The Growing Role of Distributed Energy Resources

Distributed Energy Resources
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BY:
Loren Henry

Broker

September 22, 2020

Despite the reduction of Distributed Energy Resource (DER) investments this year, and possibly into 2021 due to the economic downturn caused by COVID-19, the DER market is expected to quickly gain back its momentum. In fact, according to a recent report by Wood Mackenzie Power & Renewables, the rapid adoption of DERs is predicted to reach 387 gigawatts and be driven by $110.3 billion in cumulative investments between now and 2025.

Here’s what the report had to say about what’s driving the increased interest in DERs and forcing fossil-fueled combined heat and power systems to take a back seat.

More Solar Capacity Needed
Solar is expected to grow at a faster rate than fossil-fueled generators for behind-the-meter generation, and it will make up approximately two-thirds of the 86 gigawatts of distributed generation expected for the U.S. market by 2025. The three major growth drivers of solar are the increase in state and national policy incentives, financing innovation (solar power purchase agreements and leases), and cost declines.

Increased Growth in Residential Load Flexibility
In the next five years, we’ll see the residential energy sector grow in importance compared to commercial and industry sectors. In fact, the total amount of U.S. load management is expected to reach 2015 gigawatts by 2025. The reason for the growth is the adoption of new smart home technologies such as thermostats that can precool homes and fine-tune temperature settings, and smart water heaters that can preheat and then turn down during winter heating spikes.

Greater Use of Electric Vehicles and Charging Capacity
The electric vehicle (EV) charging capacity is diversifying and expected to quadruple by 2025. Here’s the breakdown of the key drivers of the growth:

  • Residential. Driven mainly by the increase in single-family homes with dedicated parking and access to outlets.
  • Public. Drivers include utility, state, and Dieselgate incentives and funds and potential federal funding.
  • Commercial. A public funds-supported pilot phase and broader rollout as EV costs break even with intercontinental exchange this year.

Emerging Markets for Multi-Asset Aggregation and Integration Set to Expand
The combination of distributed generation, storage capacity and flexible load likely will require multi-asset aggregations to capture the full range of grid value, including DER aggregation for virtual power plant energy and non-wires alternatives as well as front-of-the-meter and behind-the-meter integration. As a result, the Federal Energy Regulatory Commission’s Order 841 has pushed interstate grid operators to adopt wholesale markets that will allow the inclusion of energy storage in units as small as 100 kilowatts. This will enable aggregations of behind-the-meter assets in some markets.

Greater Growth in Resiliency and Storage Market Capacity
Generators provide some of the services that solar photovoltaic installations alone can’t. This includes the ability to serve as backup in long periods of grid disruption. Today, commercial demand-charge management, shifting net-metering policies that make storing solar power more lucrative and the potential for grid services are key drivers to behind-the-meter storage and are estimated to become a 6.2 gigawatt-hour annual market by 2025. The report also notes that energy storage for lithium-ion batteries also will benefit from the need for greater resiliency.

At Worldwide Facilities, we’re helping renewable energy businesses nationwide meet the specialized insurance challenges of the rapidly growing renewable energy sector.

To learn about our unique insurance solutions to problems that arise in this ever-changing industry, please contact Loren Henry at lhenry@wwfi.com or 619-541-4265. 

Source for statistics: U.S. Distributed Energy Resources Outlook.

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