The explosion of distributed resources, renewable energy, and the electrification of everything are positive steps in our fight to curb carbon emissions. These new technologies present unique challenges to our grid and the regulatory structures surrounding it.
This week, ISO-NE published a presentation on how they are thinking about potential pathways for the grid moving forward. In case you aren’t interested in reading through the report in its entirety, I’ve highlighted a few of the key takeaways I’m thinking about.
The concerns shaping these decisions are fairly obvious to those who’ve been following the space but are still worth pointing out:
- Consumers want freedom to choose between self-supply and market
- High penetration of distributed resources means thousands, if not millions, of new resources need to be aligned with reliability
- The importance of reliability grows as electrification grows
- FERC and states are still working through the challenges of creating an efficient market (FERC) while transitioning to clean energy (states)
For those new to energy, I found the graph below to be a great explanation of how energy markets are generally structured. Deregulated markets in the northeast and Texas have different structures that want to achieve the same two goals: reliability and low-cost.
Of late, the competitiveness of clean energy and storage has become increasingly important. The structure of these markets combined with state incentives will play a large role in how DER’s are deployed over the next decade, so it’s important to understand them.
It’s also a battle that could be waged in court. States are free to incentivize clean generation sources that compete in regional power markets - these markets are tasked by FERC to be resource neutral in design, so the conflict is an obvious and on-going one. The lack of certainty around how battle eventually plays out is one of the questions surrounding capacity style markets.