Decentralized energy: The shift towards smarter, more resilient grids

What’s happening

• Decentralized energy systems are accelerating, offering localized control over energy production and facilitating the integration of renewable energy.
• Innovations such as microgrids and virtual power plants (VPPs) are aggregating resources to offer grid services like demand response and frequency regulation.
• Governments and grid operators are increasingly adopting zonal pricing to address regional supply-demand imbalances.
• Massive grid investment is underway and more is needed.

Why

• Geopolitical tensions, rising global energy demand, supply security concerns, and climate threats are driving energy production and innovation in energy sourcing and management.
• VPPs enhance grid flexibility allowing for better management and integration of distributed energy resources, including renewables.
• Microgrids and decentralized systems strengthen grid resilience and reliability.
• Zonal pricing incentivizes investment in grid infrastructure and optimizes market efficiency.

Why it matters

• Decentralization is reshaping the energy landscape making markets more dynamic, flexible, and capable of accommodating much needed energy growth.
• Development of microgrids, VPPs, and zonal pricing creates new opportunities for investment in energy infrastructure.
• By participating in VPPs, consumers can lower their energy costs and potentially generate revenue by selling energy back to the grid or participating in demand response programs.
• Efficient markets and decentralized energy systems are important tools to decarbonize the grid and reach emissions targets.
• Decentralized energy systems can bring electricity to remote or underserved communities.

How we can help

• We advise clients on the structuring and financing of decentralization energy project investments.
• We develop strategies for using VPPs to create innovative solutions that benefit both companies and consumers.
• We draft and negotiate commercial agreements such as PPAs, EPC agreements, offtake agreements, and more.
• As regulatory landscapes shift, we help clients understand and shape the impact of new policies and regulations, such as those affecting zonal pricing.

What we do

• Financing new investments. We assist energy companies and grid operators with financing and structuring critical investments in decentralized energy technologies, including microgrids, VPPs, and energy storage systems.
• Supporting start-ups. We help emerging energy players and start-ups capitalize on opportunities in the energy transition, from business formation to regulatory compliance, and everything in between.
• Achieving results in regulated sectors. As leaders in highly regulated sectors, we provide exceptional legal services and strategic advice to help clients achieve their business objectives.

Authored by Oliver Travers.