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DER Software Platform Functionalities Are Converging

Dan Power
Dec 22, 2022

Guidehouse Insights

With distributed energy resources (DER) continuing to proliferate worldwide, advanced software platforms used for managing DER are becoming more prevalent and necessary in grid operations. DER management systems (DERMSs) and virtual power plant (VPP) platforms are two types of DER software platforms used by utilities, grid operators, independent power producers, and DER aggregators. As energy markets become more liberalized across the globe to allow aggregated DER participation, advanced DER software functionalities will be critical to ensuring the aggregations are utilized effectively. At the same time, utilities and grid operators will need increased visibility and control of consumer assets so that their operation doesn’t compromise the reliability or stability of the grid.

DER Aggregation Portfolios Are Increasing in Complexity

VPP platforms and DERMSs are sometimes categorized together but are distinct in how they prioritize optimizations. VPP platforms take more of a customer- and aggregator-focused view, with an emphasis on economics and grid functions that can be addressed over a wide geography. The overarching goal for a VPP platform is usually to maximize revenue for the DER owner. DERMSs take a more grid-physics-based view from the perspective of the utility and grid operator, allowing for localized active power management of distribution feeders and circuits.

Top left: Downward-pointing arrow labeled DERMS, underneath the text "Top-down grid reliability basic on physics." Bottom right: Upward-pointing arrow labeled VPP, above the text "Bottom-up DER economic optimization."

(Source: Guidehouse Insights)

Utilizing DER assets of all types—including flexible loads, energy storage systems, and distributed generation—makes for a more robust aggregation solution when addressing grid needs. However, as DER portfolios grow in both the number and type of resources included, they become more complex for the parties managing their operations and the utilities and grid operators responsible for managing the larger grid. While more open and liberalized electricity markets may allow the value of DER to be realized, the physics of electricity exchanges must also be maintained to ensure continued reliable grid operations. Global energy markets will eventually rely more heavily on DER to provide essential energy and capacity needs as well as finer adjustments related to voltage and reactive power. This is where economic optimization and location-based grid physics optimization must come together.

Optimizing for Grid Physics and Economics Is Becoming Essential

DER software platform providers that have historically been more market facing and focused on economics are starting to add locational awareness to their platforms, which opens the door to DERMS-like functions. At the same time, platform providers that have been more focused on grid physics have started adding market optimization functions that can facilitate bidding into markets like a VPP platform. Creating a hybrid platform—with market-facing functionalities capable of optimizing economics like a VPP platform, and locational awareness that enables the management of grid physics at specific locations like a DERMS—can facilitate more efficient grid and market operations. As the energy transition continues, more advanced and versatile software platforms will be required to maintain grid stability and reliability while integrating the growing network of DER.