Global Additions in Distributed Generation Capacity to Increase Significantly

The global electric power industry is facing a transformation from centralized generation toward a more decentralized grid with two-way energy flows, known as the Energy Cloud. While many distributed generation assets are deployed as redundant power or backup generation, distributed generation deployments are expected to greatly outpace centralized generation in all regions, resulting in a significant shift in grid structure and organization. Spiraling cost declines of renewable energy technologies, particularly solar panels, not only supports grid parity but also brings increases the uptake of decentralized power in this low price era.

What Can We Expect?

According to Guidehouse Research’s Global DER Deployment Database report, over 200 GW of distributed generation capacity will likely be installed annually in 2025, growing at a double digit compound annual growth rate between 2019 and 2025. It is anticipated that almost half of new distributed generation capacity will come from solar PV installations.

Global Annual Distributed Generation Additions: 2019-2025

(Source: Guidehouse Insights)

The distributed energy resources (DER) deployment forecast aggregates estimates across 12 DER technologies to measure both the speed at which DER is being deployed globally and the scale of this important trend. The report covers DER technologies grouped in six distinct parts of the value chain that generate, manage, and consume electricity. According to Guidehouse Insights, price reductions are expected to continue for PV modules, inverters, and balance-of-system (BOS) components. They are projected to be the main cost reduction drivers, as soft costs related to solar are more difficult to tackle. The price per watt for solar modules falls exponentially every time installations double, while inverters, racking, and other BOS components have historically fallen every year. These trends are expected to continue until 2025.

Incentive to Transition to Low Carbon

Declining technology costs and innovative long-term and price-based instruments support the ongoing development and grid parity of DER globally. The transition to a low carbon electricity system, especially across emerging markets, is accelerated due to the increasing deployments of distributed behind-the-meter assets. For more mature countries and regions, flexibility solutions including demand response and energy efficiency have a greater role to play.

Distributed generation stakeholders can unlock market opportunities by consolidating their business strategies and focus areas across the value chain. While some may wish to play an active role in shaping future business direction, other entities are extremely passive in their approach to develop this market. They can now explore and move into new territories from technology-focused roles to more service-oriented functions offering energy as a service (EaaS) solutions.