A new term, known as distributed energy resource, DER for short, is gaining favor in the lexicon of those conceptualizing future power grid architecture. DER is essentially a term with neutral connotation referring to less centralized, more distributed power generation—but how one envisions it implemented in the future varies amongst those with differing agendas. An engineer tasked with powering a datacenter will have a distinctly different impression of a DER than a pajama boy-turned-entrepreneur from Brooklyn.

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Let’s start with how the datacenter engineer sees it. He needs firm, reliable power to run his datacenter. He also wants to avoid years of navigating bureaucratic red tape in getting his power source in place. He could negotiate a purchase agreement with a power utility with a guarantee of steady 24/7 delivery. That might make sense, but he does have another option. The country is crisscrossed with transmission lines that comprise the backbone of the power grid. It is also interlaced with natural gas pipelines. Depending upon a datacenter’s access to one, it may be more economical to tap into it and power the datacenter with proprietary gas generation which would constitute a DER.

The power utility was initially a welcome alternative to owning and maintaining one’s own generator. It offered economies of scale that individuals and companies could not attain on their own. In addition, a power utility by aggregating customers with different time usage patterns could more fully utilize its assets than individual owners of generators who had periods when assets were idle. However, neither of those handicaps apply to datacenters. Because of their size and steady usage, they can often attain a level of asset utilization and economy of scale comparable to a utility.

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Having to decide on how to source inputs is not unique to datacenters. In recent decades, enterprises of all types have had to decide whether it was advantageous to own computing assets or purchase cloud computing services. Likewise, the cloud computing service companies must decide where to host services and the datacenters that host such services must decide on the most efficient, secure and cost-effective way to source their power.

The DER that a datacenter utilizes could include wind, solar, and battery sources in addition to proprietary gas generation, but the overall mix must result in firm, steady power to the datacenter. The datacenter could also employ an arbitrage scheme in which it fluctuated between drawing power from the grid or generating its own depending on the price spread ($/kWh) between them.

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The reader may recall that I referred to a pajama boy-turned-entrepreneur’s impression of a DER. Like many ideas that emerge from the freethinkers that frequent cafes and bars in Brooklyn, it has some rough edges. His concept of a DER is for businesses in Brooklyn to plug batteries into outlets with the hope of gaming their utility provider, Con-Ed. I wish him luck, but I will steer clear of that imaginative scheme. So, expect to hear the term DER thrown around a lot in the coming years, but understand that not all DER schemes will fly.

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Image generated by ChatGPT.