Article
Is DEG the Future of Electricity Generation?
Energy
×
Current Status of Distributed Energy Generation (DEG)
Electricity grids across the globe are undergoing a transition. One of the key reasons for this transition is an increase in the adoption of Distributed Energy Resources (DER). DER provides customers with a choice in their energy source and the ability to proactively manage their energy use.
Distributed power is generated at or near the point-of-use. Distributed power technologies consist of gas turbines, fuel cells, diesel and gas reciprocating engines, solar panels, and small wind turbines.
The Exhibit 1 below showcases the share of DEG in the global power generation for the years 2000 and 2020.
Technological innovation is contributing to the increased adoption of DEG. Software solutions such as DERMS, Virtual Power Plant, and Microgrid Control Systems facilitate in managing, monitoring, and controlling DERs.
The rise of DEG is also being attributed to the characteristic of DEG systems to overcome barriers that are associated with the development of large-scale power plants.
Solar PV has dominated the global renewable distributed energy generation market in recent years. One of the main reasons behind the dominance of solar PV in distributed generation is the decline in solar PV module prices (refer Exhibit 2).
Key Enabling Technologies and Benefits
Digitization and Software Platforms
Digital control systems that are embedded in distributed power technologies enable operators to remotely optimize operations. Both hardware and software systems for DER integration, monitoring, and control have become more sophisticated, which results in the precise control of distributed power systems even from a smartphone.
Digital control systems, including DERMS, Virtual Power Plant, and Microgrid Control Systems, have enabled operators to remotely monitor and control all aspects of DER operations according to their requirements. The monitoring and control capabilities of these solution systems have helped enhance the distributed power value proposition, which, in turn, is also one of the major driving forces behind the rise of distributed power.
Energy Storage Solutions
Increasingly affordable, modular energy storage solutions, such as batteries, play a significant role in the widespread use of DEG systems. Battery storage technologies such as lithium batteries enable distributed power systems to store energy from DERs (solar and wind generation sources) and discharge at periods of peak demand. This ability enables distributed systems, such as solar PVs, to meet a broader spectrum of on- and off-grid customer needs.
Environmental Benefits
The primary environmental benefit of distributed energy generation is the reduction in carbon dioxide emission from fossil fuel sources displaced by solar and wind DERs, which, in turn, helps reduce greenhouse gas emissions. The existing cost-effective DEG technologies can be used to generate electricity using renewable energy resources, such as solar and wind.
Reduced Cost of Operating a Bulk System
Benefits associated with the replacement of bulk systems with a DEG system are significant. Long-term cost savings can be achieved as DERs enable the utility sector and state entities to defer or avoid large capital investments in new fossil fuel generators and transmission and distribution infrastructure. DEG plants are situated near commercial, industrial, and residential users, which result in curtailment of energy losses that may occur due to inefficient power lines. DEG can harness energy through a combined heat and power system, which might otherwise be wasted.
Challenges Associated with DER Penetration
Difficulty in Managing Grid Voltages
Globally, traditional electricity networks were designed to supply electricity in a single direction from the generator to the consumer. In this kind of supply, the primary concern of the electricity network was the avoidance of voltage reduction for customers at the end of the feeder line. With the introduction of DER technologies such as solar and batteries, significant over voltage events are occurring during midday, when PV generation is at its peak, and solar inverters push up local voltages. As DERs such as solar PV generation grows in the future, this new kind of voltage variability is expected to pose a huge challenge for the smooth operation of the grid.
Regulatory and Policy Barriers
Challenges related to policies and regulations stem from the failure to facilitate the use of DERs as a resource. The conventional regulatory structure was designed keeping in mind a limited number of large-scale centralized generation assets connected to a grid. Power flow was unidirectional, i.e., from utility to consumers. With distributed generation, power flows in both directions. There are no clear regulatory policies defined for DERs in several countries. Revised roles of network operators and proper network technology are yet to be developed in most of the countries. The uncertainty associated with regulations and policies related to long-term investment outcomes, future fuel and electricity prices, and utility tariff structures can hamper the adoption of DERs.
Key Regions
China and the US have shown tremendous growth in distributed energy generation due to initiatives undertaken by their respective governments.
