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Distributed Energy Resources: A Nice-to-have or a Must-have in 2021?

image credit: Source: Smart Phases (www.novacab.us)
Stephane Bilodeau's picture
Chairman and Chief Technology Officer Novacab Inc.

Dr Stephane Bilodeau, Eng., FEC has a PhD in Energy & Advanced Thermodynamics as well as a Master in Applied Sciences. He is a Fellow of Engineers Canada. In the last 20 years, he has driven...

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This item is part of the Special Issue - 2021-01 - State of the Industry, click here for more

At the onset of a huge recovery period, there is a transformational shift in how power is generated and delivered to commercial, industrial, institutional, and government/municipal customers. Distributed Energy Resources (DERs) have growing appeal in part because of the broad array of technologies available to generate power at or near the point of use, often with significant cost savings.

The energy market is fluid. As technologies improve, businesses are looking to gain greater control over their energy plan and electricity management, so they can focus more time and resources on their core mission. While companies operate with varying degrees of risk and different priorities, they are increasingly investing in distributed energy resources (DERs) to best position their energy and natural gas strategy for the future.

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wind mill under cloudy skies

Source: Smart Phases (www.novacab.us)

Some questions come to mind, thinking of DERs and utilities:

Why so many are investing in DERs?

What is it that makes DERs so reliable and feasible across the board?

What are their benefits, and do they take precedence over their risks? 

What customers make of DERs, less and less as an emerging solution but rather as a solution that’s growing fast and a must-have?

Several considerations are apparent concerning the usage, drivers, and barriers for DERs among electric power users:

1. Customers want more control over their cost of power, and they don’t want to spend capital or money on it

Customers want independence and control to choose their energy source. This requires a more holistic approach when planning a distributed generation future. Top challenges are cost and economics of implementation.

A study by NRG recently confirmed that, of all of their responding clients, 87% cited cost savings as one of the top drivers for deploying DERs into their power system strategy. Our customers are knowledgeable about their energy spend; they know if they can reduce usage during peak hours, they can save money while simultaneously adding resiliency to their equation. While implementing onsite power generation can seem challenging at first, many businesses quickly realize how feasible it actually is when we sit down and hash out the logistics. The study also pointed to initial deployment costs as the main reason for hesitation. However, once installed, businesses save money where they never have before (e.g., conserving energy, modifying consumption, and managing load better during crucial times).

Of NRGs’ United States customers polled in 2020, respondents deployed an average of three DER types each. An impressive 75% of our respondents use solar as their primary DER, 66% use EV charging infrastructure, and 50% employ demand response. These are testaments to how versatile DERs can be. And although a manager may think that their business is too critical to employ technologies like DERs, our knowledge base and ability to take a deep dive into individual business models allow us to tailor a DER solution to fit whatever needs a customer may have.

2. Customers are confused by their choices of power 

DER choices are plentiful and the technologies that enable them are complex. In many cases, how to select the best, most cost-effective option for onsite power to meet their specific needs is unclear to many and often requires guidance from experts.

A DER partnership model where products and public services are provided by a single source is heavily favored. Successful relationships will be collaborative and have multiple components of product knowledge, forecasting, market savvy, and technical know-how. 

3. Customers see DERs as a means to have more control over their power

Customers are considering a variety of models to deploy DERs, moving from owning and operating their own assets to partnering with outside suppliers, including more sophisticated energy providers such as DER product and service providers and ESCOs. These customers may benefit from a single partner for both supply and demand.

There is room for growth in the effective deployment of DERs. A majority of respondents report less than one-third of their load is currently offset by distributed energy.

DERs are trending heavily upward, but there is immense room for growth. A majority of end-users cans offset a third  of their load with some type of distributed energy. One of the reasons they are gaining popularity is because they educate customers while also helping them save money. Once a DER is employed, the energy manager will have real-time information on their energy spend, so they will see new trends in their usage and develop a more widespread understanding of how it ties into their business model.

4. DERs are the best antidote to power outages

DERs are seen as a way to mitigate the effects of power outages. With resiliency and reliability as top concerns, having a back-up power source during a primary grid emergency has become a factor in power management decisions.

Even as resiliency concerns grow, few perform risk analysis, have calculated the actual costs, or know the true impact on their business.

