What Is a Distributed Energy Resource (DER)?

What counts as a distributed energy resource

The word “distributed” means spread out. Instead of one big plant far away, many small sources sit close to where people use power. The US Department of Energy gives rooftop solar panels, backup batteries and emergency diesel generators as examples ³.

FERC’s definition is wider than generation. It also counts things that change when or how much power you use. That list includes electric storage, demand response, energy efficiency, thermal storage, and electric vehicles with their chargers ¹.

So a DER does not have to make electricity. A water heater that a utility can switch off at peak times can count. So can a smart thermostat enrolled in a programme. What they share is size, location on the local grid, and the ability to change the flow of power.

Sources: [1] [3]

Where a home DER sits on the grid

1. Central power plant → high-voltage transmission lines
2. Substation → local distribution lines (where DERs connect)
3. Your meter → behind it, your grid-tied solar and any battery
4. Surplus from your DER → flows to neighbours on the same distribution line

How a home DER works with the grid

Power from your roof meets your home’s needs first. When the panels make more than the house is using, the extra flows out through your meter. It then feeds homes on the same street. When the panels make less, the grid fills the gap.

The inverter is the traffic controller. An inverter is the box that turns the panels’ direct current (DC) into the alternating current (AC) your home uses. IEEE 1547-2018 sets the rules it must follow when it connects to the grid ². These include how it responds to voltage and frequency changes.

One rule matters most for safety. If the grid goes down, a grid-tied system must stop sending power out.

DOE explains that an “islanded” section of grid could damage equipment or injure line workers, so many solar systems are set to detect islanding and disconnect ³.

That is also why plain grid-tied solar goes dark in a blackout.

Sources: [3] [2]

Types of DER you might own

Distributed energy resource vs distributed generation

Example: one street’s worth of DERs

An illustration with round numbers, not data for any real street. FERC’s Order 2222 lets regional grid operators set a minimum aggregation size of no more than 100 kW ¹. Here is how home batteries could add up to that size.

No single home could take part alone. A group run by an aggregator can. The real minimum, and whether a programme exists at all, is set by your regional grid operator and utility. Check a battery’s actual output on its data sheet; our battery power rating entry explains the number.

Where "DER" shows up for a homeowner

• Your interconnection application: utilities often call your solar or battery a "DER facility" or "DG facility". Georgia Power’s residential summary refers to a customer’s DER facility on its Distributed Generation interconnection page ⁶.
• Inverter spec sheets: the IEEE 1547-2018 listing shows the inverter meets the US standard for connecting DERs to the grid ².
• Tariff names: South Carolina’s Santee Cooper credits rooftop solar exports under its Distributed Generation Rider DG-25, with hourly netting ⁷.
• Battery programmes: offers to pay you for letting the utility or an aggregator draw on your battery at peak times are DER programmes.
• Hosting capacity maps: some utilities publish maps showing how much new solar each local line can take. Our hosting capacity lookup points to them.

Benefits and limits of DERs

Hosting capacity: why your line may be full

The National Laboratory of the Rockies (formerly NREL) defines hosting capacity as the amount of distributed solar a distribution system can add “before control changes or system upgrades are required” ⁴. In plain words, it is how much more rooftop solar a local line can take as it is.

It is not a hard wall. The lab notes that hosting capacity grows as upgrades are made ⁴. It depends on inverter settings, system size, where you sit on the circuit and what other DERs are nearby.

If your line is near its limit, the utility may ask for a study, a smaller export, special inverter settings, or an upgrade. That can add time to your project. Ask early, before you sign.

Sources: [4]

What drives the cost of adding a DER

We do not publish a price for a DER, because it covers everything from a thermostat to a large solar array. For rooftop solar, see our solar cost guide and cost per watt breakdown.

A few costs are specific to being a DER on the grid. Your utility may charge an application or study fee. A full line can lead to upgrade costs. Some tariffs add a monthly fixed charge for solar customers; the fixed charge lookup helps you find yours.

Equipment life drives long-run cost. Inverters and batteries carry their own warranties, often shorter than the panels’. Read each warranty on the product data sheet rather than relying on a sales claim.

How a home DER gets connected

Steps vary by utility. This is the usual order for rooftop solar or a battery.

1. A licensed installer designs the system and checks your utility’s size limit and export rules.
2. The installer files an interconnection application with the utility, often naming the system as a DER or DG facility.
3. The utility reviews it. A screen checks hosting capacity on your line; a fuller study may follow if the line is busy.
4. You or the installer get a building or electrical permit from the local building department.
5. A licensed electrician or installer does the work. You do not wire anything yourself.
6. The local inspector checks the work against the electrical code.
7. The utility may swap or reprogram your meter, then grants permission to operate.

