DERMS: A TERM GONE TOO FAR?

DER Lifecycle Management Is Not Limited to

DERMS

Ben Kellison, Director, Grid Research

May 2017
 Contents

CONTENTS
1. The Importance of Definitions .................................................................................................. 5
2. Building a View of DER Lifecycle Management ......................................................................... 6
3. Back to DERMS ........................................................................................................................ 10

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 Contents

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 About the Analyst

ABOUT THE ANALYST

Ben Kellison | GTM Research
kellison@gtmresearch.com

Ben is the Director of Grid Research at GTM Research. He manages GTM Research’s grid edge
research team and leads global research strategy and content development. Ben is an expert in
utility business models, distribution grids and customer distributed energy technologies. He has
written a wide variety of studies covering network management, reliability, power electronics,
volt/VAR control, asset health, and renewable integration.

He previously worked as a research analyst for Knwldg Houston, formerly a green energy and
healthcare consulting firm, where his research focused on AMI deployment and smart grid
regulatory policy. He graduated from Washington University in St. Louis with a bachelor’s degree
in economics and political science.

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 The Importance of Definitions

1. THE IMPORTANCE OF DEFINITIONS

Industry terms of art are valuable when they allow us to communicate precisely and with brevity.
Take “advanced metering infrastructure” – a term that has come to mean a utility metering and
communications solution that can send and receive messages from the utility. This term is clearly
distinct from AMR (automatic meter reading, which is a one-way communicating metering
solution) and electromechanical meters. But this type of industry parlance loses its usefulness
when the term’s meaning becomes amorphous. In the utility industry, this trouble arises when
industry participants falsely convince themselves that a technology, problem or solution is unique.
This leads all stakeholders – including utilities, regulators and vendors – to get trapped in an infinite
loop of endlessly defining and redefining terms of art, which can confuse the broader public and
become a real problem.

The latest victim in the long line of definitional quagmires is the pseudo skin disease turned grid
optimization platform: DERMS – or, less efficiently written, a “distributed energy resource
management system.”

A DERMS is a new software-based product that promises to solve the challenges of integrating
more distributed solar, energy storage, demand response and other energy resources on the grid
– and even to use these distributed energy resources (DERs) to improve the operation of the grid.
Taking cues from the industry buzz around DER integration, technology companies across the grid
edge vendor landscape are seeking to claim their position in the emerging DERMS category.

However, valid claims to the category are a stretch for most companies, even for those that have
already secured a place at the DER integration table. The key distinction is that, in a world where
core utility software is continually augmented by advanced applications and data integrations,
most technology companies have yet to fully develop the capabilities that constitute a true DERMS
product, rather than merely providing upgrades to legacy utility software.

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 Building a View of DER Lifecycle Management

2. BUILDING A VIEW OF DER LIFECYCLE

MANAGEMENT
Let’s try to bring some clarity to this discussion and properly position DERMS technology within the larger
software-based DER integration discussion in the industry. I approach this challenge with a functional lens
focused on use cases. This can get complicated, as various new software and power electronics products
continue to overlap in their functional designations. Still, my approach is meant to offer a more nuanced
view of this topic.

Through a functional lens, the integration of DERs is not just a question of resource dispatch from
a utility’s perspective. Instead, DER integration affects many core utility processes including grid
planning, network operations and customer service. Several regulatory efforts, such as New York’s
Reforming the Energy Vision, have taken a broad approach to DER integration, often focusing on
planning, operations and new markets for energy services.

Much like the broad approach taken by regulators, GTM has developed a framework in which to
view DER integration within the context of a distribution utility. The framework describes the
management of DERs throughout their lifecycle, pointing out the systems – both legacy and new –
that are required to fully integrate thousands or even millions of new DERs into a utility’s grid.

The process shown below provides a utility’s view of a behind-the-meter and customer-owned DER.
The process for a utility-owned DER is similar, though the initial registration step isn’t required.

Figure 1 Utility DER Lifecycle Management Process

Source: GTM Research

This framework adds nuance that can inform the focus and capability of a vendor’s solution or a utility’s
project. If we were developing the DER lifecycle management process from the ground up, devoid of
considerations of legacy investments (using an approach like the 51st State Initiative), the industry could
work to create an integrated, seamless customer and employee experience supported primarily by a single
software solution. In the process, we would have solved one of the most vexing utility IT problems of this
decade.

