Distributed Energy Resources - Rectangle

Distributed Energy Resources

Power grids around the world are becoming more decentralized, resulting in distributed energy resources (DER) that are transforming energy markets. Learn more from BCG.

The DER market has expanded annually by double digits, with the greatest gains coming from sales of power storage equipment, photovoltaic systems, and systems that manage energy and the response to demand. And recent policy moves—including new energy savings policies in the European Union—will likely further encourage the growth of the DER segment.

DER Challenges for Utilities

As the DER market grows, utilities must be prepared for a range of challenges.

Grid Integration. Without upgrades to the grid, integration will be complex. In addition, utilities will have to reckon with the difficulties of intermittent resources that are uncontrollable and often unknowable, dependent on shifts in weather as well as customer behavior.

Rate-Return Squeeze. Customers generating their own power with DER will buy less electricity from their utility, which will spread the fixed cost across a lower number of kilowatt hours sold and raise the rate of electricity overall, incentivizing further DER adoption.

Regulatory Changes. Public utility commissions and utility regulators are putting pressure on utilities to better serve DERs, enabling third parties to aggregate resources for the grid and drastically changing traditional rate-based models.

Changing Customer Expectations. As the DER markets grow, customers are more often expecting their resources to be better integrated into the grid and the utility to participate in providing energy services.

DER Opportunities for Utilities

Despite the many challenges that the DER markets are causing, utilities can look forward to exciting opportunities to change their business models and secure lasting growth.

Participate in the change. Utilities need to get actively involved in providing the latest technologies and programs, including energy efficiency, community solar, rooftop solar technologies, and the enablement of electric vehicles.

Increase the importance of the grid. Utilities must find ways to integrate DER into the grid and offer value-added services to DER customers—and compensate DER customers for grid services they provide—making the grid more valuable overall by enabling DER.

Technology and the Future of DER

Digital is playing an increasingly important role along the entire DER value chain, and it must be a central focus for utilities taking on the evolving DER market.

Advancements in technology will continue to drive and shape the future of DER and the role utilities can play, including peer-to-peer solutions and blockchain, the integration of multiple DER resources, sophisticated pricing and interaction with the grid, and the growth of the electric-vehicle market. The average electric vehicle, for example, will require approximately $1,100 in grid updates.

Competitive retailers and DER installers can acquire greater numbers of customers through digital marketing channels and the microtargeting of customers. They can improve equipment installation through virtual mapping and design, as well as the AI-based dispatching of crews. And digital can provide clear opportunities for DER operations and maintenance, including creating a mobile app for customers, so that they can control their system; the virtual monitoring of and dispatch to the grid; and more.

Meet Some of BCG’s Experts in DER

BCG’s DER business line covers the full DER transformation journey, bringing deep expertise and market understanding, data, tools, and a proven track record. These are our experts on this topic.

protected by reCaptcha

Subscribe to read our latest insights on Power and Utilities.