AEP Sustainability - DERs and Grid Reliability

Distributed Energy Resources

Integrating distributed energy resources (DERs) into the grid presents both challenges and opportunities for the electric power industry. This requires changing the traditional business models, forming strategic partnerships and regulatory reform – all while maintaining the reliability and security of the grid.

DERs have the potential to provide society with increased energy reliability and security while also reducing our reliance on traditional large, centralized generating stations. DERs include rooftop solar panels, wind turbines, home energy management systems and battery storage systems. As these decentralized, local sources of energy generation become more widespread, AEP continues to ensure the infrastructure exists to integrate these resources safely and efficiently.

These smaller power sources can work together – such as advanced renewable technology, small natural gas-fueled engines, turbines and fuel cells – to meet energy and demand. Widespread deployment of DERs requires planning and coordination to integrate them with the rest of the power grid. These are often deployed as demand-side installations by our commercial customers and can potentially provide benefits for the grid and customers.

AEP is investing in a company that has developed an advanced natural gas-fueled distributed generation solution for customers and communities. The gas-fired linear generator developed by EtaGen is highly efficient and is low-maintenance because it has so few moving parts. These are the types of technologies we are seeking to complement and support the grid.

As power from more and more alternative energy sources enters the grid, we face some significant challenges, such as maintaining grid reliability when voltage levels vary. This includes balancing the load when excess power is generated and flows back through the grid from DERs. We need to understand and plan for these dramatic changes so we can integrate them into our planning and future operation of the grid.

Many of our large commercial and industrial (C&I) customers have been early adopters of local generation. These users want more control over their systems, as well as lower costs and increased reliability of the power that drives their businesses and keeps them competitive. As the economics of DERs, such as private solar, continues to improve, C&I customers are increasing their adoption rate.

Examples of local generation systems in use by residential, commercial and industrial customers

Residential sector Commercial and Industrial Sector
Solar photovoltaic panels Solar photovoltaic panels
Small wind turbines Wind
Natural gas fuel cells Natural gas or biogas fuel cells
Emergency backup generators Reciprocating internal combustion engines, including back-up generators
Combined heat and power systems

Net Energy Metering

As DERs continue to increase in use, the debate over the continued need for and structure of net energy metering (NEM) rules continues in both regulatory and legislative arenas across the country. Under traditional NEM, customers are credited for any excess electricity they generate from DERs and sell back to the grid.

The number of NEM customers in AEP’s footprint is relatively modest, but growing. At the end of 2018, 5,369 net metering installations with a capacity of approximately 103 MW were on the grid in our service territory. Most of these are private solar generators who have rooftop solar installations.

In the past few years, policymakers across the country have started evaluating NEM. So far, 17 states have moved to reduce the compensation given to private solar customers on the grounds that the policy is inefficient and/or unfair. This includes several states in our service territory.

We believe the policies around NEM should ensure that customers pay equitably for the electric services they use and do not shift their costs to others, thus ensuring that all customers pay a just and reasonable rate. We continue to review compensation policies and mechanisms in other states to learn what would work best for our operations and our customers.

DERs and Grid Reliability

As we modernize the grid, we are designing in practices, materials and standards for ensuring long-term reliability and security of the system. 

DERs may be changing the way we view the electric power system, but they won’t change our need for a resilient, reliable system that provides customers with the energy and capacity they need every day. All customers – including those with installed private generation – will require supplemental power from the grid at times, such as when weather conditions prevent solar and wind farms from producing sufficient energy or during scheduled maintenance of private generation sources. DERs also need the grid to accept excess electricity when they produce more energy than they need, in addition to providing voltage control, frequency support and other services that are essential to reliability and living in a connected society.

As DERs become more common, the demand for traditional generation will decrease. At the same time, we will continue to rely upon 24/7 capacity from reliable resources such as natural gas as a cost-effective way to meet demand and maintain the reliability of the grid. AEP continues to invest in our transmission and distribution systems to prepare the grid to integrate with a multitude of DERs.