Will FERC’s Resiliency Order Create Opportunities for DER?
February 14, 2018
On January 8, 2018, FERC issued an order establishing a new proceeding (Docket No. AD18-7-000) to specifically evaluate the resilience of the bulk power system in areas that are operated by regional market operators (“Order”). Responses from Regional transmission organizations (“RTOs”) and independent system operators (“ISOs”) must be filed in this proceeding by March 9, 2018 and will likely determine FERC’s next steps in addressing electric grid resiliency issues.
One of the most widely-reported elements of the Order was FERC’s decision to terminate the so-called “DOE NOPR” (Docket No. RM18-1-000), which had been requested by the Department of Energy, in part, to investigate whether coal and nuclear powered electricity generation facilities should be subsidized. The Order terminated the DOE NOPR due, in part, to the absence of substantial record evidence that existing RTO/ISO electricity tariffs were “unjust and unreasonable” pursuant to Section 206 of the Federal Power Act. However, FERC’s decision to investigate “resiliency” in the subject Order will likely be more significant than the termination of the DOE NOPR because the Order will likely impact the terms and conditions under which RTO/ISOs offer electricity services.
Although “resiliency” is capable of multiple definitions, this term is integrally related to electric grid “reliability” (e.g., cyber security measures, ensuring facility redundancy, addressing fuel availability, and the “hardening” of transmission facilities). The Order clarified that elements of resiliency may include, at a minimum, “the ability to withstand and reduce the magnitude and/or duration of disruptive events, which includes the capability to anticipate, absorb, adapt to, and/or rapidly recover from such an event.” (Order at P. 23). The Order is much broader than the focus of the DOE NOPR, which was more narrowly focused on whether a generation facility had a 90-day fuel supply on site (i.e., coal and nuclear facilities).
In contrast, the Order seeks to answer broad questions regarding the resiliency of the electricity grid. As the Order stated: “The goal of this proceeding is: (1) to develop a common understanding among the Commission, industry, and others of what resilience of the bulk power system means and requires; (2) to understand how each RTO and ISO assesses resilience in its geographic footprint; and (3) to use this information to evaluate whether additional Commission action regarding resilience is appropriate at this time.” (Order, P. 18).
In order to developing this “common understanding” of resiliency, the Order requested that RTO/ISOs answer more than two dozen questions focusing on a wide range of the elements affecting resiliency, including: (1) what are the primary risks to resilience in your region?; (2) what attributes of the bulk power system contribute to resilience?; (3) how are the impact and likelihood of resilience risks assessed?; (4) what criteria, (e.g., duration of load loss, vulnerability of generator outages, and duration of generator outages) are used in RTO/ISO studies to determine if the bulk power system will reasonably be able to withstand a high-impact, low-frequency event?; and (5) do any studies indicate whether the bulk power system is able to reasonably withstand a high-impact, low frequency event?
Significantly, FERC’s investigation of resiliency will include, for example, the impact that distributed energy resources (“DER”) have the ability of an RTO/ISO grid to withstand “disruptive events”. Commissioner Richard Glick expressly raised the issue of DERs in his concurring opinion in the Order:
[T]he addition of a diverse array of generation resources, including natural gas, solar, wind, and geothermal, as well as maturing technologies, such as energy storage, distributed generation, and demand response, have in many respects contributed to the resilience of the bulk power system. . . . I also believe that it is important to consider the advantages that newer technologies, such as distributed energy resources, energy storage, and micro-grids, may offer in addressing resilience challenges to the bulk power system. (Order Concurrence, p.2 and p. 4).
Thus, the subject Order provides supporters of DER with a valuable opportunity to demonstrate that such resources may not only be valuable in keeping energy prices low and protecting the environment, but also in assisting RTO/ISOs to “keep the lights on”, as an important resiliency resource. FERC invited all parties to file comments on the March 9th RTO/ISO filings made in this proceeding by April 9, 2018. It will be important for parties that are interested in promoting DER to highlight the benefits of DER to enhance grid resiliency, rather than merely focusing on the many other benefits of this valuable resource.
This Eckert Seamans Energy Blog is intended to keep readers current on matters affecting businesses and is not intended to be legal advice. If you have any questions, please contact Daniel Clearfield at (717) 237-7173 – dclearfield@eckertseanans.com.
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