Unlocking the Power of DERs: A Policy Playbook

America has a distributed energy problem — not a technology problem.

The hardware exists. Rooftop solar works. Battery storage works. Virtual power plants are already running in parts of the country. What's missing is the policy architecture to scale them. The Pew Charitable Trusts just released a playbook designed to close that gap, and it's one of the more practically useful documents to come out of the energy policy world in years.

The headline finding is damning: despite a nearly 80% jump in adopted DER policies last year, the United States still lags significantly behind peer nations in deploying distributed energy resources at scale. That's not a technology gap. That's a regulatory and institutional failure — one that's leaving real money, real reliability, and real resilience on the table.

What "Distributed" Actually Means Here

Distributed energy resources are, in plain terms, power sources that generate electricity close to where it's consumed. Rooftop solar on a warehouse in Phoenix. A community solar farm serving a neighborhood in Ohio. A fleet of EV batteries soaking up midday solar and feeding it back to the grid at 6 p.m. Generally speaking, DERs operate at under 5 MW and on relatively small tracts of land — a fundamentally different model than the centralized gigawatt-scale plants that have defined American electricity for a century.

The "close to where it's generated" principle isn't just an engineering preference — it's an economic and resilience argument. Less energy is lost in transmission. There’s less infrastructure strain during peak demand. Recovery is faster when storms knock out the grid.

The problem is that most utility planning, regulatory incentive structures, and permitting systems were built for the old centralized model. Asking a distributed resource to navigate that system is like asking a food truck to comply with regulations written for a commercial kitchen the size of a hospital.

Six Recommendations That Actually Have Teeth

The Pew playbook doesn't traffic in generalities. It offers six specific recommendations organized around three goals: integrating DERs into utility planning and procurement, reducing permitting and grid access barriers, and strengthening community resilience.

The six recommendations are:

1. Require DER optimization as part of distribution grid planning

2. Establish targets for VPP (virtual power plant) capacity and customer participation

3. Align utilities' financial interests with DER deployment

4. Automate and streamline permitting processes

5. Automate and streamline interconnection

6. Leverage DER backup capacity to reduce the frequency and duration of outages

The most structurally important of these is the first — requiring that DER optimization be embedded into distribution planning, not treated as an afterthought.

Here's why that matters: utilities have historically done distribution planning in relative isolation, quietly running models that reflect their existing asset base and preferred investment patterns. The Pew recommendation pushes that planning into integrated resource plan (IRP) processes — the formal, stakeholder-visible exercises that most utilities conduct every few years. Bringing DERs into that tent forces utilities to justify their resource choices against a legitimate distributed alternative, in public, with modeling they have to share.

For states where utilities aren't responsible for IRPs at all, the report points to Australia's energy market operator as a model — a regional body capable of requiring utilities to develop rigorous distribution plans even when those utilities would rather not.

The financial alignment piece (recommendation three) is equally important and often overlooked in these conversations. You can mandate all the planning processes you want, but if a utility earns a guaranteed return on poles and wires and earns nothing on a DER program, rational operators will always find reasons to prefer the wires. The incentive structure has to change.

What New York and Australia Got Right

The playbook draws on success stories from New York, Texas, Virginia, Puerto Rico, the UK, and Australia. Two are worth examining closely because they represent meaningfully different approaches.

New York's Reforming the Energy Vision (REV) framework, approved by the Public Service Commission in 2016, set out to fundamentally reorient how utilities make money. Instead of rewarding capital investment in infrastructure, REV pushed toward a market- and performance-based revenue model. The mechanism that made it concrete was the "share of net benefits" incentive — utilities got a cut of the value created by DERs and non-wires alternatives, giving them a clear financial reason to pursue those options rather than default to building more traditional infrastructure.

By the time this approach was formalized in a 2020 rate case, New York utilities had what the Pew report describes as "a clear pathway to profit from DER investments in the same way they do from traditional assets." That sentence sounds bureaucratic, but it represents a genuine structural shift. Utilities aren't charities. Align the profit motive with the policy goal, and you remove the most powerful institutional resistance to change.

Australia's trajectory is different — and instructive for a different reason. As coal began declining in the 2010s, Australia turned hard toward renewables, with rooftop solar penetration eventually reaching some of the highest rates in the world. The Australian Energy Market Operator (AEMO) developed planning frameworks capable of integrating massive amounts of distributed solar into a grid that was never designed for it. The fact that Pew references AEMO twice — once for distribution planning and once for overall DER strategy — signals that U.S. regulators should be studying that model seriously.

The Real Barriers (And Why They're Mostly Solvable)

The obstacles to DER scaling in the United States aren't primarily technical. They fall into a few familiar categories.

Permitting is still largely manual, jurisdiction-by-jurisdiction, and wildly inconsistent. A solar installer operating across multiple states can face dramatically different timelines and documentation requirements for systems that are functionally identical. This isn't protecting anyone — it's just friction that raises costs and slows deployment.

Interconnection has the same problem at scale. Getting a distributed resource connected to the grid requires navigating utility queues and studies that were designed for large projects. Small resources get stuck in systems that weren't built for them, and the backlog compounds every year.

The Pew playbook's answer to both problems is direct: automate and streamline. Several states have already moved toward standardized, online permitting platforms for smaller solar installations — California's SolarAPP+ system being the most prominent example. The results are measurable. Permit timelines that used to take weeks now take hours. That's not a marginal improvement; it's the difference between a market that works and one that doesn't.

The utilities' financial misalignment is the harder problem because it requires regulatory courage. State commissions have to be willing to revisit rate structures and revenue models — a politically exposed move that takes time and generates opposition from incumbent utilities. The New York experience shows it's possible. It also shows it takes years.

The Grid Needs What DERs Offer

There's a timing argument here that doesn't get made loudly enough. U.S. electricity demand is growing faster than it has in decades, driven by data center buildout, EV adoption, and reshoring of industrial manufacturing. The traditional answer — build more centralized generation and transmission — is slow and expensive. Transmission projects routinely take a decade or more from planning to operation.

DERs can be deployed in months. A well-designed virtual power plant aggregating thousands of rooftop solar systems and home batteries can provide meaningful grid services — peak shaving, frequency response, backup capacity — without waiting for a new transmission line to be permitted, built, and energized.

The community resilience dimension is arguably the most undervalued part of the DER case. When a hurricane or ice storm knocks out the central grid, distributed resources with storage can keep critical loads — hospitals, water systems, emergency services — running independently. That's not a theoretical benefit. Communities in Puerto Rico, where conventional grid infrastructure remains fragile, have experienced it directly.

The Pew playbook frames DERs as a solution to energy affordability and reliability challenges. Both halves of that framing are accurate. But the reliability argument may ultimately be the more politically durable one — because it's the argument that resonates at the state legislature level, where most of the relevant decisions actually get made.

The policy infrastructure to scale distributed energy resources exists in rough outline. Pew has now provided a detailed map. The question is which states move first — and how quickly the rest follow once early movers demonstrate what a functioning DER market actually looks like.

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