How Pew's DER Playbook Can Transform Local Energy

Most energy policy documents are written, praised at conferences, and forgotten. Pat Wood III wanted to ensure this one wouldn't be.

Wood — former chairman of both the Public Utility Commission of Texas and the Federal Energy Regulatory Commission, now co-chair at Pew Charitable Trusts — put it simply: "Let's just pick the golden examples. We wanted to make sure that every state, from Texas to Alabama, could see some path forward."

That instinct produced the Pew Charitable Trusts' *DER Policy Playbook*, a practical guide for state regulators and policymakers navigating the distributed energy resource boom. No theoretical frameworks. No aspirational language untethered from reality. Just real-world examples, organized around the question that actually matters in statehouses: what has worked, and where?

The timing is sharp. The committee began work in October 2024 — precisely when data center demand started its steep climb up the grid's priority list. But Wood is careful to frame the DER story as bigger than hyperscalers and GPU clusters. General electrification trends, EV adoption, and deepening grid capacity constraints are all accelerating the same fundamental need: more generation, closer to where it's being consumed.

What We're Actually Talking About

Distributed energy resources are, at their core, power assets that live on the customer side of the meter or close to load — rooftop solar, behind-the-meter batteries, EV chargers capable of pushing power back to the grid, small-scale wind, and backup generation assets. Individually, a 10kW rooftop solar array barely registers. Aggregated across millions of homes and businesses, the numbers become serious infrastructure.

Pew's report projects 217GW of DERs deployed in the U.S. by the end of 2028. Wood acknowledges that figure may be optimistic, but even at half that amount — roughly 108GW — you're talking about capacity equivalent to more than 100 large natural gas peaker plants. The grid implications are substantial whether the bullish scenario materializes or not.

What makes DERs genuinely different from centralized generation isn't just location — it's the resilience profile and the speed-to-deploy curve. A utility-scale solar farm takes years of permitting, transmission buildout, and capital planning. A neighborhood of solar-plus-storage homes can add meaningful capacity in months if the regulatory environment gets out of the way.

The Playbook's Core Argument

The report organizes its recommendations into three buckets: grid planning, barrier reduction, and implementation. Each addresses a distinct failure mode in how states currently handle distributed resources.

On grid planning, Pew recommends that states formally include distributed resources in their planning processes — not as footnotes, but as legitimate supply-side options evaluated against transmission and distribution builds. Roughly 14 states have already established DER deployment targets. That's a start, but it also means 36 states haven't.

The financial incentives problem is where the Playbook makes its sharpest observation: utilities primarily earn regulated returns on capital investments in T&D infrastructure. That structure, baked into decades of rate cases, creates a quiet but powerful bias against distributed solutions that might be cheaper and faster to deploy. Recommending that a utility embrace rooftop solar aggregation instead of a new substation isn't just a technical decision — it's asking the utility to accept lower earnings. Aligning incentives requires deliberate regulatory design, not wishful thinking.

Barrier reduction addresses the death-by-paperwork problem that plagues residential solar and small commercial storage. Permitting delays and inconsistent interconnection procedures don't just add costs — they add months, sometimes years. Pew calls for automated permitting for residential installations and streamlined interconnection for commercial providers. These aren't radical asks. They're operational fixes that states like Texas have already demonstrated are achievable.

The VPP Gap Is Bigger Than Most People Realize

Here's the number that should stop anyone working in this space: 80.5% of existing DER capacity is not enrolled in any virtual power plant program. That means the vast majority of installed distributed generation is sitting largely idle from the grid's perspective — generating when the sun shines, charging when prices are low, but not responding to grid signals in any coordinated way.

Virtual power plants solve this by aggregating individual assets — residential batteries, commercial solar installations, EV chargers — into a single dispatchable resource that grid operators can call on like any other generator. The technology to do this exists. The business models are being proven. What's missing in most states is the regulatory framework to make it work at scale.

The VPP's value proposition cuts multiple ways. Customers earn revenue from assets that would otherwise sit idle. Utilities defer expensive peaker capacity. Grid operators get flexibility exactly when they need it. The challenge is that VPPs require coordination across utilities, aggregators, customers, and regulators — four parties who historically haven't had great reasons to work together.

What Texas and Puerto Rico Prove

Texas offers the clearest domestic proof of concept, partly because its deregulated structure gives it more room to experiment than most states.

Recent Texas legislation now allows third-party engineers to certify solar installations, eliminating municipal permitting requirements that previously added cost and delay to residential deployments. The state's VPP aggregation program raised its capacity cap from 60MW to 250MW — with active proposals to push that to 500MW. Companies operating in that space include Base Power (residential energy storage), Tesla's vehicle-to-grid program, and Sonnen's VPP platform.

That's not a coincidence. When regulatory barriers come down and market structures support aggregation, commercial activity follows.

Puerto Rico's example is different in character but equally instructive. The island has suffered years of grid unreliability following Hurricane Maria, and that pressure — the real, lived consequence of a fragile centralized grid — accelerated DER adoption in ways that mainland policy debates rarely do. On July 8, 2025, more than 70,000 batteries discharged simultaneously, delivering 48MW to the grid and preventing a widespread blackout.

Forty-eight megawatts from 70,000 residential batteries acting in concert. That's what coordinated DER deployment actually looks like in practice — and it's the kind of outcome the Playbook is trying to replicate through policy design rather than crisis response.

The Regulatory Complexity Problem

The Playbook is honest about something that optimistic DER coverage often glosses over: there is no universal solution. Approaches that work in Texas's competitive market require entirely different implementation frameworks in traditionally regulated states, where utilities operate as vertically integrated monopolies with different incentive structures and different relationships to their regulators.

This is where Wood's political instincts — shaped by years at FERC and the Texas PUC — come through in the document's design. Rather than prescribe a single model, the Playbook identifies examples that work across multiple market structures. The goal isn't uniformity; it's showing every state a credible on-ramp.

That framing matters. A state regulator in Alabama doesn't need to reinvent Texas's wholesale market to make progress on DER deployment. They need practical examples from states with comparable regulatory structures — and a framework for adapting those examples to local conditions.

What Comes Next

The gap between installed DER capacity and grid-participating DER capacity represents the most immediate, high-leverage opportunity in the distributed energy space. Getting that 80.5% into coordinated VPP programs — even partially — would fundamentally change how the grid handles peak demand, renewable intermittency, and the load growth being driven by electrification.

The Playbook doesn't pretend this is easy. Utilities need incentive realignment. States need updated planning processes. Permitting systems need modernization. Interconnection queues need reform. Each of those requires political will, not just good analysis.

But the policy scaffolding now exists in enough real-world examples that "we don't know how to do this" is no longer a credible excuse. Regulators who want to move forward have a roadmap. The question is which states will actually use it — and how quickly the ones that don't will feel the consequences of falling behind on grid capacity when their neighbors aren't.

Explore more about the DER Policy Playbook and its impact on local energy solutions.

[INTERNAL LINK: Pew Charitable Trusts]

[INTERNAL LINK: Virtual Power Plants]

[INTERNAL LINK: Distributed Energy Resources]