How Do We Make Old Power Grids Work with New Energy? - DERMS Industry Overview

The equation utilities are managing is supply must always equal demand. And while storage is difficult at scale in the centralized case, it's more feasible in smaller formats in the distributed case. So we can add an inventory variable here too. Supply plus storage inventory equals demand. The distributed energy resources or DERs provide more levers for managing these equations. And we can segment the various types of DERs based on their role, supplying power, storing it, or managing the demand for it. Let's first look at the first group. These are the generation DERs, small-scale power production systems. They help solve this equation in a straightforward way by producing more supply. These are often behind the meter, meaning they are fully in the control of the off-taker and beyond the reach of the utility. The biggest and fastest growing example is rooftop solar. Other renewables can be used in this way as well, such as small wind turbines or small hydropower systems. But these are larger systems and better suited for commercial and industrial customers, also known as C&I customers. In most markets, surplus power generated from behind the meter can flow in the reverse direction back onto the grid for a price. In deregulated markets, customers can be paid via feed-in tariffs for their power generation. In regulated markets, they can usually get a credit on their bill. Generation DERs can also be in front of the meter, meaning they connect to the low-voltage distribution grid. For example, say that a small community installs a small solar farm. In this case, the utility will be able to monitor and often control these resources. Distributed energy generation is not actually new. We've been using fuel generators to produce on-site electricity for a century. But renewables are different in a key way. They involve zero marginal costs. This means that for the first time, producing a surplus and sending it back onto the grid for others to use is a real possibility. Next, let's turn to the storage DERs. The leading example is batteries, which are often paired with rooftop solar. Storage DERs can store power that is generated on-site by a generation DER, or they can store power from the grid, say charging up during off-peak hours for use later when prices are higher. The largest and most promising source of distributed batteries is hiding in plain sight. Or, well, hiding in garages, on roads, and in parking lots. We're talking, of course, about electric vehicles, or EVs. Emerging technologies will likely soon allow power to flow from parked EV batteries back into homes, or even back onto the grid. This concept is called vehicle-to-home building, or grid, V-to-H, V-to-B, or V-to-G. While these technologies are not yet widely feasible, pilots are currently underway in markets like California. Alternatively, energy can be stored in the form of heat. This is sometimes called power-to-heat, but more often thermal storage. The most common case is a simple hot water heater. When power is in abundance and low cost, water can be heated for later use. Other media can also be preheated in this way. For example, special phase-change materials, called PCMs, are designed to retain and slowly release heat. These can be built into floors or walls. So, generation DERs work by adding supply, and storage DERs work by putting energy into on-site inventory. The final set of DERs work by reducing or deferring the demand for power. These are the demand response management resources. The word response refers to the fact that these reductions or deferments are often triggered by signals from the supply side, usually from the utility. These signals are called demand response events. Historically, we've only made use of limited, centralized demand response tools. One example is when utilities send a message to customers in a given area asking them to use less power. This is commonly called a behavioral demand response event, or BDR. The systems that help send demand response events are called demand response management systems, or DRMS, adding to our list of similar sounding acronyms. In a more digitized, decentralized world, the vision is to trigger automated demand response events, known as ADRs. The devices that can respond to an automated response and find opportunities for demand reduction are the demand response management DERs. A leading example is smart home devices, like smart thermostats. By adjusting the set point temperature by a degree or two, a smart thermostat can reduce the site's power demand. Add this up over thousands of sites, and you're talking about a sizable grid impact. There are a range of smart appliances that fit into this camp. Smart refrigerators, for example. Smart EV chargers fall here as well. They can increase or decrease their rate of charging based on demand response events. Of course, real-time responses from the demand side would require real-time information sharing to and from the supply side, and information flows of this kind are not yet widely available, however, and unlocking them will require significant changes. This is the focus of the next chapter.