Today’s explosive growth in distributed generation is drawing business away from utilities, especially in Western Europe, according to a new Navigant Research report that forecasts the worldwide DG market will surpass $182 billion within the next decade.
The growing use of distributed generation is eroding utility revenue, leaving some to predict an eventual economic ‘utility death spiral’ for utilities, unless the utility business model undergoes reform.
The market report is significant to microgrids because they use many of the types of distributed generation analyzed by Navigant.
Navigant says that utilities are losing hundreds of billions of dollars in market capitalization as countries like Germany, the United Kingdom, and Italy increase DG installations. Meanwhile, US utilities worry about the prospect of similar losses prompting a struggle among utilities, the DG industry, and regulators over the future of DG models, according to the research firm.
“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,” says 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.”
The report pegs today’s DG installations at 87.3 GW, with revenue of $97 billion, and predicts installations will reach 165.5 GW, with revenue of $182 billion by 2023.
New business models, such as solar leases and the solar power purchase agreement, are part of what drives investment in the sector, according to Navigant.
The report, “Global Distributed Generation Deployment Forecast,” analyzes the global market for several DG technologies that are used in microgrids, including solar photovoltaics, small wind turbines. stationary fuel cells, natural gas, and diesel generators.
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