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Distributed Energy Resources (DER) are small-scale electricity generation, storage, or demand-management technologies located close to electricity consumers and connected primarily to the distribution system.
DER technologies are transforming the structure of electricity systems by shifting some generation and energy management activities from centralized power plants to distributed locations across the grid.
DER resources interact with both the Local Distribution Companies (LDCs) that operate local networks and the Independent Electricity System Operator (IESO) that coordinates bulk system operations and electricity markets.
⚡ Distributed energy resources shift part of electricity production and system flexibility from centralized power plants to distributed locations across the grid.
This transition introduces new operational and market challenges for electricity system operators.
Distributed energy resources include a variety of technologies deployed at customer sites or within distribution networks.
Small-scale generation resources connected to the distribution grid.
Examples include:
These resources generate electricity near the point of consumption.
Battery systems store electricity and release it when needed.
Storage systems provide several services including:
Storage resources can interact with both distribution systems and wholesale electricity markets.
Demand-side resources adjust electricity consumption patterns to support system operations.
Examples include:
Demand-side resources allow electricity demand to respond to electricity market signals.
Integrating DERs into electricity systems introduces several operational challenges.
Traditional electricity systems were designed for one-way power flow:
Generation → Transmission → Distribution → Consumers
DER deployment introduces situations where electricity may flow from distribution systems back toward the transmission grid.
This can affect:
High levels of distributed generation can cause voltage fluctuations within local distribution networks.
Maintaining stable voltage requires coordination between DERs and equipment used for Voltage Regulation.
Many distributed energy resources are located behind customer meters.
This can reduce visibility for system operators attempting to monitor electricity supply and demand in real time.
Advanced metering systems such as Interval Metering help improve visibility into distributed energy resources.
Individual distributed resources are often too small to participate directly in wholesale electricity markets.
Aggregation allows multiple DERs to be coordinated and operated collectively.
These aggregated resources may form a Virtual Power Plant (VPP).
Virtual power plants can provide services such as:
Distributed energy resources can sometimes replace traditional electricity infrastructure investments.
These solutions are known as Non-Wires Alternatives (NWA).
Instead of building new transmission or distribution infrastructure, utilities may deploy distributed resources to reduce demand or manage local electricity flows.
Examples include:
Under evolving electricity market structures, DERs may participate in electricity markets through aggregation or specialized market programs.
Participation mechanisms may include:
Ontario's Market Renewal Program (MRP) is expected to improve opportunities for DER participation in wholesale electricity markets.
Distribution utilities increasingly evaluate how DER adoption affects distribution infrastructure planning.
Planning considerations include:
Distribution planning processes are coordinated with regional planning conducted by the Independent Electricity System Operator (IESO).
Distributed Energy Resources (DER)
Small-scale electricity generation, storage, or demand-management technologies located near electricity consumers and connected primarily to the distribution grid.
➡ Next Topic:
Electricity Market Overview
Distributed energy resources represent a major shift in how electricity systems operate and are managed.
Understanding DER integration provides context for how electricity markets coordinate supply and demand across both centralized and distributed resources.
Last Updated: 2026-03-26