When I talked about DERMS in my Q&A recently, I said the challenge is that the economic case tends to come after the technical deployment, rather than before it. I’ve been thinking about that more since, particularly after some conversations at the IEEE T&D conference last week.
Most DERMS deployments follow what the industry calls a crawl-walk-run approach. Right now, most utilities are still at “crawl”.
I came to Electron from the DERMS world, so I have some sympathy for where utilities are. The two things utilities are primarily getting from DERMS are monitoring – visualizing where known DERs are and what they’re doing – and control of utility-owned or contracted assets.
Being able to curtail a solar installation or dispatch a contracted storage resource provides value. Developers can connect faster and cheaper, and utilities have a way to manage assets that are already on their grid.
But DERMS is a technical solution, it doesn’t design the program or tell you whether it’s delivering value. And that’s the gap.
Running a pilot to prove the pilot works
As I touched on in the Q&A, utilities run pilots with DERMS to show the DERMS technically works. And then when they look at the results, they struggle to see the broader impact. That’s because nobody started by asking where on the network this capacity was actually needed, or what it would be worth to have it there (in many cases this is due to the DER owner choosing the best site for them).
DERMS deployments also tend to roll out area by area, circuit by circuit. It makes sense when you’re responding to a specific constraint. But it means utilities aren’t looking at the holistic, system-wide picture for how all of these assets and programs could be coordinated together.
So, most implementations follow that crawl-walk-run approach. Crawl is “do no harm” i.e. get assets interconnected, make sure nothing breaks. Walk means a bit more leeway, some limited grid services. Run is actually providing grid services as part of a coordinated system.
Right now, the industry focuses on that do-no-harm stage.
Pulling on the reins versus using a carrot
The reason utilities are stuck there is about the difference between telling a DER to stop doing something versus asking it to do something i.e. the crux of true flexibility.
Stopping something is straightforward, you pull on the reins to stop the cart. Getting something to move is different. You need an incentive – the carrot – set at the right level, which is where most programs come unstuck.
I was talking to a utility recently whose managed charging program offered participants a set rebate to charge during a specific window. Uptake was poor because the utility wanted them to charge during rooftop solar generation hours.
However, many customers weren’t home with their EVs at that time. They therefore didn’t want to charge during the utility’s preferred window.
The rebate they were getting for being flexible didn’t incentivize them enough to change their behavior, so they just didn’t participate.
Let the market guide you
This is where I think flexibility markets advances the debate around DERMS.
If a utility is weighing whether to deploy DERMS on a given circuit, they typically rely on the vendor’s modelling to tell them what it’s worth. A market gives you a different kind of answer. Every bidder in that area is showing you how much they need to be paid to participate. That’s data about the economics of that constraint, from the assets themselves (straight from the horse’s mouth, to continue the analogy…).
If the market is clearing at a level where the cost of dispatch approaches what it would cost to reinforce the circuit, that tells you something. And if the market is clearing at a level where it makes sense to roll out DERMS to coordinate those assets, that tells you something too.
The utilities I’m talking to who have DERMS but feel like it’s not expanding as quickly as they want are often dealing with this gap. They’ve deployed DERMS where there’s a constraint. However, they don’t have a way to show that what they’re doing is the most affordable approach, or to make that case to their regulator.
How the two fit together
Flexibility markets and DERMS can close the loop on each other.
Once a market has cleared, say, a week-ahead market where assets have committed to two hours of dispatch, the utility’s concern is needing something to happen. Integrating with DERMS gives them visibility in real time into whether assets are dispatching as agreed. They also have the ability to call on other assets they control if they aren’t. It’s that layer of oversight that can help make the utility comfortable with a market-based approach in the first place. They don’t have to give up control.
There’s a broader benefit to that integration too. One of the persistent problems with DER programs is that they are siloed. They’re managed by customer teams that operate separately from planning and operations. When markets and DERMS share data, different teams are looking at the same picture: what the DERs are worth, how they’re performing, and where the value is. That common view is what allows coordinated decisions, rather than each team optimizing for their own part of the system – a core part of our value orchestration capability, alongside detecting DERs that utilities may not currently access through ElectronCompass.
The way I see it, the market provides the carrot, the DERMS provides the reins. And planning and operations need to hold them together, directing where the horse is supposed to go, pushing it to canter.
That means you can start making investment decisions based on economics. An area that’s not currently constrained starts to look like a potential opportunity for DERMS deployment when you have market data showing you what the flexibility there is worth and how it scales.
And that’s the difference between crawling and running. DERs operating as coordinated grid services, backed by decisions based on economics that regulators can rely on.
