The Future is Distributed

But to lower costs and increase reliability, distributed energy needs orchestration.

This is the dawn of the distributed energy era. There are already millions of devices in homes and businesses that can respond to signals — and turn on and off — in times of abundance or scarcity. 

Soon, many gigawatts of distributed energy will be scattered in the batteries of millions of electric cars, trucks, and buses, and will be generated from rooftop solar panels and stored in powerwall battery units. 

But distributed energy also means demand management. Energy will go further as high efficiency heat pumps replace aging, inefficient electric heaters and blackout-inducing resistance heat — these and other devices also will respond to signals to power down when electricity is expensive and they aren’t needed, then come back online when it’s cheaper and more plentiful.

The demand part of our distributed future is just as important as the supply part. Take, for instance, the early morning after a cold winter night. Electricity use will spike around 7 a.m. as people wake up, make coffee, shower (activating water heaters), and dry their hair. That orchestra of activity will include cold weather-rated heat pumps, which will get a signal to work a little harder at 4 and 5 a.m., then throttle back at 7 a.m. when things are pricey and dicey. Temperatures would hold steady in well-insulated houses, and if enough customers participate (such programs would always be voluntary and opt-in), no one would even have to think about high bills, conservation calls, or blackouts.

The same signals could drive distributed electricity supplies. Soon, we’ll have the technology to allow fully charged electric vehicles to feed a manageable amount of power to the home — helping keep the coffee makers, hair dryers, and heat running while maintaining more than enough of a charge to get to work and run errands. Not only would this be voluntary, but owners would actually get paid for reducing their demand on the grid when electricity is needed elsewhere.

I could go on. All kinds of appliances and devices — pool pumps, hot water heaters, refrigerators, and air conditioners, among many others — can be engineered to respond to a signal that will make their owners money by reducing demand on the grid. They’re all part of the orchestra.

We just need a conductor.

The Distribution System Operator (DSO)

The Pacific Northwest National Laboratory ran an experiment to study the effects of a DSO model in Texas — through which ERCOT would adopt a “transactive energy” model to pay residential customers for reducing electricity. (To be clear, Texas already has this model, but it only applies to customers at transmission level voltage like crypto miners, manufacturers, and other very large electricity users; they get paid to reduce electricity use when the grid is stretched, while individuals, families and small businesses don’t.)

The results of the experiment were staggering: Texans would save between $3 billion and $5 billion every year — and Texas would have a more reliable electricity system — if ERCOT would pay consumers for reducing electricity use and enabling the technology required to make it happen. (See the graphic at the bottom of the article and here for the quick findings of the PNNL study.)

The study was completed three years ago, but the state continues to treat this very realistic alternative like it’s fantasy. Former Public Utility Commissioner Will McAdams said Texas needs an independent entity to coordinate distributed energy and demand response systems amongst consumers and the load-serving entities such as retailers, municipal utilities, and co-ops — much as ERCOT operates the Texas grid on the transmission level. 

Beth Garza, former IMM at ERCOT and 40 year veteran of the utility industry, thinks the local distribution utilities — investor-owned like CenterPoint and Oncor, as well as co-ops and municipal utilities — could serve as de facto conductors, as represented in the graphic from Camus Energy below.

Credit: Camus Energy

One way or another, someone needs to conduct. Our distributed energy future will involve tens of millions of individual resources controlled by opt-in devices that allow their owners to get paid. Even customers who don’t participate would save money (~10%) as overall system costs go down between $3.3 and $5 billion.

But we won’t realize the savings or the realibility benefits if everyone’s on their own. The distribution system needs a coordinated market and orchestrated signals.

Who’s going to send them?

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Credit: PNNL

Further Reading

Black and Veatch (2020). Distribution System Operator (DSO) Models for Utility Stakeholders: Organizational Models for a Digital, Distributed Modern Grid.

Camus Energy (2022). What is a Distribution System Operator?

Pacific Northwest National Laboratory (2022). The Distribution System Operator with Transactive (DSO+T) STudy, Executive Summary. 

Texas Advanced Energy Business alliance (2022). Future Proofing the Texas Grid with Distributed Energy Resources. 

Texas Advanced Energy Business Alliance (2019). The Value of Integrating Distributed Energy Resources in Texas. 

Volts Podcast (2023). Managing a distributed grid: A conversation with Astrid Atkinson (Camus Energy)

Roberts, Dave (2018). Vox. Clean Energy Technologies threaten to overwhelm the grid. Here’s how it can adapt.

Also see comments from many parties in the PUC’s 2022 DER docket before the ADER Task Force and VPP pilot were established.