Aaron Denman: How Utilities Can Make the Most of Distributed Energy Resources

In order to prepare for a future in which customers will generate more of their own electricity, utilities need to plan strategies for integrating distributed energy resources into their capacity planning systems. Aaron Denman, a partner with Bain's Utilities practice, outlines what companies should do to act assertively and plan for success in a changing industry.

Read the Bain Brief: How Utilities Can Make the Most of Distributed Energy Resources

Read the transcript below.

AARON DENMAN: The electric power sector is in the midst of a transformation right now, where in the future, customers will generate more of their own electricity. They're going to install new technologies like electric vehicles or smart thermostats or building control systems that will change how and when they consume electricity.

You know, left unplanned, this could wreak havoc on the utility sector, both around reliability for customers, and the need to add more investments that could drive higher cost. If planned well, they could create immense value for utilities and for their customers. The ability to reduce peak demand, to mix the investment allocation to best meet their customer needs, and create new revenue streams—products and services that customers really want.

Now, the challenge in all of this is how do you actually integrate those DERs into the capacity planning system which requires new capabilities for utilities they don't have today. One step is to pilot some of these programs, to understand which DER technology, where at in the system, and when is most valuable to deploy that asset. At the same time, they're going to have to develop new business models to compensate DER owners who likely in the future won't be utilities. Again, this could be a great growth opportunity for utilities, both driving traditional investments into the distribution system, like advanced metering or demand management systems, but also creating new revenue streams, whether that's a new asset class or just those products and services that customers want.

Utilities that act assertively, move aggressively to understand where along the system DERs are best positioned, to drive the right technology at the lowest cost for customers, are going to be best positioned to take advantage of this opportunity.

Read the Bain Brief: How Utilities Can Make the Most of Distributed Energy Resources