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1. What is DERMS ?
Distributed
Energy
Resources
Management
System

2. A Distributed Energy Resources Management
system (DERMS) is a platform which helps mostly
distribution system operators (DSO) manage their grids
that are mainly based on distributed energy resources.
By lack of a common definition, a DERMS thus –
depending on your point of view – is something similar
or even identical with a Virtual Power Plant (VPP).

3. On some key aspects, people seem to agree: DERMS is
a software platform that is used to organize the operation of
the aggregated DER within a power grid. The usual DERMS
application is found at the distribution grid level.
DERMS typically require a more full-fledged integration of
various other systems such as a distribution management
system (DSM) for integrating it with a utility. Furthermore,
an outage management system (OMS) or a supervisory
control and data acquisition (SCADA) system is usually
needed to provide all DERMS functionality.

4. DERMS vs VPP
From a use case view, one can think of a DERMS as a VPP
for applications on the distribution grid levels.
DERMS provide grid services that especially focus on the
location of each aggregated asset.
Objectives Of a DERMS are:
•Voltage management of the grid
•Optimization of the power flow within the grid
•Local grid load management (e.g. for smart grid projects)

5. VPPs on the other hand are responsible for active
optimizations and control of power production and
consumption.
The location of the aggregated doesn’t play an important
role.
The main purposes of a VPP are:
•Grid frequency stabilization
•Energy trading
•Portfolio management
•Peak load/demand management

6. Across the globe, the energy industry is witnessing increased
penetration of distributed generation resources, such as solar PV,
energy storage, and microgrids— which are small-scale versions of
centralized electric grid.
This past century, most electricity systems have experienced
gradual, incremental change. And electricity has flowed in one
direction from centralized generation to consumers. However, over
these past 10 years, those electricity systems are now confronting
the most transformational period of change. The widespread
adoption of distributed energy resources (DER) such as solar PV
and energy storage, energy-efficiency efforts, and declining asset
utilization rates are simultaneously driving the industry to
reevaluate the way it manages the electricity network.

7. Within the next five years, whole regions of an electricity system
must be capable of operating securely, reliably and efficiently
with conceivably 100% of instantaneous demand met by DERs.
While central generation tends to provide supply from above the
distribution substation, DERs are located at the opposite end of
the power lines, and even behind electric meters.
This presents monumental technical challenges for systems that
were all designed for an entirely different time.

8. Industry Trends
Historically the electric grid was managed using a combination of
manual controls, supervisory control and data acquisition
(SCADA), and distribution management systems (DMS), which
provided basic information and control to electric utility operators.
These systems enable the management of traditional capabilities
such as voltage, reactive power (VAR), and monitoring of power
flow, but they were designed to support centralized generation and
very limited amounts of renewable resources, and of course,
DER. As DER penetration levels increase, utilities and power
system operators must look to new control solutions.

9. SCADA, DMS, and remote microgrid control providers are thus
adapting their systems to de-centralized assets with often
unpredictable and intermittent generation profiles. Because these
solutions are still based on a centralized framework, they prevent
operators and owners from fully leveraging the capabilities of
distributed generation. This, in turn, hinders the development of
new value streams derived from DERs’ inherent flexibility.
As DER systems expand and proliferate, all actors in the power system
(local utilities, third-party aggregators, communities, and end-customers)
want the value they contribute to it to be recognized. A platform is
needed to manage as a coordinated system such diverse assets as solar,
wind, energy storage, combined heat and power, and conventional
generators.

10. Enter the distributed energy resource management system (DERMS).
With it, a utility can ensure power reliability with high amounts of
DER, lower costs, and create new value streams for other local utilities,
their customers, service providers, developers and site owners.
Value of DERMS
In the future, energy markets will compensate DER owners who
provide valuable grid services to the distribution power
system. Incentives and financing mechanisms will create new
opportunities and business models that spur the installation of
additional distributed generation, DERMS solutions must adapt to
ensure that DER add value, not just shift costs from one user group to
another. As policies and regulation change, a DERMS must be able
to extract from the same underlying architecture and DER capabilities
values that simultaneously complement different business strategies.

11. Any solution that some utility custom-design solutions intending to meet a
single need will not be able to adapt the product fast enough to compete with
the market. Across the industry, power purchase agreements (PPAs) continue as
an important financing instrument for clean energy projects. PPAs between an
electric generation seller and buyer of electricity (typically a utility), establish
terms to help both parties deal with uncertainties around energy cost and
supply.
PPAs also create a mechanism for the buyer to receive tax credits or renewable
energy credits associated with the energy produced, where appropriate. All these
incentives and financing mechanisms are creating new business opportunities and models to spur the
installation of distributed generation. Similarly to PPAs are virtual power plants (VPPs), in that they
create a virtual version of either power or load aggregate. In many areas, both of their successes have
moved the industry from the early adoption phase to a more mainstream phase. As this happens, the
underlying regulatory environment needs to encourage grid-friendly behavior and fair incentives. As a
result of potential changes to policies, a DERMS solution must be able to navigate this change of policy
to ensure that the DER is adding value, not just shifting costs from one user group to another.

