What Is Distributed Energy Resource?
A distributed energy resource (DER) is a small-scale power generation or storage system located at or near the point of energy consumption. Unlike large, centralized power plants that transmit electricity over long distances, DERs generate or store electricity locally, often integrating with the existing electrical grid resilience. These resources are a key component of modern energy infrastructure, contributing to a more decentralized and resilient energy system. Common examples of distributed energy resources include rooftop solar panels, battery energy storage systems, and small-scale wind turbines.
History and Origin
The concept of localized energy production is not new; distributed energy was the primary method for generating electricity globally in the early 1900s, predating the widespread development of large-scale power generation and extensive transmission systems13. However, the rise of large, centralized power stations and the economies of scale they offered led to a shift away from distributed systems by the 1940s12.
Renewed interest in distributed energy resources began in earnest in the late 20th and early 21st centuries, driven by advancements in renewable energy technologies, growing concerns about carbon emissions from fossil fuels, and the desire for enhanced grid reliability. The evolution toward a more decentralized power grid has been a significant trend, moving away from electricity delivered solely via large central power plants and long transmission lines11. A landmark moment in the integration of distributed energy resources into the U.S. energy landscape occurred with the Federal Energy Regulatory Commission (FERC) issuing Order No. 2222 in September 2020. This order was designed to enable distributed energy resource aggregations to participate directly in wholesale electricity markets, opening up new opportunities for these resources to compete alongside traditional power sources10.
Key Takeaways
- Distributed energy resources (DERs) are small-scale energy generation or storage systems located close to consumers.
- They enhance grid reliability, reduce transmission losses, and can lower energy costs.
- Common examples include solar panels, battery storage, and electric vehicles.
- DERs support the integration of renewable energy and contribute to environmental sustainability.
- Regulatory changes, such as FERC Order No. 2222, are facilitating their participation in electricity markets.
Interpreting the Distributed Energy Resource
The presence and growth of distributed energy resources are interpreted as a significant shift in how electricity is produced, consumed, and managed. A high penetration of DERs indicates a move towards greater decentralization of the power grid, allowing for more local control and potentially reducing dependence on a single point of failure in the energy supply chain. For consumers, the ability to generate or store their own power through a distributed energy resource offers increased energy independence and the potential for reduced utility bills.
From a grid operator's perspective, a higher adoption of DERs implies a more complex but potentially more flexible system. It necessitates advanced management systems, often referred to as Distributed Energy Resource Management Systems (DERMS), to forecast, plan, and control these dynamic assets in real time9. The U.S. Department of Energy (DOE) actively works with policymakers, regulators, and utility companies to identify challenges and best practices for integrating these resources to ensure a reliable, resilient, secure, and affordable power grid8.
Hypothetical Example
Consider a small commercial building that installs a rooftop solar array and a battery energy storage system. This setup represents a distributed energy resource. During sunny hours, the solar panels generate electricity, first meeting the building's own needs. Any excess electricity produced by the solar panels can then charge the battery storage system. If the building's electricity demand exceeds the solar generation, the battery can discharge to supplement the supply, reducing the amount of electricity purchased from the main grid.
In periods of high demand on the main grid, or if electricity prices are particularly high, the building could opt to draw entirely from its solar generation and battery storage, or even sell excess power back to the grid if allowed by a power purchase agreement. This localized generation and storage capability makes the building less susceptible to grid outages and fluctuations in wholesale electricity prices, showcasing the practical application of a distributed energy resource in managing energy consumption and supply.
Practical Applications
Distributed energy resources have numerous practical applications across various sectors, impacting investing, market dynamics, and regulatory frameworks.
- Residential and Commercial Use: Homeowners and businesses increasingly install rooftop solar photovoltaics and battery storage systems to reduce electricity bills and increase energy independence. These systems can also participate in demand response programs, where consumers receive financial incentives to reduce or shift their electricity consumption during peak periods.
- Grid Support: DERs can provide essential services to the electric grid, such as voltage support, frequency regulation, and reactive power. By deploying these resources strategically, grid operators can improve system stability and efficiency, reducing the need for costly infrastructure investment in new transmission lines or large power plants7.
- Microgrids: Distributed energy resources are foundational to microgrid development. Microgrids are localized grids that can operate independently of the main grid during outages, providing enhanced reliability and resilience for critical facilities like hospitals, military bases, and data centers. The U.S. Department of Energy highlights the role of DERs in improving resilience and enabling cost savings for federal sites through microgrid integration6.
