Distributed Energy Resources

Integrating distributed energy resources (DER) into the grid presents both challenges and opportunities for the electric power industry. This requires changes to traditional business models, strategic partnerships and regulatory reforms – all while maintaining reliability and security of the grid. To fully optimize the power grid, we need to play a role in how these technologies are integrated.

The number of net energy metering (NEM) customers in AEP’s footprint is relatively modest but is growing. We continue to advocate for fair, equitable and sustainable solutions to NEM.

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

As power from more and more alternative energy sources enters the grid, we face significant operational challenges. These include maintaining grid reliability when voltage levels vary, and managing different interconnection standards that exist in different parts of the country. The power industry is focusing on how to balance load when excess power is generated and flows back through the grid from different technology interfaces.

AEP’s Transmission, Distribution and Generation teams are collaborating to address these changing grid dynamics. For example, Transmission and Distribution are participating in discussions at the regional transmission organization (RTO) and industry level to address the opportunities and challenges that high penetration of DERs on the grid creates. Increasing amounts of DER can change how the distribution system interacts with the transmission system and may transform distribution systems into active sources for both energy and essential reliability services.

We need to understand and plan for these dramatic changes, which can alter the flow of power as well as the responses to various types of disturbances, so we can integrate them in the planning and operation of the grid. Existing processes in forecasting, modeling, operations, system protection and planning will all need review to adapt to changes that will occur as DER penetration increases.

Large industrial and commercial customers have been the early adopters of local generation, where energy managers want more control over their systems, lower costs and increased reliability of the power that drives their businesses and keeps them competitive. The economics of local generation, particularly private solar, continue to improve, 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 distributed generation (DG) continues to grow, debate over the continued need for and structure of net energy metering (NEM) rules continues in both regulatory and legislative arenas across the country. The number of NEM customers in AEP’s footprint is relatively modest but is growing.

At the end of 2017, 4,464 net metering (solar and wind distributed generation and other net metering) installations with a capacity of approximately 92 MW were on the grid in AEP’s service territory. Most of them are private solar generators who have installed rooftop solar. The discussion focuses on the value of the grid and who pays to use it.

AEP continues to advocate for fair, equitable and sustainable solutions to NEM. We believe the policies around NEM should ensure that all customers pay for the grid services they use, 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 customers.

State legislatures are beginning to take action on this complex electric rate issue. In Indiana, legislation that would phase out net metering in that state by 2047 was signed by the governor in May 2017. In January 2018, legislation was introduced in Kentucky to lower the amount paid to DG customers and to require them to pay their share to maintain the regional electric grid.