12. As many utility customers are taking advantage of DER technologies and
policies, the utility is in danger of losing business and relevance. The
evolution of the power industry has many parallels to the telecommunications
industry where dramatic changes in regulation and technology enabled entirely
new competitors and eliminated the established monopoly. A DERMS
solution should enable a utility to embrace the public mandate and participate
in new business models that enable their customers and themselves to benefit
from the transformation.
Each utility must seek to get ahead on DER penetration and enable DER
proliferation through the DERMS platform. Finally, and over time, utilities
will become the distribution system operator for both utility-owned, and non-
utility owned DER with appropriate agreements in place. The future state
scenario includes creation of a transactive energy market that enables
compensation for various entities (including customers) providing valuable
grid services through this market structure.

13. With regard to the above ideas, DERMS platforms will undertake the following roles:

14. •Aggregate – Take services from individual distributed energy resources and
aggregate them in a manageable number
•Organise – Manage DER settings and provide simple grid-related services
•Optimise – Harness the multitude of DERs economically and enhance
reliability
•Translate – Communicate to many resources that may use different
communication protocols, but interface cohesively through DERMS.
Additionally, a DERMS platform may provide the following benefits:
• New business models – encourage new product and service development and
new revenue streams from these offerings
• Customer empowerment – provides customers with choice of services, through
which customers can sell back to the grid
• Economic value – reduces cost of ownership while increasing reliability,
efficiency and overall system utilisation. Exposes resources to a larger market at
the distribution level.

15. •Regulatory flexibility – allows jurisdictions to implement higher penetration of
DERs, while maintaining power quality within prescribed limits.
•Societal value – reduces emissions with prolific deployment of DERs and
improves management of renewable intermittency and volatility.
The DERMS is responsible to communicate optimization operations to the
underlying systems that it oversees; including SCADA, DMS and the relevant
DER. It monitors system conditions and current, as well as forecasted,
constraints. Constraints can be electrical or contractual.
The DERMS must constantly optimize system stability with economics.
Therefore, if DER participate in contracts (either through VPPs or direct to the
utility through tariffs), the DERMS will also optimize the system’s larger
economic outcomes along with the power system requirements.

16. DERMS Architecture
The figure below presents a high-level concept for the DERMS solution that
utilities should use as they consider platform deployments. If energy balancing
is occurring from the substation down to the customers, the distribution system
appears more closely resembling a microgrid than it does a central grid.
Assuming substations are interconnected via transmission lines, each distribution
microgrid becomes part of a federated scheme which can share resources across
the many.
Some of these microgrids could be operated by other utilities, third-party
aggregators or other customer-owned DERs. Therefore, DERMS organizes its
optimization schemes at various spheres of control: circuit level, neighborhood
level, microgrid level, substation level and then the whole system.

18. DERMS can meet emerging needs for utilities that utilize its benefits across
its systems:
•DER Device Management
•DER Monitoring and Control – Situational Grid Awareness
•DER Optimization, Scheduling and Dispatch
• Grid-connected
• Island mode
• Environmental Dispatch
• Economic Dispatch
• Customer Load Priority
•Distribution Services Management
• Peak Shaving
• Reliability
• Voltage/frequency Regulation
• Energy Arbitrage
• Circuit Overload Mitigation
• Support Renewable Smoothing
• Volt/Var Support
• Spinning Reserve

19. •Demand Response
• load-driven demand management
• price-driven demand management
•Market Operation
• Transactive Energy
Following are the key functions or features that a DERMS solution shall support to meet the
objectives of the above use cases:
•Systems Operations Centre – Enables operation of the DER through a control centre.
•Data Acquisition – Acquires and maintains power system topology and parametric data for
network connected DER under active management of DERMS.
•Field Equipment Integration – Enables integration of devices in the field that connect the DER
to the DERMS. Allows creation of protection schemes for the DERs to effectively participate in
the DERMS area of operation.
•DER Management – Provides access and enables oversight and management of various DERs
under its area of control.

20. •Change Management – Allows expansion of DERMS control area through modular change and
expansion.
•Enterprise Integration – Enables integration with backend systems and other systems in the
utility’s operations centre.
•Application Management – Enables incremental extension of capability with modular
applications for selective installation or uninstallation.
•User Access and Management – Enables secure access to authorized users and stakeholders.
•Security – Implements high-level security functions that enable safe modes of operation for the
DERs and protects the data from these resources.
Its useful to note that a mature DERMS platform aggregates DER and grid resources
according to the needs of the system operator. Therefore, aggregates can be composed of:
•DER on a single circuit;
•All electric storage at 50% charge or higher;
•All Demand Response within a substation’s network; or
•Other aggregators.
Since the DERMS can aggregate, it enables the utility to avoid paying for future aggregation
services, and thereby reduce the cost of managing operations.

21. Path Forward
• As identified above, utilities are coming under increasing pressure to cope with
variable generation resources that they don’t own. Frequency, voltage and
economic chaos is become the norm. With the introduction of stable and mature
DERMS products readily available in the marketplace today, utilities can start to
tame these challenges.
• Substantial work has been undertaken to define best practices for DERMS
platforms. Since 2012, EPRI and others have held industry discussions on this
subject. And more recently, SEPA has developed a template with functional
requirements that utilities should consider when planning a DERMS deployment.
• The bottom line is that this is not new science. Products are available today
for immediate deployment. The time for pilots is over and the industry can
move forward to economically calm the system network.