With Electricity Costs Increasing, New Coalition Says Deploying DERs Can Lower Costs and Reduce Outage Numbers

With the right policies in place that maximize the benefits of deploying microgrids and other distributed energy resources (DER), electricity will be more affordable, said Lorenzo Kristov, a consultant to the Climate Center who specializes in electric system policy, structure and market design.

That’s because microgrids and DERs can reduce the need for transmission lines and transmission-scale generation. In addition, DERs are locally owned and operated resources that keep energy revenues in local communities and strengthen local economies, he said. 

New coalition to focus on DERs and give customers choice

Common Charge, a new coalition of consumers, nonprofits and businesses, aims to highlight those advantages and accelerate deployment of DERS to lower electricity costs, provide resilience and give utility customers more choices over how they acquire power.

The coalition, which includes Advanced Energy United, Charge Ahead Partnership, Coalition for Community Solar Access, Eco Capital, Institute for Local Self-Reliance, Pivot Energy, Solar United Neighbors, Sunrun, Vote Solar and others, will focus on advocating for policy changes and increasing consumer access to DERs.

Lowering energy costs–and providing resilience–is becoming more important as growth in data centers and AI, electrification and extreme weather boost energy prices and spark outages.

Power cost increases expected in PJM territory

In some areas, power costs are expected to soar in response to data center demand. In PJM territory, a hub for data centers along the eastern U.S., power costs are estimated to jump by up to 60% over the next five years. 

“Everywhere there is an ongoing rate case looking to increase rates because demand is increasing and utilities are under pressure to find new resources. Distributed resources should be considered along with traditional resources,” said Katherine Hamilton, acting executive director at Common Charge.

To help address rising energy costs, it’s important to identify and share information about policies that promote DER deployment, she said. The coalition’s members don’t have a forum for sharing information. 

Policies that could increase DER deployment

The group is studying efforts that include:

–A virtual power plant (VPP) pilot in Virginia, HB 2346, under which Dominion Energy Virginia must propose a VPP aggregating various DERs, providing up to 450 MW of capacity.

Dominion must evaluate electric grid capacity needs and the ability of VPPs to supply grid services, including peak-shaving, during peak electric demand. The law is based in part on a model DER program created by Solar United Neighbors.  “It remains to be seen how that will spin out,” Hamilton said. “Let’s see how you can do this in a way that’s at scale.”

–Two new Oregon laws that aim to overcome regulatory and other barriers to microgrid development. The bills are also designed to promote local energy production and energy storage, insulating communities from rising costs associated with load growth. HB 2065 allows third-party engineers representing communities to conduct studies about interconnection. The goal is to overcome bottlenecks in the energy planning process and help projects get built. Under HB 2066, communities could designate themselves as resiliency corridors. The bill would compel utilities to work with them as technical partners.

–A  July 29 California virtual power plant (VPP) test involving Sunrun, Tesla and Pacific Gas & Electric, during which VPP aggregators in California discharged their batteries between 7 p.m. and 9 p.m., yielding 535 MW of average output.  Most of the batteries participated in California’s Demand-Side Grid Support Program. The 535 MW of battery output wouldn’t have happened without the test event, said the Brattle Group in a report.

The report also found that output from the batteries was consistent during the entire event.

Helping customers acquire DER technologies

To leverage the benefits of batteries and other technologies that can support the grid in this manner, the coalition wants to increase access to DER technologies for consumers.

“The major challenge is that the market is locked up. There are technologies out there that could benefit consumers right now, but consumers don’t know about them and don’t have access to them,” Hamilton said. One challenge is the difficulty of establishing a quick interconnection for solar energy. Another is consumers’ lack of access to their own utility data.

But the coalition shouldn’t just focus on behind-the-meter customer-sited resources, Kristov said.

Establishing revenue models for front-of-meter supply resources

The coalition should also work toward creating viable revenue models for front-of-meter supply resources as a “substantial portion” of each state’s renewable energy supply, he said.

In addition, creating a new resource type in utilities’ integrated resource planning efforts would help accelerate DER deployment. It could be called “distributed solar and storage in the built environment” and would recognize the benefits of locating supply sources close to the load. This would not require transmission or create land-use conflicts, Kristov said.

He also called for enabling energy transactions between front-of-meter supply sources and local customers within the distribution system, without going through the transmission system and independent system operator markets. In addition, this type of policy should be under the jurisdiction of states and avoid the Federal Energy Regulatory Commission, Kristov said.

A major challenge to getting DER programs up and running has been utility entrenchment, he noted.

“The major industry incumbents have been making gobs of money for 100 years on transmission-scale investments with comfortable low-risk rates of return. DERs are a threat to their profit ecosystem, so they use the political process to present barriers and keep the focus on transmission,” Kristov said.

 For example, the incumbent utilities and their supporters argue that customers deploying DERs harm other customers and drive rate increases, which isn’t accurate, he said. DERs are more likely to lower rates.

“The political arena is where a strong coalition could start to build a countervailing lobbying force,” he said.