PJM Proposes New Model for Distributed Energy Resource Aggregation
On February 1, 2022, PJM Interconnection, L.L.C., submitted a compliance filing (Filing) in response to Order No. 22221 of the Federal Energy Regulatory Commission (FERC). That order removed barriers to participation by distributed energy resource (DER) aggregators in energy, capacity, and ancillary markets operated by Regional Transmission Organizations and Independent System Operators (RTOs/ISOs).
Specifically, the Filing proposes numerous modifications to the PJM Open Access Transmission Tariff and related PJM agreements to reflect a novel model for participation of DER aggregators in RTO/ISO markets.
How Do DERs Fit Into Markets?
The term DER refers to a variety of electric generation (e.g., solar panels and wind turbines) and storage facilities that are generally located closer to load (i.e., are decentralized) and able to provide a variety of benefits to the system. DERs can contribute, for example, to greater grid resilience, enhanced efficiency in energy usage, and lower carbon emissions.
DERs can achieve these benefits if they are permitted to participate (individually or in aggregation) in markets from which they can derive revenue to finance construction and operation. Order No. 2222 represents one important regulatory step to facilitate that market participation.
PJM's DER Model for Participation in Services Markets
PJM explains in the Filing that it is addressing two "jurisdictional determinations" from Order No. 2222 that provide a "framework" for the Filing. First, FERC concluded in Order 2222 that it had sufficient authority to issue regulations removing barriers to the participation of DER aggregators in RTO/ISO markets. Second, FERC acknowledged that nothing in Order No. 2222 preempts the right of states and local authorities to regulate the safety and reliability of the distribution system to which aggregated DERs may be interconnected.
PJM's proposal adopts a "DER Aggregator Participation Model" (DER Model), which defines a new entity—the "DER Aggregator"—to participate in PJM's energy, capacity, and/or ancillary services markets. PJM noted that this is an additional model for participation in the PJM markets. DERs that meet the requirements for participation in other PJM models will remain able to participate in PJM markets under existing rules.
The DER Aggregator must use a "DER Aggregation Resource" that is capable of satisfying a minimum energy and/or ancillary services market offer of 100 kW but that does not exceed 5 MW.2 The DER Aggregation Resource must be comprised of at least one "Component DER," which is the underlying DER.
DER Aggregation Resources that maintain this capacity commitment will also have to meet a number of other requirements listed in the DER Model, including obtaining key locational and data components from applicable distribution utilities prior to registration, submitting cost and price-based offers, and conducting simultaneous testing and non-performance assessments.3
Once PJM has reviewed the registration, the DER Model provides a 60-day period for a distribution utility review of the proposed DER Aggregation Resource, with review criteria explicitly stated in the Tariff and the PJM Operating Agreement. The distribution utility will review the proposed registration for reliability impacts and make a recommendation on approval to PJM.
PJM will then have 15 calendar days to approve or deny the registration.4 DER Aggregators will be able to use one or more DER Aggregation Resources within a defined zone or sub-zonal Locational Deliverability Area (LDA) to form a DER Capacity Aggregation Resource, but that aggregation resource must also satisfy a minimum capacity market offer of 100 kW.
Aggregator Pooling, Wholesale Markets, and Meter Data
To ensure that DER Aggregation Resources are allowed to be geographically broad, the DER Model will also implement a "nodal" model for energy market participation and simultaneously permit a "multi-nodal" model for capacity and ancillary service-only DER Aggregation Resources.5 This will allow pooling capabilities for DER Capacity Aggregation Resources, permitting development of a larger portfolio within a modeled capacity zone. This pooling will allow DER Aggregators to reach across a broad geographic area and enhance overall opportunities for performance management.
In order to enable retail and wholesale participation, the DER Model will: (1) allow Component DERs that participate in one or more retail programs to also participate in PJM's wholesale markets; (2) allow Component DER to provide multiple wholesale services; and (3) include appropriate "double-counting" restrictions on the Component DER's participation in PJM markets through DER Aggregation Resources.6 PJM's proposal will also allow DER Aggregators to self-schedule their DER Aggregation Resources into the PJM Day-ahead Energy Market and Real-time Energy Market based on bidding parameters for the applicable technology-type.
With respect to meter data, PJM's proposed language requires that DER Aggregators provide all individual Component DER meter data necessary to facilitate the settlement (i.e., the determination of revenue based on metered output) of the DER Aggregation Resource. However, DER Aggregation Resources with a Component DER that are mass market customers will only be required to provide aggregated meter data, thereby relieving DER Aggregators of the burden of having to assemble meter data for every individual mass market customer.7
In further compliance with Order No. 2222, PJM also included the concept of single-resource aggregations in the definition of DER. This gives the opportunity for an individual resource to serves as its own aggregator.8
Will PJM's DER Model Pass Muster With FERC?
PJM has requested an extended effective date for the Filing of February 2, 2026, in recognition of PJM's need to plan and budget for a number of software and application changes to support the DER Model.9 PJM has requested an extension of the standard 21-day comment period which will allow stakeholders additional time to develop responses to the DER Model.
PJM's DER Model seemingly represents a balance of priorities between the need of DER Aggregators to access and participate in PJM's markets on a level playing field with other resource types, and the rights of distribution utilities to ensure safe and reliable operations on their systems. Ultimately, FERC will rule on the Filing, but in the interim interested parties should monitor this proceeding and comments submitted to ascertain whether there is a consensus of stakeholders who agree that this balance has been attained in the path-breaking DER Model.
* Taylor Sutton is a law clerk in the Washington, D.C. office of Davis Wright Tremaine.
FOOTNOTES
1 Participation of Distributed Energy Resource Aggregators in Markets Operated by Regional Transmission Operators and independent System Operators, 172 FERC ¶ 61,247 (September 17, 2020) ("Order No. 2222").
2 P. 43
3 P. 25
4 P. 28
5 P. 46
6 P. 39
7 P. 64
8 P. 45
9 For proposed revisions related to a DER Aggregator offering a DER Capacity Aggregation Resource, PJM requested a July 1, 2023, effective date to permit such a resource to participants in the 2026/2027 delivery year base residual auction.