Benefits of Distributed Energy Resources: Shifting the Energy Landscape

Centralized energy systems are insufficient to meet the world’s needs. Large power grids and plants can be cumbersome, environmentally harmful, and present a single point of failure. They can also prevent consumers from accessing key information about their energy usage. In our modern energy landscape, a new approach to power is necessary—and distributed energy resources can facilitate this transition.

Distributed power systems have the potential to transform the way we consume, generate, and transact energy. However, many people are unaware of the benefits of distributed energy resources. In this simple guide, learn how distributed energy resources can help unlock improvements in environmental impact, cost effectiveness, energy efficiency, and more.


How Distributed Energy Resources Are Changing the Energy Landscape

Distributed energy resources are powerful tools that place energy transactions in the hands of consumers, not utility companies. Instead of relying on a large, centralized grid system, communities can generate power at the local level and reap economic benefits in the process. 

Understanding Distributed Energy Resources

For decades, we have relied on a centralized energy generation system where utility companies owned and operated massive power plants. These utilities are responsible for assessing the cost of energy and billing consumers for their usage. Under this system, the utility is the only party that benefits from energy transactions.

Distributed energy resources are small energy generation units owned and operated by small groups or individuals. These units generate power, often from renewable energy sources, near the point of use.

Examples of distributed energy resources include the following:

  • Wind-generating units
  • Biomass generators
  • Rooftop solar panels
  • Battery storage
  • Hydropower
  • Combined heat and power units
  • Emergency backup generators
  • Smart batteries in electric vehicles

When an energy consumer owns and operates distributed energy resources, they can fully participate in the energy economy. This means that the consumer can sell their excess energy back to the grid. As a result, the consumer becomes a prosumer, meaning that they use and produce energy at the same time.

The transformation of energy consumers to prosumers is causing a major shift in the energy landscape. Both residential and commercial consumers can choose to implement their own power systems in their homes or places of business, taking control of their energy usage.

Changes in Policy and Public Planning for Distributed Systems

Our current power grid systems are insufficient to meet the world’s energy needs. Legacy infrastructure is old, slow, and crumbling. A singular failure in one part of a centralized system could cut off a community’s power for days.

Grid modernization using distributed energy resources can help transform energy systems, improve their performance, increase resilience, and alleviate stress on the traditional power systems. To support this shift, several governments are advancing policies to regulate distributed generation systems and encourage the adoption of renewable energy sources.

For example, the Australian Energy Market Commission has established rules and standards for the adoption of distributed energy resources throughout Australia. The California Public Utilities Commission has published a road map to facilitate the penetration of distributed energy into the state’s power grid.

Traditional utility providers are also preparing for the shift to a distributed energy system by leveraging advanced technologies. Experts are refining models to better predict distributed energy resource demand while creating utility load forecasts. Advanced customer modeling tools help utilities better understand decisions related to distributed energy, monitoring demographics, retail rates, cost and performance metrics, and other key factors.


Environmental Benefits of Distributed Energy Resources

It is no secret that fossil fuel emissions are harmful to the environment. According to the United Nations Environment Programme, the concentration of greenhouse gases in the atmosphere directly affects the average global temperature. The average global temperature has increased by 1.1 degree Celsius, which experts have linked to an increase in extreme weather events, like heat waves, droughts, flooding, and wildfires.

Experts consider a rise in average global temperature beyond 1.5 degrees Celsius to be a major tipping point for climate disasters. To prevent warming beyond this threshold, emissions must decrease by 7.6 percent every year from 2021 to 2030. However, our current energy systems are nowhere near to meeting this goal.

Power plants typically run on high-polluting energy sources like coal and natural gas and are major contributors to fossil fuel emissions. In fact, just 5 percent of the world’s power plants are responsible for an astonishing 73 percent of global electricity production emissions.

By adopting a distributed energy framework, communities can help decrease pollution by reducing demand on traditional centralized power plants. When communities rely on individual generation units, they decrease the amount of electricity that a centralized power plant needs to produce.

Due to a reduction in demand, power plants can generate less emissions during their day-to-day operations. If the community switches to renewable energy generation units, they avoid releasing harmful gases into the atmosphere. The result is a true reduction in fossil fuel emissions and air pollution, improving the community’s quality of life.

Additionally, switching to a distributed energy framework can help reduce pollution-related deaths. According to the World Health Organization, air pollution kills an estimated 7 million people each year, and fossil fuels are major contributors to poor air quality. By reducing power plant demand, communities can reduce air pollution and avoid these preventable deaths.


Cost Benefits of Distributed Energy Resources

Distributed generation is not only environmentally friendly, but it is also more cost efficient than the traditional centralized plant framework. In fact, distributed resources go beyond saving money—they can also deliver compensation directly to the pockets of energy consumers.

Distributed Energy Resources Are More Cost Efficient

Distributed energy resources enable consumers to reduce their overall energy costs. These generation units provide energy on site, eliminating the need for expensive infrastructure to transmit and distribute power.

As a result, the cost of providing energy decreases overall, delivering cost savings benefits to the energy consumer. With a strong and effective implementation plan in place, deploying distributed energy resources could yield a 50 percent reduction in the localized cost of electricity.

