Guide to Distributed Energy Resources

As the energy demand grows, innovative solutions are necessary to increase energy efficiency and grid reliability. One promising solution is distributed energy resources (DERs). DERs such as solar PV panels, home batteries, and small wind turbines decentralize the grid and create a bidirectional power flow.

This reciprocal system of energy generation and storage through DERs is called distributed generation. Learn more about this system’s capabilities, potential impacts, and implementation challenges in this guide to distributed energy resources.


Capabilities of Distributed Energy Resources

Distributed energy resources are an essential component of a transactive energy framework that allows homeowners to sell energy back to the system. This two-way power system permits consumers to partake in demand response programs, which lessen the energy burden of power grids at peak hours.

Many countries around the world are taking advantage of the potential of the distributed energy resource. Australia’s national science agency created a roadmap that projects the nation’s energy consumers will generate up to 45 percent of the country’s power by 2050. A smart grid of this scale would be capable of much more than a traditional centralized power system.

Home Energy Storage

The small size of DER technologies allows consumers to have one or more electricity sources in their homes, decreasing their dependence on their utility company. Homeowners can then contribute to wholesale markets, selling energy back to their utility companies, potentially profiting from their distributed resources.

Renewable DERs like solar energy and wind supply clean energy and can reduce energy costs. By using local renewable energy sources, DERs reduce “line loss,” or energy that is wasted during distribution in a centralized electric grid. A decentralized grid can offer cheaper power with more competition and many other potential benefits. Advocates of a decentralized grid cite greater reliability, efficiency, and environmental friendliness.

If a centralized system has a power outage, entire neighborhoods lose their energy supply in an instant. It is far less likely that multiple decentralized power systems will experience a simultaneous outage. Distributed energy resources can also be used for backup power during a power outage or to provide supplemental power on days with high energy demand.


Like any developing technology, DERs rely on research. As research uncovers more effective ways to produce and integrate DERs, their limitations decrease. The present capabilities of DERs are limited by both technological and meteorological circumstances.

Current technological limitations of DERs include reliability, maintenance, and safety. Standards like the IEEE 1547 provide specifications for the interconnection of DERs and utility electric power systems. Standards like these are important for testing and improving the reliability, maintenance, and safety of an interconnection.

Many renewables are heavily dependent on weather and climate conditions. Hydro generators depend on rain for a steady supply of flowing water. Wind turbines require a minimum wind speed to keep their blades spinning. Solar panels need clear skies and long hours of daylight. If any of these conditions are absent, these sources are no longer dependable.

Research on Future Methods

Labs like the UCLA Smart Grid Energy Research Center (SMERC) are researching distributed energy resources, renewable energy, and development of an integrated smart grid. SMERC’s smart grid research includes a combination of technologies such as cybersecurity, smart air conditioning, and clean energy.

The National Renewable Energy Laboratory (NREL) is a government-owned lab in Colorado dedicated to researching DERs. NREL studies how DERs can be part of the complex power systems that provide energy to the United States. NREL envisions a future in which clean energy is distributed equitably across the United States and around the world, including underserved communities. NREL offers resources like a hosting capacity analysis, which helps utilities and policy makers better understand and plan for a cleaner electrical grid.


Impact of Distributed Energy Resources

As distributed energy resources penetrate the energy market, they will have a larger impact on energy storage, transmission, and consumption. This guide to distributed energy resources shows the significant role of DERs in the future of the power system by examining the impact to peak loads, potential benefits, and capital costs.

Peak Loads

Distributed energy resources can reduce peak loads through demand response management (DRM). Research has shown that DRM can be effective in peak load reduction. These promising results are especially important because of the increasing energy demand, which is estimated to grow by up to 24 percent in the next several decades.

Distributed energy resources can also reduce peak loads through blockchain, a type of distributed ledger technology. This technology collects data that can be shared and used to incentivize investment in a storage battery to flatten peak loads. This results in a more stable electrical grid.

Potential Benefits

The potential benefits of distributed energy resources are vast. As the movement toward an integrated system grows, power production and consumption complement one another for greater efficiency.

Distributed energy resources benefit the average citizen in many ways, even if they don’t control their own DERs. Electric utility companies save money by using solar and wind power, and they pass those savings on to their customers. Even electric cars are projected to be used as DERs someday, acting as portable generators for residential homes.

Additionally, replacing fossil fuels with more widespread use of DERs allows for a reduction in emissions and positive environmental impacts. The technologies behind solar panels and windmills have grown rapidly in the last ten years, producing energy more efficiently and increasing access to renewable energy.

Capital Costs

The capital costs of a DER system are high. Whether DERs are being purchased and integrated by a utility company or a homeowner, they are a significant investment. Solar panels, windmills, and other DERs are expensive to purchase, but they are also expensive to maintain and repair.

