Report: IT giants needed to push DG over the top

Distributed generation (DG) is getting increasingly closer to disrupting the power sector but it will need software and IT giants like Google, IBM and Cisco to help it over the top and usher in a new age in the process, according to a new report by Lux Research.

"Much of the challenge and opportunity lies in software for controlling, optimizing, and integrating DG, and while IT companies like Google, IBM, and Cisco have yet to make a serious mark, they’re particularly well-positioned to solve these problems and should take advantage of big opportunities in the future," said Katrina Westerhof, Lux Research analyst and lead author of Powering the Future: Evaluating the Contenders That Aim to Rule the Distributed Grid.

DG will disrupt the power sector by bringing power generation, primarily from renewable sources, and integration at or near the location of use, according to the report.

While the traditional power industry is dependent on large, distant, fuel-burning plants for generation that transmits electricity over long distances to reach end users, DG generates and stores power close to end users employing new technologies.

"The DG landscape is still in early stages with many players and no definitive winner, but renewables-focused DG installers and large industrial conglomerates are best positioned today," Westerhof added.

Westerhof found that partnerships are key. While no company has so far developed leading technologies in all facets of DG, some of the best-performing players are the product of partnerships that have brought together diverse skills, the report notes. SunPower, in partnerships with battery startups Stem and Sunverge, takes the top spot overall. Other strong partnerships include SolarCity and Tesla, Toshiba and Landis+Gyr, and ABB and Samsung SDI.

Westerhof reckons that DG startups are mostly long shots. The report points out that nearly all start-ups lack both the technological breadth and the business strength to rival incumbents, “meaning acquisitions are likely best exit opportunities for most.” Yet the report points to three startups that are better-positioned than most: Sonnen, Stem and Green Charge Networks, each of which has benefited from a larger partner.

While the report stresses that IT companies likes of Google, IBM and Cisco are well positioned to offer the vital solutions that could accelerate DG rollout, particularly as the Internet of Things and big data come into play, the report adds to date, the big players have failed to embrace a hands-on role, and risk falling behind other companies that might step in to fill the IT gap.