DOEE Files Virtual Power Plant Report Re: Participation in PJM Wholesale Markets

The Department of Energy and Environment (DOEE) issued a report entitled, “Unleashing Virtual Power Plants in the District of Columbia: Recommendations for a Regulatory Roadmap to Implement FERC Order 2222”. FERC Order 2222 enables so-called Virtual Power Plants (VPPs) to directly participate in wholesale markets, including PJM’s capacity, electricity, and ancillary services markets.

“This report focuses on how the District can support and enable VPPs that have the ability to directly participate in wholesale electricity markets administered by PJM and take advantage of the new market opportunities created by FERC Order 2222. If implemented well, the District should view FERC Order 2222 as an opportunity to optimize existing and future infrastructure to access additional value from distribution, transmission, and PJM markets, and in a manner consistent with the District’s climate commitments.

This report focuses on steps the District should take to support FERC Order 2222 implementation. The report is not an assessment of overall District VPP policy, nor does it delve deeply into the design of retail-level VPPs. However, many of the recommendations in this report would serve as valuable building blocks to support retail-level VPPs in the future.

This report urges action by District agencies to implement FERC Order 2222. The District has two key options or regulatory pathways to implement the order:

• Path A – Minimum Set of Policies Needed for Meaningful PJM market participation; and
• Path B – More Robust Set of Policies to Support Viable VPPs.

To provide additional markets for VPPs, facilitate greater DER deployment, and create additional sources of revenue and value, this report recommends Path B. This report also recommends a regulatory process to implement these pathways.”

VPPs are essentially aggregations of various distributed energy resources (DERs), which can range from smaller retail-level programs to large-scale projects capable of selling into PJM’s wholesale markets. DOEE’s Clean Energy DC Plan identifies VPP development as an important pathway toward meeting the District’s climate and clean energy goals. FERC Order 2222 aligns with District policy by unlocking new value potential for VPPs, which should incentivize further development and deployment of VPPs.

To advance this policy, DOEE commissioned this report from Kathan Energy Consulting, a leading expert on VPP policy and FERC Order 2222 implementation, to better understand what steps the Public Service Commission of the District of Columbia should take to support implementation of FERC Order 2222. Kathan worked closely with Energy Policy Design Institute’s VPP Convergence Project in preparing this report. Kathan and DOEE also held a series of workshops with industry representatives, Pepco, and non-profit groups to discuss next steps to support FERC Order 2222.

PJM plans to fully implement FERC Order 2222 by February 2028. But for VPPs to realize their full potential, local rules and processes must also be in place before then to enable VPPs to sell power at both retail and wholesale levels. Maryland, New Jersey, and Pennsylvania are currently in various stages of developing rules around PJM market access for VPPs that could serve as a model for the District of Columbia.

However, the Commission has yet to undertake any action on VPPs or, more generally, on implementing FERC Order 2222 in the District. DOEE recommends that the Commission promptly initiate action in an existing docket or create a new proceeding focused on implementing FERC Order 2222 based on Kathan’s report. Because PJM is targeting full implementation of FERC Order 2222 by February 2028, time is of the essence.”