Load grows! And over time, this increases the possibility of overload conditions, which traditionally require system infrastructure upgrades to continue reliably serving load. The ongoing need for electric utility system investment occurs when capital budgets are either flat or declining. A paucity of prior rate relief and uncertainty about future relief cause utilities to aggressively control costs. Across the country, utilities are trying to maintain service quality with less investment.

DTE Energy (Detroit, Michigan, U.S.) is using distributed energy resources (DER) as a component of an effective strategy in utility planning and operation. For some applications, DER may offer a cost-effective way to defer basic distribution infrastructure investments.


Managing distribution is no longer solely about engineering a solution to overloads or low voltage. The complexity of today's utility business is just that: it's about making business decisions. It's about quantifying distribution problems and communicating them in terms of investment.

Utilities cannot afford to solve every 1-MVA problem with the traditional solution that provides a 30-MVA capacity increase. This is especially true of problems that may only exist for a few hours per year, especially when the traditional solution provides capacity that would not be fully utilized for many years.

In this environment, DER is one approach to delivering just-in-time “right-sized” capacity to resolve smaller shortfalls, while minimizing the initial capital outlay and freeing dollars for reliability and maintenance. The challenge is to demonstrate how DER can fit into the engineer's tool kit for solving distribution problems.

DTE Energy is not promoting DER; the company considers it an alternative solution. In fact, most of the time, sticks and wires are cheaper. However, in a small number of instances, the cost of traditional T&D alternatives may be greater than the cost of DER. These alternatives should be examined to see if there is an opportunity to cost-effectively use DER. In this sense, DER is a specialty tool, much like a directional bore machine is; you don't dig every hole with it, but you're really glad to have it when it comes time to get under the interstate.

Utilities can use DER like a portable substation to meet several common needs:

  • To supplement the aging grid in areas where growth is straining the system

  • To address localized reliability problems or power-quality concerns

  • To provide temporary power during maintenance and repair activities.

In 2002, DTE Energy created an engineering group to explore the use of DER to manage overloads and improve reliability. In that year, the DER group completed three projects, all of which were emergency-type situations that staved off the specter of rolling blackouts due to overloaded or damaged circuits.

With the knowledge gained from these early experiences, DTE Energy bought generators for future use and standardized DER design and installation. The next year, DTE Energy bought four more generators and installed them in the distribution system, partnering with a school and a church. In the third year, DTE Energy developed a continuing budget strategy, involved previous customers to act on its behalf, relocated generation from one circuit to another, and continued to decrease the time and cost of installations.


Grosse Ile is an island in the Detroit River near its entrance to Lake Erie. To meet load growth on the island, DTE Energy has planned a 4.8-kV substation expansion project, which will cost US$3.8 million and will require another marine cable feed to the island. As an alternative, DTE Energy's DER group explored the feasibility of deferring the T&D expansion by temporarily installing a 1-MW natural-gas generator on the island.

One of the most complex and frustrating aspects of any generator project is the approval and permitting process. For its DER sitings, DTE Energy has sought to build good relationships with various community members and has partnered with schools and churches in the site-selection process. Typically, schools and churches are located in densely populated areas that may have temperature-sensitive, short-duration load problems. These organizations usually have enough available land to enable the DER to be “out of sight and sound” of the neighbors. In addition, making a monetary land lease to these community-based entities is what a good corporate citizen might do anyway.

At the outset of the Grosse Ile project, by looking at aerial photographs, the DER group realized that school property was the only available location for DER in this primarily residential area. The group contacted the school system with the idea of placing the DER on its property in exchange for a minimal lease payment. The school was receptive and even helped find an acceptable site that was located in an area out of the sight and sound of all neighbors.

The DER group subsequently hand delivered letters to each of the 10 closest neighbors, explaining the situation to those at home and inviting all to a meeting hosted by the school board. For this meeting, the DER group created a simple 8-minute video that explained the whole story, without interruption, showed what the site might look like and explained that the anticipated hours of operation were typically less than 100 hours per year and would not be late at night. The meeting also included a site walk over and a sound test.

The neighbors' primary concerns were regarding sound, the impact on the environment and that the installation not become permanent. The DER group also created a three-page, easy-to-read lease. The neighbors wanted language in the lease limiting the term of the lease and a clause that gave them review of any extension of that lease. Following the initial meeting, the city manager, also a school board member, became very supportive of the project and waived site permitting.

In terms of protection on the distribution circuit, no single-phase devices or regulators were in the feed-forward path between the substation and the DER. The newly designed and built connection skid was used to connect the DER to the circuit.

Economically, the installation of the DER on Grosse Ile was a better alternative for the initial deferral of the substation, because DTE Energy had already purchased the generator. The capital cost of the DER installation was $150,000, plus $15,000 for operation and maintenance, for a total cost of $165,000. The annual cost for this expenditure was $30,000. As noted earlier, the substation expansion cost is $3.8 million, with an annual cost of $380,000.

With the aid of new communication and monitoring technologies, DTE Energy has automated the operation of DER. At the Grosse Ile site, when the load on a circuit reaches its day-to-day level, the DER senses this and turns on to maintain this level of load on the circuit by supplementing or following the actual circuit load. Furthermore, DTE Energy developed a load-following strategy to provide freedom from transfer trip and at the same time minimize fuel expenses.


The DER alternative to the traditional T&D approach is exactly that, an alternative. DER does not replace traditional methods. It is a tool in the planning and operations process to resolve distribution problems. DTE Energy considers DER as primarily distribution capacity, not as generation in the utility sense.

