Pew’s US DER policy playbook aimed at giving ‘every state a path forward’

“Let’s just pick the golden examples,” Wood says. “We wanted to make sure that every state, from Texas to Alabama, could see some path forward.”

The committee began work on the report in October 2024, around the same time that data centre demand began rapidly accelerating. However, Wood notes that the need for DERs extends beyond data centres, and includes general electrification trends, electric vehicle (EV) adoption, and grid capacity constraints.

The report cites a projection of 217GW of DERs by the end of 2028, though Wood acknowledges this figure may be high. Even at half that amount, it would still represent significant capacity.

Additionally, Pew found that the majority of DER systems are not enrolled in a virtual power plant (VPP) programme, and as such are not being leveraged for grid services. According to the report, 80.5% of DER capacity is not enrolled in a VPP programme, compared to 19.5% of DER capacity that is.

Recommendations and market examples

The report groups its recommendations into three categories.

Under grid planning, the report recommends including distributed resources in state grid planning processes, establishing state deployment targets (approximately 14 states have already done this), and aligning utility financial incentives with distributed resource deployment.

The recommendation on utility incentives addresses that utilities primarily earn returns on capital investments in transmission and distribution (T&D) infrastructure, which can create misaligned incentives for adopting lower-cost distributed solutions.

To reduce barriers to entry, Pew calls for automating permitting processes for residential installations and streamlining interconnection procedures for commercial providers. These administrative improvements aim to reduce costs and delays that slow deployment.

For implementation, the report emphasises the need to aggregate DERs into VPPs. This would allow individual residential and commercial systems to be pooled together and managed as a single resource that can respond to grid needs.

Texas has implemented several relevant policies. Recent legislation allows third-party engineers to certify solar installations, removing municipal permitting requirements that previously added costs and delays.

The state has also expanded its VPP aggregation programme. The capacity cap has increased from 60MW to 250MW, with requests to raise it to 500MW.

Multiple companies have expanded VPP offerings in Texas, including residential energy storage startup Base Power, Tesla with a vehicle-to-grid (V2G) programme, and VPP provider Sonnen.

Puerto Rico is another area that has seen significant growth in DERs and VPP programmes. The report notes that on 8 July 2025, more than 70,000 batteries discharged simultaneously, providing 48MW to the grid and averting a widespread blackout

Regulatory considerations

The report acknowledges that regulatory frameworks vary significantly between states. Solutions that work in competitive markets like Texas require different implementation approaches in traditionally regulated states like Alabama.

“It’s not a deregulation one-size-fits-all,” Wood says. “This can work inside a very regulated state. It’s going to look different than it does in a competitive state.”

Wood, drawing on his experience as a former regulator, noted that while the federal government regulates transmission, distribution systems remain under state jurisdiction. This creates complexity for providers trying to operate across multiple states.

He considers a personal example from Winter Storm Uri in Texas. His home has three separate electrical panels: one connected to a gas generator, another to solar panels and a battery, and a third without backup. During the storm, the battery-backed panel powered the electric igniter and fan for his natural gas heating system, maintaining heat in one room while other parts of the house lost power.

“Those Tesla batteries are about 13kWh, so that won’t run your air conditioner all night, probably, but it could run fans for a long time, keep your lights on, and help run your electronics,” he notes.

Cost considerations and supply chain issues

The report also emphasises that DERs can be more cost-effective than building additional transmission infrastructure, particularly when addressing localised grid constraints.

Wood notes that a colleague from a consumer protection background emphasised that distributed resources can defer or avoid the need for large, regulated infrastructure projects, which could help control electricity costs.

A similar strategy was recently highlighted by Rob Greskowiak, chief commercial officer at US storage developer-operator Lightshift Energy, in an interview with ESN Premium.

On 16 April, Lightshift announced a five-project, distribution-scale battery storage portfolio across Virginia. Instead of pursuing 200MW-500MW transmission-scale projects that require years of PJM interconnection studies and tens of millions in upgrade costs, Lightshift is deploying smaller batteries, typically 20MW or less, at existing distribution substations.

Greskowiak said, “While people are waiting for those large assets to get built and to get studied, we can go in and leverage the existing infrastructure that’s already out there and build things in 12 to 24 months. I think there’s a whole host of reasons why the distribution system is kind of getting its moment right now.”

Wood says that while there is interest in addressing data centre demand and expanding clean energy, tariff policies and supply chain restrictions are limiting equipment availability.

“We’ve got this desire to solve the data centre-driven demand, but then we’re doing all these things to prevent equipment from coming to our country. That’s got to be reconciled,” he says.

Currently, wind equipment comes primarily from non-US sources, solar panels are heavily manufactured in China and batteries are produced mainly in China, Korea, and Japan, with some US production.

The report is intended to help state regulators and policymakers understand options for expanding DERs within their existing regulatory frameworks.

Wood emphasises that the focus is on achieving outcomes, rather than promoting a particular regulatory model.

“At the end of the day, I don’t care how we get the outcome, which is a resilient, affordable, dispersed grid that has a lot of empowered customers,” he says.