DER: Boon or Bane for Electric Utilities?

Power Lines
Image by norqin from Pixabay

According to a new report from Navigant Research, while the growth of distributed energy resources (DER) poses some significant challenges for electric utilities, it also provides a number of opportunities.

"The proliferation of distributed energy resources (DER) will be among the most disruptive trends to the traditional energy industry over the next decade," Navigant writes in the report titled "Global DER Deployment Database."

Most energy companies are already wrestling with revenue erosion due to the increasing popularity of energy efficiency strategies, demand-side optimization and solar photovoltaic setups that are increasingly being utilized and installed by their customer bases. In fact, Navigant predicts DER generation deployments will outpace the deployment of new centralized generation capacity beyond 2024 and that DER capacity will reach over 500 gigawatts by 2028.

"However, if orchestrated by the right flexibility solutions, the accelerating pace of DER growth can provide the stability needed in power grids to manage dispatchable energy demand," the report states.

In addition, the report notes, innovative business models, regulatory support and technological investments can improve access to financing for DER deployments.

"Declining technology costs and innovative long-term and price-based instruments support the development and grid parity of DER globally," the report states. "While most DER use cases support electrification needs for behind-the-meter and on-site generation, existing and planned additions of centralized generation around the world greatly influence the proportion of DER technologies in the system."

In sum, as Navigant sees it, the future is bright for DER and its benefits for utilities, noting that energy price volatility will continue to cause uncertainty for small and medium producers, making investment in DER attractive.

However, getting financing for DER can be difficult unless the projected return on investment is one to two years, which, Navigant pointed out, would be uncommon for utilities. To circumvent this challenge, the report notes innovative financing options are gaining popularity and that these might be a place for utilities to look.

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