FERC Order 2222: Implementation Plans Create Risks, Challenges, and Growth Opportunities for Market Players

This Guidehouse Insights report analyzes outstanding issues that could impact how Order 2222 is implemented-and ultimately, whether the order effectively integrates DER into wholesale power markets-forecasting the impact on various market sectors. The report also presents some unique business models and potential growth opportunities for some stakeholders suggested by the proposed implementation of Order 2222.

Table of Contents

1. Spark

2. Context

3. Recommendations

4. Fully Implemented, Order 2222 Could Open New Markets to DER and Create New Growth Opportunities for Stakeholders

5. Implementation Challenges Could Undermine Order 2222's Ability to Integrate DER into Wholesale Markets

5.1 Order 2222's Effectiveness May Hinge on Whether FERC Rescinds Order 719's Opt-out Provision

5.1.1 Order 2222-a Clarified Order 719's Opt-out Provision

5.1.2 Order 2222-b Rescinded Order 2222-a

5.2 The Vote on the Opt-out Provision Could be Close

5.3 Rescinding Opt-out Authority Encourages Harmonization of Markets

5.3.1 West Virginia and Vermont Demonstrate Success with Market Harmonization

5.3.2 West Virginia and Vermont Demonstrate the Value of Market Harmonization

6. Over-the-Horizon Outlook: How Order 2222 Implementation Impacts Key Stakeholders

6.1 Aggregators of DR Resources

6.1.1 Benefits of Order 2222 May Rest on the Fate of Opt-out Authority

6.2 Aggregators of Distributed Generation Resources

6.2.1 Utility Net Metering Programs May Inadvertently Limit Participation in Wholesale Energy Markets

6.3 DER OEMs and Software Vendors

6.3.1 Complexity of Implementation Means a Windfall, Particularly if FERC Rescinds Opt-out Authority

6.4 DUs

6.4.1 Greater Grid Balancing Resources and Market Harmonization Outweigh Added Burdens

6.5 Transmission-Level Stakeholders

6.5.1 Order 2222 Means More Load-Balancing Options and Faster Adoption of Innovations

6.6 Renewable Energy Project Developers

6.6.1 Order 2222 Implementation Suggests a Way to Bypass the Transmission Interconnection Queue

6.6.2 FERC's Efforts to Clear the Interconnection Backlog Is Likely to Take Years

6.6.3 Unique Business Model Aggregates Assets No Longer Eligible for Utility Net Metering Programs

6.7 Municipal Governments and Other Owners of Large EV Fleets

6.7.1 Order 2222 Paves the Way for Interconnected EVs-Like School Buses and Other Municipal Fleets-to Generate Revenue While Enhancing Grid Flexibility