Types of distributed energy resources

Distributed energy resources, or DERs, have rapidly expanded over the past decade. Their expansion is one of the most significant changes that the power generation sector has experienced in that period. 

If DERs are new to you, don’t forget to check out what are distributed energy resources and how they work before going ahead.

Homeowners and businesses install DERs to reduce their energy bills and to have backup power in the event of a service outage. 

Utilities and independent power producers (IPPs) install DERs as standalone assets on the grid to supply a variety of grid services. Increasingly, the industry is focusing on aggregating residential and commercial DERs to provide services to the electricity grid. There are several benefits of distributed energy resources in these use cases, including transmission deferral and generation balancing. 

DERs include several categories of small and modular electricity generation technologies. Here are the main ones:

Small hydro as a distributed energy resource

Hydroelectricity remains one of the most widely used forms of renewable energy. 

Hydroelectric plants of all scales exist, from the Tennessee Valley Authority’s enormous dams, to small run-of-the-river turbines which provide a few kilowatts of power. Small hydro consists of units smaller than 5 MW, though definitions vary. Small hydro units usually involve no dam, so they have less environmental impact than large projects, and can be built with less red tape. 

Small hydro units are built wherever streams, rivers and other water resources are available, which naturally results in a highly distributed development model.

Solar as distributed energy resource

Solar panels are one of the fastest growing power generation technologies. 

In the residential, commercial and industrial sectors, the growth of solar power has been promoted by feed-in tariff and net metering policies, as well as rapidly falling prices for solar arrays. Under feed-in tariffs, utilities are required to purchase solar electricity from homeowners and businesses, usually at an attractive rate. 

Net-metering policies, meanwhile, allow solar producers to credit the electricity they produced, against their consumption, on their utility bill. Where such policies are in place, significant quantities of solar DERs have thus become integrated into the broader electric grid.

Demand response as distributed energy resource

Demand response schemes have also existed for a long time. 

Traditionally, they consisted of agreements between utilities and industrial sites with large electric loads. When the utility called, the factory would shut down a set of large machines or heaters, thus alleviating the load on the grid. 

Lately, demand response schemes have trended towards an even more distributed form. 

Changes in the regulatory environment have enabled homeowners and small businesses to become participants in demand response aggregates. The load from a single home is not significant in terms of balancing the grid. When aggregated, however, the load from several thousand homes constitutes a DER which utilities have come to value highly.

Battery energy storage as distributed energy resource

Battery energy storage has been growing at a rapid pace since its appearance in the power sector as a mainstream technology in 2016. 

Most stationary battery systems in service or in construction today use lithium-ion batteries—the same kind that power phones and electric vehicles, but other types of stationary energy storage technologies are sometimes used in power applications. Flow batteries, for example, are an emerging category of energy storage batteries which use a liquid electrolyte, and can be made to last a very long time, overcoming many of the technological challenges of lithium ion batteries.

Battery energy storage systems of all scales exist, from large centralized systems with several hundred megawatt-hours of capacity to home battery packs rated for a few kilowatt-hours. The latter can be included in virtual power plant aggregations along with demand response contracts. Residential energy storage aggregations are actually an innovation that has only recently been deployed at scale.

Power generators as distributed energy resources

Standalone power generators are a popular choice for many businesses and homeowners. Residential and commercial generators are typically used to provide backup power. 

For data centers, hospitals , air traffic control centers and many other types of activities, a power outage can lead to significant negative consequences, so backup generators are kept on-site in case of a grid outage. 

Some facilities also use on-site generators during normal times to optimize their energy profile. Most of the time, these generators serve the facility’s own needs and are not interconnected to the grid in a way that allows them to export power. 

Increasingly, however, facility managers are able to enter into power purchase agreements (PPAs) with the utility, or with private off-takers to whom they supply power via the grid. From an economic standpoint, this makes a lot of sense. Why leave backup generators doing nothing more than 99% of the time when they could be used to make money instead? 

It’s not just large industrial generators that can be used to export power to the grid. Small-scale commercial and residential generators can also potentially be aggregated into virtual power plants in the same way that demand response schemes and battery systems are.

Upcoming technologies of distributed energy resources

Distributed energy resources belong to a field which is rapidly evolving.  

Several upcoming technologies are likely to achieve broad appeal in the next decade or two. Fuel cells, for example, rely on technologies that are well understood. Though their cost remains prohibitively high for mainstream applications, many companies and research institutions are developing more affordable fuel cells. In a home, a fuel cell could run on either natural gas or hydrogen and could provide electricity, heat and hot water, all in the same package. Fuel cells could, like generators, also be interconnected to the grid and serve as DERs.

Some see the utilization of electric vehicles to provide energy storage on the grid as a sort of Holy Grail of DER technology. Electric vehicles contain lithium-ion battery cells that are very similar to the battery cells used in home battery packs and in large-scale energy-storage applications. When they are plugged in, their batteries have the potential to serve as distributed energy storage assets for the grid. There are various technical and practical obstacles to overcome before this can be the case, but this is an area of active research and development. 

Sign up for Energy IQ to receive energy focused insights in markets ranging from data centers and healthcare facilities, to schools and manufacturing facilities, and everything beyond.