Study: Distributed generation represents a threat to utility revenues
Accenture surveyed more than 100 utilities executives, 58% of whom said they are expecting distributed generation to cause revenue loss by 2030
Research shows that utilities face the greatest risk of lost revenues from distributed generation (DG), including residential solar photovoltaics (PVs) and fuel cells.
Accenture’s Digitally Enabled Grid study, in its fourth year, surveyed more than 100 utilities executives across more than 20 countries, including the UAE and Saudi Arabia.
The survey revealed that 58% of distribution utility executives are of the opinion that DG will cause revenue reduction by 2030.
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.
The study also showed that 59% of executives believe the biggest DG-related stress on utilities’ network-hosting capacity will come from energy prosumers, who are driving small-scale DG. Meanwhile, 28% said it will come from medium- or high-voltage-connected DG, such as a large-scale solar plants.
Accordingly, 59% of the respondents said they are expecting grid faults to increase by 2020, due to more volatile uses of networks as triggered by the deployment of distributed renewable generation.
The same percentage of respondents believe they will exhaust their DG-hosting capacity within 10 years, if they haven’t already. After that, they pointed out, accommodating new DG on the distribution network will require increasingly high capital-reinforcement costs.
According to Accenture, in the face of such disruption, only 14% of distribution utilities have a very clear forecast of their potential DG network-hosting capacity.
Stephanie Jamison, managing director of Accenture Transmission and Distribution, said: “The rapid evolution of the technology, better economics, and the growing accessibility and environmental appeal of residential solar photovoltaics 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.”
She added: “Despite the challenges that the integration of these new technologies at scale brings, it is essential to meet the growing expectations of consumers in order to position utilities to provide service-based business models that could drive much-needed new revenue.”
Survey results also revealed that utility executives regard the integration of distributed generation as the business challenge that has grown the most over the last two years.
Accenture pointed out that in response to the disruptive network impact of DG, a majority of utilities are considering deploying a broad set of new capabilities over the next 10 years in network-capacity planning, storage support, and distributed generation operations.
”A balanced, network-wide approach is required to successfully integrate DG and enable utilities to benefit from its proliferation,” said Jamison.
She continued: “The key will be to strike the right balance between prudent capital investments and 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.”
Supporting the findings of the study, Accenture’s economic modelling revealed that deploying customer-facing smart grid solutions could reduce capital spending for small-scale DG network reinforcement by around 30%, by 2030, in the US and Europe, equating to reductions of $6bn and $18bn (€16bn), respectively.
Accenture said that the reductions in cost would be enabled by technologies that optimise networks for greater efficiencies across a more dynamic operating range.
Giving an example, the company noted that locational incentives could steer investment to parts of the network with higher reinforcement costs, adding that curtailment of DG output could be made at critical times, and storage and demand-response services could be deployed.
Jamison concluded that smarter DG integration has the potential to be a foundational component of the smart grid for many distribution utilities, providing cost-effective solutions to one of their most urgent challenges.