The impact of Distributed Energy Resources (DERs) on the energy market

May 30, 2023
According to the International Renewable Energy Agency (IRENA), in the EU, Distributed Energy Resources (DERs) have the potential to provide 100 GW of demand response, where the supply of power is better matched with consumer demand.

In recent years, distributed photovoltaics (PV), electric vehicles (EV) and heat pumps have accounted for the expansion of distributed energy sources in Europe. The International Energy Agency (IEA) estimates that 167 GW of distributed PV was added globally from 2019 to 2021, with almost 64% of the new capacity being installed in China, Europe and the United States.  

Let’s take a closer look at how DERs are impacting the energy market in Europe:

The different types of distributed energy resources

There are several types of distributed energy resources:

  • Distributed generation refers to small-size power-generating units, such as micro wind turbines and solar rooftops. It’s increasing expansion continues to be driven by the EU’s recent deal to source 42.5% of its energy from renewable sources like wind and solar by 2030.
  • Demand response enables consumers to adjust their electricity consumption patterns based on affordability. It has a positive impact on grid and consumers benefit from additional revenue from system operators.
  • Smart-charging electric vehicles optimise the charging cycle of EVs based on the availability of local renewable energy. They also optimise charging in accordance with driver preferences and distribution grid constraints.
  • Vehicle-to-grid (V2G) technology enables car batteries to serve as both EV power sources and backup storage cells for the grid, revolutionizing the way we utilize high-capacity batteries.
  • Behind-the-meter batteries are connected behind consumers’ electricity meters. They store electrical energy during periods of surplus generation.
  • Power-to-heat includes technology such as heat pumps, thermal boilers, and thermal storage. These resources are primarily used to heat residential homes.

How distributed energy resources benefit consumers and the energy market

The primary benefit of DERs is that they provide consumers and businesses with more flexibility and auto-consumption capabilities. Consumers are able to produce and consume electricity in a way that better meets their needs and preferences.  

For example, distributed PV reduces consumers’ reliance on the grid and can supply affordable electricity when it’s required. When distributed PV is paired with energy storage, consumers and businesses are also protected from power outages during extreme weather, which is particularly beneficial to those in rural areas.

From an environmental viewpoint, DERs also support decarbonisation strategies. For example, distributed PV can replace fossil-fuel generation, and electric vehicles can replace internal combustion engine vehicles.  

In the electricity markets, DERs could help integrate distribute renewable energy by managing energy resources and operating the grid more effectively. They could provide additional revenue streams for asset owners, particularly when bundled to provide services for longer periods.  

Having more DERs in the wholesale electricity markets would increase competitiveness and lower price volatility by reducing price spikes. For example, when large-scale solar PV produces less energy than predicted, distributed generators connected to storage devices could bid in the wholesale market.  

The challenges of integrating distributed energy resources into the energy market

Perhaps the biggest challenge of integrating DERs into the energy market is the fact that today’s grids aren’t equipped to deal with the infrastructure required to support distributed energy resources. According to the IEA, in 2020, 35-40% of low-voltage power lines in the EU were 20 to 40 years old, and 25-35% of them were more than 40 years old. In short, grid systems need more flexibility to be able to balance supply and demand consistently over long periods.  

The electrification of the energy market in itself is challenging. For example, replacing gas boilers with heat pumps can cause higher evening peak loads, which current grid infrastructures aren’t able to cope with. Likewise, the energy exported from distributed PV can increase local voltage levels, which can negatively impact grid stability.

Technically, some DERs like smart EV charging and battery storage are capable of overcoming these challenges by shifting charging loads and providing system flexibility. However, on a large scale, system operators and their regulators don’t have sufficient distribution grid monitoring or enough data on DERs to leverage such capabilities.  

There’s also a need for regulation, particularly with behind-the-meter batteries, where consumers are free to operate them as they like. This auto-consumption could lead to conflicting interests between consumers and system operators, and may restrict the benefits that these resources could provide to the grid.

As such, regulation is required to ensure that DERs are valued appropriately, that consumers are compensated fairly, and that operators are able to integrate DER services into the grid.

Examples of successful DER initiatives

Toronto-based energy storage company NRStor recently implemented the city’s first virtual power plant pilot, which saw all beneficiaries reduce their costs, resulting in equal cost-sharing between system operators, utility companies, and customers.  

