In a new report, titled ‘Distributed solar energy generation: Demand drivers and barriers, technology issues, competitive landscape, and global market forecasts’ Pike Research claims that while renewable distributed energy generation (RDEG) contributes to just 0.2 percent of current global electric power generation capacity, it has the potential to play a much more significant role in the future.
"The global electric power industry is evolving from a financial and engineering model that relies on large centralized power plants owned by the utilities to one that is more diverse both in sources of generation and ownership of the generation assets RDEG technologies represent a growing part of the new model for the electric power industry," says Pike Research in the report.
In particular, distributed photovoltaic systems dominated by residential and commercial grid-connected systems are said to comprise the largest subset of RDEG technology. Pike Research forecasts that this market will grow from around US$66 billion in 2010, to over $154 billion by 2015 a compound annual growth rate of 18 percent. Meanwhile, it predicts that total installed capacity of distributed photovoltaic systems will increase from 9.5 gigawatts (GW) to more than 15 GW.
New business models
However, the company points out that since RDEG "contradicts" both the one-way power supply traditionally delivered by utilities, and the relationship they have with their customers, new technologies and business models must be created. It adds that the boundaries between centralized and decentralized photovoltaic power are becoming "very blurred".
New business models have been steadily emerging for a while, continues Pike Research, including solar leasing, power purchase agreements (PPAs), and utility-owned distributed assets. "Utilities and independent power producers (IPPs) are leasing commercial and industrial rooftops across urban areas to create ‘virtual’ power plants," explains the company.
It adds, "The power is fed back to the grid just like a small residential or commercial installation. The difference is how the asset owner is ‘paid’ for the power. Residential customers who have net metering are essentially paid the retail rate for their power. IPPs are paid a wholesale rate, depending on the terms of their contract with the utility, and the power is not intended to offset the power used at the site. These larger distributed solar PV installations have the economic advantage of scale, but compete against a lower price point."
Emerging PV trends
In addition to identifying the importance of new business models, Pike Research also outlined seven emerging photovoltaic trends. These are:
- Growing awareness of photovoltaic technology It believes that global awareness of alternative energies is increasing. However, that is only half the battle, according to Pike Research, which adds that customers must know how to take advantage of local, state, and federal incentives, and be able to navigate local permitting ordinances.
- Leasing programs These financing options are on the increase, thus making it easier for consumers to install photovoltaics on their homes. The U.S. is a leader in this kind of program see SunRun or SolarCity, for example, although DZ4, is currently in the pilot phase of a new leasing program in Germany.
- Utility ownership Pike Research states that utility-driven distributed photovoltaic installations are an "emerging dynamic" in the RDEG industry. It believes that this sector has the potential to create "significant additional market expansion".
- Third-party ownership Similar to leasing programs, although power purchase agreements are carried out on a much larger scale. "This type of business model represents a growing portion of the PV markets and has the advantage of lower costs associated with larger-scale installations," says Pike Research.
- Economic stimulus According to the company, "Developing local resources benefits local economies by keeping the dollars spent on energy in the community and creating jobs and possible export revenue."
- Price drops The falling costs of modules, polysilicon and wafers, for example, which plagued 2011, have helped to open up new markets for both distributed and utility-scale photovoltaics, concludes Pike Research.