Are Distributed Energy Resources Gaining Traction?


A 10-year horizon: 2005 - 2015.

A 10-year horizon: 2005 - 2015.

Fortnightly Magazine - February 2005
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What does the current landscape look like for distributed energy resources (DER)? What applications and business models are being pursued by leading companies, and where can we expect to find DER in the next 10 years-in 2015?

An EPRI white paper, Distributed Energy Resources: Current Landscape and a Roadmap for the Future , developed with input from industry stakeholders, provides a broad-based picture of the current state and potential future of DER. The project team conducted interviews with more than 15 utilities and systems developers. These interviews offer a diverse portrait of different approaches to DER and an up-to-date, "on-the-ground" look at energy company attitudes toward DER.

Overall, EPRI found a renewed interest in DER. Increasingly, evidence suggests DER could have significant impact on the future of the grid and its design, including better utility asset utilization and less expensive system upgrades to meet new peak demands. Opportunities also are being explored for DER to be applied in joint utility/end-user applications-to meet both customer end-use needs as well as utility grid support-and thereby to capture dual benefits.

However, much remains to be done to reduce the costs of technology, facilitate applications in concert with the needs of the grid, and remove policy barriers.

From the 1990s to Today

In the mid to late 1990s, the energy industry in the United States witnessed a growing wave of interest in the alternative energy sector, particularly in DER. This interest was fueled by several drivers, including electric utility deregulation, availability of cheap and plentiful natural gas, new non-utility market entrants such as Enron, and the prospect of exciting new breakthroughs in small generation options that could change the landscape of how electricity was generated and delivered. By 2003, the picture had changed. Many of the preconditions and drivers anticipated for DER growth had experienced delays and reversals, and the prospects for large markets looked less hopeful.

Today, the electric utility industry faces continued challenges and uncertainties. Over the next decade, the cost structure of the generation sector is anticipated to increase considerably due to rising fuel costs, environmental regulations, and energy security concerns. A lack of consensus exists on future utility business models-whether they will be supply-side commodity-based or will be transformed into a more demand-side services business. In addition, substantial new investments in electric transmission and distribution system infrastructure are needed to address load growth and increase reliability.

These key industry uncertainties continue to drive interest in the role of distributed power, particularly in their opportunity to meet peak demand and use precious natural gas resources more efficiently. Also, there still is hope for new technologies-especially certain energy storage systems and high-efficiency hybrid options that have the potential to significantly affect the course of supply-side and demand-side utility business models.

Within this context, the outlook for DER today once again has changed. Recent mega-city blackouts, dramatic reductions in investments in central-station plants, and an aging T&D infrastructure point to the need to continue to follow