Haukur Asgeirsson is the supervising engineer of distributed resource planning at Detroit Edison, where he is responsible for integrating distributed resources in the T&D planning and operating process. Since 2002, he has installed 18 distributed generation projects on the Detroit Edison distribution system, including DG that automatically operates to manage circuit loading. He earned his BSEE and MSEE degrees from the University of Michigan, and he is a registered professional engineer in Michigan. AsgeirssonH@DTEenergy.com

Richard Seguin is principal engineer, distributed resources, system planning and engineering for Detroit Edison. He has 35 years of experience in electrical system planning, design and operation. Since 2002, he has installed 18 distributed generation projects on the Detroit Edison system totaling nearly 9 MW. He holds a BSEE degree. SeguinR@DTEenergy.com

William J. Steeley is a senior project manager in distributed resource and energy storage at EPRI. His work experience also includes 24 years at PG&E in transmission planning and in PG&E's R&D department where he was project and program manager for various generation and T&D projects. He holds BSEE and MSEE degrees from Ohio State University and is a registered professional engineer in California. WSteeley@epri.com


In these early applications, DTE Energy learned several key lessons from early distributed energy resources (DER) applications:

Change the evaluation measure

One of the expectations of management was to make sure that DER projects made sense economically. Therefore, an important part of the DER economic evaluation, which compares traditional T&D solutions to DER solutions, is to compare appropriately. The cost of the DER alternative should not be based on the cost per kilowatt of capacity added, but rather compared to the cost to resolve the capacity shortfall problem.

For example, consider the cost to build a new substation for an area experiencing loading problems. A new 30-MW substation will cost around $6 million, which translates to a cost per kilowatt of $200. This will usually be cheaper than any DER alternative when factoring in the cost of buying DER. However, this assumes that one will be using the whole 30 MW immediately. Generally, most overloads are not 30 MW; they are more on the magnitude of 1 or 2 MW. The cost to resolve a 1-MW capacity shortfall problem with the same $6 million substation is $6000/kW. Now comparing this cost of a 1-MW DER alternative, approximately $450/kW, it begins to look very favorable for the “DER and Defer” strategy.

Develop a DER capital budget

After DTE Energy integrated this new measure on all new capital projects, the next step was to develop a DER capital project budget. Although the DER and Defer strategy permits better economic use of resources, it is not the only reason to use DER. After a probability analysis is performed, it becomes apparent that the load will arrive before some T&D projects will be completed. DER can be a tool to help make sure that these projects are addressed even if the final T&D solution is years away. DER can become a planned budget line item to rescue the project when and if it cannot be done (storms, right-of-way, community approvals and faster-than-anticipated load growth). DER also can be used as a “Do Nothing” alternative in the capital project budget process. This becomes not only part of a project alternative analysis, but can be used as preplanned recovery plan.

It's just like a portable substation

There is another way to look at the economics of using DER. The purchase of a portable substation is not based on the need to facilitate maintenance or for the change-out of a transformer for one particular instance. It would not be possible to justify its purchase on that basis alone. The portable substation is justified on repeated use over time. This is the same rationale used to demonstrate the cost effectiveness for the purchase of DER.

The DTE Energy DER team arrived at this truism after a review of the economics of its first DER installation. This project involved the use of a leased portable generator in an emergency. Over the course of a subsequent economic evaluation, the team demonstrated that purchasing the DER was more economically sound than leasing one. Once a DER is purchased, the comparison is between the DER installation cost and the cost of traditional T&D cost.

Management support is essential

In order for DER to be successful, it takes real management support. At DTE Energy, this support came from the highest levels, specifically the CEO and president.

Name a champion to shepherd the integration

This management support came in the form of naming a champion to shepherd the integration. In DTE Energy's case, a small DER planning group was established and given director-level reporting.

Consider your alternatives

Although utility-owned DER is sometimes a cost-effective solution to a summer peak loading situation, it is not the only answer. There may be customer-owned generation on the circuit that can be used under a joint-use arrangement with the customer.

Protection engineering

This must always be included in the site-selection process.

Location Day-to-Day Rating (amps) Emer Rating (amps) Peak Rating (amps) 2002 Hours Above 2003 Hours Above 2004 Hours Above 2005 Hours Above
Adair DC322 408 520 650 182 81
Grosse Ile DC2841 500 636 684 45 3 40 234
Shores DC1770 493 552 553 22 2 41 122
Union Lk DC1688 524 760 860 265 55 188 410
Wayne DC9435 577 789 636 27 9 24
Milford DC8103 590 695 695 32 58
Webster DC371 360 505 416 N/A 75
Ivanhoe DC1760 600 720 760 N/A New in 2006
Golf DC8518 450 630 647 N/A New in 2006
Circuits with DER circuit support (peak amps value would be the overload without DER). 26 Days over 90 3 Days over 90 2 Days over 90 20 Days over 90

EPRI and DTE Energy have recently published a report entitled Best Practices Guidebook for Integration of Distributed Energy Resources into Utility System Planning (product ID 1011250). This report provides, for the first time, a practical guidebook of industry best practices for integrating DER into the utility planning and operating process. The information presented in the report is based on DTE Energy's real-world experience in DER planning and implementation for distribution solutions and customer services.

The report includes key lessons learned, capital budget planning, financial calculations for engineers, planning and protection, system design, siting and approval, construction and in-commissioning, and methods of control and operation. It also presents five case studies of DTE Energy's DER-based distribution solutions.