The Distributed Energy Market Gains Strength

Two indicators suggest that the growth of distributed energy is accelerating: The battery sector is thriving and the financial community – the people who make all the research and development possible – is paying much closer attention to what is going on.

The first indicator is the growth of batteries. One recent example was announced two weeks ago. Morgan Stanley announced that Bloom Energy will install a fuel cell system at the firm’s world headquarters at 1585 Broadway, which is in the Times Square neighborhood of New York City.

A major financial institution making the technology so central to its operations is a sign of acceptance. The fuel cell will generate about 750 kW of energy, which the press release says is 6 million kWh of clean electricity annually. In addition to cutting emissions, the installation is aimed at extending the resiliency of the facility’s power supply.

The demand for batteries – which of course are deeply linked to distributed energy — is accelerating. Earlier this month, Utility Dive reported that there is the Tesla Powerwall is a hot item – even before marketing and sales job begins in earnest:

Since unveiling its Powerwall system in April, Tesla has been enjoying widespread media coverage that has helped spur sales. Last August, Musk said the company had received “reservations” for “well over $1 billion worth of Powerpacks and Powerwalls” all without any marketing or advertising. With marketing plans in place, he estimated that sales could hit $45 million in the fourth quarter and up to 10 times that amount in 2016.

The second element is the attention being paid by the financial sector. The Rocky Mountain Institute posted a blog last week by David Labrador that looked at Lazard’s “Levelized Cost of Storage Analysis.”

The piece is long and involved. The key takeaway, at the highest level, is that Lazard is doing the analysis at all. Beyond that, the post suggests that the Lazard analysis parallels RMI’s in that it sees storage installations as generally being analyzed on a single use basis. However, the economics kick in in earnest when the batteries a utilized in more than one way. However, determining “those economics gets difficult quickly.”

It’s also worthy of note that Tesla and the Institute for Energy Research (IER) – which is funded by the Koch Brothers – are involved in a back and forth about the payback period of the Powerwall. The IER measures the payback period in multiple decades. Tesla responded that it is less than ten years. The important point here is not which side is more likely to be correct. It’s that the technology is entrenched enough to stimulate such a debate.

Last spring, Deloitte released a study that analyzed business practices from 2014. Marlene Motyka, who is the U.S. Alternative Energy Leader and a Principal in the Deloitte Advisory service, told Energy Manager Today that companies are “moving towards self-reliance when it comes to [their] energy supply.” She wrote:

A solid majority (55%) of businesses say they generate some portion of their electricity supply on-site, up from 44% in 2014 and 13% of the generation comes from renewables such as wind and solar and the renewable generation is expected to grow to 16% by 2017. By sector, technology, media and telecommunications (TMT) companies (67%), and healthcare organizations (65%) are leading this trend toward greater self-reliance, perhaps due to the critical nature of their operations, requiring a high degree of reliability.

Though the numbers from last year are not included in the report, there are indications that the trend is accelerating. “As of November 2015, corporations had signed power purchase agreements for large-scale, off-site renewables covering 2 GW of power, up from 1.2 GW for all of 2014,” Motyka wrote. “Others were studying ambitious programs to increase on-site generation.”

The success of the distributed energy resources (DER) market may be getting ahead of the financial and regulatory infrastructure that must be in place to manage it. This week, GTM Research released a report entitled “Unlocking the Value of DER 2016: Technology Strategies, Opportunities and Markets.” The release says that costs and falling and penetration increasing, but “, few states are developing the policies, technology ecosystem and data infrastructure required to enable the location-based valuation systems that will underlie the development of distribution integrated resource planning and DER procurement processes for grid services.”  In other words, the market is taking off – but much work remains to be done.