How to Build a Better US Utility Sector

The energy sector in the US is moving through a period of change and growth, propelled by ambitious net zero goals set at the State level, plus the largest federal investment in climate and clean energy ever with the Inflation Reduction Act (IRA), and new regulations such as the FERC Order 2222 enabling DERs to participate in electricity markets.

Earlier this year, the 2023 National Association of Regulatory Utility Commissioners (NARUC) Summer Policy Summit took place in Austin, TX, which involved utilities, thought leaders, and energy professionals from across the country to discuss how energy policy can help to improve the US’s energy system.

DERs will be an increasing part of this structure: solar PV and other renewables, electric vehicles (EVs), and energy storage systems, will come online to supersede many traditional centralized power generation plants and improve resiliency on the network.

In 2022 electric power generation from all types of renewables accounted for nearly one-quarter of total generation nationwide. As the US energy landscape continues to adapt, grid flexibility will be crucial to addressing the variable availability of renewable energy and ensuring that load management adapts to ensure resilience of the grid.

Following the passage of the IRA last year, over $40 billion in domestic clean energy investments has been made – an amount equal to the total investment estimated for all clean energy projects installed in 2021. For these new low-carbon technologies to connect to the grid quickly and effectively, grid upgrades to manage the additional impact and variable load and generation patterns will be required.

Unfortunately there are challenges to be faced: upgrading the grid will take quite a long time, due to shortages of equipment, long permitting times and other factors. This indicates that there is a vital need to expand and invest in DERs to provide grid flexibility. Marketplaces need to be set up and advanced methods of economically balancing supply and demand are needed, which could include AI or blockchain-based systems. To expedite the potential of flexible energy from a deployment and grid services perspective, regulators need to look at appropriately valuing DERs and ensuring that adequate incentives are in place.

Innovative programs, like Con Edison’s Brooklyn Queens Demand Management Program which included energy efficiency, demand response, and distributed resources strategies that resulted in an estimated net benefit of $94.9 million, need to be set up nationwide.

DERs have a robust future in the US. Analysts expect that the DER market will nearly double by 2027, and much of that expansion will be driven by the growth of EV infrastructure and energy storage. As more states set ambitious goals for EV procurement, clean energy generation, and electrification, the country's need for strong DER deployment will only increase.

With the increased deployment of low-carbon technologies, including marine energy, DER-driven grid flexibility will be crucial to enable the efficient storage and utilization of renewable energy during peak generation times, which can then be released during periods of high demand or low generation. Countries like the UK have had grid flexibility programs in place for some time, to match generation with demand and benefit consumers with flexible pricing schemes.

The US should decarbonize its grid with the urgency that is required, while ensuring reliability and affordability for customers. Greater grid flexibility will be needed, with the addition of DERs, energy storage, and perhaps further into the future, small, modular nuclear reactors (SMRs). The whole industry will need to meet this challenge by building a flexible, secure, reliable, and environmentally conscious energy system for generations to come.