Facilitating Power Grid Decarbonization with Distributed Energy Resources: Lessons from the United States

Abstract

Decarbonizing power grids is an essential pillar of global efforts to mitigate climate change impacts. Renewable energy generation is expected to play an important role in electricity decarbonization, although its variability and uncertainty are creating new flexibility challenges for electric grid operators that must match supply with constantly changing demand. Distributed energy resources (DERs)—including distributed generation, demand response, and distributed energy storage—can play an important role in providing the flexibility needed to integrate high penetrations of renewable energy. This article examines federal and state enabling policies and regulations for DER, market strategies and business models that have facilitated DER expansion, and key emerging challenges for DER in the United States. Based on a review of the US experience, the article offers lessons for other countries, focusing on the role and limits of policy, the facilitative role of utility regulatory reform, the need to balance different interests in tariff design, the benefits of DER participation in wholesale markets, and the importance of proactive interconnection policies.