Changing dynamics: Using distributed energy resources to meet the trilemma challenge

November 16th, 2017, Published in Articles: Energize

The global energy sector is being transformed by three trends that are impacting demand and supply at an unprecedented pace: decarbonisation, digitisation and decentralisation. These trends are reinforcing each other and helping to facilitate a new trend of empowered consumers. This is happening at a time when we are seeing a shift in final energy consumption with demand for electricity doubling globally by 2060.

This is the executive summary of the report. Click here to download the full report

There will be new opportunities and challenges for policymakers to navigate the Energy Trilemma. This will require managing a greater diversity of market actors and technologies without fragmenting the energy system. Provided governments and regulators allow and plan for it, empowered consumers can play a key role in this transition. While the transmission system will remain important, the potential changes support the increasing significance of the distribution level to the optimal operation of energy systems.

Key findings

Distributed energy resources are becoming increasingly important to the global energy system, particularly in the context of the energy transition. Improved efficiency and falling technology costs are expected to further accelerate this trend, with distributed generation, particularly renewables, playing a key role. In many countries, regulatory frameworks are trying to catch-up with technology options and shifting energy users demands.

Policymakers must move quickly to seize new opportunities in meeting their countries energy needs. More than 50% of energy leaders surveyed for this report expect a rapid increase in the share of installed distributed generation capacity in their country to 15% or higher by 2025.

This represents a significant shift in the generating mix but there are large regional variations based on countries’ current electricity structures and how their regulatory systems impact the pace of change. Policymakers, energy utilities, innovative new entrants and consumers are the driving forces behind the increase in distributed generation, pursuing electricity access, affordability and competitiveness as well environmental goals.

Small-scale industry-level off-grid and household level on-grid are the most common forms of distributed generation in many countries. Along with the increase in distributed generation, energy storage, including batteries, are becoming a key element of the grid of tomorrow, helping to support flexibility to enhance system efficiency and cost stability. Over the past decade, storage installation projects have sharply increased and that trend is expected to continue over the coming years. Global energy storage capacity along with revenues from utility-scale applications are expected to increase dramatically over the next five to ten years.

But without dynamic policy frameworks this growth could stall. As the decentralisation trend continues in many countries, four power system archetypes emerge. Each archetype represents a different combination of centralised and decentralised generation, including a centralised, two hybrids and a decentralised system. Recognising these emerging systems will be important in managing the complex transition from the infrastructure backbone of past to the grid of the future.

Implications for the energy sector

To achieve long-term energy goals and enable policy innovation, as well as reform, to play a part in navigating the Energy Trilemma, policymakers and regulators need urgently to focus on these emerging technologies. New opportunities can be created, but may be associated with the disruption of existing market frameworks, roles and responsibilities, leading to a reconsideration of the energy services provided and how the costs for energy services are recovered.

As countries transition from one archetype to another, the role of energy incumbents will change. This transition will need active management given the financial exposure of other economic sectors. Without coherent and predictable policy and regulatory frameworks in place, incumbents may refrain from making the necessary and new investments that may, in turn, affect system reliability and affordability.

Energy incumbents need to work with regulators to develop effective and responsive tariff and pricing models to cover the cost for operating, upgrading and maintaining grids, as well as providing back-up capacity. If consumers – residential, commercial and industrial – are enabled by regulators to exploit these new opportunities, regulators will also need to ensure equity for all consumers across the energy system.

As distributed energy resources give consumers with financial capacity and empowered by suitable aggregation services the opportunity to manage energy cost and price volatility, it exposes those consumers without financial capacity to price increases. Distributed energy resources could also offer scope to reduced carbon emissions and address localised pollution and some empowered consumers are already using them to meet their own environmental sustainability goals. Regulators will need to consider how their market frameworks can adapt to support suitably distributed energy resources while improving the environmental sustainability of their power systems.


Evolving technology and customer demands are two key drivers of a transition of the electricity system at an unprecedented pace. Policymakers should develop their own in-depth analysis of the potential opportunities and challenges that may arise in their own countries or regions from adopting distributed energy resources.Regulatory frameworks must evolve to integrate new opportunities to balance the Energy Trilemma effectively.

The 2017 World Energy Trilemma research has identified three key focus areas for policymakers and industry leaders to consider in order to build a resilient energy system of tomorrow:

  • Enable a dynamic and resilient market framework with the agility to adapt with the transitioning system. The market framework must be responsive and resilient to the future changes that will arise from new consumers and evolving customer needs and technological advances, as well as changing roles and responsibilities of market participants. Within this dynamic environment, regulators will need to enable adaptable funding mechanisms for rates and charges to support the necessary continued investment in the energy system.
  • Establishing robust technology-neutral regulations supported by agreed standards with all stakeholders will be key to building a more dynamic and resilient market framework that supports transitioning energy systems. This includes standards for project development and financing to reduce cost and inefficiencies. Technical interoperability and service harmonisation, as well as standards to promote uptake and integration of distributed generation and distributed energy resources, are critical.
  • Allow and plan for aggregator services to empower consumers to be more proactive by ensuring that the market framework can adapt to their evolving and shifting needs. Technology will provide new options to access and consume energy so the framework design will need to enable consumers to make those choices. This will require a different approach of considering what consumers may want and ’reverse engineering’ a market framework to facilitate new market entrants while keeping the trilemma goals in balance.

The energy transition is an unstoppable phenomenon. There will be leaders, learners and laggards, and adapting to this new reality with innovative policy responses and new business models will require an enormous effort. The ability of companies and policymakers to respond rapidly, creatively and collaboratively will determine the pace and shape of the global transition and, in turn, affect the ability of societies across the world to navigate the Energy Trilemma of security, sustainability and equity successfully. Governments and regulators need to plan for the transitions and anticipate its likely impacts on energy systems and market actors.

This is the executive summary of the report. Click here to download the full report


This executive summary is published here with permission.

Contact Lucy Chakaodza, World Energy Council,



Related Articles

  • South African Government COVID-19 Corona Virus Resource Portal
  • Ministerial determinations propose 13813 MW of new-build by IPPs, none by Eskom
  • Crunch time for South Africa’s national nuclear company, Necsa
  • Dealing with the elephant in the room that is Eskom…
  • Interview with Minerals & Energy Minister Gwede Mantashe