The growing adoption of distributed energy resources presents another challenge for utilities and grid operators as they design and plan for how electricity is produced and delivered.

The past few years have seen more discussion about the modernization of the power grid, and depending on who’s talking, that conversation can take many forms. It could be about upgrading infrastructure. It may focus on improving the efficiency of the power production and delivery system. Some people may center on decarbonization, others on technologies for a smarter grid.

No matter the focal point, there’s agreement that the power grid must become more flexible, more dynamic, and certainly more digitized. As distributed energy resources (DERs) are increasingly utilized, it’s more important than ever to share data, have an enhanced ability to monitor systems, and allow multiple parties to collaborate—all with an eye toward resiliency and reliability, while keeping the power grid safe.

“DERs are being introduced into the grid in ever-increasing numbers as well as types and capacities. This is happening both with and without utility planning input,” said Florian Kolb, chief commercial officer and general manager for energy at Intertrust Technologies, a company that manages distributed data and devices to enable data-driven business models and works extensively with utilities and energy companies.

Distributed energy resources are the focus of POWER’s virtual Distributed Energy Experience, scheduled for Oct. 19-22. The event moved online when the in-person Distributed Energy Conference was put on hold due to the COVID-19 pandemic. An extra day of sessions has been added for the virtual event. Register today for this important event and join the discussion around DERs.

Kolb told POWER that “If all the DERs in a grid could be properly networked and orchestrated, power generation installation, design, planning, etc., could be greatly changed. One of the barriers to this ‘grand orchestration’ of DERs is gaining the trust of all the various stakeholders involved to share data with each other, not to mention following appropriate regulations,” he said. “While it’s a mouthful, ‘secure multi-party distributed dynamic data management systems’ are an emerging solution to this issue. These types of systems are designed from the bottom up to allow multiple parties to collaborate over data while simultaneously protecting their data and respecting the rights of all the parties involved.”

Managing Multidirectional Energy Flows

Management systems, as Kolb said, are key to the integration of DERs such as grid- and small-scale solar arrays, energy storage batteries, or wind power (Figure 1). The need to manage multidirectional energy flows has been driving the shift to smart grids, and smart management systems are needed to monitor, control, and optimize the energy flow across those grids, which still include coal, natural gas, and nuclear generation.

1. Solar and wind power, along with energy storage, are among the distributed energy resources (DERs) that have changed the landscape for electricity producers and grid operators. Source: Shutterstock

“The goal should be a level playing field for all energy resources, both DERs and more traditional areas of utility investment like centralized generation and grid infrastructure, to compete fairly,” said Bennett Cohen, partner at Piva, a San Francisco-based venture capital firm. Cohen told POWER: “Today many market frameworks hinder the ability of DERs to compete and get paid for the full value they can provide to the power system. Policies that explicitly support DERs can be helpful, particularly for new technologies that are still maturing, but ideally these will be temporary and DERs will be adopted based on their economics and other benefits [resilience, emission reduction, etc.].”

Learn more about DERs in this POWER Interview with Bill Strohecker of Hitachi ABB Power Grids, and in this POWER Interview with Sam Uyeno of West Monroe Partners.

There’s plenty of debate about how much government support should go to new energy technologies, and how involved federal, state, and local officials should be in setting energy policy. The discussion has become more important as federal policies in recent years have been at odds with state and local programs.

“Oftentimes you’re going to have state programs that look to stimulate DERs for various reasons,” said Stu Caplan, a partner with Troutman Pepper who focuses on energy issues. Caplan told POWER that the adoption of DERs “has the potential to grow in ways that aren’t real clear right now. You have states looking at substantial decarbonization, such as California and New York. You have increased electrification, more use of renewables, storage, and other renewables capable of balancing the system. All the economists and energy consultants that have looked at this see an incline in beneficial electrification.”

Caplan continued: “Looking ahead, it looks like DERs will become an increasing phenomenon. Whether we have a national policy will depend on a lot of things, including the next election. In the here and now, you had some states with pilot programs for distributed energy resources, and sometimes pilot programs are just to gain investment and experience. But even these pilot programs can supply a beneficial [look] at the issues that need to be resolved before moving forward.”