Getting ahead of a power outage can save business millions of dollars. Extreme weather, power surges, and unforeseen circumstances can all lead to costly situations that could jeopardize your business’s integrity and its ability to serve its customers. Without some type of DER, companies rely 100% on the resiliency of the grid. So, if there is a widespread blackout, you will lose power and have to wait until it is ready to come back online. By adding an onsite power generator, your business can predict when an outage may occur and mitigate its effects by switching over to a localized battery storage system or power source instead of relying solely on a power plant. 

5. DERs can help achieve renewables/sustainability goals

DERs can be an effective means to achieve renewable and sustainability goals, as meeting these targets are a driving force for more and more organizations.

Emissions reduction and renewable resources goals have emerged as a leading driver for DER adoption.

Meeting emission reduction targets/goals increased in North America as a driver of allocating DERs from 52% in 2019 to 69% in 2020. This signals two things: 1) businesses are much more invested in their sustainability goals, and, 2) they are making actionable strides to meets those goals. So, feasibly investing in DERs is correlated with setting ambitious sustainability goals. For example, respondents who are currently considering the deployment of energy storage and microgrids — two technologies poised for growth — have higher-than-average rates in setting goals. It doesn’t stop there, though. As a business becomes more knowledgeable about their energy usage and how they can shift reliance to and from the grid, they are able to adopt sustainability goals that position themselves and the environment well into the future.

As work-in-progress conclusions, we can say that customers are increasingly expressing interest in taking control of decisions regarding how and where they get their power. Additionally, they do not expect to spend capital to get it and are looking for real value in new deployments. So, in 2021, with the recovery ramping up, we might see an increase of end-users that feels they must have DERs in their energy mix.  All utilities and stakeholders need to be prepared

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Matt Chester's picture
Matt Chester on Dec 15, 2020

As work-in-progress conclusions, we can say that customers are increasingly expressing interest in taking control of decisions regarding how and where they get their power. Additionally, they do not expect to spend capital to get it and are looking for real value in new deployments. So, in 2021, with the recovery ramping up, we might see an increase of end-users that feels they must have DERs in their energy mix.  All utilities and stakeholders need to be prepared

This sounds like the type of conditions that make community solar or aggregators particularly appealing to customers

Stephane Bilodeau's picture
Stephane Bilodeau on Dec 16, 2020

Matt, you're right.  And this smaller players' version of the "energy independence" became one of the key drivers in the decision making in the last few years.  And this should just grow in importance in the coming years.  

Bob Meinetz's picture
Bob Meinetz on Dec 15, 2020

"...we can say that customers are increasingly expressing interest in taking control of decisions regarding how and where they get their power. "

I, and other environmentalists, are increasingly expressing interest in how DER customers plan to regulate their emissions. Can we expect everyone to regulate their own, or are we now allowing them to decide whether their neighbors will have clean air to breathe?

Stephane Bilodeau's picture
Stephane Bilodeau on Dec 16, 2020

Bob, this is a great complementary question.  The carbon footprint should be considered in the big equation.

Rao Konidena's picture
Rao Konidena on Dec 27, 2020

I want to take a crack at answering this question. From a grid operator point of view, a Security Constrained Economic Dispatch algorithm can incorporate carbon emissions as a constraint in the solution engine. Similar to the operational characteristics such as ramp rate, heat rate and min capacity segments.

Since in the US, the states are leading with carbon free goals due to the lack of a comprehensive federal policy - a grid operator can include the carbon constraint for resources in that particular state, respective state policy.

To answer your question, state's are responsible for answering that question. Obviously, states in a RTO can band together and provide a comprehensive direction to the RTO. Otherwise, Maine in ISO-NE would restrict carbon and Vermont may not - hypothetically speaking.

Hope that helps.

Bob Meinetz's picture
Bob Meinetz on Jan 26, 2021

Rao, states may be leading with "carbon-free goals", but setting goals is easy. I have yet to see one carbon emissions goal that's been met.

For example: California claims to have met its 2020 CO2 emissions goal. But on closer inspection, the state is simply outsourcing its emissions to other Western states by importing dirty power coal- and gas-fired power. Then, it's building a few solar farms and patting itself on the back.

In the real world, countries, and states, and municipalities, and communities, and individual homeowners will overwhelmingly do what's in their financial self-interest - unless they're regulated, inspected and fined where necessary. That can be done most cost-effectively at centralized power plants.

"From a grid operator point of view, a Security Constrained Economic Dispatch algorithm can incorporate carbon emissions as a constraint in the solution engine."

