2.3   What Are the Issues on DER Technologies Affecting Regulations?

2.3.1 Why Are Utilities Concerned About DER?

Utilities can manage small numbers and sizes of DER systems using their normal planning and operational procedures. This is currently the situation in most States and jurisdictions.
The issues arise when there start to be higher penetrations of DER systems, both from a technical aspect and a financial aspect, due primarily by customers seeking to reduce their energy costs, but also in response to environmental regulations and incentives (see 3.9).

Technically utilities must plan for and operate their distribution system which no longer matches the traditional patterns of load and generation (see 3.3.2). This causes many concerns about safety and reliability. Although some efforts are underway to incentivize customers to locate DER systems at sites that can benefit distribution operations (see 3.6), the technical and financial issues still require significant studies.

At the same time, the installation of generation at customer sites decreases utility revenues (depending upon rate structures), both by reducing the revenues from serving loads and by needing to compensate customers for excess generation through net metering and other tariffs.  At the same time, the need to provide and maintain the “wires” that serve these customers remains the same or may even grow more costly (see 3.3.4).

In some jurisdictions, utilities that are essentially “wires” companies are prevented from owning local generation (except possibly for grid reliability issues). This causes anxiety since they cannot compensate for the loss of revenues by selling energy. Many are looking at ways to restructure their business models (see 3.1.4) as they see aggregators and retail energy providers competing for their customers.