In May 2022, with some, but relatively little, acknowledgment in the trade press, the North American Energy Standards Board (NAESB), at the behest of the Department of Energy (DOE), Lawrence Berkeley National Laboratory (LBNL), and Pacific Northwest National Laboratory (PNNL), announced its intention to “create standardized, technology-neutral grid service definitions that can benefit both wholesale and retail electric market interactions” for DERs. According to a NAESB press release, “the NAESB standards development effort will promote more efficient wholesale and retail electric market operations while also advancing market utilization of distributed energy resources  The request proposes to build upon existing wholesale market structures by standardizing common grid service names, definitions, and performance characteristics that align with the market product taxonomies and definitions identified in the Federal Energy Regulatory Commission (FERC) Electric Quarterly Reports.” Purportedly, “the NAESB standard[s] will enable wholesale market operators to associate or classify existing market products with common grid services and support more efficient communications between market operators and market participants, such as generators, distribution system operators, and distributed energy resource aggregators.”

The NAESB press release raises some questions. The first rather obvious question is, given that FERC is housed within the DOE, why didn’t FERC join the referenced request to NAESB? Does FERC support the request? Is FERC going to order the six complying RTOs/ISOs to adopt any new taxonomy developed? Is NAESB going to incorporate its new taxonomy into its Business Practice Standards that FERC may later mandate the ISOs/RTOs adopt?

For those unfamiliar with the FERC-NAESB relationship, although no formal relationship exists, FERC has on occasion tasked NAESB with developing standards for adoption by FERC, which standards then can become mandatory. Portions of the ever-evolving NAESB Wholesale Electric Quadrant Business Practice Standards (BPS), which govern much of how open access transmission is implemented, must be adopted (or a waiver obtained). Other portions of the BPS are not FERC-mandated. Interestingly, a NAESB spokesperson stated that its would incorporate “this effort into standards development already underway related to energy storage and distributed energy resources in support of FERC Order Nos. 841 and 2222.” FERC did not assign NAESB a formal role in either of those orders, but nonetheless NAESB been working on standards related to storage and DER aggregations for some time. In its 2022 Annual Plan, NAESB indicated that the WEQ is working on the following BPS-related tasks:

  1. Develop and/or modify standards for information and reporting requirements to support battery storage/energy storage and, more broadly, distributed energy resources in front and behind the meter. Standards applicable to qualified wholesale participants, e.g. FERC Order No. 841, should take precedence.

a. Develop business practices that define an index/registry for qualified energy storage resources and distributed energy resources participating in the wholesale markets.

b. Develop business practices for information and reporting requirements for the qualified energy storage resources and distributed energy resources participating in the wholesale markets.

c. Develop business practices to establish performance metrics for the qualified energy storage resources and distributed energy resources participating in the wholesale markets.

If FERC were to make any such BPS standards mandatory, presumably, it will first issue a rulemaking in Docket No. RM05-5.

With or without a FERC mandate, a common DERs taxonomy should prove useful, if it is indeed then adopted by the ISOs/RTOs and their members whether voluntarily, via FERC encouragement, or by FERC rulemaking. Now that all six Order No. 2222 compliance filings have been submitted and four of the (inevitably) six Deficiency Letters issued, we know there is a fair amount of commonality in basic terminology, but less so when one digs into the details. For example, Distributed Energy Resource and Distributed Energy Resource Aggregator are terms most ISOs/RTOs used in compliance filings. And, they should be fairly consistently defined, although FERC itself threw a curveball in its ISO-NE Order No. 2222 Deficiency Letter, when it asked the ISO-NE’s about resources participating in the ISO-NE market exclusively through an aggregation which resources are interconnected to the transmission system. The implication that aggregation participants could be interconnected to transmission was unexplained; perhaps FERC was speaking about a non-DER aggregation, if such a thing was permitted or existed in a market. In any case, more uniformity would be helpful to those who plan to participate in multiple ISOs/RTOs.

Given the relatively slow pace of implementation of Order No. 2222, NAESB may end up out in front of FERC on DER and DER aggregation. It would be helpful for the industry to know more about the expected interplay between what NAESB is working on and FERC regulation. States also may have a keen interest, given their somewhat hazy role as to the interplay of DERs in aggregations, DER aggregators, and distribution-owners. Virginia, for example, already has registration requirements in place for DER aggregators that are even stricter than some retail energy service provider registration standards in retail choice markets. Given that DER aggregators are interfacing with retail electric customers, such regulation appears permissible even if a DER aggregator sells only FERC-jurisdictional products. But will NAESB standards recognize such a state role?

In sum, although NAESB membership is somewhat costly and participation in actual standard drafting can be time-consuming, NAESB seems intent on a playing major role as to DERs and DER aggregation with the full support of the DOE. These efforts should not be ignored, but FERC and the states need to let the industry know more about their views on these NAESB efforts.