Distributed Energy Resources capacity is growing rapidly
Distributed Energy Resources (DERs) are behind the meter technologies, including generation, storage and load management systems. DERs are expected to be a critical component of the Energy Transition. Wood Mackenzie expects cumulative DER capacity in the U.S. to reach 387 gigawatts by 20251 while Frost & Sullivan forecasts the rate of annual investment in DERs will increase by 75% by 2030.2 This growth is being driven by multiple factors, including the need for more reliable power supply, moves towards decarbonization, and the introduction of utility rates, incentives and market mechanisms that encourage and reward investments in DERs.
DERs will become a critical part of grid resilience and support a competitive market
Market participants, including power traders and an increasing number of DER developers, facilitate value creation in the wholesale energy and ancillary services markets through various approaches. Power traders facilitate liquidity in the markets and that translates into more retail developmental activities, resulting in more investment. DER developers who interact directly with end-user customers similarly support market development through their investment in DER systems and trading activities. This activity will be increasingly critical to the growth of DERs in all the organized power markets. For example, a part of Texas’ future plans for improving market resilience will include DERs as a critical component of the resource mix, and many businesses are looking at DERs to mitigate the risk of extreme weather like that of Winter Storm Uri in 2021. Market participants have recently been asked to contribute their strategic input on DER integration to Texas’ power reliability planning process.
What data and capabilities are needed to create value and manage risk?
In the evolving world of DERs where the number of interconnection points will be very high and the unit capacity will be relatively small, the need is for systems that can process and analyze data for the asset owner/operator and transmit the requisite information securely to the utility or market operator to support and optimize grid operations. Traders and DER developers owning and controlling multiple facilities will need their own systems to manage all assets across multiple customers, locations, markets and utilities.
How Capco helps DER owners and market intermediaries
Capco possesses deep domain experience in the wholesale and retail power markets, including supporting clients with strategies and the design and development of technology solutions to better manage information, operations, transactions and risks. Capco has supported clients with technology strategies and deployed SCADA systems and other technology applications to support transaction-oriented business across all sectors of the energy industry, including distributed energy.
Richard Zdunkewicz is a Capco Fellow based in Houston, Texas. Richard is Principal Consultant for Energy Transition Advisors, a consultancy that provides strategy and investment advisory to companies seeking to navigate the complexities of the Energy Transition.
Chris McNeely is a Capco Partner with Capco based in Houston, Texas. Chris works with companies across the energy value chain to develop and implement technology solutions that support mission critical operational and financial functions.
1. Wood Mackenzie study, July 2020, https://www.woodmac.com/news/editorial/der-growth-united-states/
2. Frost & Sullivan study, June 2020, https://www.frost.com/news/press-releases/nearly-1-trillion-in-investments-estimated-by-2030-as-power-sector-transitions-to-a-more-decarbonized-and-flexible-system/