On April 16, 2024, the New York Independent System Operator (NYISO) launched the first distributed energy aggregator market entry plan in the United States, incorporating distribution network side loads such as small photovoltaics, household energy storage and electric vehicles into the wholesale power market. In terms of form, distributed energy is a comprehensive system that involves various disciplines. The definition of distributed energy is also diverse, but generally includes basic elements such as location, installed capacity, technology use and energy.

Countries do not have a unified definition of distributed energy. The U.S. Department of Energy defines it as a small-scale, user-friendly, energy-saving and environmentally friendly energy system; Schneider Electric of Germany believes that distributed energy is a small-scale power generation and storage system that mainly uses renewable energy as a fuel source; the New York Public Service Commission defines it as a power supply system distributed at the user end that can achieve comprehensive cascade utilization of energy and improve energy efficiency. Looking at the world, the United States started early in distributed energy and is a pioneer in the development of distributed energy in the world. After decades of development, its institutional system has become more mature.

Others can learn from others. This paper summarizes the current status of distributed energy development in the United States, analyzes the challenges and development differences faced by distributed energy in China and the United States, and puts forward relevant suggestions for the development of distributed energy in my country.

Current status of distributed energy development in the United States

The United States is a pioneer in the development of distributed energy in the world. With the implementation of federal tax incentives and state government support policies, it is expected that the investment in the distributed energy resources (DER) market in the United States will double from 2022 to 2027, with an annual investment of nearly US$68 billion. In addition, the installed capacity in the commercial and residential sectors is expected to increase 3.7 times over the past five years.

Development history of distributed energy in the United States

In the early 20th century, the rapid development of centralized power generation systems made some users realize that installing and using their own power equipment had obvious advantages in reliability and economy. At the same time, some public utilities, such as telecommunications centers, hospitals, and schools, began to build their own power facilities to meet their specific needs due to their high requirements for power supply reliability. This small-scale user power generation model can replace local power suppliers in some cases and provide these consumers with the required power, thereby bringing positive effects to the entire power system. This period is called the "traditional" distributed generation in the United States, and its main characteristics are small scale and mainly combined heat and power.

In 1978, the United States promulgated the Public Utility Regulatory Policy Act (PURPA), marking the entry of distributed energy into a new stage. Section 210 of the Act refers to individual users of such non-utility power generation as "qualified facilities" (QFs) and provides financial incentives to encourage the development of combined heat and power and small-scale power generation. Since then, some QFs have begun to provide electricity to consumers. In 1992, the United States National Energy Policy Act was promulgated, which allowed non-utility companies to compete fairly in the entire energy market, further promoting the development of distributed energy. With the promulgation of the IEEE (Institute of Electrical and Electronic Engineers) Standard 1547-2004 "Draft Standard for the Interconnection of Distributed Power Sources and Power Systems" in the United States in 2001, the development of distributed energy has been pushed towards standardization.

At present, the development of photovoltaic industry, micro-turbines, fuel cells, digital control technology and shale gas has further expanded the application areas and opportunities of "next generation" distributed energy, making it possible to customize energy systems according to the personalized needs of consumers. These technological innovations, coupled with the continuous evolution of consumer demand and the restructuring of the wholesale and retail markets of electricity and natural gas, provide consumers with more diverse options to use distributed energy to meet their needs.

Policy Analysis and Market Environment of Distributed Energy in the United States

In order to promote the development of distributed energy, the United States has formulated a number of effective energy laws and regulations. The U.S. Department of Energy (DOE) and the U.S. Environmental Protection Agency (EPA) promote the progress of distributed energy from the two dimensions of energy conservation and environmental protection. The U.S. EPA has also specially established a distributed energy cooperation group (Combined Heat and Power Partnership), clearly stating that distributed energy is an economically viable clean energy solution and regards it as one of the national priorities. Policies at the national level include: the Public Utility Regulatory Policies Act (PURPA) of 1978, the National Energy Act of 1992, the IEEE Standard 1547-2004 "Draft Standard for Interconnection of Distributed Generation and Electricity Systems" of 2001, the National Energy Policy Act (EPACT) of 2005, the New Energy Act of 2007, and the American Clean Energy and Security Act (ACE-SA) of 2009. States and cities have also formulated relevant policy measures to encourage and promote the development of distributed energy.

In 2010, state governments issued the Clean Energy Work Plan, which aims to achieve an additional distributed energy installed capacity of more than 6,500 megawatts by 2030 to achieve the goal of greenhouse gas emission reduction. Taking California as an example, the state has significantly surpassed other states in terms of distributed photovoltaic power generation installed capacity.

The market mechanism in the United States has vigorously promoted the widespread application of distributed energy through competitive power markets and policy incentives. First, the opening of the power market allows independent power producers and users to directly participate in power transactions through power purchase agreements (PPAs), increasing the market opportunities for distributed energy. Secondly, tax breaks and subsidy policies provided by the federal and state governments, such as the Public Utility Regulatory Policy Act and the Solar Investment Tax Credit (ITC), have reduced the initial investment cost of distributed energy projects. The market-oriented mechanism in the United States has significantly promoted the development of distributed energy by enhancing market competitiveness and lowering the entry threshold.

