How distributed energy resources could combat soaring electricity costs in the US

Distributed energy resources (DERs) such as residential energy storage systems and solar panels could help to alleviate these everyday pressures.

Residential clean energy solutions company Palmetto’s 2025 ‘Impact Report’ notes that “Compared to the electricity rate from their incumbent utility, Californians working with Palmetto collectively saved US$27.8 million in 2025.”

The organisation also states that in 2025, its solar installations are expected to generate 704GWh.

Still, these positive developments occur against a backdrop of continued utility rate increases nationwide. Duke Energy’s recent announcement of price hikes across its service territories exemplifies the broader trend driving consumer interest in energy independence through DERs.

Investor-owned utilities

In November, major US utility Duke Energy filed requests with the North Carolina Utilities Commission (NCUC) requesting an annual revenue increase of US$1 billion for Duke Energy Carolinas.

If approved, monthly electric bills for typical Duke Energy Carolinas residential customers using 1,000kWh per month would increase by US$17.22 per month, from US$144.98 to US$162.20, starting 1 January 2027, followed by a US$6.34 increase on 1 January 2028.

Duke Energy is an investor-owned utility (IOU). IOUs are profit-driven companies owned by shareholders, which provide utility services and own their infrastructure. Public Utilities Commissions (PUCs) regulate state electricity services, including IOUs.

Farrell explains, “The key way to understand how IOUs work is that the service area that they serve is a monopoly by state policy. Back in the early 20th century, the utility companies actually came to state regulators and asked to be regulated in exchange for protection from competition.”

He continues, “Utility companies routinely earn a return of between 9% and 11% on the equity they invest, funds they receive from shareholders for investments that are very low risk because they are almost guaranteed to be recovered, as their customers are captive. Utilities, generally in at least 49 states, primarily generate their income through capital investments.”

There is often very little that residential customers can do to push back against a utility’s plans to raise electricity prices. The public is reliant on PUCs to do this on its behalf.

Farrell says, “(PUCs are the) ones responsible for overseeing utility actions, requiring technical expertise to evaluate and demand sufficient information. We depend heavily on public regulators.”

“I spoke with Charles Howe from PowerLines, he noted that this job is extremely difficult, and most who hold these positions are either elected or appointed by governors. Many lack energy system expertise, often coming from utility backgrounds or hoping to join utilities later. This makes them reluctant to hold the utility to the fire, fearing loss of personal relationships or future job prospects with utilities, which can influence their decision-making.”

Some PUCs have taken steps to pushback against the plans of IOUs to raise customer rates.

For example, in October, the Colorado PUC voted to require utility Xcel Energy to supply more detailed data on its electricity transmission infrastructure within the state. The PUC also approved a flexible tariff aimed at helping developers connect energy storage and other clean, renewable energy projects to the grid, ultimately to lower grid connection costs.

The PUC scrutinised Xcel throughout the hearing. Sky Stanfield, a member of IREC’s regulatory team and partner at law firm Shute, Mihaly & Weinberger, LLP, noted:

“During the deliberations where the commissioners were talking about what they were going to require, they all expressed a sort of deep distrust with whether Xcel will actually do what’s required, which I haven’t heard very often in my practice all over the United States, and you don’t often hear commissioners just outright question whether the utility will even comply with their order.”

Xcel’s reasons for not complying are unclear, when the utility encounters more delays in expanding energy infrastructure.

Stanfield said, “If Xcel does not take into account managed charging and the ability of distributed energy resources (DERs) to respond to grid conditions and be ‘flexible,’ that results in a need for more distribution upgrades, which means the ratepayers have to pay for more distribution upgrades, and the shareholders get a greater profit every time they build what’s called a capital investment.”

“So were they motivated? Are they not motivated to enable the flexibility of the DERs because their shareholders don’t get as much of a profit? That’s the question that I think the commission was grappling with in this proceeding, overall,” Stanfield added.

Another factor contributing to rising utility costs is the rapid expansion of data centres.

Farrell explains, “I believe the key to understanding whether data centres cause cost increases is to ask: ‘do they receive a sweetheart deal?’ My suspicion is that they do. There are many ways this could happen. For instance, it might involve tax abatement not visible on utility bills but reflected in property taxes.”

“It could be a preferential rate for purchasing electricity. It might also involve infrastructure built by the utility—like new power lines or substations connecting the data centre to the grid—that other customers end up paying for. Even if they save money on electricity, they might still be bearing costs for these assets,” he says.

Additionally, Farrell says that data centres might be granted exemptions from standard environmental regulations that normally apply to others. The public’s concern over data centres stems from numerous instances where they seem to enjoy special privileges.

Although the actual contracts are often kept confidential between utilities and data centre operators, he states that we can reasonably infer that data centres likely secure more favourable terms than they are justified in.

Utilities tend to benefit from supporting these projects because their revenue largely comes from constructing and charging for infrastructure like power lines. When utilities invest in connecting a data centre to the grid, they are usually keen to do so, as it provides a return on their infrastructure investments.

While some utilities and PUCs take a stand against consistent rate increases to customers, other options, such as DERs, can help to fill in the gap.

Distributed Energy Resources

DERs, including energy storage, rooftop solar panels, microgrids, small wind turbines, and others, produce, store, or regulate electricity locally to assist the main grid or function independently, boosting reliability and efficiency. 

