State Electricity Regulatory Policy and Distributed Resources: Accommodating Distributed Resources in Wholesale Markets

Distributed resources can provide cost-effective reliability and energy services - in many cases, obviating the need for more expensive investments in wires and central station electricity generating facilities. Given the unique features of distributed resources, the challenge facing policymakers today is how to restructure wholesale markets for electricity and related services so as to revealthe full value that distributed resources can provide to the electric power system (utility grid). This report looks at the functions that distributed resources can perform and examines the barriers to them. It then identifies a series of policy and operational approaches to promoting DR in wholesale markets. This report is one in the State Electricity Regulatory Policy and Distributed Resourcesseries developed under contract to NREL (see Annual Technical Status Report of the Regulatory Assistance Project: September 2000-September 2001, NREL/SR-560-32733). Other titles in this series are: 1) Distributed Resource Distribution Credit Pilot Programs - Revealing the Value to Consumers and Vendors, NREL/SR-560-32499; 2) Distributed Resources and Electric System Reliability,NREL/SR-560-32498; 3) Distribution System Cost Methodologies for Distributed Generation, NREL/SR-560-32500; 4) Distribution System Cost Methodologies for Distributed Generation Appendices, NREL/SR-560-32501