Is Distributed Generation a Threat to Utility Revenue?

According to a study done by Accenture Research, distributed generation including residential solar PVs poses an ongoing threat to utility revenue and hosting capacity.

The study comprises interviews conducted by Accenture with some 100 utility executives across 20 countries. The report is Accenture’s fourth edition analysing trends within the digitally enabled grid market.

Distributed energy generation and challenges

59% of utility executives who participated in the study said distributed generation will result in a decrease in utility revenue by 2030 and that they expect to give up hosting distributed generation capacity on their grid networks within ten years.

“The concern is higher in North America and Asia Pacific than in Europe, due to the prevalence in these regions of vertically integrated utilities, which face the double impact of declining energy sales revenue and increased network costs to support reliable energy delivery,” says a company statement.

Nearly six out of ten of the utility executives forecasts grid faults to increase by 2020 due to the unsecure integration of grid networks with distributed renewable energy generation.

Some of the findings of the study include:

• 14% of global utilities have a clear forecast of their potential distributed energy generation network hosting capacity within the next ten years.
• 50% of utility executives say distributed generation related stress on utilities’ network hosting capacity will come from energy prosumers who are driving small-scale distributed generation followed by medium or high voltage connected DG

Stephanie Jamison, managing director, Accenture transmission and distribution, said: “The rapid evolution of the technology, better economics and the growing accessibility and environmental appeal of residential solar photovoltaics – or PVs – have pushed distributed generation from the fringe to a mainstream factor on the grid.

“Combining solar PV with more economical options for battery storage, demand response and energy efficiency will give consumers more power and require distribution utilities to provide more flexibility and different types of services.

“Despite the challenges the integration of these new technologies at scale bring, it is essential to meet the growing expectations of consumers in order to position utilities to provide services-based business models that could drive much-needed new revenue.”

Meeting the challenge

Due to increasing utility challenges associated with the integration of grids with distributed energy generation, the majority of energy providers expect to improve their focus and investments in network capacity planning, storage support and distributed generation operations over the next ten years, says Accenture.

”A balanced, network-wide approach is required to successfully integrate DG and enable utilities to benefit from its proliferation. The key will be to strike the right balance between prudent capital investments, optimising operations and maintenance spending, while managing regulatory constraints on deployment and investing in smart solutions.”

“This investment offers the opportunity to reduce the anticipated capital spending on network reinforcement and operating costs while maintaining the quality and reliability of the power supply,” added Jameson.

Accenture says it believes the deployment of customer-facing smart grid technologies may help utility firms reduce capital spending in integrating grid networks with small-scale distributed generation by 30% by 2030 in Europe and the US