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Will DERs Be a Driving Trend in 2017?

The challenge with DERs for grid operators and distribution utilities is their location on the distribution system or behind the meter where they cannot be seen or planned for by the transmission system operators.

Many industry experts predict that we will see continued maturation in the distributed energy resource (DER) market, continued advancements in battery technology and corresponding reductions in price for both, which will spur more installations in 2017.  Others predict a continued emphasis on large-scale renewables for capacity additions and a few hold out hope for EVs to finally blossom.  Almost certainly, we will see the continued overhaul of our aging transmission infrastructure and digitalization of the distribution grid.  Many of these predictions are basically “more of the same” or more of what we have seen in the recent past.  But more of the same can have consequences, so will there be winners and losers?   

A year ago an energy research firm, Renewable Impacts, reported that the increased penetration of renewables on the grid could be modeled and the impacts on system operations evaluated.   The company developed a model for assigning the causality of increased power plant cycling and tested it on the CASIO market.  Renewable Impacts determined that increased wind penetration had a one-for-one impact on cycling of existing resources and increased solar penetration had a three to one impact on cycling.  The controversial recommendation made by Renewable Impacts was that the new entrants should pay the incremental costs experienced by plants required to cycle more due to the entry of the intermittent resources into the market.      

At last check, CASIO did not penalize renewables for their impact on other generation sources on the grid.  Moreover, new power plant entrants in the market historically have not been penalized because they had performance attributes that caused other plants to perform differently.  Think about the example of new combined cycle plants that exhibit significantly better heat rates than older plants.  They were not penalized because an older oil plant had to cycle more or run less. Is it different for DERs? 

The challenge with DERs for grid operators and distribution utilities is their location on the distribution system or behind the meter where they cannot be seen or planned for by the transmission system operators who manage buying and selling in the wholesale market.  Further, distribution utilities might argue that DERs are not paying their fair share of distribution system costs.  The rules and protocols implemented in response to FERC’s proposed rulemaking on storage and DER aggregation should help flesh out how transactions will be handled on an increasingly complex and interdependent transmission/distribution system and whether any cross subsidy is needed. 

There is no question that the federal government and many industry analysts see DERs as a major component in the modernization of the nation’s electric grid.  Numerous recommendations regarding the integration of DER’s into the grid are contained in the Administration’s Quadrennial Energy Review (QER), the second installment of which was released on January 6, 2017 (https://energy.gov/epsa/quadrennial-energy-review-qer). 

A pertinent question is what will happen with renewables and the QER’s clean power related recommendations under the next Administration.  Society has put a high priority on renewables, so the change may not be drastic.  Further, DERs include many technologies in addition to renewables including microgrids, distributed gas and reciprocating engines, energy storage, demand response and energy efficiency systems.  

Perhaps an omen of the future is that utilities are beginning to recognize that distribution level renewables and other DERs represent a movement that is not likely to “go away” and they are better off getting involved and getting ahead of the movement than being left behind.  Utilities are well positioned to lead energy efficiency programs,   water heater storage programs, community battery and solar programs.  Utility planning to encourage distributed generation in the right places can lead to DER benefits essentially equivalent to spinning reserve, load following, ramping, frequency response and power quality improvements on the distribution system, thus creating value for the customer and the distribution utility.  One U.S. DOE program sponsored by the Advanced Research Projects Agency-Energy (ARPA-E) was designed to help address DER issues like intermittency.   The Network Optimized Distributed Energy Systems (NODES) program is providing grants for projects that help with the integration of distributed generation into the electric system.  You can read about ARPA-E’s work here: https://arpa-e.energy.gov/?q=news-item/arpa-e-reimagining-us-electric-grid

As energy technologies mature and prices decline, it will be increasingly challenging to meet electric customer expectations and deliver grid benefits without offering a mix of conventional and distributed energy solutions. A number of utilities are positioning their companies to provide expertise in distributed generation, energy efficiency and other energy service solutions.  The losers may end up being the companies that ignore the maturing DER market.

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