Global communities increasingly turn to distributed energy resources (DERs) to boost their local economies and enhance energy resilience. Generating and managing power locally cuts energy costs and fosters sustainable development.
Recent successes in various cities and towns showcase how DERs can drive significant economic growth. As a result, it has become a viable strategy for regions looking to improve their financial and environmental landscapes. Localized energy production and management benefits are becoming increasingly evident as more communities embrace this approach.
Economic Growth Through Localized Power Generation
Benefits grow abundantly as cities worldwide turn to DERs. Two recent projects illustrate how localized power generation drives economic growth and resilience.
Montezuma, Iowa’s Microgrid
A groundbreaking project in Montezuma, Iowa, led by researchers from Iowa State University, is set to establish the state’s first electricity microgrid. Almost $12 million has been invested in the project, which will unfold over approximately four years, beginning in late 2024 or early 2025. The microgrid will produce 3 MW of renewable energy for more than 1,400 residents.
The economic benefits of this project are substantial. Energy costs for residents are expected to drop by 18%, while transmission expenses could decrease by 34%. Additionally, the microgrid will reduce purchases by 3.5 GWh. These savings will translate into lower energy bills for the community, creating economic stability for customers.
Meeting the Future Demands of Energy in Austin, Texas
Similarly, in Texas, Austin’s growing electricity needs are driving a large shift toward DERs. To meet the demand by 2040, Texas must deploy approximately 130 GW of new energy, generating about 213 million more MWh. This plan includes constructing 1,350 miles of new transmission lines.
Construction costs are estimated at $9.4 billion, and the project is projected to yield more than $1.1 billion per year in production cost savings, averaged over 15 years. According to Electric Reliability Council of Texas (ERCOT) reports, these savings could be even higher than the stated $7 billion, making this a highly cost-effective solution.
Beyond cost savings, the project is expected to generate $18.9 billion in new local taxes and $20.1 billion in payments to landowners. Moreover, it will create approximately 40,700 new jobs over the next 20 years and reduce the energy grid’s consumption of water for cooling by about 50 billion gallons annually.
Localized power grids are also notably resilient during Texas heat waves, which are renowned for causing power outages due to the high usage of cooling systems.
ERCOT will sometimes ask consumers to voluntarily reduce power consumption to avoid putting the grid at risk. However, it manages its electricity supply by drawing power from various renewable energy sources, such as wind and solar. According to American Clean Power, wind and solar energy provide up to 40% of electricity during heat waves, saving consumers more than $1 billion in costs.
Features Needed to Implement Distributed Energy
DERs require an integrated system to support localized power generation. Key features necessary for this implementation include:
Infrastructure. The physical infrastructure comprises solar panels, wind turbines, and battery storage systems. These components must be strategically placed to maximize energy production and efficiency. Additionally, the infrastructure must accommodate the installation of inverters and ensure all wiring is protected and organized to reduce the risk of fire and pest damage.
Synchronization and Connection Equipment. This equipment ensures DERs work seamlessly with the main power grid. This requires inverters to convert energy and synchronize the phase and frequency of the local power with the grid. Automatic transfer switches also ensure a smooth transition between grid and regional energy sources.
Metering Equipment. Accurate metering is crucial for monitoring energy production, consumption, and storage. Smart meters are used in this case to measure the flow of electricity. As such, they provide data to consumers and utility companies in real time.
Software Systems. Managing and operating DERs effectively requires aggregated software systems to handle everything from energy management to predictive maintenance. Energy management systems (EMSs) monitor and control the performance of DERs, ensuring optimal operation and power distribution. These systems analyze data from smart meters to predict demand and adjust renewable energy output.
How Distributed Energy Resources Support Communities
DERs generate or store energy close to the point of use rather than relying on large, centralized power plants. Individual homes, businesses, and community buildings can install DERs and produce on-site energy. These systems reduce the need for long-distance transmission, minimize energy loss, and improve overall efficiency. Smart grids and energy management systems enhance DER effectiveness by optimizing distribution and power usage based on real-time data.
Beyond the benefits of bill savings and backup power, DERs support communities in several ways, especially during high energy demand. They eliminate the need for expensive natural gas plants by reducing electricity consumption during peak periods. These plants are typically used to meet short-term demand spikes but are costly to operate and maintain.
Additionally, DERs can decrease further investment in additional electric grid infrastructure, as they provide localized energy solutions that alleviate the strain on the broader grid. DERs also generate and store carbon-free energy, which prevents air pollution and reduces emissions. Renewable sources create a cleaner environment, whereas power plants are responsible for 40% of the world’s carbon emissions.
DERs can even generate revenue streams for local governments and communities. Entities participating in wholesale energy markets can sell excess power or provide grid services based on demand. Such services may generate additional income but also support the stability of the overall energy system.
A study on the cost-benefit analysis of DERs in Beijing, China, even found that residential areas benefited economically. With the combination of photovoltaic (PV) and combined heat and power (CHP) systems, 47% and 57% contributed to economic growth.
Policies and Regulations Supporting Distributed Energy
Anyone who wants to get involved in supplying DERs in their communities must start by navigating the policies and regulations that promote their adoption. Recent federal actions have bolstered support for DER adoption.
The first initiative includes the Inflation Reduction Act, which includes an extension of the investment tax credit that offers financial incentives for solar panel installations. This act also provides grants or loans for energy storage projects, making it more affordable for communities and businesses to implement DERs.
Additionally, the Federal Energy Regulatory Commission (FERC) Order No. 2222 is a landmark ruling facilitating DER participation in wholesale energy markets. This order requires regional grid operators to remove barriers that prevent DERs from competing in these markets.
These federal actions, combined with supportive state policies and utility programs, provide a strong regulatory environment for DER growth. Consumers and businesses can participate in their expansion by leveraging these policies.
The Path Forward for Distributed Energy
Adopting distributed energy resources offers substantial economic, environmental, and community benefits. Local communities have an opportunity to lead the way in this energy transformation as DER projects continue to demonstrate their value. Embracing DERs is more than about reducing costs—it is a way to create a more resilient and sustainable future for all.
—Emily Newton is an industrial journalist who regularly covers stories for the utilities and energy sectors. She is also Editor-in-Chief of Revolutionized.
