A surge in the deployment of distributed solar power could compel traditional utilities to significantly change their mode of operations.
A new report forecasts a surge in distributed power generation over the next decade on the back of the expanded deployment of renewable energy as well as increased usage of small scale fossil-fuel generators.
According to the new study from Navigant Research, total distributed generation (DG) capacity is set to roughly double over the next decade, from 87.3 gigawatts in 2014 to 165.5 gigawatts by 2023.
Revenue from distributed generation is expected to surge in tandem with this increase, rising from $97 billion to $182 billion during the same time frame.
A broad range of renewable energy sources were included within the Navigant Research report’s definition of distributed generation, including biomass and wind, as well as natural gas and diesel generators with capacities of up to six megawatts.
According to the company’s research, however, the key driver of growth in DG will be the widespread deployment of solar power, with Western Europe taking the lead, closely followed by North America and the Asia Pacific region.
Dexter Gauntlett, a senior analyst with Navigant Research, said the rapid expansion in the deployment of distributed solar generation is already having a severe impact on the bottom lines of power companies in Europe’s leading economies.
“Utilities in Western Europe are losing hundreds of billion of dollars in market capitalisation as DG reaches higher levels of penetrating in leading countries such as Germany, the United kingdom and Italy,” he said.
According to Gauntlett, the effect of DG on utilities in Western Europe could have mixed implications for its deployment on the other side of the Atlantic.
“The prospect of similar losses by utilities in the United States is prompting a struggle amongst utilities, the DG industry and regulators over the future of DG models,” he said.
He foresees the flourishing growth of DG posing a major challenge for established operators in the traditional energy sector, with the potential, however, for them to derive significant benefit from its increasing prevalence.
“One of the most important issues for the energy industry is striking a balance between DG growth and fairly compensating utilities for the ability to effectively use the existing electrical grid as a backup service for onsite power at higher concentrations in the future,” said Gauntlett. “Utilities that pro-actively engage with their customers to accommodate DG – and even participate int he market themselves – limit their risk and stand to benefit the most.”