Our interconnection timeline tool shows where delays usually happen.

Keeping a DER working

• Check your monitoring app monthly. A sudden drop to zero often means the inverter has tripped; see monitoring showing zero.
• Keep inverter firmware current. Utilities can ask for new grid settings under IEEE 1547 ², and updates usually come through the installer.
• Tell your utility before you add panels or a battery. A change in size is a new interconnection review.
• Keep your interconnection agreement and permission-to-operate letter. You will need them if you sell the home.

Warning signs and when to call a pro

• The system makes power during a grid outage without a battery and transfer switch. That is unsafe; call your installer at once.
• The inverter shows repeated grid voltage or frequency faults. Your line may be near its limit; ask the utility and installer.
• Someone offers to connect a system without utility approval. Unapproved systems can be disconnected and may break your tariff terms.
• A battery programme contract lets a third party drain your battery fully. Check how much reserve you keep for outages.
• Any burning smell, buzzing or heat at the panel or inverter. Shut off at the labelled disconnect only if safe, and call a licensed electrician.

Safety rule

The rules: FERC Order 2222 and IEEE 1547

On 17 September 2020 the Federal Energy Regulatory Commission issued Order No. 2222. It requires the regional grid operators that run organised wholesale markets to let DERs compete in those markets alongside power plants, by grouping them into aggregations.

One home battery is far too small to sell into a wholesale market. Hundreds of them, managed together by an aggregator, can be. Each grid operator’s rules must set a minimum aggregation size of no more than 100 kW.

The order also lets a DER that is already in a utility retail programme take part in wholesale markets, with limits to stop the same service being paid for twice.

Order 2222 covers only organised wholesale markets, and grid operators phase it in on their own timelines. Much of the Southeast has no such market, so do not assume a programme is open to you.

The technical rule is IEEE 1547-2018, the standard for connecting and operating DERs with the grid ². Your state commission and utility decide how it applies, along with size limits and export credit. Local electrical inspection follows the code your state adopted.

Sources: [1] [2]

Common misconceptions

Myth A DER must make electricity.

Reality FERC’s list also counts storage, demand response, energy efficiency and EVs ¹.

Myth My solar keeps my lights on in a blackout.

Reality Grid-tied solar is designed to disconnect when the grid fails ³. Backup needs a battery or other islanding equipment.

Myth Order 2222 means my utility must pay me for my battery.

Reality It applies to organised wholesale markets, through aggregators, on each region’s timeline ¹.

Myth Hosting capacity is a fixed cap.

Reality The lab says it is not a hard limit and rises as upgrades are made ⁴.

DER terms in South Carolina, Georgia and Virginia

When the DER label matters to you

Most homeowners never need the term. It matters in these cases:

• You are filling in an interconnection form. Answer the DER questions with your installer; the system size and inverter model must match the permit.
• You are buying a battery. Ask the utility whether it runs a battery or demand-response programme, and what control it would take.
• Your utility mentions a hosting capacity limit. Ask what a smaller system or export limit would allow.
• You want backup power. Plan a battery or hybrid solar system rather than plain grid-tied solar.
• Next step: compare installers who handle the paperwork for you through Get Solar Options.

Related terms

Grid-Tied Solar

Grid-tied solar is a solar system connected to the utility grid through your home’s electrical panel and meter, so the house uses solar power first, draws from the grid when solar falls short, and can send surplus back to the utility.

Electric Grid

The electric grid is the connected network of power plants, high-voltage transmission lines, substations, transformers and local distribution lines that carries electricity from where it is generated to the homes and businesses that use it.

Utility

An electric utility is the organisation that delivers electricity to your home and bills you for it.

Solar Battery

A solar battery is a rechargeable battery, usually lithium-ion, that stores electricity your solar panels make but your home does not use straight away, so you can use it after dark, during a power cut, or when grid power costs most.

Net Metering

Net metering is a utility billing arrangement in which the electricity your solar system sends to the grid is subtracted from the electricity you take from it, so you are billed only for the net amount over a set period.

Peak Shaving

Peak shaving is discharging a battery, or cutting load, during the moments a building draws the most power from the grid, so the highest kilowatt reading in the billing period comes out lower.

Hybrid Solar System

A hybrid solar system is a grid-connected solar system with a battery, able to store surplus solar, use it later, export to the grid when allowed, and keep chosen circuits running when the grid fails.

Solar System

A home solar system is the full set of equipment that turns sunlight into electricity your house can use: solar panels, an inverter, mounting hardware, wiring and safety disconnects, and the utility meter, sometimes with a battery.

Also referenced from: Grid-Tied Solar, Distributed Generation, Megawatt, Battery Energy Storage System, Electric Grid, Grid-Tied Inverter, Grid Resilience, Avoided Cost