From Microgrids to Smart Cities: Shaping the Future of Distributed Generation Market

From Microgrids to Smart Cities: Shaping the Future of Distributed Generation Market

Distributed generation refers to small renewable energy sources that are connected to a local power distribution network of the utility. It involves small-scale generation plants or technologies such as solar photovoltaics (PV), bioenergy, wind turbines and thermal systems distributed across distribution networks or residential areas to supplement main grid power generation. Distributed generation techniques provide clean power production options at or near the point of use. They offer benefits like reduced power transmission and distribution losses, higher reliability and energy security.

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, as highlighted in a new report published by Coherent Market Insights.

Market Opportunity:

Grid modernization provides a major market opportunity for distributed generation. As governments focus on retiring aging infrastructure and upgrading the grid, distributed energy resources can play a key role in modernizing electricity grids. Distributed generation helps unlock grid flexibility and support increased adoption of renewables. It eases grid congestion and enables two-way power flows between producers and consumers. Investments in advanced grid technologies like smart inverters, energy storage, demand response and grid edge controls will be crucial to harness the full benefits of distributed energy integration. As grids evolve into more distributed, dynamic and responsive systems, distributed generation technologies are poised to see surging demand driven by grid modernization initiatives worldwide.

Porter's Analysis

Threat of new entrants: The distributed generation market involves high initial investments which pose as a barrier for new companies to enter the market. However, trends towards modularity and flexibility are lowering these barriers.

Bargaining power of buyers: Individual consumers and prosumers have high bargaining power in this market due to the availability of a variety of distributed energy resources to choose from.

Bargaining power of suppliers: The suppliers of distributed energy systems have moderate bargaining power due to the alternative source options available to buyers. However, leading technology providers have established brands.

Threat of new substitutes: Grid defection enabled by technological advances in battery storage is a key threat as it allows for further customer independence from centralized grids.

Competitive rivalry: The distributed generation market is competitive with the involvement of technology giants, solar panel manufacturers as well as independent power producers.

SWOT Analysis

Strengths: Distributed energy sources provide reliable backup power and energy resilience. They also enable energy independence.

Weaknesses: High initial installation costs. Intermittency issues with some renewable sources like solar.

Opportunities: Growing demand for clean and decentralized energy sources. Investments driven by climate change targets of nations.

Threats: Regulatory uncertainty around net metering and interconnection standards impedes market growth. Fall in government support through subsidies also poses a threat.

Key Takeaways

The distributed generation market is expected to witness high growth over the forecast period driven by global focus on clean energy transitions. 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.

North America currently dominates market share due to supportive policies and high consumer adoption of distributed solar PV installations particularly in the US. However, Asia Pacific is poised to be the fastest growing regional market led by China, Japan and India on account of large renewable expansion targets.

Key players operating in the distributed generation market are Wartsila, General Electric, Siemens, Schneider Electric, Mitsubishi Heavy Industries, Toyota Turbine and Power, and Doosan Fuel Cell America. Wartsila is a notable leader in the sector offering energy management and flexibility solutions to support the integration of renewables into energy systems.