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Warning signs for utilities as distributed generation increases

Around the world an increasing number of customers are opting to produce their own power using rooftop solar panels. The main drivers are long-term cost-effectiveness and less reliance on the centralised utility for their power needs.

This turn towards distributed generation is complicating the utility’s integrated resource planning. According to Engerati more than ever, utilities need predictive analytics to anticipate population growth and economic trends to stay ahead with regards to the development of distributed generation. Utilities need to estimate the number of people that may employ rooftop solar in the future. The failure to accurately predict these numbers could result in the utility over-building or under-building generation. This could have serious financial and operational implications for the utility.

While the majority of the population in developed countries still receive their electricity from centralised power plants, the growth of distributed generation continues to complicate the traditional utility compact where regulated electric monopolies provided power to captive customers.

However, if self-generating customers are no longer obligated to buy power from the regulated utility, it could have a major impact on the utility business as we know it. While the current setup allows distributed generation participants to use the utility’s network of wires and infrastructure as a battery, the introduction of cheap batteries to the retail market could have a devastating effect on the utility business. This could see many independent power producers go off-grid completely. It is therefore critical that utilities formulate a business strategy to account for this possibility. Even electric vehicles are being developed with their own solar panel charging system so that they don’t need to be plugged in to the grid for charging.

Distributed generation is growing in popularity as these power producers are offered various subsidies, pay-outs and legal incentives which tend to offer distributed generation customers a break from some of the expenses that go into reliable electric infrastructure.

With more customers looking into self-generation, it has created some talk of a utility death spiral where the regulated companies’ cost of maintaining infrastructure remains high while profit potential erodes. As prices come down, utilities will be forced to alter their business models dramatically to avoid stranded assets. While this shift may take a while, it is advisable that utilities plan for it in advance in order to remain competitive.

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