Here’s the TL; DR, and why this matters:

1. We offered foundational principles to best serve DERs. We tried to be comprehensive, covering the major issues that relate to DER integration, and incorporated a lot of the existing literature. We didn’t just offer pet projects to serve certain business models. This is especially clear in that we didn’t oppose utilities acting as aggregators. Instead, we said that if utilities do act as aggregators, they need to have fair, low-friction processes for data access, registration, review of aggregations, etc. We can do this advocacy because we are independently funded.

2. We proposed ways to improve the policy making process. We proposed that the PJM states could engage in coordinated DER policy development, led by the Energy Policy Design Institute. With this process, the PJM states could have one meeting about data access, rather than 14 different meetings in each jurisdiction. On Friday 5/31, we discussed this idea with the PJM states, and those discussions are ongoing.

3. We moved equity to the front. Equity needs to be baked into the policy development process (highly recommend Revolutionary Power on this point). So instead of leaving Equity as consideration 15 out of 15, we moved it to our first section——on overarching principles for policy design——and gave specific recommendations to incorporate equity.

4. We pointed out that this isn’t really about 2222. DERs are coming regardless of 2222. A lot of the work that needs to be done is to simply incorporate DERs. And we if we want a cost-effective, reliable grid, one of the best ways to do that is by unlocking the latent capacity of the DERs that are rapidly coming onto the system. So, we need better data access policies, better distribution system visibility and management, and distribution services tariffs that complement 2222’s path to wholesale market participation.

Finally I’ll note that just as DERs unlock the latent potential in the grid, these comments unlocked the latent potential in the DER community: this filing was a group project that incorporated the expertise of over a dozen members of our DER community.

The goal is that these principles can serve as a framework to develop scalable DER solutions across PJM. That doesn’t mean all the states would do the same thing. But if several states had interchangeable VDER-style tariffs while several vertically integrated states had similar BYOD programs, that scale would represent progress.

Happy to hear your thoughts, allison@dertaskforce.com or on Slack.

Can Retail Choice 2.0 succeed where Retail Choice 1.0 (maybe) failed?

I point out ways in which retail choice now is different from the 2000s and 2010s:

In Retail Choice 1.0, retailers are energy traders. Only cost matters.

In Retail Choice 2.0, retailers are technology companies.

By listing some of the innovation provided by competitive retailers, I’m showing that these are real companies now, not shady just slammers and crammers. An industry has evolved, like the music industry going from Napster to Spotify.

This piece highlights two unique characteristics of DERTF Policy. First, independence. No company paid to be included in that piece. I like what they’re doing enough that it’s moved me from Retail Choice Skeptic to Retail Choice Curious. Second, paradigm-shifting ideas. I create language so that hopefully people now see how Retail Choice 2.0 is different from 1.0. I also note other ways that circumstances have changed (like now we have YouTube reviews of retailers and their products). The ultimate goal is to create new vantage points to move past old sticking points.

And we’re just getting started. If you like what we’re doing, help us by subscribing.

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As DER Task Force Policy gets up and running, we’ve identified a need: getting credible information out there and encouraging debate. Often, energy companies don’t put information into the public sphere – whether due to fear of annoying regulators or customers, because there are too many hoops to get company sign off, or because they don’t want to be responsible for the resulting dialogue.

We at the DER Task Force don’t have these concerns, so when the Retail Energy Advancement League (REAL) asked us if we’d be interested in a report they recently commissioned, it seemed potentially like a good role for DERTF. We have no problem ruffling feathers, provided its intellectually valuable.

So in the interest of open information access and shining the light of the best minds in our industry on a variety of perspectives, we’ve decided to publish this report by REAL, on the impacts of New York’s Market Reset Order on New York consumers.

The gist is that in 2021, New York’s “Market Reset Order” became effective, and required ESCO’s (NY's term for competitive retailers) offers meet one of three pretty restrictive criteria. One of them, for example, is requiring that a competitive retailers’ fixed-rate product price must not exceed the trailing 12-month average utility rate plus 5%. Some believe these restrictions have hurt consumers so REAL commissioned analysis to explore the consumer impact. The report argues that the Market Reset Order is hurting consumers: for example finding a ~50% decrease in the number of ESCO electricity offers while Prices-To-Compare ("PTCs") increased 104%, and that only 9% of the NY ESCO offers fall below PTCs compared to 60-99% in Connecticut, Massachusetts, and Pennsylvania. 

To re-iterate, the DER Task Force did not commission this report, is not a member of REAL, and is not even philosophically “pro” retail choice. We are publishing the report in the interest of full and open access to all information, and we encourage debate or criticism. If upon reading this report you would like to publish a rebuttal, feel free to reach out. Also feel free to provide any feedback on how DERTF can best approach future posts like this.

The data is here. Give us your thoughts.

