Why DERs are super cool, super smart and can help cut your electric bills

(Editorial note: Life, in the form of travel and health issues, has been highly disruptive of late, and I was unable to publish my regular post on E/lectrify last week. I hope to catch up with two posts this week. Your patience and ongoing support is deeply appreciated.)

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Jargon happens. Some new wonky term pops up in an industry report or during a panel discussion at a conference, and within months or even weeks, you find yourself using it, thinking in terms of it — like some insidious mind worm.

Which brings us to distributed energy resources — DERs — energy industry jargon that is almost universally disliked but widely accepted and used for the simple reason that no one has ever been able to come up with anything better. (It is variably pronounced “D-E-Rs” — my preferred usage — or “durz.”) 

While it can be traced back to the early 2000s (more on which later), I first started seeing and hearing the term in the mid-2010s, when I was working at the Smart Electric Power Alliance. Then, as now, it was an umbrella term covering a group of clean, smart and energy-efficient technologies — from rooftop solar to demand response — that could generate and/or store electricity, allowing a home or business to cut or shift its power use at times of stress on the grid.

And, as may be clear from the preceding sentence, talking about DERs involves explaining even more jargon; so buckle up.

The first thing we need to untangle is the “distributed” part, which is the critical element in DERs. It means that all the various technologies involved are on a utility’s distribution system, which is itself industry jargon for the poles, wires and other equipment you can see from your window or on the street, delivering electric power from the transmission system to homes and businesses (as pictured above). 

The transmission system is made up of bigger poles and wires — pylons strung with cables, running along highways, train tracks or across open fields — which can move large amounts of electricity at high speeds and over long distances. 

Now why I am telling you all this is because, first, yes, we need both kinds of poles and wires to make sure electricity is there when we need it; and second, in most cases, the cost of building these vital systems ends up on our electric bills. 

(Previous E/lectrify Energy Literacy pieces include a brief history of the U.S. transmission system and the people who build and operate it, here, and hopefully clear and concise explanations of why and how utilities get you to pay for their poles, wires and other stuff, here and here.)

But — and here’s why DERs have become super important — these technologies can help both consumers and utilities manage, minimize or optimize their electricity use, allowing them to cut the amount of power they need or shift it so it can be used more efficiently and cost-effectively.

I have to get a bit wonky here because to really understand DERs, you have to understand the various ways that producing, storing and shifting the use of electric power on local poles and wires may help lower your electric bill. 

First, sending any electricity over poles and wires involves some loss; so, the closer you produce electricity to where it is going to be used, the less you lose. 

According to the U.S. Energy Information Administration, we lose an average of 5% of our power every year to our transmission and distribution systems, and fossil fuels are the least efficient way to produce electricity. Just burning them means we lose 18% of their potential power, and depending on type, one ton of coal can produce anywhere from 3,000 to more than 7,000 pounds of carbon dioxide.

Equally important, if you are producing, storing and shifting the use of power on local poles and wires, your utility can use the energy it has more efficiently. 

For example, in July of 2025, Pacific Gas and Electric ran a demonstration, aggregating electricity from 100,000 residential batteries — powered by solar — allowing the company to ride out the peak in demand that typically occurs on its system in the evening. (Most utilities have an evening peak — from about 5 to 9 p.m. — when people come home, turn on lights, run their heat or air conditioning, cook dinner, watch TV, etc.)

So, having this kind of “virtual power plant” — made up of aggregated DERs like solar and storage — means a utility won’t have to fire up a natural gas plant or import power from other states, which can be very expensive, to meet its evening peak. Further, it might not have to build more power plants or poles and wires — which customers would pay for through rate increases — to ensure it will be able to provide electricity wherever and whenever it is needed. 

A study of California’s DER programs, including the VPP demonstration, estimated customer savings of $28 million to $206 million between 2025 and 2028, in addition to any compensation individual customers might receive for participating in a VPP or similar program.

Yup, when a utility taps into your DERs, you should get paid for it — maybe not a lot, but it all adds up to help cut your utility bills. 

So, DERs are cool in general — and save you money — but they get even cooler when you dig into the technology and how it is evolving, becoming smarter, easier to use and more efficient and flexible. 

Back in the early 2000s, when energy wonks first started talking and writing about something they called “distributed energy resources,” they were talking primarily about solar, storage and demand response. (This 2003 report from the National Renewable Energy Laboratory provides some weedy historical context.) 

Now, “demand” is what utilities call the energy you use. It turns up in several different terms – demand response, demand management, demand-side technologies — which all refer to ways customers can vary their energy use at certain times of day or in an emergency to cut stress on the grid. 

Back in the day, demand response — or DR — meant a utility would install some little gadget on your air conditioner that allowed them to turn it off for a couple hours on really hot days, or a business would close its factory or offices a couple hours early. 