- Electric Vehicles (EVs): Electric vehicles, when equipped with vehicle-to-grid (V2G) technology, can act as mobile distributed energy resources. Their batteries can store energy and potentially return it to the grid, offering a flexible source of capacity and revenue streams for vehicle owners. The Inflation Reduction Act, for example, is forecast to support the rapid adoption of various DERs, including battery storage and EVs, through direct financial incentives5.
Limitations and Criticisms
Despite their numerous benefits, distributed energy resources present several limitations and criticisms that require careful management and technological advancements.
One significant challenge is the intermittency and variability of certain DER types, particularly renewable energy sources like solar and wind. Their output depends on weather conditions, which can lead to fluctuations in energy supply and pose challenges for maintaining grid stability and power quality4. Integrating these variable sources requires sophisticated grid management systems, as the traditional power grid was not designed with such dispersed and dynamic inputs in mind3.
Another critique involves the complexity of interconnection and coordination. As more distributed energy resources come online, managing power flow and ensuring system protection becomes more intricate. Historically, power flowed in one direction from large power plants to consumers; DERs introduce bidirectional power flow, complicating fault detection and protection schemes2. Utilities must adapt their operational practices and invest in advanced sensing and control technologies, such as smart grid systems, to effectively manage these resources. There are also financial and regulatory barriers that can inhibit DER adoption in certain cases, particularly concerning how costs and benefits are allocated among different stakeholders1. The high initial capital expenditure for some DER installations can also be a hurdle, although financial incentives often aim to mitigate this.
Distributed Energy Resource vs. Centralized Power Generation
The fundamental difference between a distributed energy resource and centralized power generation lies in their scale, location, and operational philosophy.
| Feature | Distributed Energy Resource (DER) | Centralized Power Generation |
|---|---|---|
| Scale | Typically smaller scale (e.g., kilowatts to tens of megawatts) | Large scale (e.g., hundreds of megawatts to gigawatts) |
| Location | At or near the point of consumption (e.g., rooftops, local sites) | Far from consumption, requiring extensive transmission lines |
| Ownership | Can be utility-owned, customer-owned, or third-party owned | Primarily utility-owned or large independent power producers |
| Power Flow | Can be bidirectional (supply and demand) | Unidirectional (from plant to consumer) |
| Benefits | Reduced transmission losses, enhanced resilience, local control | Economies of scale, easier dispatchability (for traditional) |
| Challenges | Intermittency, integration complexity, new regulatory needs | Transmission congestion, single point of failure risk |
While centralized power generation has historically been the backbone of electricity supply, a distributed energy resource offers a complementary model that emphasizes local production and consumption. The traditional model relies on large power plants, often fossil fuel-based, transmitting electricity over long distances, leading to potential transmission losses and vulnerability to single points of failure. In contrast, DERs promote a more fragmented and resilient system by placing generation and storage closer to the load, reducing transmission requirements and enhancing local grid resilience. The ongoing evolution of the power grid often involves integrating both approaches to create a more robust and flexible energy system.
FAQs
What are common examples of distributed energy resources?
Common examples include rooftop solar panels, battery energy storage systems, small wind turbines, fuel cells, and combined heat and power (CHP) systems. Electric vehicles with vehicle-to-grid capabilities can also act as distributed energy resources.
How do distributed energy resources benefit the electric grid?
Distributed energy resources enhance grid reliability by providing local power, reduce losses during electricity transmission, and can defer the need for expensive grid upgrades. They also improve grid resilience by offering backup power during outages and supporting the integration of renewable energy.
Are distributed energy resources only for large businesses?
No, distributed energy resources are increasingly accessible to residential customers as well. While large businesses and industrial facilities may install substantial DER systems, technologies like rooftop solar and home battery storage are widely adopted by individual homeowners. Aggregators can also combine smaller residential DERs to participate in broader markets, demonstrating the widespread applicability of these technologies.
What is the role of FERC Order No. 2222 regarding distributed energy resources?
FERC Order No. 2222 is a significant U.S. federal regulation that enables aggregations of distributed energy resources to participate directly in regional organized wholesale markets. This allows smaller, distributed resources to collectively meet the minimum size and performance requirements needed to compete with traditional power plants, fostering greater competition and efficiency in the electricity markets.