Distributed energy: a disruptive force
Distributed energy DE technologies have grown significantly in the U.S. Last year, DE represented one of the largest investments in the utilities space, and that investment, along with consequent growth, is likely to accelerate.
From 2010 to 2013, DE accounted for about 21 percent of all new capacity in the nation. The number of commercial and residential rooftop solar installations, for example, increased by 22 percent in 2013. The increase comprised about 1.9 gigawatts and represented roughly $8 billion in investments.
This growth will be disruptive to incumbent industries, especially utilities. Most U.S. electricity rates are variable, based on the number of kilowatt-hours used. DE reduces the number of kilowatt-hours sold by the utility to the customer. This creates a fundamental shift in cost because the fixed costs of the grid must be paid for by smaller amounts of energy sold.
Future changes in rates, such as introducing fixed or demand charges, may help alleviate some of these cost shifts in the near term, but they do not alter the underlying fact that utilities’ primacy in the generation and delivery of electricity is being supplanted. What was once a regulated market is becoming increasingly competitive.
This will cause disaggregation of the integrated value chain that has been served exclusively by utilities.