Developing Business Models

Utilities are well aware that DERs can disrupt power distribution systems if left unmanaged. Analysts who have spoken with POWER agree that utilities need to be proactive with regard to DERs when it comes to integrated resource planning.

“Utilities should be exploring how new business models around DERs can strengthen their businesses and better meet the needs of customers,” said Cohen. “When considering how to solve problems such as congestion, DERs should be assessed alongside grid upgrades. It’s important for utilities to ensure they have the latest DER cost and performance data as the technologies are improving rapidly and the sector is diverse and dynamic.”

Among those utilities is the Orlando Utilities Commission (OUC), which goes by the moniker OUC—The Reliable One, as it serves an area prone to storms. OUC has served Central Florida for more than a century with water and electricity service. The city’s first power plant, run by Orlando Water & Light Co., opened on Jan. 1, 1901. The company has evolved as the city has grown.

“At OUC, we’re seeing strong growth in DERs in our service territory and in other parts of the state, largely due to decreasing costs, particularly for rooftop solar PV,” said Sam Choi, the utility’s Emerging Technology and Renewables Manager. “Battery storage is also becoming increasingly popular, and we’re starting to see an increase in adoption. As adoption for those technologies increases, it’s likely that costs will continue to be driven lower. At some point, we expect DERs will be everywhere, like we’ve seen with rapid adoptions of consumer technology in the past. Eventually, in a mature market, we’d expect to see phasing out of incentives and DERs being treated like other generation resources. Ultimately, policymakers must weigh the trade-offs of continuing incentives with ensuring that, on balance, other promising emerging technologies are not being marginalized.”

The balancing act of adding DERs to traditional generation on the power grid is among the biggest issues for utilities as they look to add more renewable resources to their portfolios.

“Utilities should see DERs as an opportunity to optimize resource planning holistically, that is, not just from a generation perspective but to include impacts on T&D [transmission and distribution] investments,” Choi told POWER. “With advancements in the performance and capabilities of energy storage, power electronics, and controls, utilities can be equipped to use DERs to manage the grid edge and have a flexible means of addressing fluctuations caused by increasing penetration of renewables. DERs also can mitigate stranded cost risks. As utilities prepare for EV [electric vehicle] adoption growth, new investments may be required to serve that load. If growth doesn’t materialize, then traditional investments in distribution assets would be left underutilized. Those assets, with long-depreciable lives that favor high-load factors, don’t always mesh well with ‘peaky’ loads you see with fast charging. Deploying storage alongside EV fast charging can address some of those risks by deferring distribution system upgrades.”

Changing Power Delivery

Making the economics of DERs work is key to their deployment, much the same as other power sources. That can include new ways of delivering power.

“One way we’re using distributed energy resources to change the way electricity power generation is delivered, is to build a virtual power plant across bitcoin mining data centers that can shut down during peak energy demand, and in return receive a discount on the overall electricity price,” said Alex Leigl, CEO at Layer1, a company involved in connecting stakeholders in the network transformation process, helping operators and network owners to virtualize their networks and find commercial benefits from the resulting improvement in performance.

“Thereby, the energy grid operator doesn’t have to build, and keep on reserve, very expensive physical power plants that it would need to handle market peaks,” Leigl told POWER. “In times of energy market peaks, usually in the summertime, this reduces energy demand at a significantly lower cost for the grid operator. This is exactly what Layer1 is doing with ERCOT [which manages the grid in Texas], who can now use this virtual power plant to immediately reduce energy demand peaks instead of by ramping up physical power plants that are kept on standby.”

Kolb noted that one management system is “DigiKoo, an application currently being used in Europe to orchestrate grid, demographic, and other types of data for DER planning. Running on top of the Intertrust Platform, DigiKoo allows both municipal planners and DSOs [distribution system operators] to work together with data and quickly plan for EV charging station placement, estimating growth of EVs and solar panels, etc. This is done while complying with European privacy and other regulations.”

Caplan acknowledged the importance of management systems that work for everyone involved in power generation, transmission, and distribution. “DERs have different meanings to different people,” he said. “It has the potential to provide benefits that are not visible to ISOs [independent system operators] and RTOs [regional transmission organizations]. DERS in the right location will help augment losses or congestion, and can provide additional reliability, especially if we’re talking about a storage resource.