Getting people to sign up for such programs was difficult because no one really wanted their utility to be able to turn off their AC in the middle of a heat wave.

The advent of smart thermostats — now categorized as a “demand-side technology” — has made DR a more flexible and effective way to cut energy use. Enrolling in a DR program today could mean that in the middle of that heat wave, the utility would tap into your smart thermostat and turn up your AC a couple degrees, rather than turning it off completely. 

Your home might not be quite as cool as you’d like, but it would not be sweltering, and you would still help to cut stress on the system and get paid for it.

And this is where things get really fun, because the electrification of buildings and transportation, and the digital technologies involved, mean that all kinds of stuff can be used as DERs. Electric vehicles and EV chargers, heat pump hot water heaters, along with heating and cooling systems are all part of the stack of technologies that can be called on to support the grid. 

For example, a utility can shift when your EV gets charged — possibly after midnight instead of in the early evening after you get home and plug it into your EV charger. With such “managed charging” programs, your EV battery is still topped up when you’re ready to commute to work the next morning, but you’ve helped cut the utility’s evening peak. 

Moving beyond smart thermostats, start-ups are now producing pretty amazing energy management systems — easy-to-install black boxes that can monitor and manage energy use in your home. At the recent Healthy Homes Fair in Washington, D.C. — an event promoting home electrification — I saw two different energy management systems. 

A Boston-based company called Stepwise Electric has a system that can be connected to a home’s electrical panel in a few hours (as pictured below). Called Tap, it then automatically manages the electricity used by the household’s appliances and can respond to a utility’s call for help at times of high demand.

For example, the Tap could selectively turn down or briefly turn off certain appliances — such as an EV charger or heat pump water heater — to help ease stress on the grid while keeping the rest of the house comfy and operating normally.

Elastic Energy’s ER01 is an even smaller black box that doesn’t even need to be connected to an electric panel and can turn any home or business into a de facto DER, according to CEO Ben Hilborn.

The box, which is a router, automatically connects to home appliances or equipment — via Wi-Fi, Ethernet or LTE-M — and enrolls them in any appropriate utility demand management programs; so they automatically cut and shift electricity use, as needed, in real time. 

Another very cool and important thing about DERs is how flexible they are. They can operate on or off the grid and can be as small and simple as a solar and storage system on your home. Or they can be aggregated into a VPP or microgrid — a combination of DERs providing power to a group of buildings or a community — like the one I recently visited at the Illinois Institute of Technology in Chicago. 

Covering 40 acres, the IIT campus includes 52 buildings — some of them historic, designed by the modernist architect Mies van der Rohe — all of them powered by the school’s microgrid, which is the largest system of its kind in the U.S. (I was at IIT as part of a group of environmental journalists and communications people, and the scale model of the microgrid we saw — pictured below — was just super cool.) 

Mohammad Shahidehpour, a senior professor at the school who oversees the 12 MW system,  said it combines solar, storage and natural gas, which is used primarily to back up the renewables. It can disconnect from the local grid and keep the whole campus running in an emergency. Savings for the university are about $1 million per year, he said.

The microgrid can shift power between buildings to improve the system’s efficiency and cut costs — for example, by shifting nonessential computing to the middle of the night, when power is cheap. It also contains three nanogrids — mini-microgrids that power individual buildings — so even if the whole campus were to lose power, these buildings would still have electricity.

The flexibility of DERs is a critical element in Shahidehpour’s work and why such distributed technologies are important for U.S. consumers and the grid right now. Since developing IIT’s system, he has helped design microgrids around the world, from Puerto Rico to remote villages in Africa, where people have been living totally without electricity.

“Microgrids in those locations (in Africa) are very small,” he said. “We utilize whatever is available locally. For instance, here we use solar. In those places, they have rivers, they have wind energy, sometimes they have geothermal; whatever is available. We use that to help villagers, because there is no grid in those places, and building infrastructure is a monumental, expensive task that's not going to happen.”

On island nations like Puerto Rico, where one hurricane can knock out the country’s grid, smaller, local microgrids have a better chance of riding out or bouncing back from extreme weather events, he said. 

Asked about the costs for such systems, Shahidehpour said, “Well, the price, you know, this is like, you tell me how much money you have.”

 The IIT microgrid “is basically the Cadillac version,” he said. “But I can also give you something that (costs) a few hundred dollars. It very much depends on how sophisticated you want a system to be. That's the beauty of it, in the sense that you can customize it for specific applications and needs.”

What’s not covered here is the role DERs could play in meeting booming demand for electricity from data centers, manufacturing and electrification, the resulting increase in state policies promoting DERS, and the regulatory, technical and other obstacles still to be overcome.

Getting the most out of DERs means building out distribution and transmission systems – and adopting supportive policies and regulations – that will help us get the most out of these technologies, and we definitely aren’t there yet. Jargon will continue to happen as I tackle these thorny and very wonky issues in Part 2.