Making Distributed Energy Resources Pay

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Every month, you pay an electricity bill because there’s no choice if you want to keep the lights on. Today that power flows in one direction, but soon, Grist says, utility companies may actually want some electricity back from you if you have solar panels and/or a storage battery on your home as part of a distributed energy program. That storage battery could even be the one that powers your electric car as vehicle to grid technology becomes more common.

We here at CleanTechnica have been banging this drum for years, but many in the utility industry have been opposed to making electricity a two way street. Recently, we have seen California, which typically leads the nation when it comes to promoting renewable energy, completely dismantle the rules for utilities and customers with rooftop solar to the point that unless a homeowner has renewable energy stored onsite in a battery, the utilities simply refuse to accept it.

Despite such setbacks, what is known as distributed energy resources — microgrids and virtual power plants — are becoming increasingly popular. And according to Grist, new technologies may change the perspective of utility companies to the point where they are willing to pay for some of that electricity to support the larger energy grid. Those technologies often include demand response capability that reduces demand for non-essential items like hot water heaters, air conditioners, and EV chargers for a few minutes to a few hours. Doing so can eliminate the need to build new generating capacity, which in case you haven’t been paying attention lately, costs a considerable amount of money — money that can be paid to utility customers who share some of their electricity or participate in demand response programs instead.

Distributed Energy Is The Future

Grist says the energy experts it has been talking to believe the energy systems of tomorrow will be more distributed, with power coming from what they call the “grid edge.” As more people install solar panels on their roofs backed up with home batteries, utility companies can draw power from those homes when electricity demand increases. How to choreograph that electricity ballet is the question that needs to be answered. Millions of different devices at the grid edge are owned by millions of different customers, all of whom need to talk to each other and or the local utility company. To address that problem, a team of researchers from several universities and national labs developed an algorithm for running a “local electricity market” in which ratepayers would be compensated for allowing their devices to provide backup power to a utility. Here is  the abstract from the research paper that was published on February 20, 2025 by the Proceedings of the National Academy of Sciences.

The electricity grid has evolved from a physical system to a cyberphysical system with digital devices that perform measurement, control, communication, computation, and actuation. The increased penetration of distributed energy resources (DERs) including renewable generation, flexible loads, and storage provides extraordinary opportunities for improvements in efficiency and sustainability. However, they can introduce new vulnerabilities in the form of cyberattacks, which can cause significant challenges in ensuring grid resilience. We propose a framework in this paper for achieving grid resilience through suitably coordinated assets including a network of Internet of Things devices.

A local electricity market is proposed to identify trustable assets and carry out this coordination. Situational Awareness (SA) of locally available DERs with the ability to inject power or reduce consumption is enabled by the market, together with a monitoring procedure for their trustability and commitment. With this SA, we show that a variety of cyberattacks can be mitigated using local trustable resources without stressing the bulk grid. Multiple demonstrations are carried out using a high-fidelity cosimulation platform, real-time hardware-in-the-loop validation, and a utility-friendly simulator.

 “When you have numbers of that magnitude, then it becomes very difficult for one centralized entity to keep tabs on everything that’s going on,” said Anu Annaswamy, a senior research scientist at the Massachusetts Institute of Technology and the paper’s co-author. “Things need to become more distributed, and that is something the local electricity market can facilitate.”

A More Flexible Grid

At the moment, utilities respond to a surge in demand for electricity by spinning up more generation at power plants running on fossil fuels. But they can’t necessarily do that with renewables, since the sun might not be shining, or the wind blowing. So as grids increasingly depend on clean energy, they’re getting more flexible. Large banks of lithium-ion batteries can store that electricity for later use, yet grids will need even more flexibility in the event of a cyber attack or outage. If a hacker compromises a brand of smart thermostat to increase the load on a bunch of AC units all at once, that could crash the grid by driving demand above available supply.

With the local electricity market imagined in the paper, however, a utility company would call on other batteries in the network to boost supply and stabilize the grid. At the same time, electric water heaters and heat pumps for climate control could wind down, reducing demand. “In that sense, there’s not necessarily a fundamental difference between a battery and a smart device like a water heater, in terms of being able to provide the support to the grid,” said Jan Kleissl, director of the Center for Energy Research at the University of California, San Diego, who wasn’t involved in the new research.

Along with this demand reduction, drawing power from devices along the grid edge would provide additional support. In testing out cyber attack scenarios and sustained inclement weather that could reduce solar energy, the researchers found that the algorithm was able to restabilize the grid every time. The algorithm also provides a way to set the rates paid to households for their participation. That would depend on a number of factors such as time of day, location of the household, and the overall demand. “Consumers who provide flexibility are explicitly being compensated for that, rather than just people doing it voluntarily,” said Vineet Nair, a Ph.D. student at MIT and lead author of the paper. “That kind of compensation is a way to incentivize customers.” People like money, so that idea appeals to a basic human instinct.

Pay To Play

Utilities are already experimenting with these sorts of compensation programs, though on a much smaller scale. Electric school buses in Oakland, California, are sending energy back to the grid when they’re not ferrying kids around. Utilities are also contracting with households to use their  residential storage batteries as virtual power plants. That’s fairly easy to do because homes with heat pumps and batteries are already linked into the system, said Anna Lafoyiannis, senior team lead for transmission operations and planning at the Electric Power Research Institute, a nonprofit in Palo Alto, California. By contrast, connecting a solar and battery farm to the grid takes years of planning, permitting, and construction. “Distributed resources can be deployed really quickly on the grid,” she said. “When I look at flexibility, the time scale matters.”

The biggest hurdle here is getting people used to the idea of sending electricity back and forth across a set of wires. The US in particular is under heavy political pressure from those who like the way things were 100 years ago. Why mess with all this algorithm stuff when you can just build a fleet of new nuclear, coal, and methane powered generating stations? Who needs all these woke ideas? Aren’t they all part of the “green new scam” republicans are always bleating about?

The key here is money. People like it, and if there is a way for them to adopt new technology and benefit from it financially, they will clamor to be allowed to participate. Saving the planet is so abstract, most people can’t wrap their heads around it, but crinkle a dollar bill within earshot and they snap to attention. The mistake many of us here at CleanTechnica make is trying to convince people to do the right thing. Without a significant price signal, many don’t care a flying fig leaf if the average global temperature notches up a tenth of a degree or two. Who cares if Greenland melts? It will just make it easier to get at the oil, gas, and minerals trapped beneath the ice. The genius of the plan from the MIT researchers is it provides the price signal needed to get this idea off the ground and moving forward.