What are distributed energy resources and how do they work ?

Distributed energy resources, or DERs, are small-scale electricity supply or demand resources that are interconnected to the electric grid. They are power generation resources and are usually located close to load centers, and can be used individually or in aggregate to provide value to the grid. 

DERs include a variety of physical and virtual assets. Physical DERs are typically under 10 MW in capacity and can consist of diesel or natural gas generators, microturbines, solar arrays, small wind farms, battery energy storage systems, and more. They can be owned and operated by the electric utility, by independent power producers or by local businesses. The utility directs their operation in the same way that it controls the operation of large central power plants, requesting starts and stops as needed. 

You can read more about the types of distributed energy resources ranging from solar to power generators.

What are virtual distributed energy resources (DERs)?

Understanding virtual DERs requires a moderate amount of abstraction. Virtual DERs are made up of a collection of physical assets which are aggregated together and made available to the utility. From the utility’s perspective, they appear as a single resource, like a power plant. After all, what is the difference between one-hundred solar arrays of 10 kW each and a single solar farm with 1000 kW of solar capacity? 

Virtual DERs can be made up of assets of a single or mixed type. For example, behind-the-meter diesel generators, solar panels and batteries can be aggregated, forming a virtual DER. The resulting virtual DER thus possesses its own specific operational profile. When virtual DERs aggregate several megawatts of capacity, they are sometimes called virtual power plants (VPPs).

You can read more about the benefits of distributed energy resources ranging from transmission deferral to generation balancing. 

How do distributed energy resources (DERs) work?

Demand-response resources are commonly aggregated as part of a virtual DER. 

Demand response resources are electric loads which can be shaped, reduced or disconnected on demand. In some regions, for example, homeowners have the option to participate in demand-response programs. The utility or the program manager installs remotely controlled disconnect switches on the air conditioning (AC) unit or electric water heater of participating homeowners, for example. Each individual AC unit or water heater can thus be switched off as needed to reduce the load on the electric grid. Larger virtual DERs aggregate several hundred or thousand homes. The result is a resource comparable in size and function to a small power plant. 

After all, if the objective of the utility is to ensure that electricity generation matches demand at all times, then reducing demand has the same effect as increasing generation. During heat waves, for example, demand-response resources can deliver hundreds of megawatts of relief to a regional grid, averting rolling blackouts such as those ordered in California in 2020. 

Features of distributed energy resources (DERs)

Regardless of the nature of the underlying asset—generators, solar arrays, batteries, demand-response resources or otherwise, most DERs require the following features:

• A communications and controls infrastructure allows the grid operator to transmit start and stop instructions to individual resources. Since DERs are typically not monitored 24/7 by a human operator located on-premises, the controls system needs to be fully automated. Control signals can be transferred, for example, over a wired internet connection, over a wireless cellular network, or even by transmitting signals over the power lines.

• Synchronization and connection equipment ensures the electricity generated by the DERs is in-phase with the grid’s electricity. Solar inverters, for example, convert DC current received from solar panels into AC current. Their job is to provide a smooth sinusoidal AC wave form that is perfectly synchronized with the grid. Transfer switches, in addition, ensure generation resources are fully isolated from the grid when not needed. 
• Metering equipment is needed to ensure the owners of individual DERs are adequately compensated for their resources’ supply and demand. Smaller DER assets located in homes and businesses, such as residential solar systems, normally rely on their main utility meter for this functionality. In most cases, upgrading to a smart meter capable of two-way metering and time-of-day metering is required for larger and more complex DERs. Where solar net-metering programs exist, homes with solar panels can run their meter backwards when exporting solar electricity to the grid, effectively earning a credit on their utility bill. In addition to measuring the amount of power exported to the grid, smart meters can also detect power quality issues such as inadequate synchronization or voltage dips.
• Aggregation software is critical to effectively manage and operate virtual DERs. Individually controlling thousands of individual resources would be highly impractical for utilities and grid operators. Aggregation software provides a streamlined front that operators can work with in an effective way, while also managing the various constraints and features of each aggregated asset. The software, for example, can implement the contractual limitations of demand-response programs ensuring no participant goes without AC for too long or too often, and then select which homes or businesses to call upon to achieve a certain load-reduction objective.

Electric vehicles, solar panels, and more as DERS

Vast quantities of potential DERs are hiding in plain sight. Electric vehicles, residential solar panels, commercial backup generators and more are all DERs just waiting to be “harvested” by an aggregator. Under the appropriate regulatory framework and with the features outlined above, aggregating one-hundred megawatts of DERs can be easier, cheaper and faster than building a power plant of equivalent size. 

In Oregon, for example, Portland General Electric (PGE) has launched a pilot program to aggregate up to 4 megawatts of residential lithium-ion storage units across 525 homes. The utility will have direct control over the batteries; and have the option to use them for any number of services, such as voltage control, frequency control and peak shaving. Though PGE’s program is one of the first of its kind, other utilities are preparing to roll out similar systems. 

Virtual power plants and virtual DERs are a rapidly evolving sector. A future milestone for the sector will be to find a way to aggregate electric vehicles into virtual power plants known as Vehicle to Grid (V2G) technology. The majority of EVs spend most of their time parked and plugged in—in other words, connected to the grid. Therefore, the thinking goes, EV batteries could be used as DERs. Since the quantity of lithium-ion batteries installed into electric vehicles exceeds the quantity of batteries used in stationary power applications by one or two orders of magnitude, the potential benefit of harnessing EVs is massive.

There are still many challenges to overcome before DERs can be deployed to their full potential. However, they are one of the biggest opportunities available to meet future needs in the power sector. 

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