New York Public Service Commission Order Impact Assessment

An analysis of the affects the NY PSC December 12th, 2019 “Market Reset Order” has had on the New York retail energy market

Prepared on behalf of REAL

Submitted by:

Guy Sharfman

Vice President, Market Analytics

Intelometry

5373 W Alabama St., Suite 400, Houston, Texas 77056

Phone: (281) 773-9371

Email: guy.sharfman@intelometry.com

Website: www.intelometry.com

Executive Summary

The Market Reset Order must be revised to remove the harsh product restrictions impacting consumers’ ability to choose from a variety of ESCO products. Failing to revisit the Market Reset Order slows New York’s transition to green energy and harms New York consumers who are unable to choose products that meet their budget and lifestyle.

On December 12th , 2019, the New York PSC issued an Order mandating that ESCOs can only offer power and gas products to mass market customers that meet one of the following criteria:

1. A variable rate product must include guaranteed savings over the utility rate.

2. A fixed-rate product price must not exceed the trailing 12-month average utility rate plus 5%.

3. An electric renewable product must be sourced in or adjacent to New York.

In addition, the Order revised the definition of value-added services to be “only energy-related products and services”. The Order’s impact on the New York retail market has been nothing short devastating.

Harm to Consumers

Massive Decline in ESCO Residential Offers at a Time Where PTC Prices Have Skyrocketed

Since the Order took effect, the number of ESCO residential electric offers has decreased by 49% while the number of ESCO residential gas offers has decreased by 87%. While the number of ESCO offers to residential customers declined, utility residential PTCs, i.e., the utility prices that ESCOs compete against, skyrocketed, rising by an average of 104% for electric and 93% for gas. This means that while utility prices have increased tremendously since the Order, options available to residential customers to escape these high prices have plummeted. In turn, this limits the options available to consumers to lock in fixed rates and decarbonize their lifestyle and are therefore stuck paying high utility rates and only having limited recourse to choose alternative products.

New York Now Ranks Lowest in Terms of ESCO Residential Offers Falling Below the PTC

New York currently has the lowest rate of ESCO offers falling below their respective PTCs compared to other states. While increases in PTCs have resulted in 60% to 99% of ESCO residential offers falling below their respective PTCs in comparable competitive states such as Connecticut, Massachusetts, and Pennsylvania, only 9% of ESCO residential offers fall below their PTC in New York likely due to the requirement that renewable products be locally sourced. Local renewable RECs are much more costly than national RECs.

Anti-competitive Rules Benefit the Monopoly Utility not the Consumer

Monopoly utility cost-based prices always increase in the long run, while market-based prices do not. As such, limiting competition only benefits the utility and never the consumer. New York PTC prices increased in 2022 and 2023, just as the Order placed stiff limitations on ESCO offers that compete with the PTC. Only New York consumers have been harmed by this.

Less Green Options Available and Higher Priced Green Products

The Order’s elimination of green products sourced from national RECs combined with New York’s refusal to recognize carbon offsets as green, results in fewer green options available to consumers and more expensive green products. New York State often highlights that its policies are intended to demonstrate its national leadership in the fight to address climate change and to reduce carbon emissions that are responsible for environmental and weather-related harms in New York and beyond. However, the Order – unique to anywhere else in the nation - limits the availability of green products to New York consumers and undermines the development of renewable energy outside of New York. The Market Reset Order requires that any renewable product be locally sourced (no national RECs). Locally sourced RECs sell at a premium to national RECs causing consumers to pay a much higher price for renewable energy and discouraging the purchase of green products.

You can read the rest of the report here, and feel free to provide any feedback in the comments.

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Please also check out Michael’s awesome report on the failure of utilities to enable smart meter capabilities, linked throughout the discussion piece below. If you would like to draft a FeDERalist Paper on one of the rights outlined in the Bill of Rights, send me a note in Slack!

The battle over who controls data at the grid edge is only just beginning. The DERTF Bill of Rights stakes a claim on this topic that is simultaneously obvious and audacious, a bit like the Declaration of Independence.

I’m talking about personal energy data particular to a home or business. Specifically, how much energy you use (electricity and natural gas) and when you use it. The BoR declares that “Customers have a right to their own data in real-time [from utilities]” and “Customers have a right to share their own data through common DER data standards.”

Sounds simple, doesn’t it? But utilities have fought against customer ownership rights in their data for years. According to Mission:data’s recent analysis, a decade after the Recovery Act funded the installation of millions of advanced meters nationwide, only 2.9% of federally-funded smart meters have real-time usage data features enabled. That’s 14 million households that could be using smartphone apps to help them manage energy use in their homes or participating in virtual power plants (VPPs) for compensation – but utilities deactivated these capabilities.

Furthermore, according to Mission:data’s analysis, only 14.3% of utility customers are offered an application programming interface (API) by their electric utility in order to access new energy management tools. While 77 utilities received $3.0 billion in Department of Energy funding for advanced metering, today only two (2) utilities provide APIs to access smart meter data: CenterPoint Energy (via the Smart Meter Texas system) and Fort Collins Utilities in Colorado. 