An interesting hypothesis. Are you aware of any grid operator who has successfully employed such an algorithm, taking into account the fuel, efficiency, and status of thousands of independent generators, while monitoring windspeed / available sunlight at the locations of renewable sources?

Rao Konidena's picture
Rao Konidena on Jan 26, 2021

Hi Bob - To keep the dialogue going, specifically on the last point about grid operator algorithm - it is a requirement to provide forecasts for renewable resources. See this wording, from MISO Tariff Module C,

"For reliability purposes, each Intermittent Resource and Dispatchable Intermittent Resource must submit to the Transmission Provider a Day-Ahead forecast of its intended output for the next day consistent with the procedures for such forecast set forth in the Business Practices Manuals.  The Day-Ahead forecast shall not be financially binding on the Resource"

Bob Meinetz's picture
Bob Meinetz on Jan 27, 2021

"must submit to the Transmission Provider a Day-Ahead forecast of its intended output for the next day...The Day-Ahead forecast shall not be financially binding on the Resource"

"Intended output"? If only the sun would oblige us when we intended it to shine...

Seems the incentive for each Intermittent Resource would be to overestimate its output, with the difference made up by burning gas. No?

Rao Konidena's picture
Rao Konidena on Jan 27, 2021

Yes, sort of. In fact, MISO Independent Market Monitor caught this issue and brought it up to MISO Board level. As a result, MISO has changed how much they take a market participant wind forecast into real time operations versus when MISO's own forecast will be used. I believe MISO's Mean Average Percentage Error (MAPE) has improved compared to wind asset owner's forecast.

More details about this forecasts is here - https://cdn.misoenergy.org/20191121%20DIR%20Wind%20Workshop%20Presentati...

At the end of the day, I hope I have convinced you that grid operator algorithms can incorporate a carbon constraint in economic dispatch engine much like a wind forecast.

Stephane Bilodeau's picture
Stephane Bilodeau on Jan 27, 2021

Rao, this is a great example on how AI can improve (effective) usage of intermittent renewables in the mix.  The amount of data to make a proper evaluation is so huge that we need tools (analytics, machine learning, etc.) and computing capacity to achieve them efficiently.  This might become a game-changer in this market. 

Bob Meinetz's picture
Bob Meinetz on Jan 28, 2021

The title of the PDF to which you link, "Dispatchable Intermittent Resources (DIR) Wind Forecasting Workshop", is an oxymoron:

"Dispatchable generation refers to sources of electricity that can be dispatched on demand at the request of power grid operators, according to market needs. Dispatchable generators can adjust their power output according to an order. "

The wind can be turned up or down at the request of power grid operators? News to me.

Rami Reshef's picture
Rami Reshef on Dec 16, 2020

DERs are seen as a way to mitigate the effects of power outages. With resiliency and reliability as top concerns, having a back-up power source during a primary grid emergency has become a factor in power management decisions.

With the increasing impact of climate change, and especially the growing phenomenon of wildfires, power outages are unfortunately inevitable and likely to be on the rise;  resiliency and reliability are indeed top concerns.  Unfortunately, when businesses are reactive, they can be short-sighted and choose a fossil-fuel backup power source that they then activate only during emergencies as stop-gap solutions which only exacerabate the climate problem and in essence contribute to further outages.

Therefore, my answer is that Distributed Energy Resources are a must-have!  When businesses take a comprehensive look at their power consumption and energy management and recognize the value they can derive from managing independent DERs by becoming educated prosumers, they generally increase their energy efficiency and see opportunities for better adapting consumption in alignment with utility time-of-use rates. Moreover, when businesses look at their energy use in a broader, long-term perspective , they are more likely to take into consideration in parallel their sustainability and environmental objectives and can gain a much stronger win by investing in renewable DERs that provide the business both enable resilient backup power as well as reduced carbon emissions.  

In addition to private businesses, aggregators and ESCOs that sell DERs as their primary line of business, by investing in DER models and offering their customers DERs behind the meter, progressive utilities not only increase their ratio of renewables, but gain a new stream of revenue and at the same time improve grid stability, a win-win for all.  

Thanks for your important research; making stakeholders aware of the great advantages of DERs and the significant room for growth should hopefully contribute to the growth of this important trend.

Bob Meinetz's picture
Bob Meinetz on Dec 16, 2020

"When businesses take a comprehensive look at their power consumption and energy management and recognize the value they can derive from managing independent DERs by becoming educated prosumers, they generally increase their energy efficiency..."

