Distributed Energy Resources Explained

Distributed energy resources are transforming energy by decentralising power generation. The new “energy building blocks” present challenges for utilities but also opportunities to manage demand, integrate renewables, and build a more resilient, cost-effective, and sustainable energy future.

Share on

The numbers speak for themselves where distributed energy resources (DER) are concerned:

The US is set to add 217 GW of DER capacity through 2028, according to a Wood Mackenzie study. Europe is also going to experience rapid expansion of DER capacity.

Simultaneously, the number of consumers who generate power through photovoltaics or other renewable energy sources is on the rise. In Europe, up to 83% of all households could be generating electricity by 2050.

Similar trends define the continued rise of electric vehicles and battery storage.

For utilities and energy companies, the rise of DER means a rapid transformation of how energy is generated, stored, and consumed. These new, smaller, decentralised assets present new challenges—but also new opportunities to solve grid risks, reduce emissions, and actively manage energy better.

DER distributed energy resources with EVs

What are distributed energy resources?

Distributed energy resources are decentralised energy assets. They include a variety of technologies, such as solar panels, battery storage, electric vehicles (EVs), heat pumps, and wind turbines.

A shared quality is that DERs enable households and businesses to generate, store, or manage energy at or near the point of consumption. Importantly, they can also export excess energy back to the grid, reducing the overall demand for centralised power plants. In other words, they can participate more actively in the energy grid.

DERs can generally be divided into two categories: “behind the meter” (BTM) and “in front of the meter” (FTM).

  • BTM are energy systems where power is generated or orchestrated on-site without passing through a utility meter. For example, solar panels installed on a factory roof generate electricity that is consumed directly by the facility.
  • FTM involves systems where energy is passed through a meter.
Potential graph

Current and emerging DER trends

The growth of DERs is driven by factors like lower renewable energy costs, increased awareness of climate change, and supportive government policies. Key trends include:

  • Solar PV and battery storage: Distributed PV systems keep growing, with more connected to on-site battery storage. In 2022, total solar PV generation reached 1 300 TWh. The following year, 40 GW of battery storage systems were installed, nearly double the total increase from the year before.
  • Electric vehicles (EVs): One of four new cars sold in 2023 was an EV. EVs are a means of transportation but can also double as energy storage and grid support devices. For example, advanced smart charging enables them to change at optimal times to support load balancing.
  • Smart demand flexibility: Intelligent systems for heating and cooling enable consumers to optimise energy consumption based on real-time grid needs. The benefits include lower overall costs for utilities and consumers and reduced strain on the grid.
Energy flexibility icons

Distributed opportunities for utilities

Managed and integrated efficiently, distributed energy resources present many opportunities for energy companies and utilities. The list includes:

  • Resource optimisation: Utilities can leverage DERs to enhance grid utilisation through frequency regulation, demand response, and load balancing. These services help balance supply and demand, reducing the need for costly grid upgrades.
  • Decarbonisation: DERs offer better control of energy usage and can contribute to decarbonisation efforts. Rooftop solar, battery storage, and demand response programs tied to DERs all help reduce carbon footprints while saving on energy and costs.
  • Aggregation: One of the most promising opportunities for utilities is the development of virtual power plants (VPPs). VPPs aggregate a range of DERs into single, controllable assets. As a flexible, scalable alternative to traditional power plants, VPPs can provide grid-level services and options for grid and energy management.
Illustration of parts of an EV engine.

DER challenges for the energy industry

The substantial benefits and potential of DERs are sometimes counter-balanced by the challenges they present for energy companies and utilities. One of the overriding problems is that many power grids have been designed explicitly for centralised energy systems. Other key challenges include:

  • Grid stability: Intermittent renewable energy sources like solar and wind can complicate grid stability. DERs can be a solid alternative to the existing, expensive “peaker plants,” but they need to provide predictable, dependable energy. Finding the optimal way to manage DER resources to ensure grid reliability remains challenging.
  • Standardisation: Integration of DERs with utilities’ existing solutions and the grid remains challenging. Different manufacturers – and types of DERs – use various communication protocols and control systems. This fragmentation makes it difficult for utilities to efficiently aggregate and manage diverse DER assets.
  • Visibility: Behind-the-meter DERs, especially, remain somewhat of a grey zone for utilities and grid operators. The lack of insight regarding what equipment is installed or available (for example, where EVs are located and when they are charged) makes it hard to predict and manage the flow of electricity. This can lead to issues such as voltage fluctuations and congestion on distribution networks.
Network of energy grid resources

Thinking long-term about distributed energy resources

There are many considerations and choices for utilities regarding DER. One of the main areas is whether to design and implement your own DER solutions, including DERMS, or collaborate with external partners. In-house development can provide easier integration with existing solutions.

However, collaborating with external solution providers often offers a faster, more cost-effective way to adopt DER technologies. Providers bring specialised expertise and proven solutions that enable utilities to deploy and scale quickly.

Solutions scalable for future growth should be a core focus area. Solar, battery storage and EVs are set for rapid future growth, and utilities need solutions that enable them to make the most of that growth. One example is managed EV charging, which enables utilities to balance grid demands by shifting EV load to off-peak times, preventing grid strain without expensive infrastructure upgrades. As more EVs are deployed, the potential benefits grow – but only if you have solutions capable of scaling with your needs.

Checklist for DER solutions and partners

Utilities and energy companies can start their exploration of solutions and possible partners by asking the following questions:

  • Scalability: Can the solutions grow alongside increasing DER adoption, such as for EVs?
  • Portfolio: Does a provider offer a range of technologies that enable us to tailor solutions to current and future needs?
  • Track record: Has the provider successfully worked with the utility and energy industry before, including cases of delivering DER solutions?
  • Integration: How well do the solutions integrate with the utility’s infrastructure?
  • Compliance: Do solutions align with all relevant existing and coming regulations?
  • Cost-effectiveness: Will the solutions deliver long-term savings and efficiency?
  • Support and maintenance: Does the provider offer ongoing technical support and updates?

By evaluating these factors, utilities can ensure they select the right partners to meet immediate and future needs and maximise the benefits of DER integration.