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Small-scale Distributed Generation Opportunities from Renewable Energy

Small-scale distributed generation technologies using renewable energy to drive growth in virtual power plant business models and systems


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2014-01-09 01:30:03 - Small-scale Distributed Generation Opportunities from Renewable Energy - a new market research report on companiesandmarkets.com

Deployment of smal-scale distributed generation technologies useing renewable energy is expected to reduce carbon emissions and will result in the generation of energy close to the point of consumption reducing the need for centralised power generation investment. Technologies are mostly well established and have seen strong growth recently, albeit from a low base. However, the challenges for the market to move to the next level relate to successful business models.

Virtual power plant business models will win within the next few years. The deployment of smart technology and the development of micro-grids will be the key enablers. Distributed generation is poised to take off to a new level, especially in Europe. There is increasing focus on deployment of small-scale renewable energy

 

 

close to the point of consumption. This will create opportunities for suppliers or micro-generation technologies and require new strategies and business models from power-gen companies and utilities. Micro-CHP technologies will grow the most quickly. Domestic renewable energy and renewable heating technology markets have underperformed, but the combination of heating with on-site power will resonate more strongly with a much higher proportion of the customer base.

Development of small-scale distributed generation (DG) is primarily driven by two commitments: to reduce carbon emissions and to generate electricity from renewable energy sources closer to the point of consumption. For success, government support is a prerequisite for commercial viability. Countries with a strong support for these technologies witness a higher growth rate, increased awareness of end-user groups, and a noticeable reduction in the amount of carbon emissions from the residential and small commercial sectors.

Many small-scale DG technologies are well established and are manufactured on a commercial scale, but the biggest issue to be solved before the market truly takes off is how the stakeholders will make money. As the largest stakeholders and owners of the relationships with the end users, utility companies are the crucial participants: As soon as attractive business models are defined, the market will boom.

In the small-scale DG sector, micro-combined heat and power (CHP) is currently the area where we see much more utility focus and clearer business models. The micro-renewables market is still much stronger in heating technology than in electricity generation. This will change in the coming years, but it helps explain why utilities are tending to focus on technologies that link with heating solutions, because it is a more established market with higher customer awareness and lower dependence on feed-in tariffs (FITs). As far as electricity generation is concerned, in the longer term, solar photovoltaic (PV) has a bright future, but this has yet to excite utility participants at the small-scale level. Solar PV remains the domain of relatively small specialist firms that may well become acquisition targets for utilities in coming years.

One of the major restraints affecting the adoption of distributed generation is grid interconnection with the utilities. Excess power generated can be sold to the utilities, provided that appropriate grid connections exist and the utilities are willing to purchase electricity from small power producers. In most cases, the terms and conditions given in power purchase agreements (PPAs) are considered to favour the utilities, hence there is little perceived incentive for the developer to invest in these plants. In the longer term, this issue will only be truly resolved when the utilities have more consistently decided the roles they see themselves playing in micro-DG markets.

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