The government of China has developed policy initiatives, such as Renewable Portfolio Standard (RPS) and 13th Five Year Plan of Solar Power Development, among others, which have resulted in an increase in the share of DEG in the country’s energy system. In 2017, approximately 50% of global solar DEG units were installed in China. The US is the second-largest PV market preceded by China. In 2017, 30% of global DEG installations were carried out in the US, thereby making the country the second-largest energy consumer worldwide.
China
China has engaged itself in building a number of distributed generation demonstration projects, some of which include Guangzhou College Town Natural Gas Distributed Energy Supply System and PV Generation-centered Guangdong Foshan Sanshui Industrial Park Distributed PV Project.
On May 31, 2018, China’s National Development and Reform Commission (NDRC), Ministry of Finance, and National Energy Board issued a statement halting all subsidies for utility-scale solar projects in favor of competitive bidding, thereby reducing feed-in-tariffs. This move is expected to slash demand in the solar market in Chine by about 40%.
In 2018, 44.26 GW of solar PV capacity was installed, of which 47% (20.9 GW) was for distributed generation and the remaining 53% (23.3 GW) for utility-scale PV power projects.
United States
As per the US Environment Protection Agency (EPA), the US has more than 12 million distributed generation units, which is about one-sixth of the total capacity of the existing centralized power plants.
Energy Policy Act 2005 (EPAct-2005) has set new directions for renewable energy and distributed energy generation.
Some of the major reasons behind the increase in the use of DEG technologies are as follows:
- Several local governments of states like California are advancing policies to encourage greater deployment of DEG renewable technologies due to their benefits.
- DEG systems such as emergency generators and combined heat and power systems are in demand and are used to provide electricity during power outages.
The US government has started formulating and adopting different policies to diversify the mix of energy generation sources with a greater percentage of renewable and distributed sources.
Future Outlook
Distributed energy systems are expected to be used in the near future to address the electricity demand for utilities, residential, commercial, and industrial customers. These systems are expected to offer and serve different customers according to their requirements. The emergence of DEG Solar and DEG Wind has led to a reduction in the carbon footprint.
Prosumers: Favorable regulatory policies and incentives have enabled prosumers to own and operate their own DEG systems. The power grid is no longer considered as a one-directional delivery pipe for the supply of power to the customer. Power is bidirectional due to the increase in the number of prosumers.
Dubai is developing its first all-electric city known as The Sustainable City. The city will be the region’s first fully sustainable housing community when completed. Panels and inverters are expected to generate 10 MW-peak of power on private and public buildings within the city.
With the support of regulators, utilities will no longer have a monopoly on power generation. Moreover, the one-way relationship of power distribution between the utility and the customer will change.
Energy Services – beyond electricity as a commodity: The sale of electricity and other energy products are not the only value stream for companies specializing in DEG. Companies can generate revenue from aggregating and monetizing the flexibility potential of smart loads and distributed generation.
Intelligent metering technology allows automatic measurement, recording, storage, and reading of end users’ energy data. This energy data includes electricity, heating, and gas consumption, and can be leveraged as a basis for optimizing the customer’s energy production and consumption patterns. Data mining and analysis of the data can help enhance understanding of the energy use profile of each end user.
Energy service companies can use the model of energy performance contracts to share economic benefits due to optimal process management within distributed energy systems.
Digitally-enabled Utility: Efficient and effective integration of DEG system components can be achieved by using digital sensors, controls, and smart meters.
DEG systems can facilitate the emergence of new, digitalized approaches, such as virtual power plants and intelligent microgrids. Applications of innovative distributed digitalized trading technologies, such as VPPs, DERMS, and Microgrid systems, could make it possible for distributed energy to be independent of the centralized trading system in the near future.
Need a thought partner?
Share your focus area or question to engage with our Analysts through the Business Objectives service.
Submit My Business ObjectiveOur Clients
Our long-standing clients include some of the worlds leading brands and forward-thinking corporations.
- © 2021 Cheers Interactive (India) Private Limited. All rights reserved. FutureBridge ® is a registered trademark of Cheers Interactive (India) Private Limited.
