‘New culture’ will help utilities unlock power of distributed energy, experts say

Distributed energy resources have proliferated among households and energy ‘prosumers’—entities that both consume and produce energy

Energy providers and consumers both stand to benefit from a distributed energy arrangement, reaping reduced costs, increased grid security and reliability, and opportunities to innovate green and sustainability goals. Houle Electric photo.

This article was published by The Energy Mix on Feb. 23, 2024.

By Christopher Bonasia

Despite industry perceptions, increasing consumer interest in distributed energy resources is not a “death spiral” for utilities, experts have found. But to make best use of DERs, grids need better visibility on what goes on behind the meter.

“Utilities and their customers must adapt to a new culture and a more nuanced relationship than the simple provider-user dynamic that has prevailed since the grid was first built more than a century ago,” write researchers at Oxford Economics and Siemens in a new report.

DERs have proliferated among households and energy ‘prosumers’—entities that both consume and produce energy—amid technological advancements, rising public interest, and a slate of policy shifts that have prompted their expansion. But, by and large, larger utilities have resisted distributed resources.

“It is true that DERs like rooftop solar and home battery storage could pose a threat to the traditional utility model by allowing consumers to generate their own electricity, reducing their dependence on the traditional grid,” writes the Kleinman Center for Energy Policy. “Predictions for a death spiral assume that as dependence on the grid decreases, rates would increase for customers remaining on the grid, encouraging those customers to also install their own DERs in a vicious cycle that eventually would feed the collapse of the utility’s business model.”

However, some utilities have taken a different tack and integrated DERs into their infrastructure. Energy providers and consumers both stand to benefit from the new arrangement, reaping reduced costs, increased grid security and reliability, and opportunities to innovate green and sustainability goals.

For instance, Octopus Energy, the United Kingdom’s second-largest energy supplier, initiated a demand-response program that provided more than 1.86 gigawatt hours of peak electricity savings and distributed a total of £7 million (C$12 million) in rewards to 700,000 participating customers, writes Patrick Ronan, a research and innovation analyst at TAF.

And in Vermont, a bring-your-own-device program reduced annual energy costs across the system by US$3 million by offering customers up to $10,500 toward the purchase of a home battery, in return for shared control of the device over 10 years.

In Canada, Ontario’s Electrification and Energy Transition Panel (EETP) sees the potential, stating [pdf] in a recent report that DERs can “play a pivotal role in decarbonization and reduce the need for new large-scale generation, distribution, and transmission infrastructure as electrification accelerates.” In September, 2022, a study commissioned by the provincial Independent Electricity System Operator showed that between 2023 and 2032, it would be possible to cost-effectively meet all incremental system needs with DER capacity.

But hurdles still exist in Ontario, the EETP found, including a lack of regulatory and system flexibility for integrating DERs. To make best use of distributed resources, utilities need better access to data about the capacity available behind the meter.

The Oxford Economics report, based on a survey of 100 utility industry decision-makers in the United States and Canada, found that utilities across the continent must contend with opaque DER data. Increasing that visibility will depend on building trust with customers, write the researchers.

“Most utilities surveyed understand the basics of the new energy landscape, like the overall number of DERs on the grid,” they note. But more granular details, like DER location, size, and activity, “are harder to track,” and the lack of clarity can make it difficult for utilities to address operational issues. To some extent, utilities can increase visibility by investing in technologies to better track DERs.

Other barriers to behind-the-meter visibility include customer hesitation to share information, due to privacy concerns or a lack of interest or awareness. Michael McMaster, Solution Architect for NextGen Grid Management at Siemens, said utilities need to work with customers to overcome this disconnect. A good starting point is to gather usage and preference profiles to understand when customers are comfortable with utilities controlling their DERs—and when they are not.

Bridging the gap between customers and utilities “might require reframing the customer-utility relationship from an impersonal, transactional one to a collaborative one that can help maintain low costs while protecting the environment,” McMaster said.

That will call for “a paradigm shift” in customer perceptions, so that utilities “are not solely [seen as] billing companies,” he said.

“Instead, they are willing to collaborate with consumers to help achieve a common goal.”

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