OVERVIEW
The United States is entering a period of sustained electricity demand growth unlike anything seen in decades. Driven by the rapid electrification of transportation and buildings, the explosive expansion of data centers and artificial intelligence infrastructure, and broad industrial electrification, electricity demand is projected to increase significantly over the coming years.
Meeting this demand will require every available resource—including the distributed energy resources (DERs) already installed behind customers’ meters across the country. Distribution-level resources—including rooftop solar, battery storage, electric vehicles, and smart thermostats—represent a vast and largely untapped reservoir of capacity and flexibility.
GridWise Alliance’s Vision for an Integrated Grid recognizes that growing electricity demand is not a choice between expanding transmission and harnessing local resources—it requires both. This paper focuses on the distribution-level half of that coordinated strategy, describing the specific technology investments that make local resources a meaningful and manageable part of the solution.
THE GROWING DEMAND IMPERATIVE
After nearly two decades of flat or declining electricity demand, load growth has returned—and with it, urgent questions about where new capacity will come from. Multiple converging trends are now pushing electricity demand onto a sharply higher trajectory, transforming DER aggregation from a regulatory exercise into a genuine market opportunity and operational necessity.
The distribution system is simultaneously the source of new load growth and the location of the resources needed to manage it. Investing in technologies that harness these local resources is both an economic opportunity and an operational imperative.
- Transportation electrification: Rapid EV growth is adding significant new load to the distribution system, with EV charging representing one of the largest incremental demand sources utilities have ever managed.
- Building electrification: Heat pumps, electric water heaters, and other building electrification technologies are shifting heating and cooking loads onto the grid.
- Data centers and AI infrastructure: Explosive growth in cloud computing and AI is creating enormous new electricity loads, often highly concentrated in specific regions, straining both transmission and distribution infrastructure.
- Industrial electrification: Decarbonization goals are driving utilities and industrial customers to electrify processes previously powered by natural gas or other fuels.
FERC Order 2222 built the on-ramp. Rising electricity demand is filling the highway. The investment case for aggregated DER technologies is now driven by market need at both the bulk power and distribution levels—not by compliance timelines alone.
DER AGGREGATION PROCESS
The owners of individual DERs participate in energy markets and grid programs indirectly. The direct participant—the entity that acquires, manages, and deploys DER output—is the DER aggregator, which could be either a distribution utility or an independent third party. Whether conducted by a utility or a third party, the aggregation process involves six steps:
- Identification and qualification of eligible DER units based on capacity, location, and technical requirements
- Customer acquisition—contracting with customers for aggregated power services
- Installation and commissioning of communication capabilities on each DER unit
- Aggregation and management—using software and communication technologies to optimize performance as a single entity
- Participation in markets and programs—capacity, ancillary services, and demand management
- Reporting and settlement—performance reporting to the grid operator and payment for services provided
TECHNOLOGIES TO SUPPORT DER UTILIZATION
Hardware and software technologies are required to ensure reliable and efficient operation of DERs at scale. The table below summarizes the essential technologies and the entities responsible for deploying them. Detailed Technology Primers are available in the full paper.
DEPLOYMENT TIMELINE FOR TECHNOLOGIES
There is no single technology deployment pathway to full DER utilization. This technological evolution can be understood in three phases, reflecting increasing DER penetration and technology sophistication:
The urgency of rising electricity demand is a powerful accelerant for progression through these phases. Flexibility is the opportunity; these grid investments are what make it real.
ABOUT THIS PAPER
This paper is an evolution of an earlier GridWise Alliance publication. In January 2024, GridWise Alliance published Grid Investments to Support FERC Order 2222: Technologies to Enable Aggregated DER Participation in Wholesale Power Markets. That paper examined the technologies needed to implement FERC Order 2222—the landmark 2020 federal rule that opened wholesale electricity markets to aggregated distributed energy resources.
Since that paper was published, the context has fundamentally changed. Electricity demand—driven by data centers, artificial intelligence infrastructure, transportation electrification, and industrial growth—has returned to levels of growth not seen in decades. GridWise Alliance now believes that this unprecedented demand growth, rather than regulatory compliance, is the primary force that will drive investment in aggregated DER technologies and create viable markets for distribution-level resources, at both the bulk power and distribution levels.