The Grid Needs DERs and Microgrids: Here's What Can Accelerate their Deployment, says Deloitte

June 24, 2024
It could begin with utilities creating integrated DER plans along with stakeholders. States could establish decarbonization targets, and regulators could develop utility incentives to meet the targets at the lowest cost.

With climate-change-driven disasters and load growth from electrification, the grid will benefit from distributed energy resources (DERs) that can help meet increased demand, provide resilience and achieve climate and equity goals, according to a report from Deloitte Consulting.

The report identifies policies and programs that could accelerate the growth of DERs and microgrids, including rate programs that allow utilities to make the most of DERs.

The role of EVs and community microgrids

Vehicle-to-grid (V2G) efforts that create mobile microgrids are an important way to support the grid, according to the report. With vehicle-to-grid charging technology, electric vehicle (EV) capacity alone could meet peak demand in 2035. But that would require widespread adoption of V2G. 

Community microgrids also provide opportunities to meet demand and provide resilience, said Craig Rizzo, managing director at Deloitte Consulting.

A direct current (DC) microgrid behind a distribution transformer could serve three to five customers and allow for peer-to-peer energy sharing. Rizzo is working with a utility on a demonstration behind-the-meter DC community microgrid. It’s a pilot to evaluate the challenges and benefits in the hope of moving toward a formal program, he said. He declined to identify the utility because the project is in its early stages.

EVs and community microgrids are just some of the DERs needed.

“How we’re viewing this: Let’s create the structure, rate programs and policies to allow customers to own DER assets,” said Rizzo.

Potential strategies include utility DER plans and incentives

The report provides a strategy for deploying DERs. It could begin with utilities creating integrated DER plans along with stakeholders. States could establish decarbonization targets, and regulators could develop utility incentives to meet the targets at the lowest cost. Utilities could then focus on investing first in DERs and compensate customers at rates that reflect the DERs’ value to the grid, said the report.

After purchasing the DERs, customers could automatically enroll their DERs in utility or aggregator programs as well as time-of-use rates, automated energy management or demand response programs. They could also take part in virtual power plants that aggregate DERs and provide energy or other grid services.

“A virtuous circle can form as customers are incentivized to purchase revenue-generating DER that can also help meet state targets, and low- or middle-income customers receive accommodations accordingly,” said the report.

California has the highest DER potential

California, Texas, Florida and New York have the highest potential for deploying DERs, with California potentially having 347.6 GW in 2035. This analysis includes capacity from residential solar and storage, demand response, V2G storage and hot water heaters, the report said.

Community microgrids, V2G programs and other DER deployment could help meet demand that’s expected to increase at levels higher than expected in earlier projections.

In early 2023, grid planners increased their demand projections, doubling their five-year load forecast to 4.7%. Since then, growth estimates have continued to rise in response to utilities reassessing demand from domestic manufacturers, artificial intelligence data centers, cryptocurrency miners, electrification and other issues.

Meanwhile, the number of climate-change-driven disasters is growing and raising the risk of lawsuits. In 2023, $28 billion was spent on weather and climate disasters in the U.S. “Wildfire risk areas grew and spread to new states, exposing more utilities to billion-dollar litigation risk,” said the report.

More and longer climate-driven outages

Climate disasters are taking a toll on the distribution grid. Higher numbers of people are experiencing outages that are lasting longer than they did in the past.

“Demand losses have more than doubled between 2014 and 2018, and over the past five years, the disruption of 317 gigawatts of electricity impacted 66 million customers for longer durations,” the report said.

Peak demand will shift with decarbonization

Efforts to decarbonize the grid are increasing and shifting peak demand, the report said. Meeting the Biden administration’s target for decarbonizing the grid by 2035 could double peak demand to 1.4 terawatts by 2035. Demand now peaks typically on hot summer afternoons because of air conditioning loads. But with the move from gas to electric heating, peak demand will likely shift to winter mornings and evenings.

“Depending on their current generation mix and climate, most states are expected to become winter or dual peaking systems by 2035,” said the report.

DERs can also help address grid flexibility and peak demand challenges. For example, rather than curtailing renewables when production is higher than demand, it’s important to store the renewables in batteries, EVs and water heaters and use that energy when needed. And when the grid faces shortfalls, prosumers with DERs can delay hot water heating, lower their thermostats or delay charging their EVs, according to the report.

DER deployment could outpace utility-scale capacity 

Higher peak demand could be met by deploying DERs, which could outdo utility-scale capacity by 2035.

“Unlike inflexible loads that are driving up peak demand and grid expansion, residential electrification creates a load that could potentially serve itself by 2035,” the report said. Zero and positive energy homes can generate as much or more renewable energy than they consume.

To manage DERs without expensive controls, utilities could focus on time-of-use rates and demand response for programmable thermostats.

“Studies commissioned by the states of California and New York show that managed electrification could lower the cost of distribution upgrades needed through 2035 by more than US $30 billion in each of these states,” the report said. Building efficiency programs and smart devices that could manage energy usage and control EV charging could cut capital spending on new substations, transformers, feeder and other distribution equipment.

“I think the point is that anything that classifies as DER should absolutely be used as a grid resource for any use case,” Rizzo said.

About the Author

Lisa Cohn | Contributing Editor

I focus on the West Coast and Midwest. Email me at [email protected]

I’ve been writing about energy for more than 20 years, and my stories have appeared in EnergyBiz, SNL Financial, Mother Earth News, Natural Home Magazine, Horizon Air Magazine, Oregon Business, Open Spaces, the Portland Tribune, The Oregonian, Renewable Energy World, Windpower Monthly and other publications. I’m also a former stringer for the Platts/McGraw-Hill energy publications. I began my career covering energy and environment for The Cape Cod Times, where Elisa Wood also was a reporter. I’ve received numerous writing awards from national, regional and local organizations, including Pacific Northwest Writers Association, Willamette Writers, Associated Oregon Industries, and the Voice of Youth Advocates. I first became interested in energy as a student at Wesleyan University, Middletown, Connecticut, where I helped design and build a solar house.

Twitter: @LisaECohn

Linkedin: LisaEllenCohn

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