It is noticed, a hike in percentage over the smart grid interests in producers and consumers. In order to meet the requirements of the consumption of power we need to increase the use of renewable energy resources. Distributed Energy Sources (DER) is quite attractive way of distributing energy. It has got great future scope in distribution area. In the present paper the characteristics, advantages and disadvantages of various DER sources is discussed. The challenges and issues of DER are also described and addressed the problems that arise in existing grid.