Investment in DER Will Accelerate the Energy Transition

The proliferation of distributed energy resources (DER) will be among the most disruptive trends to the traditional energy industry over the next decade. Most energy companies and utilities are already wrestling with revenue erosion due to energy efficiency, demand-side optimization, and solar PV. However, if orchestrated by the right flexibility solutions,the accelerating pace of DER growth can provide the stability needed in power grids to manage dispatchable energy demand. Guidehouse Insights anticipates that new global DER generation capacity deployments will outpace the deployment of new centralized generation capacity beyond 2024. 

Annual Installed Distributed versus Central Generation Capacity Comparison, World Markets: 2019-2028

(Source: Guidehouse Insights)

Guidehouse Insights’ recent report, Global DER Deployment Database, aggregates forecasts across 12 DER technologies to measure both the speed at which DER is being deployed globally and the scale of the trend. The report covers DER technologies grouped in six distinct parts of the value chain that generate, manage, and consume electricity. Guidehouse Insights expects DER capacity to grow at a strong compound annual growth rate between 2019 and 2028, reaching over 500 GW in 2028.

Asia Pacific is expected to contribute a substantial percentage of global revenue in 2019, and to account for over half of new installations in 2028. Energy system flexibility, supportive policies and frameworks, and smart energy initiatives will be the game changers in this industry. Additionally, innovative business models, regulatory support, and technological investments can improve the access to finance for DER deployments.

Annual DER Market Revenue, Generation versus Flexibility, World Markets: 2018-2028

(Source: Guidehouse Insights)

Across most emerging countries, there is an increased acceleration in the deployment of distributed generation assets to help transition to a low carbon electricity system. For more mature countries and regions, flexibility solutions have a greater role to play. Declining technology costs and innovative long-term and price-based instruments support the ongoing development and grid parity of DER globally. While most DER use cases support electrification needs for behind-the-meter (BTM) and onsite generation, existing and planned additions of centralized generation around the world greatly influence the proportion of DER technologies in the system. 

Considerations for DER Market Stakeholders

DER market stakeholders increasingly seek balance sheet-backed vendors that can guarantee energy and cost savings through innovative financial offerings. These stakeholders would therefore need to be aware of various considerations that could affect their proposition in the industry value chain:

• Energy price volatility will continue to cause uncertainty for small and medium producers, making investments in DER attractive.
• BTM DER provide an opportunity for businesses to cut their carbon footprints and drive sustainability targets.
• Technology agnostic companies are set to gain the most, as they can offer solution across multi brand investments.
• Securing financing is difficult for DER unless the ROI is less than 1-2 years, which is uncommon for most non-utility scale solutions. Innovative financing models are gaining popularity.