Apr. 28, 2025
As energy demand evolves, utilities across the country are enhancing the traditional centralized power model. At the heart of this shift is the rise of Distributed Energy Resources (DERs)—a category encompassing reciprocating engines, solar panels, battery storage systems and more.
Rather than seeing these technologies as disruptions, many utilities are embracing them. They're rolling out DER programs, incentivizing customers to adopt these resources that can go beyond emergency back up and integrate into the broader grid. But what's driving this strategic pivot? Let's explore the key reasons utilities are investing in DER programs and what they mean for the future of energy.
1. Modernizing the Grid for a Decentralized Future
Historically, electricity flowed one way: from large, centralized power plants through transmission lines to homes and businesses. Today, that model is changing fast.
With more energy being produced at the grid’s edge, from residential solar arrays to EVs capable of two-way charging, utilities need a new approach. DER programs allow utilities to manage this shift in a way that supports grid reliability, efficiency, and customer engagement.
By incorporating DERs into their planning and operations, utilities can:
- Reduce strain on the grid during peak demand
- Create a more flexible, adaptive electric grid
DERs give utilities more tools to balance the grid, especially as they prepare for growing electrification and intermittent renewable integration.
2. Enhancing Grid Resilience and Reliability
Demand changes can happen for a variety of reasons that can pose a significant threat to grid stability.
DERs can help mitigate that risk in multiple ways.
- Battery storage systems can keep power flowing even when renewable DERs like solar or wind are not efficient options.
- Microgrids can island from the main grid and maintain service in the event of an outage.
- Allow for power independence in remote areas where restoration can take extra time.
By developing DER programs, utilities enable customers to serve as partners in resilience.
3. Responding to Customer Demand and Engagement
Today’s energy customers are more informed, proactive, and tech-savvy than ever before. Many want more control over their energy use, lower costs, and cleaner power sources. DERs offer a pathway for utilities to benefit customers.
Utilities are recognizing that these programs can:
- Increase customer satisfaction and loyalty
- Offer new revenue opportunities (e.g., Energy Program Participation)
- Provide data and insights into usage patterns
By co-creating energy solutions with customers, utilities can transform the traditional utility-customer relationship into a collaborative partnership.
4. Regulatory and Market Drivers
In many regions, regulatory agencies are encouraging utilities to move faster toward decarbonization, reliability, and grid modernization. This includes mandates for integrating DERs and developing frameworks for compensation, access, and interoperability.
For instance:
- Some states require utilities to offer solar customers net metering or time-of-use rates.
- Others are investing in DER aggregation pilots and integrated resource planning, including DERs as a formal resource class.
- Nationally, the Federal Energy Regulatory Commission (FERC) is moving toward allowing DER aggregations to participate in wholesale markets (e.g., FERC Order 2222), unlocking new economic incentives.
By proactively introducing DER programs, utilities can stay ahead of these policy changes while shaping the design of future markets and standards.
5. Lowering Operational Costs and Delaying Infrastructure Investments
Traditionally, utilities meet growing energy demand by investing in new infrastructure—substations, transmission lines, and generation assets. But these are expensive, long-term projects.
DERs offer a more flexible and often more cost-effective solution. Instead of upgrading a substation to handle summer peak demand, a utility could offer demand response incentives to local customers.
By leveraging DERs as “non-wires alternatives,” utilities can reduce capital expenditures, operate more efficiently, and pass savings on to customers.
What’s Next: The Role of DER Programs in the Energy Transition
As the energy landscape shifts, utilities that embrace DERs stand to gain operational flexibility, customer loyalty, and regulatory goodwill. DER programs are no longer optional—they’re a strategic imperative.
Looking ahead, we’ll likely see:
- More sophisticated DER integration platforms and software
- Wider adoption of distributed energy pricing models
- Increased collaboration between utilities, technology providers, and aggregators
Utilities that take a proactive approach will be better positioned to lead the transition to a resilient and customer-centric grid.
Utilities are introducing DER programs not just because technology is evolving. From grid resilience and carbon reduction to customer engagement and economic efficiency, DERs provide a multi-faceted solution to modern challenges.
Whether it’s a business deploying battery backup or multiple generators supporting demand response, DER programs create a more collaborative, resilient, and dynamic grid for everyone.