The Economics of DER and the Rise of the U.S. Prosumer

Key Points

• Over the past decade, retail electricity prices have continued to rise despite declining costs associated with generating electricity. Although the portion of total electricity costs attributed to power production has decreased by nearly 70%, the rising costs of delivery have outpaced these declines, contributing to a net increase in consumer bills of roughly 1.3% per year.
• Consumers have noticed, so the prospect of lower-cost, localized, clean generation in the form of distributed energy resources (DER) has piqued their interest. Consumer adoption of DER is poised to accelerate as cost-cutting pressure, environmental issues, and reliability concerns shift into high gear.
• DER can serve to either replace or limit the demand from traditional sources of centralized power generation. While more than half of the 65 GWs of installed capacity already participates in U.S. wholesale markets, increased investment and new policies could expand the rank six-fold by mid-decade, greatly increasing supply-side competition.
• As greater numbers of Americans produce and consume their own power, these “prosumers” will increasingly be a force to be reckoned with. The potential cost to do otherwise is staggering.
• Rural communities likely stand to benefit from the increase in DER development. Given the successful track record with consumer alignment and behind-the-meter innovations, electric cooperatives could utilize these resources to further insulate their communities against escalating future delivery costs.

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