Rami, what evidence do you have that splitting the job of generating electricity into multiple pieces is more efficient than generating it at a centralized location?

Stephane Bilodeau's picture
Stephane Bilodeau on Dec 16, 2020

Thanks for your feedback. As I've mentioned it is a work in progress, but all drivers point towards DER becoming more and more a Must-have for the grid's resilience and flexibility. 
Implementation needs to be done with proper planning and design, for it not to become chaos, but rather an important tool in the grids (big or small) toolbox.
Nevertheless, I don't see the toothpaste going back into the tube; DERs projects and importance will just increase with time.

Bob Meinetz's picture
Bob Meinetz on Dec 16, 2020

"...all drivers point towards DER becoming more and more a Must-have for the grid's resilience and flexibility."

Stephane, given adding more resources (particularly renewable resources) to any grid greatly complicates the job of maintaining frequency and voltage stability, I don't think any grid engineers would agree DERs increase the grid's resilience or flexibility. They would probably say the opposite is true.

Jim Stack's picture
Jim Stack on Dec 16, 2020

Distributed renewable power is necessary for all of us to survive. 

Bob Meinetz's picture
Bob Meinetz on Dec 17, 2020

That's a sweeping statement, Jim. What leads you to believe society will ever accept power that cuts off at night, or when the wind stops blowing?

Jim Stack's picture
Jim Stack on Dec 24, 2020

Bob,   The FACT that Renewable Energy is the lowest cost and fastest growing leads me to state my sweeping statement. Also the FACT that the GRID uses most of it's power during the day time and it cuts way back at night when the Sun doesn't shine. We also now have long lasting non toxic battery storage that is growing by the Mega Watt to cover any hours it is needed and helps balance the GRID. Fossil fuel and Nuclear also has a finite amount of fuel and it is running lower each day. Hydro is also great with 24/7 output to meet the baseloads . These are all FACTS not just a sweeping statement out of the air, or I should say Wind. 

Bob Meinetz's picture
Bob Meinetz on Dec 25, 2020

 

"The FACT that Renewable Energy is the lowest cost and fastest growing leads me to state my sweeping statement."

Jim, because solar and wind are dependent on natural gas to "fill in" when they're not available, the U.S. Dept. of Energy doesn't consider comparing solar and wind with dispatchable sources, like nuclear and gas, a valid comparison. So it combines solar/wind together with the gas needed for the times they aren't available, and finds renewables + gas is 19% more expensive than nuclear energy (and it generates a lot more carbon emissions).

"Also the FACT that the GRID uses most of it's power during the day time and it cuts way back at night when the Sun doesn't shine."

A common misconception. The image below shows consumption on the CAISO grid is currently at its peak; the sun went down over an hour ago. During the hottest days of summer it peaks about an hour earlier.

"We also now have long lasting non toxic battery storage that is growing by the Mega Watt to cover any hours it is needed..."

The largest battery bank in the world (Tesla's installation at Hornsdale in Southern Australia) is capable of powering the SA grid for just over 3 minutes. It would be capable of powering CAISO for a period measured in seconds.

Mark Silverstone's picture
Mark Silverstone on Dec 24, 2020

As much as I would like to think that DERs based on renewables can provide the best solution based on local needs, I have to question the priorities.  My guess is that the single highest priority is the adequate supply of power when it is needed.  I am forced to question whether DERs can and will assure supply without fossil fuel back-up, if that is the cheapest way to go.  Who is to say that, for example, natural gas might end up as a major source of supply and we, therefore, fail to decarbonize power supply? 

Do we have to wait until DER storage of renewables is installed and/or mandated? Will we be able to conserve our way to assuring adequate supply? Do we have to wait until a carbon tax is in place to assure that adequate supply and storage of renewable power is in place, as the use of fossil fuels will be a last resort and more expensive remedy for short supply?  Each of these scenarios seems possible.

On whom is the burden to assure supply, and on what basis are the decisions made to do so?  I just don´t see how we get there without a set of ground rules, all based on the goal of decarbonization, not price or supply, as the first priority.

I think a giant re-think of our power generation is, indeed, in the cards and in progress. But, I hope it is not, as it sometimes seems, to be the "wild west" with no rules or overall principles in place.

Rao Konidena's picture
Rao Konidena on Dec 27, 2020

I like your framing of the question on DERs - nice to have or must have. I am in the "its about time - must have" camp.