Ouch – federal taxpayers didn’t get much for our money. We wanted smart homes and apps for energy…but all we got was auto bill-pay.

Remember the phrase “Smart Grid”? It sounds cliché now, but ten years ago, it was intoxicatingly optimistic. Think back to the boundless optimism about the power grid of the future. “Prosumers” were destined to conjure an “internet of energy,” bringing forth a zero-carbon utopia that featured altruistic utilities, technological meritocracy, competent regulators and carbon-negative biogas from unicorn farts!

I’m embarrassed to admit it now, but in 2009, I was confident that Smart Grid was going to change the world. I believed.

Ultimately, however, the Kool-Aid sugar high subsided. For me, the come-down began when utilities first told me that they weren’t going to turn on the Zigbee radio that made it possible to access real-time power usage information. At the time, I was running an energy management startup company, and our customers wanted access to their real-time energy data.

At first, I was puzzled. “Don’t you believe in the Smart Grid vision?” I asked the utilities.

Yes, the utilities said. We believe, but we can’t turn that switch on right now. Because….well, because it would cost money, it would endanger cybersecurity, and our regulators need to give us permission first.

With each year that passed, railroad cars of taxpayer cash continued to flow to utilities. Those empty cars returning to the federal treasury were filled with excuses, and my puzzlement became resentment.

“But didn’t you receive tens of millions of dollars in federal subsidies to demonstrate how consumers can use real-time data on their electricity usage?” I asked utilities.

The instant smart meters were installed over a decade ago, the battle lines over customer data had been drawn, whether or not we recognized it at the time. Utilities scored large initial victories, as recently documented in Mission:data’s aforementioned report. In addition to misusing federal funds, there are many other examples of strategic data-hoarding, ranging from utilities deviously crippling real-time data-sharing to giving DERs incorrect data in order to impair wholesale market settlement of demand response resources, thereby artificially raising DERs’ costs.

But the tide is starting to turn. While the DER Task Force’s Bill of Rights is a daring declaration, it is not a pipe dream, either. Recent advocacy efforts have secured consumer rights to control their data held by utilities in six (6) states covering over 37 million meters nationwide. And last month, data portability – cleverly coupled with incentives to consumers and gamification -- saved the California power grid from catastrophic blackouts.

But we still need to grow the movement so that every American – regardless of which electric utility serves them – are put in control over their energy data. Movements need manifestos, and the DERTF BoR is a leading contender, combining moral force with climate urgency. The White Paper might as well begin with: When, in the course of human events, it becomes necessary for one people to dissolve the status quo energy system that has caused so much destruction of the human and non-human world, and to assert new principles for the reinvention and decarbonization of energy generation and delivery…

While the manifesto is audacious and compelling, I have one quibble with it. If I could change a single word to make the BoR more sweeping and timeless, it would be to replace “to” with “in”: Customers have rights in their data rather than Customers have rights to their data. The preposition is subtle but important. Customers have inherent rights to control data collected about them because energy data reflects their habits, routines, appliance choices and ways of living. Customers do not need to gain new rights to their data because such rights have always emanated from the data intrinsically. The demand for utilities to make data electronically portable is not merely a demand for utilities to give people their data; it is a demand for recognition of a long-standing principle that energy data were never the utilities’ exclusive property in the first place.

Our nations founders made a similar ontological maneuver. When the Declaration of Independence was signed July 4, 1776, the authors asserted that rulers had no divine right to power; instead, the only legitimate government was one whose “just powers” emanate from “the consent of the governed.” Americans didn’t merely ask King George to relinquish his power; they asked the King to recognize that self-government was the only legitimate form of power in the first place.

Let’s celebrate our 1776 moment and put consumers in charge of their data!

If you’re interested in learning more about the great work Michael and team do, check out Mission:data Coalition’s library of research.

We hope this piece gives you something to think about, and if you want to contribute to the discussion topics through a feature such as this, drop me a line in Slack!

DER Bill of Rights — Discussion 1: An Equitable Future for the Grid

We do not currently have equitable energy infrastructure in this country. Too often, lower-income and communities of color bear the disproportionate burden of pollution from energy generation and transmission and have greater exposure to the effects of climate change. Lower-income and disadvantaged households spend more of their income on energy bills than the national average and live in less energy efficient homes, experience greater rates of power outages, and have fewer opportunities to participate in the DER movement. Furthermore, The Energy Information Administration estimates that 14 percent of households on Native American reservations have no access to electricity, which is 10 times higher than the national average.

Compounding this inequality, lower-income households tend to be renters who are typically locked out of energy capital markets — banks and lenders who finance DERs do not underwrite single family rental homes or apartments.  As a result access to DERs, ubiquitous for single family homes and large commercial operations, is non-existent to renters. The capital markets do not distinguish among renters with investment grade income, low-and-moderate income, or credit-disabled status, instead bucketing all renters into the “credit-disabled” underwriting segment. 

