Why Utilities Don’t Trust DERs and What We Can Do About It

So, ridiculous amounts of jargon notwithstanding, distributed energy resources include some really cool, energy-efficient, clean and smart technologies that benefit consumers, utilities and the grid, cut our carbon emissions and save us all money. (See Part 1 of E/lectrify’s Energy Literacy deep dive on DERs here.)

That being the case, why doesn’t everyone know about DERs? Why aren’t utilities, policymakers and regulators everywhere doing everything they can to make it easier, faster and cheaper to get more of them online as soon as possible?

As might be expected, the answers here are complicated and involve even more jargon, as well as digging into the political and bureaucratic minutiae of how state legislatures and utility commissions do and don’t work.

In other words, welcome to Part 2 of E/lectrify’s Energy Literacy series on DERs, and again, buckle up!

To briefly recap, the term “distributed energy resources” is industry shorthand for a growing and evolving group of technologies that allow consumers and utilities to generate, store or shift when and where they use electricity to help ease stress on the grid. The current list of DERs includes everything from rooftop solar panels, smart thermostats and heat pump water heaters to microgrids coordinating power for dozens of buildings on college campuses and virtual power plants aggregating thousands of individual DERs. 

They are “distributed” because they all live on a utility’s distribution system — the local poles and wires that bring power to homes and businesses — which means they generate, store or shift electricity closer to where it is actually used. (Again, see Part 1.)

And because they can make the system more efficient and flexible, DERs could play a major role in opening up space on the grid for growing electricity demand from data centers, factories and building and transportation electrification.

 They are also ready here and now, which brings us to our first big question.

When I started writing about energy as a reporter at the Palm Springs Desert Sun in the mid- to late 2000s, the clean energy narrative was relatively simple. Rooftop solar installers were the scrappy good guys, fighting to bring clean, cheap energy to the people. Utilities were the scum of the earth, corporate baddies trying to put them out of business because rooftop solar would cut into their profits.

This was, of course, a gross oversimplification, as well as inaccurate, as I found out when I left Palm Springs for a job with the Smart Electric Power Alliance in Washington, D.C. As communications manager, I was working with a broad range of utilities — they make up about half of the organization’s members — and what I learned is that the main problem is not that they don’t like DERs, they just can’t “see” them. 

At this point, we have to get a bit wonky about your electric meter and the electrons buzzing around both behind it — inside your home or business — and in front of it on your utility’s local distribution system.

What most people know about their electric meter is that it measures the total amount of electricity you use, in some cases on an hour-by-hour or even more frequent basis. But what it does not show is how you are using that electricity, which appliances or gadgets are chewing up the most kilowatt-hours, or if you are generating your own power from rooftop solar or have a battery that is storing electrons from those panels. 

The jargon here is that anything “behind the meter” is not “visible” to a utility; so, they can’t control it. Anything “in front of the meter” is visible and controllable.  

Now why you need to know this is because of the other thing I learned about utilities at SEPA: They are all absolutely committed to delivering safe, reliable power at all times to all their customers. It is a responsibility they take very seriously and is the reason, they will tell you, they need to see and control every single electron on their systems. 

This is a valid argument, up to a point. The catch is that utilities often use it to oppose or limit DERs by putting all kinds of extra requirements on them. The standard argument here is that because  DERs are not visible — or in the case of solar and storage, because they are variable —  they may threaten system reliability.

If utilities can’t see DERs, they can’t trust them. In industry-speak, they are “risk-averse.” 

It will not matter how many other utilities have tested specific DERs and found ways to safely and successfully use them on their systems. Most utilities will say their systems are different, unique —  because of local weather, their generation mix or the outdated technology they are still using — so, any new technologies must be tested, extensively, before they can allow them on the grid.

A recent example is the largely unnecessary, very expensive equipment Virginia’s Dominion Energy requires for any solar project of more than 250 kW to connect to their system (which veteran reporter Elizabeth McGowan has written about for E/lectrify here.) 

In this case, Dominion’s limits on DERs have not affected residential solar but have resulted in downsized or canceled projects at schools and small businesses.

Now why utilities need to be able to trust DERs is because of growing demand for electricity, primarily from data centers, and the complicated questions about how to produce and pay for the power that will be needed. 

Even one of the huge, “hyperscale” artificial intelligence data centers now under construction or being planned could be the equivalent of putting a new mid-sized city on the grid, all at once. 

Some utilities, regulators and government officials — including President Donald Trump — believe the only way to meet this coming explosion of demand is to build more power plants, primarily fossil-fueled or nuclear. They also want the AI companies to pay for this new generation and grid infrastructure — poles, wires and other equipment — to minimize rate increases for residential customers.