US residential solar and energy storage installer Sunrun, has had success in its business model, in November, posting a revenue of US$724.6 million in Q3 of this year, as the company implements its “storage-first strategy”, representing the third consecutive quarter of its growth.

The company ended 2024 with an energy storage attachment rate of 62% in Q4.

Sunrun also participated in California’s Demand Side Grid Support (DSGS) distributed storage programme. DSGS reduced net load on the state’s grid on a 29 July test. Still, California Governor Gavin Newsom’s office cut the programme’s funding shortly after.

DSGS was launched in 2022 by the California Energy Commission (CEC). It rewarded customers who discharged stored energy from residential and commercial batteries during peak demand or grid stress. This approach aimed to reduce reliance on costly, polluting fossil fuel peaker plants, improve energy affordability, and lower the chances of rolling blackouts during heatwaves and wildfires.

In June, the California Public Utilities Commission (CPUC) launched a US$280 million programme to assist low-income residents in installing battery storage and solar panels.

The CPUC’s Self-Generation Incentive Programme (SGIP) allows a single-family home to receive incentives for a 15kWh battery and a 5kW solar system. CPUC stated that additional incentives for more solar and up to 30kWh of storage required load justification.

SGIP is available to low-income residential customers of IOUs, publicly-owned utilities, and community choice aggregators (CCAs).

Another notable example of  DERs being used to lower energy bills happened in November, when the Confederated Tribes of the Colville Reservation (Colville Tribes) and Open Access Technology International (OATI) announced a partnership to promote tribal energy sovereignty and resilience by designing and deploying several microgrids across the Colville Tribes reservation in Washington State.

According to OATI, the Colville Tribes face regular power outages, especially during winter storms and extreme heat. Residents typically spend between US$500 and US$600 monthly on electricity. Since various utilities serve the Colville Reservation with differing service levels, generating their own electricity could improve resilience and reliability for this vulnerable community.

While DERs offer benefits such as localised power generation and enhanced grid resilience, the interconnection process often suffers from inconsistent approaches among utilities, developers, and owners.

These stakeholders often lack alignment on installation procedures and responsibilities, leading to debates about interconnection rules and resulting in costly delays and implementation missteps due to varying field work practices across organisations and jurisdictions.

In a 2020 guest blog for ESN, Jason Allnutt, Conformity Assessment Programme Specialist for the IEEE Standards Association, wrote about the IEEE-developed IEEE 1547, a comprehensive standard providing technical guidance for DER interconnection and interoperability.

Originally published in 2003 and revised in 2018, this standard covers performance requirements, safety protocols, and testing specifications for DER systems.

Building on this foundation, the IEEE Conformity Assessment Programme began collaborating with major utilities to develop a certification programme to standardise DER interconnections through uniform commissioning processes, educational materials, and professional certification, ultimately helping utilities access trained, credentialed professionals without maintaining these resources internally.

Farrell highlights, “These programmes, like solar and storage initiatives or the DSGS, are carving out markets where people have an opportunity to get paid on a contractual basis for providing some kind of service.”

“I do think that’s where we need to go. That, to me, solves many different problems. It addresses the issue of utilities wanting to always invest in potentially more expensive solutions. It also resolves the problem of a regulator having to constantly oversee every utility investment to ensure it’s worthwhile. It offers consumers a way to reduce their electricity bills. And what I’ve observed from some of these programmes that impress me is that a considerable number of low-income customers can participate too, because the barrier to entry is just like a smart thermostat,” Farrell says.

CalCCA and PG&E

Earlier this month, the California Community Choice Association (CalCCA), which represents the interests of CCAs in Calfornia, called on the CPUC to revise its proposed decisions approving utility companies Pacific Gas and Electric (PG&E) and Southern California Edison’s (SCE) 2026 Energy Resource Recovery Account (ERRA) forecast applications, warning that the decisions would result in significant electricity rate increases for millions of Californians and violate state law protecting customer equity.

The CPUC’s proposed decisions would raise the Power Charge Indifference Adjustment (PCIA) rate for certain CCA customers by 350-455% from 2025 to 2026. In some instances, this increase is nearly ten times higher than what bundled IOU customers face. As a result, some CCA households might see their bills grow by over US$40 monthly, amounting to more than US$500 annually, with low-income residents being affected the most.

CalCCA observed in comments submitted during the week of 1 December that the CPUC proposals “breeze past” significant bill increases by denying CCA customers who have exited PG&E or SCE generation service any value for the renewable energy credits (RECs) they previously paid for. Additionally, the proposals include other measures that raise costs for community choice ratepayers.

The PCIA is determined annually during the IOUs ERRA proceedings. It covers above-market costs linked to power supply commitments made by IOUs many years ago. These include utility-owned generation assets like nuclear, natural gas, hydroelectric plants, and long-term renewable energy contracts with third parties.

The law mandates that CCA and other departed load customers receive the benefits derived from the IOUs’ PCIA resources when their utility’s generation customers utilise these resources.

The CPUC will review reply comments on the proposed decisions (PDs) in each case. A final decision on both PDs is anticipated at the commission’s 18 December voting meeting.

The Energy Storage Summit USA will be held from 24-25 March 2026, in Dallas, TX. It features keynote speeches and panel discussions on topics like FEOC challenges, power demand forecasting, and managing the BESS supply chain. For complete information, visit the Energy Storage Summit USA website.