Federal Energy Regulatory Commission (FERC) left it up to states to “opt-out” of retail demand response participation in wholesale energy markets. Therefore, we see a state like Illinois in Midcontinent Independent System Operator (MISO) allows third-party aggregators to participate in MISO markets, and a state like Minnesota does not allow aggregators.
With the increasing penetration of Distributed Energy Resources (DER) and the risk of unregistered DER, it is time for regulated MISO states to take another look at allowing third-party aggregators to provide more programs for the consumers. Utility and third-party actors can leverage MISO’s experience carving out specific resource types for demand response programs. Arkansas might be the next Illinois in allowing aggregators to participate in MISO markets.
The MISO States Opt-Out
FERC Order 745 went all the way to the Supreme Court Of The United States (SCOTUS). It affirmed federal authority to regulate wholesale demand response programs. Order 745 affirmed that Demand Response (DR) wholesale market payments should be based upon the full wholesale market price. A related order 719 (719-A) left it up to states to “opt-out” of wholesale market participation for their demand response programs.
Depending on the location, aggregators go by various names. For example, aggregators are called Aggregators of Retail Customers (ARCs) in MISO, while PJM refers to them as Curtailment Service Providers (CSPs), and NYISO refers to them as Responsible Interface Parties (RIPs). The state regulatory authorities also add more acronyms. In Michigan, the retail electric rate authority is the Michigan Public Service Commission (MPSC) that also must approve ARC customer registrations for MISO participation but is referred by the FERC terminology of Relevant Electric Retail Rate Authority (RERRA).
Increasing “Registered” DER
Registered DER refers to DER modeled in the ISO market model. Without a wholesale market incentive, if DER do not register with the market operator, i.e., unregistered DERs, then, there is less chance of all customers reaping the reliability benefit, which could then lead to “off-grid” customers. Off-grid customers are, for the most part, not dependent on their utility for their electricity needs.
The control room operator cannot dispatch unregistered resources in a market—more registered resources in the wholesale market, the better energy price for customers.
MISO Aggregators of Retail Customers (ARCs)
Recently MISO has seen an increase in ARCs’ participation in its markets. In addition to Illinois, Michigan allows for ten percent of the retail load customers to choose their electricity provider (an Alternative Energy Suppliers, or AES). Following an August 2019 order from the Michigan Public Service Commissions, ARCs may register DR directly in MISO markets from customers that are served by AES’.
Voltus is an aggregator whose name frequently pops up in the MISO ARC context, and has been registering DR with MISO in states that have not opted out. Former FERC Chairman Jon Wellinghoff, under whose chairmanship FERC Order 719 was released, is an adviser to Voltus, according to its website. Until DER popularity, DR participation in wholesale energy and capacity markets is the reason for aggregator and ARCs discussion at MISO.
Other DR and DER aggregators have taken a different approach. The Advanced Energy Management Alliance (AEMA), an industry association comprised of several DR/DER aggregators and customers, has opted to work within the confines of the state-level opt-outs from allowing wholesale market participation by DR as allowed under FERC Order 719. AEMA has been working with state regulators and utilities on advancing opportunities to allow for third-party aggregators to participate within the tariff structure. The DR provided by aggregators (or direct participants) can then be registered with MISO in one or more of the available market programs, allowing benefits of both wholesale market participation, contributing to resource adequacy, capacity obligations of LSEs, and providing other market services for which the aggregated resources may qualify. The distribution system benefits are also realized under these tariff-based models, while not interrupting the vertically integrated utility model that is prevalent across many MISO states.
Type I or Type II
MISO has experience with Demand Response Resources (DRR), and with recent FERC Order 841 on Electric Storage Resource (ESR) participation, MISO modeled an interim market resource, Stored Energy Resource (SER) Type II after the DRR Type II. The type two designation stands for a resource able to participate in both regulating and spinning services of the ancillary services market. Compared to a type one designation, only able to participate in spinning services of the ancillary services market. Providing regulating service, the ability of the resource to respond to frequency deviations, is lucrative in wholesale markets. Both type one and two market resources can participate in energy and capacity markets.
An Electric Storage Resource (ESR) market resource is available for market participants only after the MISO market system enhancement in 2022. In the interim, storage asset owners register their storage as Stored Energy Resource (SER) Type II. This type two is relevant for aggregators because DR/DER aggregator is helping to monetize load flexibility/ability to be interrupted and on-site DER injection capabilities to provide market services either to the wholesale- or distribution-level, or potentially both if the market structures allow.
Arkansas as the next Illinois?
Arkansas has the largest retailer, Walmart, headquartered in Bentonville. Walmart is also a member of Southwest Power Pool (SPP). There is a proceeding in Arkansas right now that is looking into additional market opportunities for DERs and DR programs under the “Grid Modernization” heading. The Public Service Commission of Arkansas is looking ahead and preparing for price shocks due to an increase in natural gas prices, among others. Hence Arkansas is poised to be the next Illinois among MISO states allowing third-party aggregators.
Google as an Aggregator?
Big corporations like Google (MISO and SPP member) and Walmart can function as aggregators too. Several Minnesota based companies part of a coalition called Sustainable Growth Coalition of Environmental Initiative recently communicated their clean energy goals with MISO. It is tough for businesses to dedicate resources to attend monthly ISO stakeholder committee meetings and follow all the market rules and procedures. Corporations do not have a “sector” seat at the MISO stakeholder committee yet.
Utilities as Partners
With Public Safety Shutoffs in California, the top three CA Investor Owned Utilities (IOUs) are depending on many tools to provide reliability, including Community Choice Aggregators. They, in turn, are deploying microgrids, energy storage systems, distributed scale solar to keep the lights on for their customers. As the California experience indicates, utilities have nothing to fear by allowing third-party aggregators in MISO states.
The author appreciates the insights from AEMA on a draft of this blog.