“One question, though, is who gets to control the dispatch,” he said. “The ISO-RTOs visibility into what that means in the aggregate is increasingly important, because of the need to balance the intermittency” of DERs on the grid.

2. Rooftop solar arrays continue to be popular additions for both residential, and commercial and industrial properties, as customers take more control of their energy costs. Courtesy: NV Energy

“The right DER incentives will recognize and capitalize on the value they can add,” Caplan said. “For storage to be economic, you might need to consider aggregated rooftop solar (Figure 2) combined with local storage that would be able to optimize dispatch.”

Market Support

Lower costs for solar and wind power are helping push more DERs onto the grid, which in theory should spur technology advancements to support their integration.

“All resources get some form of support, and I would argue that there is not a level playing field today,” said Phil Martin, vice president of energy storage at Enel X. Martin told POWER, “Traditional fossil fuel resources, the negatives to their use, are not captured” when comparing generation resources. “The policies that support clean resources, whether that’s the investment tax credit, or policies specifically designed for [energy] storage, are leveling the playing field, allowing them to compete with traditional sources of generation.”

The arguments for and against grid integration of DERs often center around reliability. Martin said there are ways to solve that issue.

“There are absolutely ways for policymakers to support clean energy, that are not simply a handout or a grant, to ensure a certain level of performance,” Martin said. “We are increasingly seeing policymakers support programs in a pay-for-performance construct, versus a grant. That can certainly facilitate deployment of DER technologies.

“Utilities operate to a large extent within the regulatory construct,” said Martin. “If we want utilities to be considering newer DERs, like behind-the-meter storage, it’s important that they’re not penalized for those investments. Policies that encourage the deployment of DERs, through programs that are designed to have certain outcomes, I think in many ways can address the anxiety that has existed about increasing DER penetration on the grid. In some utility territories, there is concern about a lack of control, as in, how can utilities get control of an asset that is owned by someone else.”

Martin pointed to programs such as ConnectedSolutions in Massachusetts, which is operated by utilities in that state. The program is designed to allow businesses and homeowners to earn incentives by allowing the utility to draw energy from commercial and residential battery energy storage systems. The utility takes the energy during times of peak demand for electricity, helping balance the grid, and avoiding the need to utilize peaker plants.

“The program is designed to provide a certain service and application,” Martin said. “It facilitates the deployment of those resources, so you wind up with increased use of DERs, and the DERs are deployed in such a way that the business case is aligned with the utility interest.

3. Battery energy storage systems, such as this Enel X model, are among the technologies that enable adoption of DERs on the grid. Courtesy: Enel X

“In the more traditional sources of DERs, like traditional demand response, there have been commercial and market structures put in place for smaller customers to participate,” Martin said. “Now we have an aggregated larger-scale resource, which could be virtual power plants. That’s really one of the commercial applications in the U.S. that has spurred the growth of DERs. That’s really the mindset that Enel X has, we look at the services we can provide to utilities and grids, that’s something that’s in our DNA. We already today are having our new or leading-edge technologies, like batteries (Figure 3), participating in [power] portfolios. Smart EV chargers, that really allows customers who might not be big enough to participate, to get access to those value streams that come from utility market participation.”

Martin said that, “Aggregators, like Enel, can use that aggregated capacity in their virtual power plants. That’s really where, in our mind, the ability and experience of connecting to markets, value stacking, fleet management, DERS in new geographies… we’re able to bring in new sources of economic value. That source of value is coming through grid services.

“Particularly in the environment we’re in now, we’re seeing the impact of that on the grid,” Martin noted. “Our flexibility portfolio in North America has been called upon about three times as often as last year, and our battery [assets] five times as often. When you have a portfolio of distributed, flexible assets, they’re able to respond to grid needs. It wouldn’t make sense to build a temporary power plant for the loads we’re seeing now, but with DERs in place, that provides grid operators with the flexibility they need.” ■

Darrell Proctor is associate editor for POWER (@POWERmagazine).