Distributed Energy Resource Management Systems and Utilities

Distributed Energy Resource Management Systems (DERMS) are increasingly vital for utilities. Knowing key trends for distributed energy resources and DERMS is crucial in implementing future-proof, cost-effective solutions.

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According to a Wood Mackenzie report, the US market for distributed energy resources (DERs) will nearly double and reach US$68 billion by 2027.

The numbers mirror the rapid increase in the adoption of distributed energy resources, such as batteries, electric vehicles (EVs), and rooftop solar panels, worldwide. However, managing these diverse and dispersed resources presents a significant challenge for utilities, and could increase grid risks.

This is where Distributed Energy Resource Management Systems (DERMS) come into play.

What is DERMS?

A Distributed Energy Resource Management System (DERMS) is a software platform that enables utilities to monitor, manage, and optimise DER assets. These assets, often customer-owned, generate or store electricity and can help utilities balance supply and demand, provide grid services, and maintain grid stability. DERMS is a vital tool that helps utilities leverage the potential of DERs, integrating them into the grid and transforming them into valuable resources.

According to a report by Guidehouse Insights, global spending on DERMS is expected to reach US$24.8 billion in 2030, driven by utilities’ need to enhance grid flexibility and reliability.

The Current State of DERMS Technology

Today, utilities worldwide face the challenge of integrating increasing amounts of DERs into their grids. The proliferation of renewable energy, EVs, and behind-the-meter energy storage systems primarily drives this influx.

However, despite this growth, many utilities still rely on piecemeal solutions to manage DERs.

DERMS offers a more sophisticated approach by automating much of the process, allowing utilities to forecast issues, optimise DER performance, and ensure grid reliability. For example, DERMS can aggregate thousands of DERs into virtual power plants (VPPs), which can respond to grid needs as a single, cohesive unit.

Distributed energy resource management systems tomorrow

As DER penetration continues to rise, the importance of DERMS is expected to grow. By 2030, it’s estimated that DERs could provide up to 20% of the grid’s capacity, highlighting DERMS’s critical role in ensuring grid stability and flexibility.

Moreover, as regulatory bodies push for cleaner energy solutions, DERMS will help utilities meet compliance targets.

For instance, the European Union’s Clean Energy Package and the US Federal Energy Regulatory Commission’s (FERC) Order 2222 both prioritise DERs and highlight their importance for lowering energy companies’ emissions and increasing their effectiveness.

DERMS challenges and opportunities for utilities

While the benefits of DERMS are clear, utilities face several challenges when implementing these systems, including:

Complexity: Utilities must integrate DERMS with their existing infrastructure, which often includes legacy systems not designed to handle the complexities of modern grid management.
Cybersecurity: With the growing reliance on digital platforms, utilities must ensure cybersecurity and comply with increasingly stringent standards.
Cost and ROI: Implementation costs must be carefully assessed and weighed against benefits and return on investment (ROI).

However, the opportunities are equally significant, including:

Revenue streams: DERMS can help utilities unlock new revenue streams by enabling DERs to participate in grid services markets.
Infrastructure: DERMS optimise existing infrastructure use and reduces the need for costly upgrades, potentially saving utilities billions in capital expenditures.
Grid resilience: DERMS can improve grid resilience by enabling utilities to manage supply and demand better, especially during peak periods or grid emergencies.
Customer engagement: DERMS can also help utilities engage customers by allowing them to participate in demand response programs and offering incentives for using DERs to support the grid.

Key DERMS trends for utilities

Several key trends are shaping the future of DERMS, including:

AI and ML: Advanced algorithms and AI are enabling DERMS platforms to predict grid conditions and optimise DER performance in real time.
Flexibility: As renewable energy generation fluctuates, utilities are looking to DERMS to provide the flexibility needed to balance supply and demand.
Regulatory support: Government policies and regulations increasingly recognise the value of DERs and DERMS. In the US, FERC’s Order 2222 allows DERs to aggregate and participate in wholesale energy markets, further incentivising their use.

Selecting the optimal DERMS solution

When selecting a DERMS solution, utilities should consider the following steps:

Current and future needs: Utilities should first assess their current and future grid needs, including the types of DERs in their service area, regulatory requirements, and decarbonisation goals.
Integration capabilities: A DERMS platform should integrate seamlessly with existing IT systems, such as Advanced Distribution Management Systems (ADMS) and grid analytics platforms.
Cybersecurity: Cybersecurity should be a top priority, and utilities should look for DERMS solutions that meet industry standards and have third-party certifications.
Vendor track record: Utilities should work with reputable vendors with experience in the energy industry and a track record of success. Strong integration capability with DER units is also important.

Finally, implementing DERMS can be complex, so a phased approach prioritising high-value use cases can help mitigate risks and ensure success. It may also be advisable to start DERMS projects with a focus on select DER types, such as EVs or EV fleets.