Addressing these concerns requires a consistent, scalable, foundational framework, and the DER Task Force believes that the principles outlined in the DER Bill of Rights, if adopted by regulators and policymakers, will enable a far more equitable grid. Below, we present several ways the DER Bill of Rights can be leveraged to create more equitable outcomes, as the Task Force believes DERs will be critical for protecting all customers against institutionalized power structures and enabling a more equitable future. The Task Force also recognizes that the below recommendations are only a starting point, and that further work will be necessary to advance policies and programs in support of equity goals.

Principles of DER Equity

Low-and-moderate income (LMI) and environmental justice (EJ) communities should have access to the same resilience and cost-saving benefits enjoyed by early adopters of DERs. While it is the belief of the DERTF that implementation of the four fundamental rights of DERs will lead to equitable outcomes, the DERTF acknowledges existing structural inequalities are hard to overcome. Thus, where there are gaps in DER deployment, policies should exist that close this gap. 

Further, state DER programs must center the inclusion of marginalized groups, especially those that currently face high barriers to access DER technologies. Participation mechanisms must be available for all potential grid services and broaden the scope of DER ownership beyond those that can afford the upfront costs, own their property, or have the credit-worthiness to receive third-party financing, in part by setting aside adequate funding for LMI and EJ communities and designing more inclusive incentive programs. 

The most effective approach to ensuring equity is to use public funding mechanisms separate from scalable, accurate, market-based compensation frameworks. While utility-focused DER deployment programs should have requirements for LMI and EJ spending, these policies must exist outside of utility-created rates and tariffs. Attempting to solve social issues via bureaucratically defined tariffs and rates obscures the true techno-economics of the physical grid, creating perverse incentives and distorting proper market signals. Ironically, this distortion is what can lead to inequitable outcomes. While the discussion that follows argues how the rights proposed will decrease inequity, public funding and other programs can further accelerate that process and close any gaps the market creates.

Equitable Allocation of Costs (Right to Compensation)

A common critique of DERs has been that only wealthier customers can afford, or benefit from, third-party ownership models, and that DERs shift the social costs of the grid from wealthy DER owners onto those that cannot afford them. Neither is a characteristic fundamental to the nature of DERs, but rather the frameworks by which they have historically been advanced. 

The Right to Fair Compensation does not mean the Right to Over-Compensation. For example, net metering in its traditional form runs the risk of over-compensating customers (particularly solar generation), at the expense of non-generating end-users. If unchecked, this can certainly lead to inequitable outcomes, with those who can least afford it paying more to maintain a system they have no choice but to rely on. Bureaucratically imposing taxes or other penalties on DER owners, however, can further raise costs and barriers to entry, locking out those already excluded by the system.

Citing equity concerns due to this cost-shifting under the existing NEM 2.0 regime, California's NEM 3.0 proposal looks to tax solar customers as opposed to addressing the underlying reason for cost shifting (i.e. blunt payment schemes to solar customers that are not reflective of the physical reality of the grid). Contrary to its stated goals, the proposed decision, when implemented, will lead to further inequity. Taxes levied against DER customers will raise the barrier to entry, not lower them, ensuring that only the wealthiest will be able to afford solar and storage systems as back-up power in the face of increasing outages. 

Instead, the DER Task Force strongly endorses “Avoided Cost”, VDER, or other similar methodologies to determine the stacked-value that DERs provide to the grid. If the underlying techno-economics of the grid are properly incorporated, this group of valuation methods address the problems of cost-shifting by encouraging the net reduction of costs to the grid and thus reduces the overall cost of grid maintenance for all users. It also ensures fair compensation to DER owners and keeps the playing field level.

Equitable Financing & Ownership (Right to Ownership)

A market-based framework for compensating DERs is necessary but not sufficient to unlock more equitable ownership of DERs. Over time, these more robust market signals will lead to new financing mechanisms that the existing paradigm of blunt or over-compensation does not allow for. However, that alone will not suffice — steps must also be taken to reduce red tape to lower the costs of installing DERs, which will in turn lower barriers to entry and reduce the need for third-party financing. Any remaining gaps in DER ownership can and should be closed by public funding. The following are illustrative examples of the types of solutions that the DERTF Bill of Rights, if abided by, can unleash:

In a net metering regime where solar can only offset the customer bill, the customer bill (and corresponding faith that the customer will continue to pay the bill, or credit-worthiness) is all that can be used to finance DERs. However, by properly compensating DERs for their value to the grid, the credit-worthiness of an individual customer is no longer the primary concern and opens up the market to renters and less-credit worthy populations. If regulators shift compensation to a value-stacked, avoided cost approach with robust market signals, DERs can be compensated by an actual market, and the customer becomes relevant only to the extent that the DERs are located on their property. This reduces the reliance of credit-based underwriting as a form of third-party financing in a DER-heavy future, reducing the chances lower income individuals are denied the chance to purchase a DER based on their credit-worthiness. It also reduces the reliance on state-sponsored funding, which can be dependent on state budgets and availability.  Further, the value-stacked, avoided cost approach would open the energy capital markets and DER financing access to all renters, regardless of high or low FICO scores and/or credit-disabled consumer profiles.