In addition to the financial investment, DERs also require large areas of land. A 2 MW turbine occupies as much space as an 850 MW nuclear facility. Solar panels also cover a lot of land, but they can be placed on top of roofs. This makes them easier to install than windmills, which require large, empty spaces.

Another cost of DERs is energy storage. The cost per kilowatt per hour (kWh) decreased by almost 70 percent from 2015 to 2018, but it is still expensive to store energy. According to research from Dr. Micah S. Ziegler, et al., storage costs need to be below $20/kWh for the US national grid to be cost-competitive and supported by 100 percent renewable energy. This represents around a 90 percent decrease from the current storage costs. The future of DERs is bright, but cost and complexity must continue to decrease.


Challenges of Distributed Energy Resources

DERs offer many benefits, but they aren’t without their flaws. Utility companies, politicians, and private citizens all have opinions challenging their widespread use, funding, and regulation. DERs also face technological and scientific challenges.

Private Sector Challenges

The private sector holds many obstacles for DERs. Distributed energy resources pose a threat to regulated utilities, which lose revenue when consumers produce their own power. Still, utility companies could offset lost revenue by investing in their own DERs and adapting to an ever-changing market.

One of the biggest issues with the implementation of DERs is funding the upkeep of the existing grid, which is maintained by a grid operator. Utility companies are responsible for the costs of the national power infrastructure, even if their revenue decreases as DERs supply alternate power. As with any big change, many people are skeptical of the cost-efficiency of an integrated grid.

Public Sector Challenges

Distributed energy resources face many challenges from the public sector, usually in the form of policies and regulations. Since energy is essential for a country to function properly, political decisions largely direct how the power grid develops and determine much of the future of DERs.

One challenge DERs face is their impact on the bulk power system. DERs are not currently required to provide reactive support to help control local voltage levels. DER technology is advanced enough to provide reactive support, but until public policy requires it, DERs could have a negative effect on the voltage levels of the larger grid.

Application Challenges

Like any developing technology, DERs face many challenges, even outside the private and public sectors. In addition to challenges surrounding funding and regulation, DERs are limited by their own technological advancement. Many of the limitations were presented earlier in this guide to distributed energy resources, but they include power, cost, and reliability limitations.

DERs also face the massive challenge of coordination between utility companies and grid operators to ensure that all parties are properly compensated for their contribution. This is precisely the challenge that transactive energy systems hope to solve.


New Opportunities for Distributed Energy Resources

Distributed energy resources are a newer technology, but they have already seen significant acceptance worldwide. Many research groups project even wider acceptance as the technology and regulations surrounding DERs continue to advance.

DER Infrastructure Worldwide

DER infrastructure is booming all over the world. Sweden is one of the foremost leaders of these new technologies with a goal to eliminate all fossil fuels from electricity generation by 2040. The Nordic country challenged other countries to race them to this lofty goal. Costa Rica is a smaller country, but it aims to become carbon neutral. The island nation produced 95 percent of its electricity from hydro, geothermal, solar, and wind from 2015–2019.

In other regions, DER infrastructure is stimulating innovation and employment. Scotland created the world’s largest floating wind farm. The farm is a six-turbine, 50 MW facility off the coast of Aberdeen. The US solar industry employs more people than nuclear and coal combined. Other DER and renewable energy leaders include Denmark, Uruguay, and Germany.

Collaboration of DER and Renewable Energy

Renewable energy has penetrated international power systems rapidly in the past few decades in response to growing concern for the environment. DERs have experienced that same growth due to their incentivized participation. Both DERs and renewables have distinct supporters, but they also have several shared interests, such as a solution to the instability of weather-dependent renewable DERs like solar and wind.

DERs and renewables need technology to advance to become more reliable and efficient. Swaminathan Ganesan, et al., researched the necessary voltage source for a battery energy storage system, a type of DER that helps manage the “intermittent nature of renewable energy sources.” Research like this demonstrates the shared interests of renewable energy and DERs by showing their technological interdependence and combined potential as reliable sources of power.

DER Market Trends

The consumption of renewables is projected to increase rapidly. The US Energy Information Administration predicts that by 2050, the global consumption of renewables will grow to nearly 250 quadrillion British thermal units from just over 50 quadrillion in 2010. Another EIA report shared that US fossil fuel consumption in 2020 was the lowest that it has been in nearly thirty years.

Other market trends, such as increased battery storage capacity, represent positive changes for the future of DERs. However, there are also negative trends that highlight the flaws of renewables. The EIA expects US hydropower to decline 14 percent in 2021 because of drought conditions. Following market trends helps consumers, policy makers, and stakeholders understand the future of the power system and DERs.


Learn More about Distributed Energy Resources

As seen in this guide to distributed energy resources, DERs can benefit consumers, utility companies, and others. It is crucial for policy makers, providers, and consumers to understand both the benefits and drawbacks. To learn more about transactive energy and how it enables participation in the DER market, read this position paper from the IEEE Blockchain Initiative.

Interested in learning more about distributed energy resources? 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.