2Q 2022

Generating Value from Deregulated Electricity Markets

Power generation is undergoing a transition from a centralized, top down, and regulated model to a decentralized one with distributed networks that provide more reliable, affordable, and sustainable electricity. The increased integration of variable energy resources, such as renewable energy-based resources, into the grid may fundamentally affect how it functions. distributed energy resources (DER) deployments offer stakeholders new revenue streams, and are opportunities for bringing more localized solutions to grid stability, reliability, and resiliency. Equally important, DER also offer multiple new revenue streams to stakeholders.

Introducing competition into electricity markets removes centralized control and allows the entry of independent power producers. In these markets, players no longer have responsibility for supplying power to all consumers, but can decide how to maximize their profit potential. Efficient coordination between transmission system operators (TSO) and distribution system operators (DSO) can enable increased participation of DER and aggregators in the wholesale electricity market. In addition to providing energy services, a DSO acts as a platform to exchange data between a TSO and DER or aggregators.

This Guidehouse Insights report provides an overview of DER opportunities in deregulated energy markets. It explores the changing role of system operators and various DER services to the grid. Additionally, it examines how DER owners can create multiple value streams using various business models and by participating in different markets. It also covers the enabling digitalized platforms that encourage stakeholder participation in the market.

Pages 17
Tables | Charts | Figures 4
  • What is the fundamental difference between a deregulated energy market and a regulated energy market?
  • How do the system operators’ roles vary in the changing market paradigm?
  • What are the services provided by DER?
  • Which are the various business models that attract DER owners?
  • How does market participation provide different value streams to the stakeholders?
  • How do digital platforms encourage DER participation in deregulated markets?
  • DER technology developers and manufacturers
  • Energy storage technology firms
  • Microgrid controls and software companies
  • Renewable energy development financing companies
  • Government and regulatory agencies
  • Utilities
  • Investor community
  • Energy retailers, aggregators, and system operators




Regulated and Deregulated Electricity Markets Differ

System Operators’ Roles Are Expanding

DER Services Are Key to a Deregulated Electricity Market

DEM Demands Attractive Business Models

Bundled Solutions Encourage Energy as a Service

BESS-based Price Arbitrage and Peak Avoidance Provide Consumer Value Streams 

DER Aggregators

Energy Communities Can Show Profits

Pay as You Go Models Assist Underserved Communities

DER Participation in the Market Increases Stakeholders’ Value

BTM BESS Participates in Day-ahead and Real-time Electricity Markets

Demand Response Offers Services in the Capacity Market

EVs Show Potential in the Ancillary Service Market and V2G Applications

DER Adds Value to Aggregators and Energy Retailers

DEM Needs Enabling Technologies

Grid Operators Have Enhanced Opportunities

Energy Retailers Add Value with Increased Digitalization

Aggregators Enable End-User Participation in Capacity and Ancillary Markets

All Stakeholders Must Determine How to Adapt

  • REM vs. DEM
  • Flexibility Service for Deregulated Energy Markets
  • TSO-DSO Coordination Scheme
  • DER and Their Services
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