ORIGINAL REPORTING: How Utilities Are Answering The Distributed Energy Resources Challenge

Learning by doing: How utilities are answering the distributed energy resources challenge; Utilities are beginning to understand how to make money with DERs, but it's still a work in progress

Herman K. Trabish, March 9, 2016 (Utility Dive)

Editor’s note: Since this story ran, the effort by utilities and consumers to seize the DER opportunity has accelerated.

In the most recent Utility Dive State of the Electric Utility survey, 60% of utility professionals surveyed said their utilities should partner with third party vendors to deploy DERs, up from 56% the previous year. But nearly the same amount (59%) said they thought their utility should own and operate DERs, rate-basing their investments in the technologies. These two seemingly contradictory strategies being explored by utilities suggests they are still considering options for DER-centric business models and may even be pursuing multiple opportunities. As utilities across the nation move toward a less centralized power system, many of them are learning about how to operate and deploy distributed resources through rate-based pilots, which may help explain the popularity of the utility ownership option for DERs.

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As utility leaders mull how to enter the DER market themselves, they are also considering how to respond to the steady proliferation of distributed resources already taking place throughout much of the nation. As consumers increasingly generate and store their own electricity, they pay less to the utility, decreasing its revenues. The problem is accentuated by the fact that 74% of utility executives’ expect minimum or stagnant load growth in their territories and another 9% expect declining load growth. Only 18% expect the load in their territories to increase. In response, utilities across the nation are moving to change their rate structures so they can better recover costs from customers who install DERs like rooftop solar or residential storage. But many rate structure reforms would effectively impede the DER value proposition and slow progress…The goal should be rate structures with price signals that drive DER owners to deliver power at periods of peak electricity demand so they become grid assets, rate design experts say… click here for more

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