However, another school of thought is to meet rising demand and potential rate increases via energy efficiency and grid flexibility. DERs could reduce stress on the grid, and data centers themselves could “flex” their demand by running on less than full power for a few hours. The industry term here is “curtailment.”

A 2025 paper from Duke University estimated that if data centers would curtail 1% of their power demand per year, they could open up enough space on the grid to add 126 GW of new demand. 

Similarly, a report from electrification advocates Rewiring America argues that residential DERs — specifically heat pumps and solar and storage — paid for by hyperscalers like Google, Meta and Amazon could save enough power to cover all new data center demand. 

Google is providing the first case studies. On March 20, the company announced it will power a new data center in Michigan with 2.7 GW of solar power, advanced grid technologies and demand flexibility, and will provide $10 million to fund home weatherization and energy efficiency upgrades in local communities. Another data center it is developing in Minnesota will include $50 million for smaller, distribution-level storage projects, along with 1.9 GW of utility-scale solar, wind and long-duration energy storage.

Again, the technology is ready. New business models and regulatory change are the next steps. Do we have the political will?

Here’s where we get into the nitty-gritty of how state legislatures and utility commissions can remove obstacles to DERs or inadvertently create more. 

First, the good news. With data center demand and rising electric bills very much front of mind, state legislatures are taking action to get more DERs online. Between 2021 and 2025, states red and blue have passed more than 400 new laws providing various levels of support for DERs, according to a new database from the Pew Charitable Trusts and North Carolina Clean Energy Technology Center (see chart below).

While this surge of legislative action is encouraging, in many cases, actual implementation and impact remain to be seen. Just one example, progress on DERs can hit road blocks if utilities, legislators or regulators call for pilot programs to test DERs on local grids. 

In most cases, before large, corporate utilities run a pilot program, they have to get it approved by their state utility commission, which can take months or years. Typically, getting commission approval will mean demonstrating how the DERs being tested will benefit consumers. Will the cost be less or more than the benefits? What kind of time frame and definition of benefits are being used?

A utility may have to make small or major changes, such as cutting the number of customers involved or creating a task force to get more input from consumers, technology developers and others. 

If the pilot is successful, and the utility wants to expand it into a permanent program, the whole process repeats itself. In New Jersey, the state legislature passed a law creating a community solar pilot program in 2018. The actual pilot was launched in 2021, and the state’s Board of Public Utilities approved a plan to make it permanent in 2023.

(Community or shared solar allows people who cannot or do not want solar on their roofs —  such as apartment dwellers and other renters — to subscribe to a larger project in or near their communities and get credits on their bill for their share of that power.) 

Sometimes, even a good pilot doesn’t get picked up and expanded. A key challenge ahead will be pushing for widespread adoption of DERs.

Are we there yet?

The brief answer here is no. Many unanswered questions and complex issues remain to be addressed. A current flash point is whether or under what circumstances utilities should be allowed to own DERs — like a microgrid or distribution-level storage — and pass the cost on to customers through increased rates.

In addition to visibility, utility support for DERs could also depend on whether they can make money off them. 

Washington, D.C. held its own Climate Week April 20-26, with multiple panel discussions on data centers, affordability and DERs. During one, I was able to ask Jane Chen, cofounder and CEO of Stepwise Electric, a DER developer, what it would take to overcome utility and regulatory distrust. 

Her answer was honest and insightful, so I am quoting it here at length.

“What's challenging is that every state, every jurisdiction has a different level of penetration of DERs as well as visibility of those DERs. So, I think the key here is not like, can DERs satisfy the [reliability] gap for utilities, but rather, are we able to have enough visibility and control over the DERs in a reliable way for the utilities to actually accomplish what they need to?

“In the former question, I would say, absolutely, DERs hold the promise, but on … reliability and visibility on the ground, I don't think it's there yet, but we are moving in that direction. One aspect of it is just making sure that as we're deploying the DERS, they're all connected and actually being able to be utilized. And that, in and of itself, is a big interoperability question, and one that we grapple with on the ground.

“But from the utility perspective, unless they're seeing evidence of that kind of being resolved over and over again on the ground, they're going to be reluctant. So therein lies the chicken or the egg, because they have a lot of power to push for standardization, but they're not really going to get involved unless it's clear what the pathway is.”

At the same time, according to Allison Clements, a former member of the Federal Energy Regulatory Commission, creating that clear pathway for DERs is going to take a major leap in how we think about utilities, utility commissions and regulatory change.

“If ever there was a time to take advantage of DER technology … it is right now,” Clements said at a March 21 home electrification event in D.C. “We have an opportunity to make these things work, and if we don’t do it right now, we’re not going to get it done.”

Clements called on people to “think about what it really means to make changes. Don’t accept that just because we’ve been really bad at it for 25 years, that that’s the way it has to be, because it doesn’t.”