Distributed Energy Resources Evolve the Role of Electricity Suppliers

DENVER (February 9, 2021)—Retail electricity prices have continued to rise over the last decade, despite the declining costs associated with generating electricity. Moreover, severe natural disasters and longer duration outages have motivated many electricity customers to seek greater resiliency and explore cost-effective options beyond their electricity providers.

For consumers, the prospect of lower-cost, localized clean generation has spurred increasing interest in distributed energy resources (DER). Consumer adoption of DER is poised to accelerate rapidly in the years ahead as cost-cutting pressure, in addition to environmental and reliability concerns, shift into high gear.

According to a new report from CoBank’s Knowledge Exchange, roughly 65 GWs of customer-controlled energy resources can already substitute for centralized utility-scale generation, with estimates suggesting the prospect of six-fold growth by mid-decade.

“Generation and transmission assets developed without regard to expanding DER substitutes could become stranded,” said Teri Viswanath, lead energy economist at CoBank. “Although pathways toward a more compatible future are increasingly unfolding. Several states are evolving new visions for DER, with electricity suppliers and regulators actively considering how to reframe traditional utility business models to better integrate these resources.” Utility pilot programs are building the bridge toward better consumer collaboration, with technology and incentive structures enabling beneficial load flexibility.

For rural electric cooperatives and their members, open communication and strategic planning is essential in figuring out DER compatibility and how traditional business models will evolve. The primary role of traditional suppliers might include managing distributed resources owned by their consumers. A move toward a service-based business model could open additional opportunities.

Rural communities could also benefit with buffers against escalating future delivery costs. A future of change brings greater optimism for rural electric cooperatives that have a successful track record with member engagement, a critical element for thriving in this evolution.

“The rise of distributed energy resources will impact and potentially alter traditional models of generation, transmission and distribution throughout the industry,” said Viswanath. “The future state of the industry, where upstream electricity suppliers take on a very different role, might unfold faster than anticipated.”

Read the report, The Economics of DER and the Rise of the U.S. Prosumer.

About CoBank

CoBank is a $148 billion cooperative bank serving vital industries across rural America. The bank provides loans, leases, export financing and other financial services to agribusinesses and rural power, water and communications providers in all 50 states. The bank also provides wholesale loans and other financial services to affiliated Farm Credit associations serving more than 70,000 farmers, ranchers and other rural borrowers in 23 states around the country.

CoBank is a member of the Farm Credit System, a nationwide network of banks and retail lending associations chartered to support the borrowing needs of U.S. agriculture, rural infrastructure and rural communities. Headquartered outside Denver, Colorado, CoBank serves customers from regional banking centers across the U.S. and also maintains an international representative office in Singapore.