Currently, Developer environments with Dataverse cannot install Dynamics 365 applications such as Customer Service. As confirmed by Microsoft support, this is by design.

This limitation prevents teams from using Developer environments for realistic Dynamics 365 development scenarios and forces the use of Sandbox environments, which consume more capacity and hinder scalable ALM practices.

We propose enabling Dynamics 365 app support in Developer environments (or introducing a lightweight developer sandbox tier), allowing developers to build and test Customer Service and other app customizations independently while maintaining lower capacity usage.

This would significantly improve developer productivity and align Power Platform with modern DevOps practices.

Documentation should clearly state that Dynamics 365 apps cannot be installed in Developer environments.