Policy Studies Energy and Environment

Enabling and Benefiting from Distributed Energy Resources in Texas


Chris Villarreal
Associate Fellow, Energy and Environment

Key Points

DER will allow for better utilization of the distribution system, but only if the customer and markets have information about the system and opportunity to participate in that system.

Regulators can assist the development of these markets by opening up utility distribution planning activities to support customer choice and locating these resources in more optimal and beneficial locations.

Texas can remain a leader in development of market opportunities, this time by focusing on the distribution system to enable innovation, system efficiency, and lower costs for customers.

Press Release

The Growth of Distributed Energy Resources in Texas


After the passage of SB 7 in 1999—which deregulated the electricity market for most of the state—Texas has been a leader in the electricity industry. Currently, it is one of the leading states in installed capacity for wind energy, and has the most robust energy choice market across the United States. By deregulating electricity for most of the state, Texas has ensured that its residents continue to be served by highly reliable and low-cost electricity, which includes some of the most innovative rate design options for electricity customers. The Electric Reliability Council of Texas (ERCOT), which is the wholesale market and transmission operator for the deregulated portion of Texas, manages an increasingly diverse electricity mix built on wind, natural gas and solar.

In the current system, electric utilities maintain the poles and wires of the electricity system, which leaves the retail choice market free to innovate new products and services. As a result, the ERCOT can develop new market opportunities for those products and services. Nevertheless, with Texas’ focus on the ERCOT market, those products and services have focused primarily on that market leaving the distribution system in the hands of the distribution utilities. With the growth of distributed energy resources (DER), Texas will need to pay greater attention to the opportunities DER can provide. For example, solar and electric vehicles (EVs) are expected to continue to grow across the ERCOT territory, which will put a new focus on the distribution system. For the non-ERCOT portion of Texas—which remains served by vertically integrated utilities—the opportunities for DER will also be available to customers. This paper will outline several steps that will allow Texas to take better advantage of these new resources, enable new markets for products and services, and maintain its spot as a leader in electricity policy.

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