Before the turn of the 20th century, distributed generation was the norm. Do you remember when Thomas Edison formed the Pearl Street Station in New York? This station served 82 customers in the city. His distributed generation model was replicated by early power stations in the US and elsewhere in the world.
However, the 1950s marked a sharp decline in distributed generation installations. Industrial steam turbines had entered the scene and introduced a centralized option for low-cost electricity. By the end of the century, alternating current had toppled direct current as the preferred standard for the power grid. Both drivers determined the growth and domination of centralized generation in the industrial, commercial and residential markets.
It is a sure bet that you are seeing more of solar panels on roofs and farms than on large portions of land. That shows that distributed generation is gaining traction. What is the inspiration and what could be the effects of this surge in the energy sector? We seek to answer these questions in this post.
Distributed Generation Comeback
A recent report on the distributed generation market shows the growth path of this industry. Cision PR Newswire reports that by 2025, the market size for this industry will be about USD 118,898.35 Million.
According to this report, the largest share of the market will be in Europe. North America and Asia Pacific are also showing impressive growth potential. Places with active government involvement in renewable energy policies are expected to show significant demand for distributed generation. These include the UK, Germany and Russia. In India, Japan and China, where the energy demand is increasingly high, the distributed generation is at the core of the projected supply.
Trends Favoring the Evolution
Electrification is an influential factor in the recent surge of distributed generation adoption. People, businesses and industries are using far more electricity as compared to some years back. Electric vehicles are slowly getting into people’s lifestyles. Cooling and heating appliances are a common sight in properties. Hybrid boats are taking over the seas. The changing electricity demand patterns are favoring distributed generation.
If there is an industry that has experienced massive disruption from technological advancement, this is energy. Energy generation and storage are now much cheaper. Because of the technological evolution, as at today a big portion of the world can reach grid parity for solar and wind energy either at subsidy free or approaching that status. Additionally in the last decade, lithium-ion storage cost reduced by 80%! The resulting economics is triggering that more people have access to renewable energy for self-consumption at an affordable cost. In general, technological advancement has enabled many people to access Distributed Energy Resources.
Fig 1: Technology Drivers with Most Impact on Power and Utilities- Survey Results (from source)
The link between digitalization and the development of solar and other distributed energy resources is undisputable. Through digitalization, producers can have an easier time storing and transferring excess electricity to the grid. They can streamline their processes to gain unprecedented efficiencies, while being more effective in securing the maximum productivity of their assets through artificial intelligence and advanced analytics and machine learning. For local communities, block-chain and related tools are expected to support the peer-to-peer trade in power.
During the period between now and 2030, a number of governments will lay down measures to drive adoption of distributed energy generation. Solar PV and wind, alongside energy storage technologies, are already part of government agenda in various parts of the world.
Impact on Conventional Centralized Generation
Traditionally, the power utility model has been characterized by companies making money through centralized grids that generate, distribute and retail power. These companies have incredible capacity to develop large asset bases thanks to access to credit ratings as their cost recovery over a long period is predictable.
In a recent paper, the Edison Electric Institute from the US notes that several disruptive technologies are sprouting and seem to be competing with traditional utility power. Examples are:
- Geothermal energy
- Electric vehicle (EV) enhanced storage
- Battery storage, and
- Solar photovoltaic (solar PV)
The impact of distributed generation on the traditional electricity model has been monumental. In the near future, a blend of distributed and centralized generation will meet power demand growth. The disruption is so huge that the electricity generation and distribution model will be unrecognizable in a short timeframe, even by 2030. Some experts even predict that distributed generation will completely overhaul centralized generation.
Centralized generation companies are already aware of the impending shifts, and some are taking action. Most of them are developing a mixture of efficiency improvement, cost reduction and policy strategies, while they develop they renewable capacity both distributed and centralized
Industry players believe that performance and efficiency improvement by at least 20% can buy them the much-needed time for new strategies to take effect. Some potential approaches for being competitive in a more distributed world include advanced analytics, modern scheduling & storage, smart grids, and geospatial technology.
There is no denying it; a low carbon future is unachievable without renewables. However, the current grid system is still relevant and may remain so for many decades to come. Renewables introduce intermittency in the grid, and that’s a huge challenge. If there is to be a smooth shift from centralized generation to distributed generation, then investment in advanced and flexible technology is paramount. This calls for careful planning and execution, and this may take many years. In any case, this evolution has been happening for some time now, and it seems to only be halfway.
QBI offers an end-to-end process optimization and information integration platform that allows our clients to manage their assets and operate optimally in all stages of the project: development, construction, asset management, and M&A. It is designed by, and for, renewable energy professionals, and is flexible and configurable by country, state or region, and technology, regardless of the energy source. Your projects, associated tasks, documentation, dashboards and other project-related information are centralized and digitized.
Additionally, we can connect to any peripheral information system, thus optimizing the use of your infrastructure and assets, reducing operational costs, driving energy efficiency initiatives and improving the financial return on your investment. If you want to join the more than 17 GW of Controlled Capacity managed through QBI, then we have all the information you need in our website.