Emerging Role of Distributed Energy Resources
One of the most significant trends impacting the electric power sector is the emergence and growth of distributed energy resources (DER). it it DER refers to small-scale energy generation and storage technologies that are located close to the end-users they serve. Typically located on the distribution system, DER includes solar photovoltaics (PV), wind turbines, combined heat and power (CHP) systems, energy storage, electric vehicles (EVs), and demand response technologies.
Traditionally, electricity has been Distributed Generation in large, centralized power plants and delivered to customers over long-distance transmission and distribution lines. However, declining costs for DER technologies like solar PV are enabling more customers to generate their own power and even sell electricity back to the grid. According to the U.S. Department of Energy, DER capacity in the U.S. grew by nearly 15% in 2020 alone and is expected to continue expanding rapidly in the coming years.
Implications for the Electric Grid
The rise of DER presents both opportunities and challenges for electric utilities and grid operators. On one hand, distributed generation can help reduce greenhouse gas emissions, enhance energy security, and create alternative revenue streams for customers. However, the intermittent and variable nature of many DER technologies like solar also creates operational and planning challenges for maintaining a stable and reliable grid.
The influx of DER is changing long-held assumptions about power flows on the distribution system. Traditionally designed for unidirectional power flows from central stations to customers, distribution grids are increasingly experiencing bidirectional power flows as DER customers also feed electricity back onto the lines. This can cause issues like overvoltages if not properly managed and coordinated. Utilities will need to upgrade infrastructure and adopt new operational practices to accom modate high DER penetrations.
Advanced grid technologies like smart inverters, distributed energy management systems, and microgrids can help maximize the benefits of DER while maintaining grid reliability. For example, smart inverters allow two-way communication between rooftop solar systems and the local distribution grid. They can adjust a system's active power output in real-time based on signals from the utility to avoid overloading lines during peak solar production periods. Distributed energy management systems coordinate multiple distributed resources across a local area to ensure they operate as a “virtual power plant.” Microgrids take this one step further by enabling groups of buildings or a section of the distribution network to “island” and operate autonomously using local DER during outages.
Regulatory and Market Challenges
Widespread DER adoption also presents challenges from regulatory and compensation perspectives. Current utility rate structures and regulations were designed primarily for centralized systems and do not always accommodate the new technical and economic realities of distributed resources. Key challenges include:
- Net metering policies: Many states have established net metering policies that allow DER owners to receive retail rate compensation for excess power fed to the grid. However, questions remain around the long-term costs and benefits of net metering as DER penetrations increase significantly.
- Interconnection standards: Ensuring the safe, reliable, and coordinated interconnection of many small distributed resources requires well-defined technical standards and interconnection procedures. Some upgrades to existing standards may be needed.
- Utility business models: Utilities derive most of their revenue from electricity sales. But as customers reduce consumption through DER or switch to self-generation, revenues decline even as infrastructure costs remain. This threatens the utility business model and their ability to maintain the grid.
- Market participation: Current wholesale markets were not designed for small distributed resources. Enabling aggregated DER to participate in capacity, energy, and ancillary service markets requires new market rules, products, and compensation mechanisms.
The Future of Distributed Generation and the Grid
As costs continue declining and policies and markets evolve, the share of electricity supplied by distributed generation sources like rooftop solar is expected to grow substantially in the years ahead. Utilities, regulators, and grid operators will need to work together to modernize rules, regulations, and grid infrastructure to fully leverage the benefits of distributed energy while ensuring reliability in a high-DER future.
Some industry experts project that by 2050, over half of U.S. electricity could come from distributed solar, wind, storage and other small-scale systems. With coordinated planning and the right market structures, policies and technology solutions, distributed energy resources can empower customers while transforming our aging electric grids into more decentralized, interactive, and climate-friendly systems. However, it will require close partnerships across many stakeholders and a shared vision for an integrated distributed energy future. The evolution of distributed generation promises both challenges and opportunities in shaping the future of power systems for decades to come.
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About Author:
Ravina Pandya, Content Writer, has a strong foothold in the market research industry. She specializes in writing well-researched articles from different industries, including food and beverages, information and technology, healthcare, chemical and materials, etc. (https://www.linkedin.com/in/ravina-pandya-1a3984191)
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