And I don't say no to capital T transmission. All I say is, let's invite all resources including DERs inside the transmission "tent".

The technology for DER operation and control has progressed a lot. If we see around the energy ecosystem, Virtual Power Plants, Non Wires Alternatives, Alternative to Transmission Solutions, Grid Enhancing Technologies, Microgrids, Grid modernization, the utility of the future, and others are here and functioning well.

However, DERs are not like a hammer in need of nails. It is not a solution for everything. There might be, and would be instances when the electric system would need a strong transmission system backbone for instance, which is actually good for DERs to access wholesale markets.

By the way, the US federal regulator FERC defines DER as, "“any resource located on the distribution system, any subsystem thereof or behind a customer meter.”

Finally, there are grid services such as reactive support and voltage control that are financially settled at a transmission node today. We need to move them to a market node, and have wholesale energy market like price transparency. That would really show the Value of DER (VDER).

Nathan Wilson's picture
Nathan Wilson on Dec 29, 2020

From a grid engineering perspective, DERs are simply a terrible idea.  However, I suppose even a terrible idea can allow middlemen to make a tidy profit off of the attempt.

As to the notion that DERs are a way to get more renewable generation, every year when the reports come out from the DOE NREL and/or SEIA, distributed (residential) solar PV comes out at over double the cost of utility scale PV.  Large PV systems on the rooves of factories and shopping malls are better than residential, but still much more expensive than utility scale.  And every time someone does a study on how to integrate high penetration renewables on the grid, the answer comes out put the renewables on the high voltage long-distance transmission grid, in order to smooth out fluctuations due to clouds, not the local distribution system.

As to the possibility of saving money on the electric bill, that only works if the utility regulator has agreed to let normal customers subsidize the grid connection for PV system owners, in order to incentivize deployment.  It is appalling that in some locations this cost shifting is concealed from the public in order to pretend rooftop PV is cost effective.

If a company or individual wants protection from power outages, fine, install a generation system.  But society should not tolerate additional air pollution, or subsidize the cost by offering a free grid connection for backup use (for consumers, the grid connection and billing service is much more costly than the electricity it is bundled with).

Jim Stack's picture
Jim Stack on Jan 28, 2021

Combined with advanced Battery Storage makes wind ,solar and hydro a Dispatchable Energy Resource. That can add a lot of value to the system. Plus battery Storage is getting lower in cost every year. Solid State and Flow batteries are going to make it a great ROI.  

Bob Meinetz's picture
Bob Meinetz on Jan 29, 2021

"Combined with advanced Battery Storage makes wind, solar and hydro a Dispatchable Energy Resource."

Jim, that seems to be a common misperception. But the supply / demand curve from CAISO for August 16, 2020 (below) shows all grid storage in California, on one of the hottest days of the year, provided no help at all.

The top (aqua) line is consumer demand; the lines below represent the various resources CAISO tapped to meet it.  The maximum amount of battery power delivered to the grid was 150 MW for about two hours before noon, as you can see by the yellow line.

You can't see the yellow line? Neither can I, there wasn't enough of it to rise above the graph's baseline. We'd need 330 times as much "Advanced Battery Storage" to meet peak demand on that day, and tens of $billions in investment to even time shift any significant amount of gas generation forward.

The only reason to build grid batteries is to boost battery and gas sales at the expense of California ratepayers, who get nothing of value in return.

William Thai's picture
William Thai on Feb 5, 2021

I feel DERs started off as a nice-to-have with the multiple government-sponsored incentives and projects, but have have turned into a must-have with recent regulatory changes and technology & standard developments.  In the US, there have been a number of state and federal incentives, rebates, and tax credits made available for DER adoption.  In addition to this, there have been regulations, policy, and standards changes.  For example, Renewable Portfolio Standards (RPS), FERC Order 2222, California Building Energy Efficiency Standards (Title 24), and wide adoption of electric vehicles (EV).  In addition, other industries and companies are being encouraged to reduce their carbon footprint through adoption of DERs and EV.  Technology developments and other tools have been making it possible for Utilities to adapt (monitor & control) to the dynamic needs of the grid, while supporting the societal shift towards green energy.  This is a trend I am seeing driven by customer demand & behavior, regulatory changes, and an increase in Environmental, Social, and Governance (ESG) investments.

Glad to set up time to discuss more, if you like.  Feel free to send me a note, if you prefer.  wthai@wtpartners.us .

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