With Tesla’s announcement it will rent solar panels to customers for $50/month with no long-term contract, the energy industry is seeing more examples of inventive partnerships. Utilities and service providers are looking to innovative business models to offer solutions that meet customers’ energy and non-energy needs. Paramount to this trend is the ability to integrate multiple resource types into a single customer offering instead of the traditional siloed approach.
Integrated distributed energy resources (IDER) are a topic of growing interest. Several utility-led pilot programs have explored the potential of distributed energy resources (DER), controlled in aggregate, to provide valuable grid services. IDER programs actively manage energy through the integration and coordination of one or more of the following: Energy efficiency, demand response (DR), distributed generation (DG), energy storage, and EVs.
Management and coordination does not need to be performed by the utility. It could be achieved through a combination of grid operator and utility price signals, third-party aggregator control, and customer choice.
IDER can be broken into several categories:
- Integrated demand side management (IDSM): Combines energy efficiency and DR technologies
- Bring your own device (BYOD): Program where customers purchase their own technologies, such as thermostats, water heaters, energy storage, and EVs, and participate in utility/energy supplier demand side management programs
- Non-wires alternatives (NWA): DER used to defer or replace traditional transmission and distribution system upgrades
- Deregulated IDER: Competitive retail energy suppliers and energy service providers offering IDER as opposed to regulated utilities
- Other IDER: Includes all other forms of programs that utilities are piloting and expanding
Several financial and regulatory drivers are pushing utilities and suppliers to explore and implement IDER, including:
- Grid services for renewable balancing: The rising penetration of renewable resources makes the load flexibility provided by IDER increasingly valuable. IDER management systems can at a site level or aggregate level to identify and prioritize the resources best suited to provide a given grid service.
- Deferring capital costs: In addition to the NWA scenario, IDER may provide load curtailment or energy dispatch to reduce peak load and the costs of capacity buildout.
- Customer satisfaction: Some utilities are attempting to provide innovative energy solutions to attract and retain customers and, for a handful of commercial customers, help them meet internal sustainability targets.
- Lower business disruption risk: Utilities are transitioning from the traditional model of being generation, transmission, and distribution system operators to energy solutions providers.
There are several market barriers that must be addressed to allow IDER to graduate from pilots to larger-scale deployment.
Measuring DER: The opacity of DER assets’ capacity can make planning (long term) and operation (short term) difficult. While traditional turbine generation has a well-defined, dispatchable capacity, DER assets’ capacity must be defined relative to an expected baseline, which is highly dependent on day-of factors.
DER communication and interoperability: Interoperability between DER at a customer site can be a challenge. Devices operating on different platforms may be blind to the existence of other devices, reducing the potential for co-optimization.
Separation of DER programs: Energy efficiency, DR, DG, and EV programs are typically run by different departments within a utility. Because of this, utility programs often have their own budgets, timelines, data, and program staff. This can make combining program efforts difficult.
Different vendors and financing mechanisms for different DER: Vendors will often specialize in a given DER technology, with their own financing models and platforms, making it difficult for the customer to acquire a single energy solution set with central, co-optimized control. Different financing schemes can complicate the customer buying process and hinder potential DER bundling.
As DER presence grows, utilities and energy suppliers are developing capabilities and partnering with or acquiring solutions providers to provide integration services and increase value to customers. Some examples worth highlighting follow:
Through its BYOD program, Green Mountain Power operates a subscription marketplace model for IDER open to residential customers.
Eversource is working to avoid siloed approaches to DER resources and solutions through existing programs and upcoming demonstration projects around storage, EV load management, traditional curtailment, and software and controls.
European energy supplier ENGIE offers DER management system services to commercial and industrial customers that capture the value of DR, storage, EVs, and generation.
Navigant Research anticipates that nearly $404 million will be spent on IDER in 2019 globally (see graph). This spending will likely be driven in North America. However, in 2028 spending is expected to also be substantial in Europe and Asia Pacific. IDER spending through 2028 will likely be determined by the addition of IDSM, deregulated DER, NWA, BYOD, and other DER spending. Navigant Research anticipates that IDER spending will increase to more than $4.8 billion in spending by 2028. Growth will be fastest in deregulated markets.
Europe, as a deregulated market, has energy providers and aggregators participate directly in energy markets. This contrasts with the US where aggregators often participate in IDER via utility programs. In Asia Pacific, following the 2016 deregulation of its electricity markets, Japan has undergone a significant shift. The Ministry of Economy, Trade and Industry established a consortium of major Japanese industrial and energy companies in 2016 to create a virtual power plant demonstration. Australia has become a global IDER leader, with the Australian Renewable Energy Agency playing a critical role in facilitating and partially funding three large IDER trials.
As energy markets trend toward deregulation and DER technologies fall in price and increasingly penetrate all regions of the globe, IDER is expected to become a bigger piece of the resource puzzle and a bigger customer offering for utilities and energy suppliers.
Lead photo by Khara Woods on Unsplash