon, Voltus CEO said in an interview last month.

“We could address this summer’s capacity shortfalls in MISO simply with the stroke of a pen by FERC eliminating the opt out that states enjoy with demand response, but do not enjoy with energy storage, distributed generation or energy efficiency,” Dixon said.

Ending the opt-out could bring thousands of megawatts of demand response into MISO and could cut capacity prices by about 80%, according to Dixon.

The opt-out issue isn’t new to Voltus. In 2020, the company, which is preparing to go public in the third quarter, filed a complaint at FERC over MISO tariff provisions allowing states to prevent retail demand response from taking part in the grid operator’s market.

About six months later, FERC issued a notice of inquiry seeking comments on whether it should end the opt-out option for demand response. At the same time, FERC paused an earlier decision barring opt-outs for DER aggregations that include demand response.

Voltus’ filing last week urged FERC to move forward with that notice by proposing to end the opt-out for demand response aggregations, citing MISO’s tight capacity situation and the grid operator’s proposal to not fully allow energy storage into its markets until 2030.

“Eliminating the aggregator ban could stand up a power plant overnight,” Voltus told FERC.

Voltus, for example, could aggregate hundreds of big box stores across MISO’s footprint that individually don’t have enough load to qualify for utility interruptible load programs, according to Dixon.

Also, there is about 6,500 MW of residential load in MISO controlled by smart thermostats that could be aggregated to meet MISO’s needs, Dixon said.

Although MISO states do “a very good job” on demand response, aggregation could help the grid operator, especially in combination with distributed resources, according to Rao.

“When you start to aggregate these residential demand response programs with solar on the roof or a battery in the garage, we start to see some savings from a grid services point of view,” Rao said. “You see the savings right away, reducing the capacity prices.”

States would benefit from allowing demand response aggregations, which would reduce the need for new transmission lines or generating capacity, according to Rao.

FERC’s annual demand response and advanced metering reports consistently indicate MISO has the highest demand response penetration among grid operators, according to Marcus Hawkins, executive director of the Organization of MISO States, or OMS, which represents state utility commissions.

“There’s untapped potential everywhere, but the states and MISO are already doing a really good job on demand response,” Hawkins said.

Last year, MISO had nearly 12,000 MW of demand response resources, including about 7,150 MW of “load modifying” demand response, according to a report released last month by Potomac Economics, the grid operator’s market monitor.

At least three MISO states — Arkansas, Michigan and Minnesota — are undertaking some review of their decision to keep their demand response out of the grid operator’s markets, according to Hawkins.

About a year ago, OMS filed comments urging FERC to maintain the demand response opt-out option for states, saying in part removing it would interfere with state jurisdiction over retail demand response programs. OMS is waiting for FERC to make a decision in its notice of inquiry, Hawkins said.

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