3.10 Tariff and Market Issues

3.10.6 Retail Energy Market Concepts and Structures

Although the market rules used for bulk power are sometimes seen as applicable to the retail (distribution level) market, there are many very important distinctions. First, the retail market is State dependent with some States having no retail market. Other States have enacted very detailed regulations which are vastly different from either the bulk power market or other State retail markets.

For instance, in some jurisdictions, distribution utilities are excluded as generation suppliers, so they are limited in what DER systems they can install for reliability and efficiency purposes.  In addition, the type and purpose of stakeholders in the retail market could be very different.  For example, most customers install DER systems for their own use, rather than primarily to sell energy on the bulk power market.  Often non-exporting generation and storage are installed that just meet a part of the facility’s load. As another example of differences, some third party stakeholders can aggregate groups of DER systems they do not own, but are under contract to manage, in order to provide ancillary services. However, a combination of self-use and exporting is probably the most common DER architecture, with the use of net metering and feed-in tariffs the most “popular” approaches.

New market areas are now starting to evolve. For instance, locational incentives are being studied to see whether they can entice DER stakeholders to locate their DER systems where they can best benefit the utility’s goals of reliable and efficient power delivered to all customers. Another evolving area is community-based DER systems, where customers within the community do not necessarily own the DER systems, but can benefit from agreements for sharing the energy sold back to the grid.

Some very old market concepts are also re-emerging, such as load management or “demand response” which was originally developed as incentives to decrease loads during peak power times. Now it is being used not only for managing loads, but also for managing DER generation and storage, as well as providing ancillary services.