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Interest in and growth of distributed energy resources (DER) are increasing among residential customers in particular, but some utility executives and regulators have yet to settle on collaborative ways to prepare for the potential shift, according to business and technology consulting firm West Monroe Partners.
Traditionally, commercial and industrial customers have led the charge for self-generation technologies, but that is changing as residential customers increasingly look to adopt DER in their homes and neighborhoods through shared resources like community solar.

In fact, residential customers are the largest group adding DER, as cited by 82 percent of utility executives, closely followed by commercial and industrial customers (77 percent), according to the West Monroe survey.

So what's impacting customers' interest in DER? It's a combination of things from social benefits to economic and reliability benefits. Of customers that have adopted renewable energy sources, 71 percent said they did so to lower their utility bill and 17 percent said it was in response to their stated environmental stewardship.

"While DER adoption is beneficial for customers and the environment, it's forcing the utility industry and regulators to reconsider the traditional utility business model and how the utility monetizes the value of the services it offers to customers," said Tom Hulsebosch, managing director in West Monroe Partners' Energy & Utilities practice.

Despite residential customers' increased interest in DER, utility executives hold a conservative outlook toward the spread of DER within their systems. Only 37 percent of utility executives offer DER-specific support services, systems or technologies, and 59 percent plan to make no or minimal investments to support DER unless mandated to do so. Further, 66 percent of utility executives feel DER are both a threat and opportunity for their businesses while 68 percent expect DER technologies to provide just 1 to 5 percent of supply resources in the next five years. In addition, 47 percent believe small residential systems will be the most prevalent source of DER on their systems in the next five years, followed by third-party power providers, the utility itself, and commercial/industrial systems.

Compared to utility executives, regulators are already modifying their compliance requirements to support DER integration. Regulators cite a handful of concerns driving the proposed changes and ranked grid reliability as the top factor driving regulatory action to support DER with 78 percent, followed by rising costs of delivered energy and requests from external stakeholders with 67 percent.

Supporting DER and integrating them into daily utility operations will not come without challenges. According to the study, 61 percent of utility executives believe capital and financial constraints are barriers to DER adoption and support, while 61 percent of regulators believe regulatory barriers are the most significant obstacles.

Educating customers on these new technologies is another barrier to DER adoption. The study found 69 percent of customers do not know if their utility offers DER enrollment and 94 percent say their providers haven't approached them about alternative energy options. Utilities that fail to educate customers and provide a sufficient DER customer experience may suffer business and compliance consequences, and as a result, more oversight from regulators.

"Utility executives and regulators have contrasting views on the amount of DER penetration that can be readily absorbed into the existing grid without fundamental changes being made to accommodate them," said Paul A. DeCotis, director in West Monroe Partners' Energy & Utilities practice and East Coast lead. "This divide, along with technology availability and cost, pivoting business models and public policy interests, have put a hold on the amount of DER integration expected to come on line in the immediate future. These and other issues continue to impede the industry's ability to accommodate new energy technologies and gain greater support."

Click here to read this article as it originally appeared on SmartGridNews. To view the full DERs report, click here.