When consumers invest in distributed energy resources, they also gain access to digital platforms that they can use to monitor, manage, and control their individual generation units. Using these solutions, consumers can make changes to optimize their energy usage and reduce their energy bills in the process.

These capabilities are especially beneficial for business consumers. By implementing distributed energy resources and applications to monitor energy usage across their organization, businesses can see where they use the most energy and identify areas for optimization. With this data, businesses can easily deploy corresponding solutions and reduce their overall energy costs.

Distributed Energy Resources Unlock Economic Opportunities

In addition to saving money, using distributed energy resources can help consumers unlock economic opportunities. A distributed energy system operates using a transactive energy framework, where consumers can engage in the energy market directly. Consumers can sell the excess energy that they produce with their distributed energy resources back to the grid, earning tangible compensation in the process.

Distributed energy resources are the keys to unlocking these economic opportunities. Under a distributed system, consumers have the power to generate their own energy, instead of relying on utility companies that control each aspect of the energy transaction. Consumers have access to opportunities that were previously only available to these entities.

Digital technologies can also help consumers engage in transactive markets. Applications can monitor the market automatically and negotiate smart contracts on the consumer’s behalf when an opportunity arises. Consumers simply need to connect their distributed energy resources to the application, configure the system to match their preferences, and let the transactions occur.


Availability of Distributed Energy Resources

Distributed energy generation has the power to revolutionize the energy landscape. Communities, governments, and researchers around the world are working to transform our current energy systems and promote the adoption of distributed energy resources. However, proponents of distributed energy systems must overcome several challenges to reach their implementation goals.

Barriers to Distributed Generation Adoption

Despite growing research and interest in distributed energy systems, critical hurdles are preventing widespread adoption. These barriers include political conflicts, regulatory challenges, and lack of education on the benefits of distributed energy resources.

It is not easy for the century-old energy industry to completely overhaul its infrastructure and radically change how it operates. Also, it is often not in the best interests of these companies to encourage the adoption of distributed energy systems. This position can result in conflicts during legislative and regulatory processes, making it difficult for proponents to gain the support they need to pass critical policy.

When governments do implement regulations for distributed energy resources, they can also conflict with the consumer’s ability to control their generation units. For example, California’s Electric Rule 21 requires consumers who install distributed energy resources to ensure that their utility provider can access the equipment’s communication and control features.

Under this system, utility companies can control a consumer’s energy usage according to its needs. However, the owners of the generation units do not receive compensation during these transactions. This rule conflicts with the mission of a truly transactive energy system that relies on distributed power sources.

Finally, few people know about the benefits of distributed power systems, and many people carry misconceptions about renewable energy sources. They may believe that distributed energy is expensive, ineffective, and presents more issues to the end user than a traditional centralized system.

In reality, distributed energy resources can help alleviate the burden, inefficiency, and instability of traditional power grids. Proponents of distributed energy systems can engage in many activities to spread awareness of the benefits of distributed energy systems:

  • Engage in discussions about transactive energy with community members
  • Conduct and advance academic research on distributed energy resources 
  • Read about and share information about distributed energy success stories
  • Become involved with grassroots organizations looking to advance the adoption of distributed energy systems

Examples of Distributed Energy Resources in Action

Although barriers to adoption exist, the demand for distributed energy resources remains strong. Many communities are adopting distributed frameworks for energy and migrating away from the outdated systems of the past.

Here are several exciting success stories involving distributed energy resources:

  • South Korea’s Jeju Island is using microgrids and virtual power plants (VPPs) to reach its goal of having completely carbon-free electricity and transportation systems by 2025. Using distributed energy platforms and smart grid technology, Jeju Island’s plug-in electric vehicle population will reach 371,000 by 2030.
  • Maryland’s Montgomery County wants to reduce its greenhouse gas emissions by 80 percent by 2027, and by 100 percent by 2035. The county also required greater resilience in its energy systems and to replace aging infrastructure. In 2017, Montgomery County installed two microgrids, helping it meet its goals for resiliency, efficiency, and sustainability without a large upfront investment.
  • AGL Energy in South Australia is aggregating battery systems of one thousand homes with rooftop solar panels to create a VPP with a capacity of five megawatts. Using advanced software, this project will help coordinate and optimize distributed energy resources across its customer base, making it easier for consumers to access their benefits.


Bringing Distributed Energy Resources to Your Community

The benefits of distributed energy resources are plentiful—from reducing greenhouse gas emissions to encouraging greater participation in the energy economy. Although certain barriers may hinder growth, many organizations, institutions, and community groups are working to promote the widespread global adoption of distributed energy frameworks.

If you want to bring distributed energy systems to your community, check out IEEE 2030.11. This IEEE Standard provides guiding principles for the deployment of distributed energy resource management systems and microgrid services.

Interested in learning more about the benefits of distributed energy? Get involved with IEEE Blockchain-Enabled Transactive Energy (BCTE). This program is series of regionally diverse virtual forums addressing Blockchain-enabled transactive energy in the domain of electrical power and energy application development. To learn more about IEEE Blockchain, join the IEEE Blockchain Technical Community to stay informed of latest activities.