Distributed Energy Resources

Integrating distributed energy resources (DER) into the grid presents new challenges and opportunities for the electric power industry, requiring changes to traditional business models, strategic partnerships and regulatory reforms – all while maintaining reliability and security of the grid. To fully optimize the power grid, we need to play a role in how these technologies are integrated with the grid.

DER technologies include energy efficiency, demand response, distributed generation, microgrids, private solar, energy storage and electric vehicles. They are smaller power sources that can work together – such as advanced renewable technology and energy storage – to meet demand. Widespread deployment of DER requires planning and coordination to integrate them with the grid. These demand-side technologies are often deployed by our customers.

Solar Installation Cost Trends

+ click to enlarge

Distributed energy resources - also known as private generation, or technologies that generate electricity at or near where it will be used – are growing in popularity as technology costs continue to decline, reliability and performance improve, and consumers opt for more flexibility and autonomy over their energy generation use and costs. AEP is exploring these technologies, how they perform and interact with the grid and how we can partner with our customers on technology, such as battery storage, that can provide resiliency for the customer and energy that AEP can use to meet peak demand under certain conditions.

Large industrial and commercial customers have been the early adopters of local generation, where energy managers want more control over their systems, lower costs and increased reliability of the power that drives their businesses and keeps them competitive. The economics of local generation, particularly private solar, continue to improve, increasing their saturation rate.

Examples of local generation systems in use by residential, commercial and industrial customers

Residential SectorCommercial & Industrial Sector
Solar photovoltaic panelsCombined heat and power systems
Small wind turbinesSolar photovoltaic panels
Natural gas fuel cellsWind
Emergency backup generatorsNatural gas or biogas fuel cells
Reciprocating internal combustion engines, including back-up generators

Private Generation & Grid Reliability

Private generation can have both positive and adverse effects on the reliability of the grid. Despite the growth of emerging local generation technologies, customers will continue to depend on the grid. That’s why integration of private generation must be done in a way that maintains the reliable service that all users of the grid depend upon daily.

Distributed energy resources can provide energy security, resiliency and a way to reduce emissions. But it also means that more of the grid’s energy and capacity is spread across more sources. As local generation penetration grows, there is greater urgency in modernizing the grid infrastructure to integrate these resources safely and efficiently.

Nearly all customers, including those who have installed private generation, rely upon the grid for fundamental services. Capacity (the obligation to provide energy and meet demand when needed) is an essential service provided to all customers who are connected to the grid. This includes times when private generation sources are not producing energy, such as when a cloudy day prevents private solar customers from producing sufficient energy to meet all of their needs, or when their system is not operational. Conversely, they also need the grid to take excess electricity when their system produces more energy than they need.

The grid also provides voltage control, frequency support and other services that are essential to reliability and all the devices we are connected to in our lives. Without these fundamental services, all customers would face challenges to operate and maintain the electrical equipment in their homes or businesses.

There have been bold predictions that the electric utility industry would be too slow to adapt to this changing environment and become obsolete. While it is true that the future will likely require us to build fewer central generating stations, we will continue to rely upon 24/7 capacity as a cost-effective and reliable source to maintain the reliability of the grid.

We are making substantial investments to prepare the grid for this changing landscape, most significantly in our transmission and distribution systems to accommodate the multitude of resources that will need to connect to our system. The smart grid initiatives we began nearly a decade ago are one example of how we have laid the foundation for a modern grid. Building new infrastructure is only part of the solution. Today, we are exploring new ways to partner with our customers to manage available resource capacity in ways that are mutually beneficial.