A practical guide to holistic management of distributed energy resources

Paring knives are built with a specific use in mind and while one might be used to replace a missing screwdriver or open a bottle of wine in a pinch, the blade or the bottle is likely to be damaged in the process. A Swiss Army knife or a Leatherman tool would be a much better device for those jobs because they are designed to do far more things than a single paring knife. 

Herein lies an important lesson for the way organizations think about managing distributed energy resources (DERs). As the size of the new energy market grows, not only are there an increasing number of DERs, there are also more ways that energy providers want to and can use them to serve their customers. 

To manage all of that, organizations need a holistic approach that has the flexibility of a Leatherman rather than the narrow functionality of a kitchen knife. 

For many energy providers, though, their distributed energy programs have tended to be point solutions. For example, a demand response program that taps into a single type of resource such as residential thermostats. 

These types of programs are akin to paring knives that are perfect for the job they needed to do. But the energy world has changed dramatically, and the pace of change is accelerating. 

Today, a number of trends are making point solutions an unideal fit for the greater complexity of DERs in the market and the greater sophistication of energy providers looking to deploy these resources. 

The first trend is that of decarbonization with the growing number of renewable energy resources in the system such as wind power plants, and utility and residential-scale solar. Each of those assets have a very low marginal cost for the delivery of electrons, but there are intermittency issues that determine when these assets are available and how much capacity they can deliver to the grid. 

Another key trend is deregulation and competition, which is enabling energy providers to transition from the charging-for-electrons business model to a more customer-centric services model. It is difficult to underestimate the impact of how this commoditization of electricity is changing the ways in which energy providers operate, and consumer choice is one of the biggest impacts. 

Consumers have more choice than ever before, not only in who their provider is but in how they can use new distributed technologies to serve their energy needs. This growing decentralization of the energy grid through the use of assets such as smart home appliances, building energy management systems, rooftop solar, commercial- and residential-scale storage create new challenges for energy providers, and digitalization creates new opportunities. 

With the internet of things (IoT) intersecting the energy sector, energy providers can have visibility into distributed energy assets and control them in real-time.  

In a fast-moving market with these forces of decarbonization, deregulation, decentralization, and digitalization accelerating, a point-solutions based approach to managing and leveraging DERs simply cannot meet the growing needs of energy providers. 

It becomes a hindrance rather than a path to achieving organizational goals because point solutions are specific to a type of asset or use case, and therefore are not designed to scale as more DERs are added to the utility or energy provider’s customer base. 

What energy providers need is to take a more holistic, flexible approach to managing distributed energy resources. Key steps in such a flexible approach are outlined in this article starting with the first: what the definition of a distributed energy resource management system (DERMS) is. Sometimes, the definitions differ in how many resources are accounted for. 

Sometimes, the definition is limited by a lack of foresight into how the market and technology will evolve. Sometimes, it is limited in how it views customer needs. This may seem obvious but competing definitions and visions for DERMS may have implications on the type of solution that is procured.

Recognizing that different definitions of DERMS are being used in the industry, Navigant Consulting published on DERMS to help harmonize these. Accordingly, a distributed energy resource management system (DERMS) is defined as a software-based solution to monitor, forecast, and control grid-connected and behind-the-meter DERs across customer, grid, or market applications in real-time. These assets may be utility, third-party, or customer-owned, and directly or indirectly controlled by the utility. 

Please note that the definition accounts for the interests of all the key stakeholders — the customer programs team, the grid operations team, the procurement and/or energy markets team, and finally the end consumer. The utility customer programs team endeavors to have high levels of enrollment and engagement from end consumers in DERMS programs. 

The utility grid operations team wants to, at the very least, be able to manage the impact of DERs on their operations, and ideally be able to use these enrolled DERs for grid services. The utility energy supply and/or energy markets team wants to either reduce the cost of procuring energy, especially at peak times, and/or identify market monetization opportunities for the pools of DERs in the utility customer base. 

And finally, end customers want to use their DERs to deliver on energy bill savings, especially if they own these assets. Both the utility procurement teams and the DERMS solution provider can ensure that key stakeholders’ goals are met. The utility can ensure that key requirements from each group are included in the procurement process and it is incumbent on the DERMS solution provider to show how their software solution can help meet these goals.

Once an organization is on the same page about the definition of a DERMS, it’s important to choose a solution that reflects that definition. Scalability is the most important consideration in the assessment of DERMS solutions. There are actually three types of scalability to consider in any selection process:

࢖ Scalability of Types of Devices – An effective DERMS platform needs to not only support a growing number of devices within a certain category (smart home devices) but also support a growing variety of distributed energy devices, This type of scalability requires a solution that supports open standards, open protocols, and that has a flexible architecture enabled with the ability to accommodate an ever-diversifying ecosystem of assets for creating and delivering electrical capacity. One method of evaluating solutions providers is to consider the different types of devices that solutions providers have connected to and the open standards that they support out of the box. Open standards are especially important for utilities concerned about pools of DERs being stranded when newer technologies become available.

࢖ Scalability of Dispatch and Optimization – One of the most easily-overlooked characteristics of an effective DERMS solution is scalability in how the system can effectively manage the optimization of a large number of DERs. As the sheer number of devices increases, the optimization problem becomes more challenging both in terms of computational methods and computational power needed to solve it. The solution must, therefore, account for this added complexity and be able to forecast, optimize, and dispatch these DERs in real-time in ways that support customers’ needs and the organizations’ technical and financial goals. In evaluating the strength of the solutions providers, the utility may consider both the total MWs they have on their system and the total number of devices that they are optimizing as part of one computational run. These two metrics are a good indicator of the scalability of the platform solution’s optimization and dispatch capabilities.

࢖ Scalability of Use-cases – This type of scalability is related to the core analytical and computational capabilities but is worth mentioning separately. When the DERMS solution is able to deliver on multiple value streams simultaneously, which is sometimes described as value-stacking, all key stakeholders stand to benefit. Asset owners can monetize the value of their DERs faster, utilities are able to deliver on different types of market and/or grid services using the same pool of DERs, and end customers are able to see larger reductions in their energy bills. Some DERMS solutions providers tend to focus on one type of value stream only, usually because their core optimization engines are built to do just that. For forward looking utilities, a solution that focuses on a single use-case may limit  their ability to maximize the value of DERs in their customer base. Furthermore, flexibility built into the DERMS solution in being able to support use-cases that the organization has not yet anticipated is just as important. Evaluating this flexibility ensures that any organization’s investment into a DERMS is insulated from changes in technological, regulatory, and market environments in the future.

A final consideration may be to evaluate how the DERMS solution provider can integrate into the utility or energy provider’s Distribution Management System (DMS/ADMS). Such integrations help align the goals of the energy provider or utility’s operations and end-customer facing teams, and help create a seamless experience interacting with the DERMS wherein relevant information about the distribution network is passed on to the DERMS and the DERs connected to the DERMS are dispatched to be able to alleviate localized network congestion, manage system peaks, act as a generation sink for periods of excess renewables, and other grid-related services. 

In conclusion, a DERMS solution needs to account not only for the end-customer’s experience through the lifecycle of the programs they participate in, but also account for the needs of various teams within the utility or energy provider both at present and in the future.

About the Author: Sadia Raveendran is a Solutions Architect at AutoGrid, the leader in flexibility management software for the energy industry. Prior to that, she did research on carbon capture and sequestration at the MIT Energy Initiative and helped build Tata Power’s solar portfolio in India. 


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