For example, “vacancy-based underwriting” is emerging in areas where proper compensation is given for T&D benefits and clear energy and capacity price signals. In vacancy-based underwriting, financiers receive higher payments when customers live in buildings where the DERs are sited (receiving retail rates that offset the customer bill), but still receive payment if the building were to be vacated (receiving wholesale rates as more power is now injected into the grid). This is because the DERs are still able to provide benefit to the surrounding grid, and be paid through well-defined market signals, even if there are no off-takers in the actual building. This provides an underwriting model to the financier that values DERs based not just on the behind-the-meter consumers, but also the value to the broader grid based on its “front-of-the-meter” benefits to all ratepayers within the utility jurisdiction. When financiers look at “vacancy-based” underwriting – i.e. the chances an entire building or region of the grid will vacate and stop paying bills – their downside is limited by the very low probability of widespread vacancy. That differs from NEM, which has an extreme downside of zero payments. Vacancy-based underwriting is just one example of the innovation that market-based frameworks can unleash.

Equally as important as new financing and market frameworks is a reduction in the soft costs associated with installing DERs. Currently, difficult permitting processes and other bureaucratic red tape artificially inflate the costs of installing DERs. For example, in Australia, rooftop solar is $1219/kw and utility scale is $1061/kw, whereas in the US it’s $3520/kw ($4,236/kw in CA) and $1101/kw, respectively. This is purely due to administrative and other soft costs, all of which make access more difficult for LMI communities. In the future, with streamlined processes, DERs may become so comparatively cheap that it is analogous to a landlord installing laundry at their building as a marketable amenity (no power outages!). In areas like Australia, this future has arrived, making the need for non-credit or renter based financing schemes obsolete. Thus, efforts to reduce bureaucratic red tape will lower soft costs for installing DERs, driving down the system’s installed costs and making DERs more accessible to LMI communities.

Beyond the above examples, state-based funding will continue to play an important role in ensuring equitable DER access. Regulators should consider expanding the definition of what qualifies as low to middle income spaces, which have traditionally been multi-family housing units. Expanding the definition to include funding for local businesses that serve as community gathering spaces in outages or in hot summer months (e.g. grocery stores, community centers) recognizes that the system requires more than a one-size-fits-all approach, and that DERs can function as tools for strengthening communities, empowering residents, and remedying the injustices caused by the historically centralized system. These funding mechanisms should exist in concert with the DERTF Bill of Rights: unlike tariff structures that violate the Right to Compensation and can raise barriers to entry, public funding mechanisms working in parallel with scalable market-based approaches will drive rapid adoption of DERs across all income levels.

The Ultimate Check on Inequality (Right to Choice)

As the grid ages and infrastructure investment does not keep pace, we are witnessing increased outages and increased costs of delivering power all over the country. In markets like California, the costs of power continue to sky-rocket even while reliability decreases. This is why the Right to Choice exists. While individuals may struggle to access DERs because they are renters or not credit-worthy, communities ought to be allowed to band together to build shared infrastructure, much in the way farming communities did with the original co-ops. In a sense, it is easier to bank a community, even if it is composed of LMI individuals, than it is to bank individuals alone. Community microgrids are the ultimate check on the issue of grid inequity: when the grid fails communities, communities can build their own microgrids. This right must exist regardless of whatever powers are currently given to municipalities or utilities. Ultimately, the Right to Choice unlocks a DER-centric co-op model for historically underserved communities. In the past, communities may have been forced to take whatever service offered to them, at whatever cost. In the future, DERs make it easier for communities to choose their own fate.

Such financing mechanisms and those yet to be imagined, enabled by the Rights to Compensation, Choice, and Ownership, will lead to more equitable third-party ownership models.

Recommendations

• Promote third-party or coop-like ownership, like community solar, as important alternative/non-credit financing mechanisms to enable equitable ownership for communities which have historically been segregated from traditional banking systems.

• Reduce bureaucratic red tape to lower soft costs and barriers to entry for lower-income communities

• Set minimum percentages (e.g. 40%) of incentive program financing to go to marginalized and low-income communities

• Expand the definition of Low & Moderate Income (LMI) to include funding for local businesses that serve as community gathering spaces in outages or in hot summer months (e.g. grocery stores, community centers).

