A Deloitte report highlights the potential of distributed energy resources (DER) to aid the U.S. in meeting its climate objectives while enhancing grid efficiency. As more households transition to electrified appliances, heating and cooling systems, and electric vehicles, electric utilities are encountering new challenges in balancing increased demand with decarbonization efforts and maintaining affordability for customers.
According to Deloitte, distributed energy resources (DER) offer a solution to multiple challenges that centralized utility-scale power struggles to address efficiently. DERs encompass household electrical resources such as home solar, batteries, electric vehicles, smart thermostats, and smart appliances. When strategically coordinated, DERs can alleviate grid strain by reducing peak electricity demand.
Deloitte emphasized that if utilities effectively involve customers, they could leverage distributed energy resources (DER) to meet peak demand using clean energy sources, while also delivering crucial grid services. This approach would enable equitable sharing of revenue and resilience benefits with households, potentially lowering rates.
Deloitte projected that household power capacity from DER could exceed total peak demand by 2035 in a decarbonized grid scenario. They estimated that households across the U.S. could possess over 1,500 GW of generation, storage, and flexible demand capacity.
This development is significant, as grid planners, who previously forecasted flat demand for decades, sharply increased projections in early 2023, concluding the year by doubling their five-year load forecast to 4.7%. Utilities are reevaluating demand from various sectors including domestic manufacturing, artificial intelligence data centers, cryptocurrency mining, green hydrogen production, as well as transportation and building electrification, leading to ongoing upward revisions in demand estimates.
According to the report, achieving the Biden administration’s goal of a fully decarbonized grid by 2035, powered by renewables, could potentially double peak demand to 1.4 terawatts by 2035.
Utility-scale renewables are driving the majority of this demand expansion while simultaneously replacing decommissioned fossil fuel capacity. However, challenges related to grid interconnection delays are becoming increasingly problematic, resulting in project extensions or outright cancellations.
Deloitte highlighted these concerns, noting that the bulk power system is strained due to retirements of fossil fuel plants and extended timelines for new power plants to connect to limited transmission infrastructure, now reaching up to five years. By 2023, the backlog of primarily utility-scale renewables and storage awaiting grid interconnection had swelled to 2.6 terawatts—more than double the current installed capacity.
DERs, particularly in meeting peak demand, could present a more cost-effective alternative compared to current methods. Peak electricity demand typically occurs during summer afternoons and evenings, when households increase usage for air conditioning and appliances upon returning home from work. Traditionally, fossil-fueled peaker plants address this demand, remaining idle most of the time but ready to ramp up swiftly during spikes in electricity demand.
To enable grid-scale renewables to meet peak demand, substantial investment in generation and storage infrastructure is necessary. This is because only a fraction of intermittent capacity contributes to meeting resource adequacy requirements, and the solar generation profile does not align with the load patterns typical of winter peaking systems.
Therefore, flexible DERs installed at homes, capable of strategically reducing power consumption or utilizing stored energy during peak demand periods, have the potential to decrease the surplus capacity required on the grid. Deloitte highlighted that studies conducted for California and New York indicate that coordinated electrification efforts could collectively save over $30 billion in distribution infrastructure upgrades by 2035 in each state.
This savings is attributed to the implementation of energy-efficient building measures and smart technologies that manage energy consumption and optimize electric vehicle charging, thereby reducing the need for capital investments in new substations, transformers, feeders, and other distribution equipment.