Distributed Energy Resources (DERs) – the Next Big Thing on the Energy Landscape?

In the summer of 1889, the world’s first power transmission line was set up in Portland, Oregon – joining a hydropower station to a string of lights 22 km away. Fast forward to just over a century, and Canada alone has power transmission lines that are over 250,000 km, running all over the country.

But for the first time in history, something else is rising above transmission lines in importance – Distributed Energy Resources (DERs). In some places, DERs are even challenging the need for long-distance power lines.

By definition, distributed energy resources are electricity-generating resources that are connected to a local distribution system or a host facility within the local distribution system. Some examples of distributed energy resources are a community solar plant, EV charging stations, a sizable battery bank, or wind turbine(s), among many others.

The Importance of DERs

There are two reasons why DERs are so significant today:

Flexibility and Cost Effectiveness:

In olden times, most power sources were not flexible. You could not set up a hydro or coal plant beside your house. Today, however, the picture is entirely different. For example, the above-mentioned solar plant can be set up nearly anywhere.

Of course, you could always build a new transmission or distribution line to a community established several km away from the existing grid network. But building a power source directly in the community or its vicinity is much easier, and much cheaper.  

Having a power generating source near the consumers also means lower power losses. Additionally, DERs can protect local customers from fluctuating electricity prices, owing to fewer variables than a regular grid.

An Ailing Grid:

About 10 years ago, CBC ran a story titled “Canada’s power grid needs $293B infusion”. Among the stated reasons was “servicing of old infrastructure”. A decade later, an unexpectedly horrifying winter storm destroyed parts of Texas, mainly due to failing grids. 

Immediately, Canadians were concerned about the condition of grids in Canada. One of the newspapers published a story with the title “The unfinished business of preparing Canada’s power grids for extreme weather”, while CBC again brought attention to the fact that “Climate change could cripple Canada’s power grids.”

All of this indicates that Canada’s electrical infrastructure, however regularly updated, isn’t ideal for the increasing number of extreme weather events.

Distributed Energy Resources are a fantastic solution to this problem. Instead of one power transmission line running to connect 50 communities, there can be several DERs powering those communities. If one of those succumbs to a weather event, the others can still provide power to all the other consumers. 

Grid upgrade deferral owing to DERs (Source: Cummins)

As time goes by, it is going to be far cheaper to install newer microgrids powered by local DERs, than upgrade the existing grid.

Grid Optimization and Revenue Generation:

For a long time, DERs have been thought of as disruptors of conventional grid system – a challenger of sorts. And although that is true to some extent, DERs can in fact help support and optimize the existing grid. 

Take the example of demand-response DERs, which are a kind of auxiliary power generating systems. These DERs supply power when the grid power is insufficient. This can be an opportunity for revenue generation for that DER. 

Similarly, a DER such as an energy storage system allows entities to use energy from it when grid power is the most expensive, such as during peak hours. This is known as peak shaving, and a large number of businesses are investing in ESS for the same.

Environmental Benefits:

Last but not the least, DERs reduce greenhouse gas emissions by a significant margin. The reasons are twofold. Firstly, most distributed energy resources today are renewable energy sources, unlike most conventional power plants. 

Secondly, as stated before, DERs mean lower electricity losses, and lower transmission as well as construction materials in use. All of this leads to a greener system of electricity generation and consumption.

DERs, the IESO, and Ontario

For those who haven’t read our previous post on the IESO and its seemingly herculean work, the IESO is in charge of overseeing the electricity market in Ontario, ensuring reliability, and most importantly, planning for the future. And the last part is where DERs come in.

The IESO recognizes the rise of distributed energy resources and their undeniable need in the coming few years.

IESO ad DERs (Source: IESO)

Ontario has witnessed over 4 gigawatts (GW) of DERs contracted or installed over the last decade, and the number is expected to grow in the coming years. In the province, output from DERs has been able to offset the need for supply from the province-wide system.

The IESO has welcomed the era of DERs instead of resisting it. In its own words, “the IESO has heard from some communities, through the regional planning process, a preference for DERs to address regional demand growth or to replace aging assets.”

Interestingly, solar power is playing an enormous role in the growth of distributed energy resources, particularly in Ontario. Take a look at the chart below that shows the distribution of several DERs in the province.

Summing It Up

Every few decades, there comes a radical shift in the technologies we use. Just as we shifted from horse carts to combustion engines, the shift from complex and expensive power grids to distributed energy resources is inevitable. The reasons are obvious – lower costs, higher resilience, cleaner generation, etc.

Accepting this fact, authorities and organizations in charge of electricity markets are preparing for the change. The IESO has done a good job of planning and implementing changes that accommodate this shift.

What this means for consumers, especially businesses, is that joining in the change can bring benefits to your organization. These benefits are financial as well as about better energy security. The reduction in GHGs is another plus, and organizations (even municipalities) looking to meet their emission reduction targets can benefit significantly from DERs.

All-in-all, everything about DERs can be summed up in a few words by Canadian poet Mark Strand – “The future is always beginning now.”