The role of Policy in distributed renewable integration

As governments work to accelerate renewable energy deployment, their policy frameworks need to cater for a more diverse, decentralised and competitive energy market. Power utilities, technology providers and now EV manufacturers and prosumers (businesses and households) are all energy market players who can generate, store, consume and redistribute renewable power dynamically. Optimising the use of all these distributed clean energy assets in a way that it is most cost-effective, provides grid flexibility and unlocks consumer savings is key. As such, policy needs to adapt to this new market reality if distributed energy resource (DER) benefits, especially for the wider public, are to be realised.

The global race is on

Markets for distributed energy are already running at a pace, especially at the consumer level. In 2022 (ie in just one year) China installed 108GW of rooftop solar. To put that context, Europe has achieved ~164GW for all solar installations (roofs, arrays, farms etc) in total (ie historically). The US is poised to turbo charge a range of distributed energy resources (PV, batteries, heat pumps, EVs) to the tune of $369billion. The EU has responded with its own package of subsidies worth $272 billion that also incudes support for PV, batteries and heat pumps.

Beyond subsidies

Such subsidies are likely to have a huge stimulus effect on DERs, however policy responses must go beyond the use of subsidies if the potential of DERs is to be realised. Consumer generated energy needs to be effectively integrated into the grid and able to react flexibly when called upon. Price signals need to reflect the value of demand and supply to the electricity system. A suite of enabling policies are needed to support the building of the flexible DER asset base and remove barriers to participation. To date, markets in different jurisdictions have their own incentives and mechanisms but no one jurisdiction has a monopoly on best practice. Some have made more progress on DER integration than others. Our partners Regulatory Assistance Project (RAP) mapped policies around the world that facilitate DER integration and found that:

• There is a strong set of policies that remove barriers to DER integration, including smart codes and standards, subsidy programmes, regulatory reform to allow market access and capacity building amongst consumers, supply chains, network operators and regulators.

• The ability to sell energy to the grid is a fundamental building block of DER integration. In many emerging and developing countries, restrictions limit the extent to which this is possible.

• Time and location specific tariffs for electricity use and export drive consumers to make optimal choices for an increasingly variable energy system. As energy transitions progress, the need grows for more granular price signals to flow through the system.

• Cost-reflective price signals should be combined with fair market access for DERs. Not all consumers want to be exposed to price volatility. With non-discriminatory access to energy service markets and the full value of DERs reflected in prices, aggregators can offer tariffs that shield consumers from price volatility in return for flexible management of DERs within pre-agreed boundaries.

• A social licence is needed for consumers to fully integrate their DERs. As DERs become more mainstream, moving beyond enthusiastic early adopters, coordinating authorities need to create and maintain the conditions within which consumers are prepared to use their assets in ways that benefit the energy system.

Policy measures that, if adopted in a coordinated manner, can help drive the integration of DERs on-site, on-road and on-grid.

RAP’s report Integrate to zero: Policies for on-site, on-road, on-grid distributed energy resource integration dives into existing case studies from around the world and uncovers barriers for DERs and policy best practice that exist to address these.

What next?

Integrate to Zero and partners in Morocco (IMAL), Nigeria (Verdant, Green Protocol, PwC), and Mexico (ICM) are exploring the policy landscape in different countries to better understand how policy can optimise the benefits of DERs.

Additionally, in partnership with RAP, we will be organising webinars and targeted training to support regulators and network operators in understanding the value of integrated consumer energy systems and how to shape policies for DER integration.

Get in touch if interested at info@integratetozero.org

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