What Are the Benefits of DERs?

DERs can provide different benefits to different stakeholders in the power system. For example: consumers may use DERs to lower their power cost or increase the reliability of the power they receive from the grid; power system owners and the public may benefit from avoiding the cost (and emissions) of new generation or transmission; and system operators and distribution utilities may gain increased flexibility in managing the grid.

However, the benefits of DERs may not be equitably distributed, and they may create operational and economic difficulties for distribution utilities and system operators. To avoid this, appropriate policies and regulations need to be implemented. Fortunately, power systems with higher levels of DERs have developed approaches for addressing these issues and these can be adopted for other power systems.

---

Main Points

• DERs can provide a range of benefits to consumers, power system owners and operators, and the public at large. These include decreased costs for consumers and the power system, decreased emissions, and economic benefits from new business opportunities.
• Realizing the benefits of DERs requires planning and investment by distribution utilities, supported by policies and regulations to ensure the benefits are evenly distributed.
• Regulations also need to address the potential for decreased power system revenue from electricity sales and shifting of costs between consumers who adopt DERs and those who don’t.
• There are frameworks for considering the benefits and costs of DER adoption to inform policymaking and regulation.

---

First, Read This

DERs can provide a range of benefits to different stakeholders, though power systems may need to adjust to realize them. These adjustments must be supported by appropriate policies and regulations.

Distributed energy resources have the potential to provide consumers with a range of benefits:

• Consumers who install DER units may be able to reduce the price they pay for electricity or may obtain improved reliability outcomes.
• DER may also help reduce the cost of power system augmentation, helping to reduce the overall cost of supply faced by consumers.
• Increased penetration of DER may also help reduce the overall emissions intensity of the NEM [National Electricity Market], by displacing other more emissions-intensive generation.

While DER provides a range of benefits, it also includes a range of relatively new and developing technologies. Power systems and networks need to adjust to the effects of these new technologies. It is important that these initial issues are recognised and addressed, in order to ensure that the benefits of DER can be fully realised.

Text excerpt from Australian Energy Market Operator webpage: Distributed Energy Resources

Next, Read This

Driven by declining costs, distributed generation (DG) systems are becoming increasingly prevalent, mostly in the form of DPV. These systems have the potential to provide benefits to distribution utilities and consumers, if managed properly.

Although many kinds of distributed renewable generation can be deployed—including wind, micro-hydropower, and biomass—the most common DG energy system is a solar photovoltaic (PV) array…. Their benefits to utilities include being a means to lower GHG emissions and, in some cases, may allow them to defer expensive generation or distribution infrastructure investments. Additionally, implementing power generation at or close to where it is used also reduces electrical losses associated with the transmission and distribution (T&D) system. With proper supporting technologies and policies, rooftop PV, distributed wind, or micro-hydro can also provide a community with a source of electricity for basic needs during disasters.

Text excerpt from page 3 of Distributed Generation to Support Development-Focused Climate Action by USAID and NREL

Now Read This

In areas prone to supply disruptions, the resilience provided by DERs like DPV is particularly important. Regulatory support and technical guidelines can help ensure that DPV is incentivized and capable of providing resilience in response to disruptions.

Distributed solar photovoltaic (PV) systems have the potential to supply electricity during grid outages resulting from extreme weather or other emergency situations. As such, distributed PV can significantly increase the resiliency of the electricity system. In order to take advantage of this capability, however, the PV systems must be designed with resiliency in mind and combined with other technologies, such as energy storage and auxiliary generation. Strengthening policy and regulatory support could encourage deployment of PV systems designed for resiliency and improve public access to power during emergencies.

Text excerpts from pages 1 and 7 of Distributed Solar PV for Electricity System Resiliency: Policy and Regulatory Considerations by NREL

Next, Read This

Realizing the benefits of DERs also requires managing their challenges, like changes in power flows and increased variability from DG.

When deployed in large numbers, however, DG systems with significant amounts of renewable generation can also raise integration challenges. For the distribution system, these challenges include unplanned voltage variations and power flows in distributions systems originally designed for one-way power flow and the need for more complicated configurations of circuit breakers and other protection equipment. For the broader power system, the variability of renewable generation can complicate the procurement and dispatch of other generators and increase their ramping requirements, among other operational challenges. Careful planning with a mixture of different DG technologies or the use of enabling technologies, such as energy storage and smart inverters, can help mitigate some of these challenges.

Text excerpt from page 3 of Distributed Generation to Support Development-Focused Climate Action by USAID and NREL

And Now This

DG can also create financial issues for utilities and distribution system operators as customers meet more of their own energy needs, reducing sales of electricity, even as many of the costs associated with delivering power remain unchanged.

Consumer interest in and deployment of solar photovoltaics (PV) has accelerated in recent years. Increased adoption of distributed generation, particularly distributed solar PV, is expected to have impacts on utility-customer interactions, utility system cost recovery, and utility revenue streams. As a greater number of electricity customers choose to generate their own power, demand for utility system power declines. As a result, fixed system costs, such as the costs of transmission and distribution services, will be recovered over fewer kilowatt-hour (kWh) sales by the utility, and this could put upward pressure on electricity rates. Regulators are facing the challenge of defining and preparing for the potential rate and revenue impacts from expansion of distributed PV. Looking forward, it will be important to address potential financial impacts on utilities that are responsible for ensuring that the electricity infrastructure supports reliable electric service for customers. The regulatory context and rate structures governing utilities and owners of residential and commercial-scale distributed PV present both market opportunities and market barriers that will influence the path forward for the incorporation of higher penetrations of distributed PV. A number of regulatory models and rate design alternatives are available to address the challenges posed by the transition toward increased adoption of distributed PV.

Excerpt from page iv of Regulatory Considerations Associated with the Expanded Adoption of Distributed Solar by NREL

Next, See This

Policymakers and regulators can work to develop frameworks that make it possible to identify the benefits and costs to different stakeholders to help inform their decisions. A comprehensive approach also includes economic and environmental benefits to society. The Electric Power Research Institute (EPRI) has developed a model for thinking about this benefit-cost analysis.

See: Figure from page 9-3 of The Integrated Grid: A Benefit-Cost Framework by EPRI.

Finally, Read This

Efforts to integrate DERs into power systems are underway in various parts of the world. The U.S. case studies below reference how DERs can help meet load growth, solve transmission reliability issues, and address voltage regulation and frequency response. There is more on the grid service DERs can provide in the following section, What Are the Benefits of DERs?

Suggested Actions & Next Steps

• Consider the benefits DERs can provide for your power system. Which of these benefits is most important for your country or region?
• What is the biggest challenge for your power system in integrating DERs?
• Review the types of DPV analysis available for considering different stakeholder perspectives from Greening the Grid.