Distributed Generation: A Huge Market Opportunity for Contractors

Demand for distributed generation, also known as distributed energy resources (DER), is growing for a number of reasons – unexpected utility power outages, planned rolling blackouts, power quality problems, increases in the overall cost of power, mid-day price spikes, and much more.

Customers have always wanted reliable, high quality, reasonably-priced power. Until recently, they have had to cross their fingers and hope that their local utilities would provide all of these. Now, with the increasing availability and cost-effectiveness of distributed generation, more and more customers – industrial, commercial, retail, governmental and residential alike – are taking power generation, and even power storage, into their own hands.

Distributed generation is composed ofsmall-scale power generation sources located close to the points of use. In some cases, this locally-produced generation is set up to supplement existing utility grid power, operating as backup generation when outages occur or prices spike. In other cases, the opposite occurs: distributed generation equipment becomes the primary source of power for the customer, with grid power playing a backup role in case the distributed generation equipment experiences problems or requires maintenance.

Distributed generation can include one or more of the following sources of generation: natural gas (such as is used in generators turbines, and microturbines), hydrogen (used in fuel cells), combined heat and power (known as CHP, which uses waste heat from the generation to provide on-site heat), as well as renewable generation sources such as solar, wind, and biomass.

An additional feature of some distributed generation units is energy storage –large-scale batteries (with the most popular currently being lithium-ion) that store the distributed generation for use when the generation capacity temporarily comes to a halt (such as when the equipment breaks down or requires maintenance) or weakens (as can be the case with the instability of solar and generation). The recent introduction of the Tesla Powerwall storage battery is seen by many experts as a huge “game changer” that will encourage the growth of distributed generation even more, especially at the residential, retail, and small-commercial level.

Many customers, particularly industrial and large commercial customers, combine several of these generation and storage technologies to create what is are known as microgrids.

The trend toward distributed generation and storage is opening a huge new market for private electrical contractors, who now have the opportunity to help customers of all sizes and types to design, install and maintain these distributed generation and storage resources. In the past, of course, the only people who could design, install and maintain power generation for customers were the engineers and electricians who worked for the utilities, and virtually all of this generation was at a centralized power plant.

How big is the opportunity for electrical contractors to work on distributed generation? A December 2014 report, “Global Distributed Generation Deployment Forecast,” published by Navigant Research, stated that the global market for distributed generation is expanding at a rapid rate – expected to double in the next 20 years. That is, while distributed generation was providing 87,300 megawatts of power a year in 2014, Navigant projects 185,000 megawatts in 2023. In fact, the growth of distributed generation is threatening utility business models. “Utilities in Western Europe are losing hundreds of billions of dollars in market capitalization as DG reaches higher levels of penetration in leading countries such as Germany, the United Kingdom, and Italy,” said Dexter Gauntlett, a senior research analyst with Navigant. “The prospect of similar losses by utilities in the United States is prompting a struggle among utilities, the DG industry, and regulators over the future of DG models.