If only it were that simple. The realities of legacy investments in software, data integration, and
personnel training create a much more fragmented enterprise software environment at the utility,
with varying levels of data quality, data governance and staff expertise. The software environment
requires taking a deeper look from a perspective that incorporates the systems, both legacy and
new, that utilities have or will need in each of these steps to implement a full DER lifecycle solution.

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 Building a View of DER Lifecycle Management

Figure 2 Utility Software Systems and Integrations Involved in DER Lifecycle Management

Source: GTM Research

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 Building a View of DER Lifecycle Management

At this level of depth, it becomes clear that a multitude of vendors offer legacy solutions that can
have an impact on a utility’s DER lifecycle management process. The extension of a vendor’s legacy
product – or integration or replacement of the product with a host of legacy and new utility
applications – in most cases will have significant implications for the DER management lifecycle.
The exceptions to this rule require major overhauls or completely new solutions, such as
distribution simulation capabilities; mid- to long-term probabilistic forecasting; granular, short-
term, bottom-up production; consumption and dispatch forecasting; and DER management. (I’ll
come back to DER management shortly.)

Another insight becomes clear at this depth: The process of implementing a full DER lifecycle
management process will be an incredibly complex undertaking for utilities. In the figures above,
utility systems are tidily categorized in colored boxes that correspond to the functional area in
which each system operates. The diagram glosses over the difficulty of implementing the
extensions, enhancements, upgrades, or integrations necessary to fully enable DER lifecycle
management. Several of the systems may require major overhauls, depending on the accuracy of
a utility’s data and how often the utility has upgraded its systems, and overhauls of this magnitude
can take years. Consider the example of CenterPoint Energy’s implementation of an advanced
distribution management system, which, while ultimately successful, required a cradle-to-
operational time commitment of half a decade.

There is a silver lining to this cloud, however: It is not yet necessary for most utilities to develop
the capabilities required for full DER lifecycle management, although certain subsets of the process
may be required sooner rather than later. For example, the public utilities commissions in California
and New York have mandated the development of these capabilities, from registration to billing.
In contrast, other utilities including Pedernales Electric Cooperative, Public Service Company of
New Mexico and Pepco have focused primarily on testing the grid-planning aspects. These
components of the DER Lifecycle are more limited in scope, but can still be daunting.

Targeted efforts to develop new distribution-planning capabilities will likely be the norm in the
years to come, as regulators and utilities seek to address the challenges set to arise in their
territories.

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 Building a View of DER Lifecycle Management

Figure 3 Examples of New Requirements in the Distribution Planning Process

Source: Unlocking the Locational Value of DERs, 2016 - GTM Research

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 Back to DERMS

3. BACK TO DERMS
So, what is a DERMS, and what does it do?

In the somewhat nebulous realm of software, this question is harder to answer than one might
think. First, a DERMS is an operational technology system. The system receives a consistent and
often frequent flow of data from the field. The data could come through the head end of an existing
SCADA system, wide-area network or field-area network, or it could come through a public
network. A DERMS is constantly processing and optimizing the use of a portfolio of distributed
energy resources over which the system has control. The optimization could take a variety of forms,
which depend on the use cases, contract structures and value streams at the wholesale,
distribution and customer-premise levels. To perform optimization of DERs, the DERMS must
incorporate short-term forecasts for generation, consumption and storage of energy in order to
determine the optimal course of action in the coming seconds, minutes, hours and days. Following
the completion of each optimization calculation, a DERMS will provide suggested actions to
operators, traditional field assets, third-party DER owners or DERs themselves via an human-
machine interface (HMI) or communication channel. For DERs and third-party owners, the
communication channel can take the form of price signals, offers or direct control.

The above description may seem to delimit DERMS as a product category – and it is intended to.
We can compare this to the way that outage management systems and distribution management
systems, which were initially born out of the need to extend the capabilities of GIS and SCADA
platforms, respectively, have been integrated into traditional utility processes and software
architectures. Like the many standalone software solutions that preceded it, DERMS technology
will not completely remake the game or require a wholesale reimagining of the control room. A
DERMS is simply an increasingly important software solution that addresses a new set of real-time
optimization requirements that are necessary to augment existing technology and leverage new
DERs.

Let's talk about DERMS: GTM Research invites your input on DER lifecycle management. If you are
currently working on a DERMS integration and would like to participate directly in our studies,
please email us at hello@gtmresearch.com.

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 Back to DERMS

DERMS: A TERM GONE TOO FAR?

DER Lifecycle Management Is Not Limited to DERMS

Ben Kellison, Director, Grid Research

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May 2017
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