The time is now for establishing concrete rules, roles and responsibilities for utilities and other participants.
Paul DeCotis is Senior Director and East Coast Energy & Utilities Practice Head at West Monroe Partners, LLC.
The rise of distributed energy resources (DERs) presents a challenge and opportunity for utilities and regulators alike. DERs are introducing a new layer of complexity to utility operations, transforming the existing vertical network to a combined mesh (distributed) network, while at the same time promising to inject new life into the traditional utility business model. Utilities, however, are hesitant to make any significant investment in interconnection and system operational improvements, IT and data management systems to support DERs, until regulators address risks of utilities associated with uncertainty. Risks include cost recovery of existing investments, ground rules that define the role and responsibilities of utilities and third parties, and compensation for utilities for the added risk to system operations from the distributed business model.
Driven by policy directives over which utilities have little control, DERs will remain both a threat and opportunity until regulators agree on a new paradigm. Many regulatory bodies are suggesting precluding utilities from participating in the DER market yet utilities in some cases are the most likely entity to ensure achievement of DER goals, having risk tolerance, longer-term business focus, and responsibility for maintaining the electric grid.