• Enable wider DER ownership by deploying alternative financing paths. Energy capital markets must recognize that not all LMI consumers, whether renters or homeowners, are credit disabled, and that for renters in particular, access to DER financing will increasingly be deployed outside of mainline PPA and lease underwriting boxes, primarily via mechanisms like “vacancy-based underwriting” that provide access independent of credit

Following the release of this Bill of Rights, we will publish a series of discussion topics that naturally emerge from these rights, the FeDERalist Papers. The first and most important of these discussions, on the topic of equity and how DERs will enable a more equitable grid, will be published in the coming weeks. We look forward to sharing that as well as additional topics with you all

If you are interested in writing a FeDERalist Paper yourself or otherwise getting involved in our policy efforts, please reach out to us via Slack!

THE DER TASK FORCE BILL OF RIGHTS: 

Advancing a Distributed Energy Resources 'Bill of Rights' for Local & Regional Grid Planning

DISTRIBUTED ENERGY RESOURCES (DERs) & OUR ENERGY FUTURE

Electrification is rapidly increasing demand for electricity, creating challenges in building the distribution infrastructure needed to manage the new demand. Existing infrastructure will be unable to scale quickly enough, driving the need for innovative methods to fill the gap. Distributed energy resources (DERs), and the various ways in which they can be deployed, are one way to address this challenge. Successful adoption of DERs will be key to addressing challenges posed by climate change and aging infrastructure, while creating a more resilient, modern, and equitable grid. Yet, the existing patchwork of DER policies leads to inconsistent capture of potential DER value streams and makes it difficult to unlock the full potential of DER deployment.

THE DER TASK FORCE (DERTF)

The DER Task Force (“DER Task Force” or “DERTF”) is a community dedicated to unlocking the immense promise of distributed energy resources in the electric power system. Unlike many industry groups, DERTF is not sponsored or influenced by the largest of its members – all participation is from individual volunteers who are highly informed and enthusiastic about DERs. Since the founding of DERTF in 2020, membership has grown rapidly, with over 2,000 individuals active in the DER industry, including project developers, engineers, analysts, community organizers, utility employees, policy experts, academics, and investors from some of the most forward-thinking grid edge organizations in the country. DERTF seeks to be a resource and ideas hub for the DER community and an advocate for community members in advancing DER policy.

DERTF BILL OF RIGHTS  

Given the wide variation of DER policies from state to state (even from agency to agency), working with a common set of principles - and ones that place consumers first - will be important to help guide the transition, or at the least, reduce duplicative or contradictory efforts1. This Whitepaper seeks to provide a framework for federal, state, and local regulators and planners in managing ongoing DER deployment efforts. The DER Task Force identifies the following four (4) key rights of customers that must be incorporated into all DER policymaking, as well as specific policy recommendations that can be used as building blocks for successful DER  programs across existing regulatory frameworks and regional grid demands. If adopted effectively, the DER Task Force believes the result will be a far cleaner, lower cost, and more resilient and equitable grid.

1. Right to Ownership. Customers have a right to own distributed energy technology, and a corresponding right to interconnect that technology to the grid without undue burden or delay.

2. Right to Compensation. Customers have the right to participate in all possible markets and be compensated for all potential value streams, reflecting the true and full value that their DERs provide to the grid.

3. Right to Choice. Prohibitions on private DER interconnection and ownership should be driven only by  technical and safety limitations, not utility incumbency.

4. Right to Data. As in the telecommunications and financial sectors, energy consumers have the right to access their own data in real-time, and share that data with third-parties.

RIGHT TO OWNERSHIP

The future framework for DER ownership has critical implications across the electricity sector. While behind-the-meter (BTM) resources, such as residential solar, are individually negligible, they can be a powerful force if aggregated – both for injecting energy onto the grid and for demand response during energy shortages. Ensuring that grid-connected customers are able to build, own, and connect to the grid is therefore a critical piece of the energy management puzzle. Policies that limit customer ownership serve to reduce competition and hinder grid flexibility and resilience, innovation, and equity. It is essential to adopt policies that remove roadblocks and enable customers to build, interconnect, and export electricity. These policies include uncapped exports of energy - limited only by physical grid constraints - prevention of arbitrary and/or prejudicial rates, streamlined interconnection and permitting processes, financial incentives, and expansion of third-party ownership models.

• Identify and work with state advocate to revise state legislation barring third-party ownership

• Take special consideration in determining whether utilities offering financing/ownership of DERs is anti-competitive

• State regulators should consider adopting 'fast-track' programs, or financial incentives, or other models that allow third-party owners of DERs to pay for necessary distribution upgrades

Customers have the Right to Non-Utility Owned DER Models

Most regulated markets define electric utilities as the retail sellers of electricity, thus prohibiting third-party owned generators. Similarly, some states define electric utilities as those that use power generation equipment for anything other than personal use; in these markets, third-party owners may also be barred from owning assets and selling power directly to customers. The DERTF supports efforts to pass third-party ownership-enabling legislation, which can accelerate DER deployment by improving project economics. In addition to amending state regulations, improving financial incentives can also remove barriers to DER adoption and deployment. Financial incentives can include permitting fee reduction or elimination, grants, low interest loans, and on-bill financing. These ownership models are an alternative to direct ownership and allow customers to benefit from the federal investment tax credit and similar state tax credits.

