April 24, 2024

Distributed Generation is Shifting Towards Sustainability

The distributed generation market is shifting towards sustainability by leveraging renewable energy sources like solar, wind, and hydropower. Distributed generation refers to small-scale power generation technology located close to the end-user. The technologies involve renewable sources like solar photovoltaic panels and wind turbines installed at residential and commercial establishments to fulfill their electricity needs. Distributed generation helps decentralize the traditional electric power system and reduce dependence on the main electricity grid.

The Global Distributed Generation Market is estimated to be valued at US$ 364.46 Billion in 2024 and is expected to exhibit a CAGR of 14% over the forecast period 2024 to 2031. The increasing awareness regarding environmental sustainability and government policies promoting renewable energy adoption are fueling the demand for distributed power generation. The small-scale systems allow customers to become producers of their energy from renewable and low-carbon sources instead of simply purchasing power.

Key Takeaways

Key players operating in the distributed generation market include Siemens AG, General Electric, Schneider Electric SE, Mitsubishi Motors Corporation, and Capstone. These players are focusing on expanding their renewable energy product portfolios and project development capabilities.

The growing demand for reliable and uninterrupted power supply and rising installation of residential micro-grids is fueling the distributed generation market growth. Microgrids enable seamless power supply during outages by leveraging multiple distributed energy resources including solar PV, energy storage, and generators.

Several markets regions are witnessing growth in the distributed energy industry led by supportive government policies. Countries like the US, China, Japan, and various European nations are providing incentives for rooftop solar installations and net-metering programs to boost decentralized renewable power generation.

Market Key Trends

One of the key trends in the distributed generation market is the increasing role of energy storage technologies. Lithium-ion batteries and other storage solutions are playing a vital role when paired with distributed solar PV by storing excess generated energy for use after sunset or during grid outages. Energy storage enhances the viability of distributed energy systems and optimizes self-consumption of on-site renewable power.

Porter’s Analysis

  • Threat of new entrants: Low economies of scale in production and high capital requirements for infrastructure like electricity transmission lines pose entry barriers.
  • Bargaining power of buyers: Large power producers still have bargaining power over off-grid customers due to reliance on stable electricity access.
  • Bargaining power of suppliers: Suppliers of solar panels, inverters, batteries and other distributed energy technologies have moderate bargaining power due to availability of substitutes.
  • Threat of new substitutes: Advancements in renewable energy, energy storage and microgrid technologies continue to provide alternatives to centralized fossil fuel-based power plants.
  • Competitive rivalry: Intense competition exists among distributed generation system integrators and electricity providers as customers increasingly adopt on-site power solutions.

The North America region accounted for the highest share in the distributed generation market in terms of value in 2024, primarily due to supportive government policies for deployment of renewable energy sources, declining prices of solar PV modules and battery storage solutions, and increasing investments in microgrid projects across the United States and Canada. Asia Pacific region is expected to grow at the fastest CAGR during the forecast period owing to ongoing energy access expansion, robust economic growth and capacity additions of solar PV, wind, hydro and biomass-based DG systems across China, India and Southeast Asian countries.

The geographical regions with the largest DG market share in 2024 were North America, followed by Asia Pacific and Europe. However, Asia Pacific region is projected to experience the highest growth during the forecast period till 2031 due to ongoing rural electrification programs, rapid urbanization and climate action plans involving wider adoption of clean and decentralized energy sources across major developing economies in the region. Countries like China, India, Japan, South Korea and Australia are leading this emerging trend and driving investor interest in the Asia Pacific distributed generation market