By installing a fleet of home batteries, operated as a virtual power plant, NRStor delivered affordable customer resiliency and local demand response. For the utility companies to provide these benefits to their customers, they had to encourage homeowners to rent a Tesla Powerwall battery each month. This enabled customers to save on energy during peak hours, receive alerts during power outages, and monitor their home energy use in real-time from their phone.

Similarly, the Onslow DER Project in Australia uses utility droplets as secure gateway devices for feed-in management and visibility of distributed assets. With a local population of about 900, the Onslow grid was initially constrained by the number of renewables it could connect.  

Energy company, Horizon Power recognised the potential to triple capacity on the grid using enhanced droplet controllers, provided by energy storage company SwitchDin. The Onslow DER Project is a good example of how utility companies and customers can work together to share the costs of energy infrastructure in a way that provides mutual benefit.

How energy suppliers can leverage a DER strategy

As DERs and auto-consumption continues to take hold in Europe, energy suppliers will be faced with the challenge of maintaining electricity sales while energy costs remain the same.  

Forward-planning will be required, and energy suppliers will need to work closely with regulators and stakeholders to influence policies.

Likewise, customer relationships and company branding will become more important than ever to navigate the uncertainty of the transition to low-carbon generation and the uncertainty of the energy market.

To mitigate the challenges posed by DERs, utility companies would do well to invest in forecasting analytics to anticipate how much of an impact distributed energy resources will have on their business models. In making better use of load disaggregation analytics and meter data, utility companies can mitigate the risks of long-term investment in energy technology.  

As auto-consumption takes hold in the energy industry, the consumer-supplier relationship is at risk of weakening as consumers come to rely less on the energy services provided by utility companies.  

As such, energy companies should aim to be a part of the consumer’s DER decision-making process, and understand what consumers really want from their energy supply. By using consumer data, utility companies can advise customers on DERs while using the opportunity to offer higher-value energy services.

The benefits of Distributed Energy Resource Management Systems (DERMS)

A Distributed Energy Resource Management System, or DERMS, is a software platform that can handle DER assets, deliver grid services, and handle the supply and demand balance. DERMs can help utility companies coordinate distributed energy resources across different locations and can control the distribution of energy from battery storage devices like EV charging stations.

Essentially, DERMS enable lower grid maintenance and reduce costs in the long-term. They enable utility companies to make better distribution decisions and provide consumers with a more reliable, affordable power supply.

They can also help utility companies align customer consumption with the time-variant value of electricity. By integrating billing-CRM systems with DERMs, energy companies can better support the evolving energy markets.

For example, in the US, to enable better price responsiveness with DERs, the Commonwealth Edison Company (ComEd), offers an automated HVAC control programme and price alerts for when certain costs have been exceeded. Through a personalised online account, utility companies can track whether customers are saving under the programme.

Integrating customer billing systems with DERMs also encourages companies to consider how their rates can be better coupled with enabling technologies and third-party data access. In using complementary technologies, customers can better optimise their bills and maximise the benefits of DERs. Although there may not be a ‘one-size-fits-all’ pricing model for distributed energy resources, integrating DERMs with billing CRM systems can help utility companies move toward system optimisation.

DERMS also play a significant role in achieving Net Zero goals. In place of large-scale, centralized power plants, they encourage smaller microgeneration sources that ultimately contribute to a more diverse, reliable, and resilient energy system.

How triPica can help utility companies navigate auto-consumption and transform the customer experience 

triPica’s cloud-native utility billing system enables utility companies to capitalise on new market opportunities. It offers a real-time, fully digital experience, and the potential to unlock the power of data to direct operations. It can also increase agility, reduce costs, and enable energy companies to become leaner – all the while, putting the customer experience at the heart of the service.

The utility blling platform is flexible and can be connected to any grid in the world, making it ideal for managing distributed energy resources. It provides fast implementation and can help speed up a company’s digital transformation. triPica has already successfully connected to the grid in Germany and France, covering legacy customers and managing contract migration from different information systems such as SAP ISU.

Consumers benefit from having full control over their energy usage with smart offers and the ability to leverage smart meters and smart charging. Essentially, triPica provides the usage transparency that today’s customers demand.

triPica provides bespoke SaaS services that enable any green energy suppliers, or traditional providers, to adopt to new industry trends easily. Companies can monetise eco-friendly market opportunities while ensuring cost-effectiveness and scalability.

With triPica, companies can promote eco-friendly behaviour to customers by gaining insights into what energy they’ve consumed from the grid, and what energy they’ve auto-consumed.

Find out more about how triPica can help your company regain agility with our Utility billing technology.

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