Long before central utilities began selling electricity, industry relied on the water wheel and other forms of primitive distributed generation to produce products.
As utility prices rise, generating energy on-site is undergoing a resurgence with new technologies, systems, business models, and service providers that are altering how traditional transmission and distribution systems are controlled and operated.
The distributed generation market is poised for significant growth over the next five years, according to a report from Pike Research.
Under Pike’s "slow growth" scenario, the market will grow 46% from 2011-2016, rising from 91 gigawatts (GW) to 133 GW.
Under a more optimistic forecast scenario, which assumes a favorable regulatory environment for distributed energy, the market could expand 85% to 168 GW of capacity during that period.
"In recent years, industrial distributed generation has often been synonymous with combined heat and power (CHP)," says Pike Research president Clint Wheelock. "However, the mix is getting more diverse all the time, and while CHP is 86% of the total IDG market in 2011, its share of the market could dip as low as 53% by 2016. Renewable energy, fuel cells, aggregated generation, opportunity fuels, and data center applications are all showing strong potential to capture increasing shares of the industrial power market."
Although incentives have facilitated growth in some sectors of this market, the state of the economy, uncertainties in natural gas prices, and diminished access to capital are all deterrents to growth, particularly for CHP installations.
At the same time, third party providers are creating a new class of large scale distributed generation by aggregating much smaller units into industrial sized blocks of power, selling energy, capacity, and ancillary services into wholesale markets or in bilateral contracts with utilities, or incorporating them into energy management systems that combine generation with load curtailment.
The report,"Industrial Distributed Generation," examines industrial distributed generation in both the traditional vertically integrated regulatory framework as well as in the new grid-level open wholesale markets.
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