Policy Implications of Decentralization

By James NewcombVirginia LacyLena Hansen and Mathias Bell of Rocky Mountain Institute

  • View the policy recommendations from Distributed Energy Resources.
  • Download the executive summary [PDF].
  • Download the full Distributed Energy Resources paper [PDF].
  • View the version printed in Elsevier’s Electricity Journal.

The Situation

New technologies and consumer demand for cleaner energy are rapidly transforming the power sector. This transformation is most evident in the advent of distributed energy resources (DER) – a marriage of information technologies with the power grid. Call it the internet of electricity.

With smart thermostats, LED light bulbs, and solar panels all available at your local Home Depot, smart technologies are creating a two-way relationship between the customer and the utility, and customers are taking an active role. Industrial and institutional customers may benefit the most from new distributed energy resources, saving millions of dollars through intelligent energy management systems.

Distributed energy resources can deliver many benefits, making a cleaner, more efficient, more affordable and more reliable power system. But these disruptive technologies are encountering a regulatory system designed for the old world of centralized power plants, monopoly utilities and passive consumers.

To modernize America’s power system, we will need to take advantage of both centralized and distributed resources. The transmission section of America’s Power Plan describes policies that will help us access valuable clean energy resources, while this section describes policies and market designs that can help level the playing field to foster competition between central and distributed alternatives. The right balance between centralized and distributed resources will evolve over time as costs and availability evolve.

To incorporate DER, policymakers must first quantify the full range of costs and benefits, analyze tradeoffs, and incorporate DER into resource planning.  New market and business models are needed for both utilities and new companies, to create opportunities for innovation while preserving reliability. And specific technologies need specific attention, like microgrids, the “soft costs” of solar and electric vehicle charging.

This paper on distributed energy resources lays out a pathway for building a smarter, cleaner power system for the modern era.