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Distributed Energy Resources

Hydrokinetic turbine which uses the flow of the river to produce electricity in the Yukon River, Alaska, U.S.A. Source: Monty Worthington.
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In addition to centralized energy generation and energy storage, distributed energy resources (DERs) will play a major role in the clean energy transition. DERs refer to assets located on the electric grid capable of independently generating and/or storing electricity. DERs have several benefits:

  1. DERs can act as “grid-edge” resources, lowering electricity demands of the grid during peak hours. This can lessen or even eliminate the need for expensive and fossil-intensive natural gas peaker plants.
  2. DERs can alleviate distribution network bottlenecks, allowing the deferment of transmission and distribution infrastructure that tends to be very costly. 
  3. Lastly, aggregating DERs can allow for capacity deferment – postponing or eliminating system capacity expansion, which if needed more immediately would likely be filled by a natural gas plant.

Examples of DERs include home solar and battery systems, smart thermostats, and electric vehicles. Home solar and storage systems can feed electricity back to the grid during times of over-generation. Smart thermostats can be controlled by an electric utility or a service aggregator to reduce or increase temperatures en masse to reduce grid energy demand. Electric vehicle batteries can be charged or discharged from the grid on cue (Vehicle 2 Grid or V2G).

DERs as they stand today are highly undervalued (Greentech Media, 2019). Opening up markets and modifying age old regulatory schemes would allow for DERs to obtain their full value. Such an effort would also allow for value stacking of DERs. Rocky Mountain Institute’s (RMI) research finds that clean energy portfolios including DERs would become more economic than operating 50% of existing gas power plants by 2030. Properly constructed market participation regulations and subsidies are essential to unlock this powerful resource. 

For instance, buildings can decarbonize quickly through the use of distributed or on-site power generation. The most common distributed clean energy technology in use today is solar PV. At the end of 2018, there was a little over 140 GW of distributed solar capacity globally. By 2024, it is expected to be between 320 and 400 GW. The cost of distributed solar PV is falling steadily with median PV costs for residential and commercial systems of $3.7/ watt-DC and $2.4/ watt-DC respectively. Policy measures such as net energy metering, feed in tariffs, and tax credits can further incentivize residential and commercial customers to install solar PV. The National Conference of State Legislatures has published the Solar Policy Toolkit on such policy mechanisms.

Residential and commercial buildings can use battery storage systems situated behind meters to increase the utilization rates of on-site PV generation. Commercial buildings can use the storage system to offset peak electric power consumption and costs. The Federal Energy Regulatory Commission (FERC) Order 841 unlocked the electricity market for behind the meter (BTM) storage systems, allowing them to participate in the wholesale energy, capacity, and ancillary markets. 

The rooftop solar sector has experienced massive growth in the U.S., growing by as much as 50% since 2012. Increased adoption of rooftop solar energy, however, has come with several challenges. In a 2019 study published in Nature, severe racial disparities are seen in the installation of rooftop solar PV. On average, the study found that census tracts with predominantly Black or Hispanic populations saw significantly lower PV installations: 61% and 45% respectively. Awareness of the lack of equity in how different people experience the energy transition is necessary, as it creates opportunities to target and combat these differences.