What is Order 2222?

Back in September 2020, the Federal Energy Regulatory Commission (FERC) established Order 2222 to open the wholesale markets to Distributed Energy Resources (DERs). 

FERC describes DERs as “small-scale power generation or storage technologies (typically from 1 kW to 10,000 kW) that can provide an alternative to or an enhancement of the traditional electric power system. These can be located on an electric utility’s distribution system, a subsystem of the utility’s distribution system or behind a customer meter. They may include electric storage, intermittent generation, distributed generation, demand response, energy efficiency, thermal storage or electric vehicles and their charging equipment.” (ferc.gov) 

Previously, DERs faced barriers of entry into wholesale electricity markets as traditional methods of electricity generation reigned supreme. The goal of Order 2222 is to level the playing field, and allow distributed energy resources like solar, wind, energy storage, and demand response equal access to the wholesale market. 

Allowing DERs access to wholesale electricity markets will increase competition and drive down prices for ratepayers. It will also increase energy resilience in the face of extreme weather, and help usher in the new age of the modern electric grid. 

FERC Makes a Move to Accelerate The Clean Energy Transition

There was a hurdle that FERC had to overcome to smooth out Order 2222 and accelerate the transition to a clean energy future. States had the power to block DERs from entering the wholesale electricity market if they were aggregated with demand response resources. 

Demand response is a crucial aspect of grid balancing. Ratepayers who utilize demand response technologies allow grid operators to increase or decrease their electricity use in response to certain market conditions. “It also includes direct load control programs which provide the ability for power companies to cycle air conditioners and water heaters on and off during periods of peak demand in exchange for a financial incentive and lower electric bills.” (energy.gov) 

Last month, FERC amended Order 2222 and established Order 2222-A. Under Order 2222-A states do not wield the opt-out power they previously had.  “We decline to extend this opt-out to demand response resources that participate in heterogeneous distributed energy resource aggregations.” (Utility Dive) 

By unleashing the full potential of demand response resources, grid operators will no longer have to rely as heavily on peaker plants and other environmentally harmful generation resources.