Challenges and development differences faced by distributed energy in China and the United States

Main challenges

Technology maturity: Although China and the United States have made certain progress in the field of distributed energy technology, there are still many challenges in terms of technology maturity, economy and reliability. At present, the market vitality has not been fully activated, and both need to continue technological innovation and R&D investment. For example, distributed renewable energy technology still has the potential to improve in terms of conversion efficiency, stability and service life; distributed energy storage technology also needs to be improved in terms of capacity, cost and safety; smart microgrid technology also needs further innovation in information communication, control strategy and system integration.

Market environment: Distributed energy in the United States has a history of more than 100 years, but it still has great potential for development and application. The distributed energy market has not yet established an effective competition environment and cooperation mechanism, and its development still needs to rely on policy subsidies, which makes the promotion and application of distributed energy projects face many challenges and obstacles. For example, traditional power companies have a certain resistance or rejection attitude towards the access and grid connection of distributed energy projects; and the grid infrastructure is also insufficient or not adaptable enough in accepting and dispatching distributed energy projects.

Policies and regulations: At present, the policies and regulations of various countries in the field of distributed energy have not yet reached the level of perfection and unification, which leads to many uncertainties and risks in the implementation of distributed energy projects. For example, there is a lack of clear and transparent standards and processes in the approval, supervision and evaluation of distributed energy projects; when distributed energy users conduct grid connection, transactions and other activities with the grid, there is a lack of fair and reasonable price mechanisms and contractual relationships; in addition, when distributed energy projects enjoy government subsidies or tax incentives, there is also a lack of effective and continuous safeguards.

Differences faced by distributed energy in China and the United States

Development scale: The distributed energy market in the United States is relatively mature and large in scale, with various technologies and business models emerging in an endless stream. In contrast, China's distributed energy market is in a rapid development stage with unlimited potential.

Technical approach: There are certain differences between the two countries in the technical path of distributed energy. For example, China has a competitive advantage in the photovoltaic field, while the United States has leading technical advantages in energy storage, smart grids and other aspects.

Market model: Market mechanism construction is one of the key factors affecting the implementation effect of energy policies. There are obvious differences in the institutional arrangements between China and the United States in this regard. The distributed energy market in the United States pays more attention to marketization and adopts mature models such as power purchase agreements and leasing agreements; while China relies more on government subsidies and policy promotion.

Policy environment: The two countries show different trends in the policies and development directions of distributed energy. In recent years, there are also obvious differences between China and the United States in terms of energy structure. Although China's investment in renewable energy continues to increase, the proportion of renewable energy in its overall energy consumption is still low. China's energy structure is dominated by coal, while the United States' energy structure is dominated by oil and natural gas, and the proportion of natural gas use has gradually increased and now exceeds coal. In contrast, the United States' energy structure is more diversified, which makes the two countries have significant differences in the development path of distributed energy.

The enlightenment of the development of distributed energy in the United States to China

The report of the 20th National Congress of the Communist Party of China proposed "promoting the formation of green and low-carbon production and lifestyles." Distributed energy, as a clean energy, is characterized by comprehensive and efficient utilization, which helps to promote the green development of my country's energy. In recent years, my country has vigorously promoted the development of distributed energy (see figure). We can learn from the experience of distributed energy development in the United States and explore its enlightenment to my country.

The application of distributed energy not only maintains the characteristics of green environmental protection, but also effectively reduces the line loss caused by long-distance transmission, thereby reducing the environmental pollution caused by it. Therefore, the scientific and reasonable configuration of distributed energy generators will have a more significant effect on environmental protection. Another important starting point for the construction of distributed energy is to improve the reliability of power supply and obtain higher security than power supply through the power grid alone. Through the analysis of the California power crisis in 2001, the blackout in the United States in 2003, and the freezing rain disaster in southern China in 2008, large-scale power transmission lines are usually arranged in an overhead manner and are easily affected by external climatic conditions. When extreme weather events occur, multiple transmission lines may fail at the same time, which puts power supply security at certain risks. Distributed energy, with its advantages such as flexibility, can effectively supplement power supply and become a new way to improve power supply security.

Combined with the above discussion, the specific suggestions are as follows:

First, further improve the mechanism and business model of distributed energy participating in the power market. Improve the flexibility of distributed energy in participating in electricity futures, spot, ancillary services and other markets, and explore the diversity of interactions between enterprises, residents and other users and the power grid; at the same time, accelerate the integration of technologies such as energy storage and hydrogen energy with distributed wind and solar resources, encourage participation in the market with business models such as virtual power plants, enhance the interactive friendliness of distributed energy and power grids, and help achieve the scale and sustainable consumption of distributed energy.

Second, promote the extension of distributed energy to the spatial dimension and closely combine distributed energy with rural revitalization. Plan the construction of new distribution networks in rural areas, promote the assessment of the carrying capacity of distributed photovoltaic access to the power grid, strengthen the dispatching and operation management of rural photovoltaic configuration energy storage, and improve its implementation rules for participating in the power market, establish an interest linkage and distribution mechanism that focuses on benefiting the people, guide the orderly development of new business forms and new models of power grids in rural areas, radiate and drive the upgrading of rural industries, drive the extension of the industrial chain, and enhance the endogenous driving force of development.

Third, promote the extension of distributed energy to the time dimension, promote the development of distributed energy in stages, and improve the capacity to absorb renewable energy. In the initial stage of distributed energy development, focus on investment in safety projects and grid reinforcement projects; in the development and promotion stage, use digital technology to achieve remote monitoring, control and optimal management of distributed energy systems to improve operational efficiency; in the rapid development stage, improve grid connection standards, take positive guiding measures, and promote the evolution of distributed energy towards intelligence and low-carbonization.