Communities use distributed energy for economic recovery

Global communities are increasingly turning to distributed energy resources (DERs) to boost their local economies and increase energy resilience. Local energy production and management lowers energy costs and promotes sustainable development.

Recent successes in various cities demonstrate 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 situation. The benefits of local energy production and management are becoming more clear as more communities adopt this approach.

Economic growth through local energy production

The benefits grow abundantly as cities around the world turn to DERs. Two recent projects illustrate how local energy production drives economic growth and resilience.

Montezuma, Iowa’s microgrid

A groundbreaking project in Montezuma, Iowa, led by researchers at Iowa State University, aims to create the state’s first electric microgrid. Nearly $12 million has been invested in the project, which will run for approximately four years, starting in late 2024 or early 2025. The microgrid will produce 3 MW of renewable energy for over 1,400 residents.

The economic benefits of this project are significant. Energy costs for residents are expected to drop by 18%, and transmission costs could drop by 34%. Additionally, the microgrid will reduce purchases by 3.5 GWh. These savings will translate into lower energy bills for the community, providing economic stability for customers.

Meeting Future Energy Demands in Austin, Texas

Similarly, in Texas, the city of Austin’s growing demand for electricity is driving a big shift toward DERs. To meet demand through 2040, Texas needs to deploy about 130 GW of new energy, generating about 213 million more MWh. This plan includes building 2,350 miles of new transmission lines.

Construction costs are estimated at $9.4 billion, and the project is expected to result in production cost savings of more than $1.1 billion annually over an average period of 15 years. According to reports from the Electric Reliability Council of Texas (ERCOT), these savings may be even higher than the declared $7 billion, which makes this solution highly profitable.

In addition to cost savings, the project is expected to generate $18.9 billion in new local taxes and $20.1 billion in payments to landowners. Moreover, over the next 20 years, it will create approximately 40,700 new jobs and reduce the power grid’s cooling water use by approximately 50 billion gallons per year.

Local power grids are also particularly resistant to Texas heatwaves, which are known to cause power outages due to heavy use of cooling systems.

ERCOT sometimes asks consumers to voluntarily reduce their energy use to avoid putting the grid at risk. However, it manages the electricity supply by drawing energy from various renewable energy sources such as wind and solar. According to American Clean Power, wind and solar power 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 local energy generation. Key features needed for this implementation include:

  • Infrastructure. Physical infrastructure includes solar panels, wind turbines and battery storage systems. These elements must be strategically placed to maximize energy production and efficiency. Additionally, the infrastructure must support the installation of inverters and provide protection and organization for all cabling to reduce the risk of fire and pest damage.
  • Synchronization and linking equipment. This equipment ensures the DER can seamlessly interface with the main power grid. This requires inverters to convert energy and synchronize the phase and frequency of local power with the grid. Automatic transfer switches also ensure a seamless transition between the grid and regional energy sources.
  • Measuring equipment. Accurate measurements are crucial to monitoring energy production, consumption and storage. In this case, smart meters are used to measure the flow of electricity. This enables them to provide real-time data to consumers and utilities.
  • Software systems. Effectively managing and operating DERs requires aggregated software systems to handle everything from energy management to predictive maintenance. Energy management systems (EMS) monitor and control DER performance to ensure optimal operation and power distribution. These systems analyze data from smart meters to predict demand and adjust renewable energy production.

How distributed energy resources support communities

DERs produce or store energy close to where it is used, rather than relying on large, centralized power plants. Individual homes, businesses and community buildings can install DERs and generate energy on-site. These systems reduce the need for long-distance transmissions, minimize energy loss, and improve overall efficiency. Smart grids and energy management systems increase the efficiency of DERs by optimizing energy distribution and consumption based on real-time data.

In addition to the benefits of bill savings and backup power, DERs support communities in several ways, especially during times of high energy demand. They eliminate the need for expensive natural gas installations, reducing electricity consumption during peak periods. These installations are typically used to meet short-term spikes in demand, but are expensive to operate and maintain.

Additionally, DERs can reduce further investment in additional power grid infrastructure because they provide local energy solutions that relieve pressure on the wider grid. DERs also produce and store carbon-free energy, which prevents air pollution and reduces emissions. Renewables create a cleaner environment, and power plants account for 40% of global carbon dioxide emissions.

DERs can even generate revenue streams for local governments and communities. Entities participating in wholesale energy markets can sell surplus energy or provide network services based on demand. Such services can generate additional income, but also support the stability of the entire energy system.

A DER cost-benefit analysis study conducted in Beijing, China, even found that residential areas benefited economically. By combining 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 providing DERs in their communities must start by familiarizing themselves with the policies and regulations that promote their adoption. Recent federal actions have increased support for DER adoption.

The first initiative includes the Inflation Reduction Act, which includes an extension of the investment tax credit offering financial incentives for the installation of solar panels. This bill also provides grants or loans for energy storage projects, making DER deployment more affordable for communities and businesses.

Additionally, Federal Energy Regulatory Commission (FERC) Order 2222 is a landmark ruling that makes it easier for DERs to participate 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 public utility programs, provide a strong regulatory environment for DER growth. Consumers and businesses can participate in their expansion by leveraging these policies.

The way forward for distributed energy

The adoption of distributed energy resources offers significant economic, environmental and social benefits. Local communities have an opportunity to lead the energy transition as DER projects continue to demonstrate their value. Deploying DER is more than just reducing costs – it’s a way to create a more resilient and sustainable future for all.

Emily Newton is an industry journalist who regularly writes articles for the utilities and energy sectors. He is also the editor-in-chief Revolutionized.