Customers have the Right to Export Their Power without Prejudicial Tariffs

Many existing rates and utility tariffs harm the economic case for DERs in a manner that is either arbitrary or prejudicial, e.g. special rates and charges for customers with solar, regardless of how the customer utilizes their solar and its impact on their load profile. The DERTF position is that importing and exporting of power should be treated equally, and corresponding rates reflective of only the underlying physical, techno-economics of the grid. The rate design for a customer class should be able to properly allocate costs against any load profile, and when export is compensated properly through a value stack approach, there is no reason to limit DER generation other than for specific distribution grid engineering and safety reasons.

Customers have the Right to Interconnect without Undue Delay

Lengthy interconnection approval and permitting cycles are delaying DER deployment, increasing costs, and, in some cases, halting projects. A lack of policy to compensate customers’ excess electricity, such as uncapped net metering or a value stack, can greatly diminish the economics of a customer-owned project. These processes need to be simplified and streamlined for accelerated customer adoption. It is the position of the DERTF that export structures should be uncapped, i.e. that there is no limit to the number and size of customer-sited DERs. In cases where actual physical capacity constraints make this impossible, regulators should create a framework that the DER owners can pay for distribution upgrades that would make the project technically feasible, which would in turn benefit all grid participants.

RIGHT TO COMPENSATION

All grid users, whether customers, utility providers, or third-parties, are entitled to participate in the wholesale market and to receive full and fair compensation for all services provided to both the wholesale market and distribution grid. In its Order 2222, FERC confirmed that states and utilities cannot restrict customers from accessing the wholesale markets and that customers have the right to participate in multiple retail and wholesale programs simultaneously. Fairly compensating DERs makes them more affordable, in turn increasing the use of DERs and the cost and reliability benefits they provide. 

• Regulators should consider preventing utilities from applying technology-specific tariffs, without showing that such tariffs are necessary for grid safety

• State regulators should explore 'Value-Stack' compensation to succeed NEM programs in the context of “Avoided Costs” to both infrastructure and energy/capacity

• Such Value-Stack compensation should also include a 'Resilience' value

All DERs Should be Able to Participate in All Power Markets 

Federal law has established that a single resource can simultaneously participate in multiple retail and wholesale programs that “serve different purposes, provide different benefits, and compensate distinctly different services”2 and that any restrictions on dual participation must be narrowly designed to prevent double counting. Regulatory entities should continue efforts to ensure that DERs can participate - and receive compensation for - value both behind and in front of the meter as well as at the distribution and wholesale level3. Utilities should only be granted the customers’ wholesale market rights that are absolutely necessary to administer the retail program; otherwise, value streams like capacity and energy should be within the jurisdiction of wholesale markets and available to be serviced by third-parties in deregulated markets4.

Customers Should Receive Compensation for Multiple Services & Multiple Value Streams

Net Energy Metering (NEM) policies have been revolutionary in incentivizing behind the meter generation. But NEM is a blunt instrument, only recognizing the kWhs generated and compensating them at a flat rate regardless of time and location. Overcompensation and lack of incentivizing storage can also lead to inequitable outcomes and problems like the Duck Curve. However, the increased digitization of energy has opened the door to new ways of valuing assets. DERTF encourages fair compensation to DER owners for multiple values, including energy injections, but also capacity, offsetting need for increased supply, reducing near term distribution upgrades, or producing cleaner sources of electricity. The most effective of these programs will separate transmission and distribution (T&D) benefits and wholesale market benefits, putting the former in the hands of the utility, and the latter in the hands of the ISO (in deregulated markets).

State Programs Should Compensate for the Value of Resilience

Even state programs that do compensate based on multiple value inputs still systematically undervalue resilience. This is largely because existing wholesale electricity markets are designed to keep bulk power (generation/supply) uptime or reliability in mind, and not endpoint (consumer/demand) uptime resilience5. This means that the value of resilience becomes an externality to the electricity market, and DERs are unable to capture the true value they provide. Since it is unlikely that wholesale markets will reform with resilience at the core of the compensation scheme for some time, the DERTF encourages local utilities to include resilience payments as a core part of the value stack.

RIGHT TO CHOICE

Utilities have an obligation to serve end-use customers within their service territory, and an obligation to protect infrastructure to ensure reliability for all customers; however, end-use customers do not have an obligation to take service from the utility. While this Whitepaper does not advocate for or support unregulated customer infrastructure, if end-use customers are free to self-generate, they should have a related right to build shared infrastructure for personal reliability and use where appropriate (provided system reliability is not negatively affected). 

