Good morning FERC, I have a few questions about your recent order 2222. After review and discussion with colleagues, I fear you haven’t provided enough guidance. Rather, you’ve asked the Independent System Operators (ISO) to determine how to implement it and provide you with their plan. The ISOs are having no issues with many parts of the order, but Energy Efficiency may have lots of outstanding questions. So let me ask a few of them to demonstrate the challenges:
1. What’s the start date from which to measure energy efficiency improvements? Is it the date the order was signed or the date the ISO starts up its market for energy efficiency, or something else?
2. If a contractor insulated a premise, how is the efficiency value of that work measured? Is it level for 8,760 hours per year, or is it based on hourly temperature, or on predicted degree days?
What role does projected humidity play in determining the value that can be bid?
How often must insulation be tested, if testing is required, to verify that the insulation is still effective?
How long can new insulation collect credits for energy efficiency? Is it for the expected life of the type of insulation? The life of the building? Something else?
Does the credit follow the person or firm who paid for the insulation, or stay with the premise if it’s sold or if someone new moves in?
If the owner of the newly insulated premise also receives a rebate from the Inflation Reduction Act, is that double counting? Is that allowed?
If a premise that received an energy efficiency allocation is demolished, does the allocation disappear? And along the same lines, could someone claim efficiency allocations for demolishing inefficient buildings, even if they do not build anything to replace them?
3. If a developer builds a new neighborhood to higher energy efficiency standards than required — putting in the best, most-efficient insulation and appliances — will the developer get energy efficiency to bid in, even though that neighborhood is net new load?
If the minimum standard for building efficiency changes, will it reduce the claimable energy efficiency of a premise, or is that allocation grandfathered in? If yes, for how long?
4. Could an appliance retailer keep track of what it sells to customers and what it picked up from the same customer and count the difference between the two? For example, could the retailer sell a high-efficiency refrigerator that replaces a less-efficient one, then bid the aggregated difference in energy into the market? Does it need explicit permission from the customer to do this or can the retailer just send the customer a surprise check? Or could the retailer keep the money for itself?
5. Can an aggregator bid in efficiency improvements by its customers in a utility’s service territory if the customer’s utility isn’t required to participate in the program? What happens if, for example, a Chicago aggregator bids into MISO instead of PJM?
What if an aggregator always bids a negative efficiency value to make sure that is selected; does it have to pay the ISO because the clearing price it has set for itself is negative?
6. Does each local utility have to keep track of how much energy efficiency is being bid each hour and add that to its forecast? If the energy efficiency bid does not clear, how should the system back out the load added by the local utility?
7. What about efficiency improvements in factory process equipment? If a business trades steel welding robots for aluminum rivet robots that use less energy, does the business get an efficiency credit? What happens if, due to higher demand, the factory runs those new robots 16 hours a day instead of eight hours? How should the business account for that change? Is the answer different if running 16 hours versus eight is required because the new process is slower but less energy-intensive?
8. Why was an existing standard for energy efficiency not part of the order, or why was a standards board not asked to create a uniform standard for this?
9. Is conversion from natural gas to electricity, energy efficiency if I use fewer BTU?
There are lots of additional questions that people are asking, many of them quite tricky, such as what happens when a consumer buys a new high-efficiency refrigerator, but keeps the old one in the garage?
FERC, you did not make this easy, and the results likely will not be uniform across the nation without some further guidance. Many are arguing that if it is not measurable on the meter it should not be counted, but so far, the instructions seem to indicate metering is not a characteristic that counts.
I’m looking forward to your answers to my questions.