Distributed Generation Most Disruptive in Europe

European Union utilities are losing are losing hundreds of billions of dollars due to distributed generation.
Published: Thu 25 Sep 2014

In recent years, billions of dollars of public and private investment in distributed generation (DG) technologies have seen strong results in both cost reduction and technical capabilities. [Engerati- Distributed Generation – A Force to be Reckoned With.]

Public and private investment in DG technologies has grown significantly as new business models, such as third-party owned systems (specifically the solar lease and solar power purchase agreement), have been deployed.

Navigant Research expects worldwide revenue from DG to grow from US$97 billion in 2014 to more than US$182 billion by 2023.

Dramatic growth in distributed generation technologies

To date, DG has been more disruptive in Western Europe than any other region, according to the report, where utilities are losing hundreds of billions of dollars in market capitalization as DG reaches higher levels of penetration in such leading countries as Germany, the United Kingdom, and Italy.

The prospect of similar losses by utilities in the US is prompting a struggle among utilities, the DG industry, and regulators over the future of DG models, Navigant contends, as utility business models are threatened by the dramatic growth in the deployment of technologies that generate electricity onsite or at the distribution grid level, reducing the need to purchase electricity from centralised utility-scale generation facilities.

Engerati wrote recently about Dropbox joining a growing number of companies that are now powering their facilities with distributed renewable energy. [Engerati - Dropbox to Use Distributed Renewable Energy.]

Distributed generation growth will spark innovation

A more reliable and cheaper supply of electricity is becoming very attractive to consumers around the world and it is being fuelled by cheap solar panels and installation. [Cheaper Solar Installations-Watershed Moment for Distributed Generation and Renewables.] Unreliable power supply is another driver.

While this movement away from the central grid is keeping utilities awake at night, there are still a number of opportunities to be realised. [Engerati-Distributed Generation Opens a Floodgate of Opportunity.]

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," explains Dexter Gauntlett, senior research analyst with Navigant Research. "Utilities that pro-actively engage with their customers to accommodate DG -- and even participate in the market themselves -- limit their risk and stand to benefit the most."

Perhaps this extremely competitive setting will instigate innovation within the traditional power industry.

Further Reading

General Electric - The Rise of Distributed Power [pdf]