• Public utility commissions should have a mechanism for developers to submit non-utility-owned distribution wires for approval on a case-by-case basis, in order to efficiently integrate DERs into the distribution grid

• Regulators should encourage the ability of community microgrids to build shared, community-owned (non-utility) distribution infrastructure between DERs in order to enhance community and local resilience

Customers Should Have Options for Private Interconnection

Utility franchise rights should not prevent end-users from developing their own community microgrids, especially in situations where allowing customers, e.g. neighboring landowners, to connect with each other offers significant resiliency benefits to both the customers and the grid. Moreover, if the current distribution company is not providing adequate service (i.e. rolling blackouts, extreme energy price spikes), customers should not be summarily prohibited from accessing private wires. Where microgrids would be connected to the utility’s infrastructure, the interconnection process should evaluate the microgrid no differently than it would evaluate a facility with a similar number of connected load points located at similar distances from each other, utilizing similar equipment. Local municipal authorities, not the utility, should authorize the crossing of property lines, and customers should therefore be free to build shared infrastructure for personal use, provided there is no negative impact on the broader distribution system6.

Customer DER Technology Should be Regulated Equally

In essence, all DERs offer an ability to meet demand, store, and reduce demand to optimize electricity flow. As such, all DER technologies should be subject to the same regulatory framework. These frameworks can be designed to limit negative externalities but should allow customers the freedom to choose the technology most appropriate for their own needs and requirements for electricity generation, consumption, and resilience. For example, customers should be entitled to interconnect their chosen technologies and export electricity as long as the system operates within the same regulated standard for safety and function. These technologies include, but are not limited to, onsite renewable generators (e.g., solar and/or wind resources), onsite non-renewable generators (e.g., natural gas backup generation), battery storage, electric vehicle (EV) charging and discharging devices, load controls (e.g., smart thermostats, heat pumps, or electric hot water heaters) and any other microgrid technology.  Special consideration may be given to emissions rules, but not in a way different to that given to a traditional wholesale power plant.

RIGHT TO DATA

There has been a rapid digitization of our grid over the last decade. Until recently, energy consumption was captured on a monthly basis; now it can be measured in real-time. Providing information in a readily accessible format to customers will help customers make more informed energy decisions; accordingly, DER owners should have the right to the associated data for their meter. Customers should also be able to easily share their data with third-parties of their choice, which provide important energy management tools and services not available to individual users. Lastly, customers have the right to use this data for financial settlement, and not be obligated to receive service under utility-designed profiled usage rates. 

• Encourage AMI & interval meter rollout - or equivalent upgrades - to all customers

• Develop standards for data formatting, reports, security, and authorization where no current standards exist (which also recognize the consumer right to share data)

• Access to data should be secure, and not unreasonably burdensome to set up through utility-led APIs or secure protocols to allow third-parties to query data directly from the meter at no cost

• Open access to third-party rate-design – i.e. “settling to the meter”

Customers have a Right to their Own Data in Real-Time

To unlock and measure the value created by DERs, DER owners and authorized third-parties should be able to access, export, and share real-time and historical interval data generated by DER owners’ meters without undue burden. Such data should be made available in a manner that can be automated in common and well-documented formats, and DER owners should be able to share usage data as it is generated in real time7.

Customers have a Right to Share their Own Data through Common DER Data Standards

DER owners should be able to export their data for a selectable time period to third parties via API. While electricity usage data may be anonymized on a larger scale, the individually collected data is uniquely linked to each customer account and smart meter, but that does not mean it is inherently higher risk given a customer’s consent. Individual-level data can be anonymized, through various encryption methods; in fact, such encryption has occurred for years with respect to personal financial data and has generally not produced outsized security risks for the individual. And in the absence of a common definition and protocols for shareable 'customer data', the creation of a DER data standard would create certainty among third-party service providers and give electricity providers the ability to demonstrate compliance with any regulatory standards.

Customers with Interval Meters Should Always be Settled Using Interval Data

To realize the value created by DERs, DER owners must be billed for their true, individualized load shape and usage, rather than on the basis of a generalized load shape for a customer class. For energy settlement it allows for customers to select rates that reward them for flexibility (and does not penalize  flat-fixed-rate customers). For transmission, distribution, and capacity charges, this ensures that customers who shift load during critical periods realize the value of that load shifting, rather than simply subsidizing customers who elect not to do so. Such “financial settlement to the meter” ensures the fair treatment of electricity users both within and across customer classes: load behavior is more precisely measured and credited, and residential customers are able to benefit to the same extent as commercial and industrial customers from load shifting and DER deployment. Settling to the meter is critical to create incentives to support grid stability during peak hours, and given that more than 75% of U.S. households are already equipped with smart meters, will help recoup rate-payer investment8.

NEXT STEPS

In the coming year, the DER Task Force will expand on the recommendations outlined in this Whitepaper, through select policy deep dives and topical discussions. It will also look to identify - and participate in - public service dockets across the country that are addressing issues relevant to the DERTF community. In the meantime, the DERTF invites any interested individuals and organizations to learn more about the Task Force and become involved in its work.