As utilities move towards distributed energy, the customer’s role in the energy value chain increases dramatically. The utility’s ability to influence mutually beneficial DER adoption and behavior will dictate whether or not DERs serve as an opportunity or threat

Distributed Energy Resources (DERs)

Sam Uyeno | West Monroe Partners' Energy & Utilities

How do you define a distributed energy resource (DER) as it relates to a utility?

I like to think of DERs as any local resource that enables a utility to match energy supply and demand.  Of course, these resources take many forms—e.g., rooftop solar to generate supply, TOU EV charging programs to shift demand to off-peak times, and hybrid battery storage and gas turbine systems that shimmy short-run ramps and disturbances.  Nonetheless, these resources enable utilities to match supply and demand in an increasing distributed energy environment.

 

Why do utility executives and regulators have differing opinions on the impact of DERs?

We observed several differing opinions amongst utility executives and regulators in our survey regarding the impact of DERs.  The first being which DERs are having the greatest impact on utility operations. Majority of utility executives responded that rooftop solar was having the greatest impact, while regulators responded with concerns of EVs, smart homes and buildings, and microgrids.  I think this is possibly attributed to utilities’ tendency to focus more on current operations, while regulators are often focused on future trends and concerns.

The second difference of opinion between utilities and regulators was regarding the ‘tipping point’—i.e., the degree of DER penetration that will require significant investment/change for utilities and regulators.  Three years ago, roughly half of utilities and regulators felt that tipping point was between 11% and 25%. In contrast, less than a quarter of utility executives now believe that penetration of between 11% and 25% will require significant investment and change, while regulators remain far more skeptical.  We believe this signals an increased comfort level that utilities have in operating with DERs. Perhaps this is an indication that DERs are being adopted with improved customer-utility coordination (e.g., program design, siting, grid operations).

 

Where do you see a tipping point that will require a significant investment and change for the utility and regulator?

I think what makes this ‘tipping point’ so difficult to discern is the fact that it’s a function of so many different parameters—e.g., the type of DERs that are proliferating in a given area, the ways in which those DERs are used, the degree of DER coordination amongst customers and utilities, the utility’s distribution visibility and control capabilities.  The list is quite long, and each change dramatically alters the calculus in matching energy supply and demand.

 

What are some of the main changes / costs that result for a utility to embrace DERs?

While there’s a number of changes necessary to enable DERs to participate meaningfully within utility operations, I think the more transformational areas of change include the customer and distribution operations.  

The customer relationship is perhaps the most foreign and arguably the most valuable asset emerging for the modern utility.  As utilities move towards distributed energy, the customer’s role in the energy value chain increases dramatically. The utility’s ability to influence mutually beneficial DER adoption and behavior will dictate whether or not DERs serve as an opportunity or threat—e.g., avoiding mass EV charging during coincidental peak times, DER siting in areas of need, avoiding over generation of rooftop solar during times of low demand.  Investments in new customer programs, digital customer experience and engagement techniques will likely be required to properly integrate customer DERs into safe utility operations.

Improving distribution visibility and control remains another very important area of change.  Most utilities lack visibility of all the many DERs that are being operated behind the customer’s meter, which can have dramatic impacts on local grid reliability—thermal overloading due to a lack in hosting capacity, voltage excursions, frequency disturbance, etc.  To enable these new capabilities, utilities will need to expand grid telemetry and control equipment beyond the substation, and in some instances, to select DERs. In the back office, utilities will require significantly greater integration across the enterprise (people, processes, and technology) to properly operate a grid in high DER environments.  

 

What do utility companies need to do to keep up with consumer demand?

First and foremost, I believe utilities require a much different relationship with their customers to enable this.  Most utilities lack the appropriate listening posts, customer understanding, and trust necessary to adequately poll consumer demand.  I believe deep customer empathy, a customer-centric focus, and advanced voice-of-the-customer techniques will be required by utilities to keep pulse on the types and ways in which customers will use DERs.

 

What opportunities arise for utilities from the increase of DERs?

There are a number of utility opportunities that arise out of increasing DERs.  In general, we find that the greatest opportunities are generated at the intersection of customer, utility, and regulatory needs.  For example, vehicle electrification enables regulators to carry out progressive clean climate legislation, while lowering an individual customer’s total cost of ownership.  With some proactive electric vehicle program planning, utilities can increase their load growth, support climate goals, improve customer satisfaction, and leverage charging stations as flexible grid resources.  

 

What does the increase of DERs mean to the average customer?

This is a bit of a tricky question as the ‘average customer’ may experience something dramatically different from one utility to the next depending on the degree of DER planning, grid capabilities, and regulatory pressure that a utility is subject to.  For customers of more advanced utilities, it hopefully brings more choice, control, and convenience—the ability to choose where and how your energy needs are met, ability to control energy consumption, and all in a convenient, easy-to-use manner. However, for some it may mean footing the tab the fortunate few who have the means to purchase DERs. I’d venture to guess customers will continue to have many different experiences leading up to a modern energy economy where all customers have access to better choice, control, and convenient energy options made possible through DERs.  

 
The content & opinions in this article are the author’s and do not necessarily represent the views of AltEnergyMag

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