Small-scale PV systems led to the installation of more than 200 GW of solar capacity last year and could support more than 300 GW this year. This means resetting the utilities.
Two of the largest solar markets, the US and China, increased their distributed generation capacity by more than 65% in 2021 and 2022, as electricity consumption fell by 4% and recovered by 18%. This means a qualitative change in financing, especially to support the integration of bulk, gridded, distributed energy resources (DER) under virtual power plants (VPPs) and traditional plants. Rethink Technology Research believes that utilities, especially in the United States, are going to participate in the mass deployment of distributed solar energy. We believe they offer cooperation to owners of residential and commercial and industrial properties and act as a bridge to financing.
While net metering charges and reduced electricity sales may scare off electricity costs, utilities have huge balance sheets to borrow against and can recruit “full-scale” distributed generation (DG) customers equipped with their maximum solar rooftop and energy storage potential.
First mover
Others will follow the lead of the first utility to embrace this change, as the alternative is for customers who are wealthy enough to abandon it to switch to full-scale distribution on their own, without grid dependency. Utilities that lease rooftops back to customers who can’t buy solar systems outright open up the market to more solar customers and insulate themselves from lower energy prices while maintaining control of power generation.
With half of the world’s electricity coming from solar in the future—and half of DG systems—utilities will need to adopt VPPs, which are expected to become commonplace in the U.S. in the next two years and later in Australia, parts of Europe and potentially strong DER markets like Japan.
VPP outlook
The Rocky Mountain Institute, a sustainability think tank, announced a virtual power plant partnership with General Motors in January. It also announced deals with Ford, Sunpower, Sunrun, home automation specialist Google Nest and the OhmConnect energy efficiency program. In addition, it started cooperation with Olivine, an expert responding to energy demand, and SPAN, which offers home energy consumption panels. It also collaborates with VPP developer SwitchDin and Virtual Peaker, a household electricity consumption software platform.
Utilities in the US and elsewhere are already required to allow VPP networks on their own networks, which means they must monitor and model VPP network participation. More than two-thirds of US electric meters at the end of 2021 were smart devices, with 120 million installed now.
Independent aggregators are now driving VPPs, which means more generation and storage is taken out of utilities’ hands until they enter the market. If more than 60% of the solar capacity is small-scale, similar storage capacity can be expected, paid for by homeowners or whoever paid for the system, and connected to the revenue-generating VPP.
Despite rising solar prices, Rethink Energy estimates the global solar industry grew 30% last year, adding 221GW, and will grow 50% this year and 2024, based on 330GW of annual solar generation capacity last year, plus 45GW per year. a month more this year.
Distributed view
We estimate rooftop panels accounted for 57% of solar added last year and will remain above 50% until mid-2025, with headcount increasing in the US, China and most other major markets. While high module prices and other supply chain issues affected utility use, the war in Ukraine pushed people and businesses to use solar energy to ensure energy security.
Rethink Energy expects the pendulum to swing back to utility from 2025 to 2030, when manufacturing bottlenecks ease and module prices – which make up about 40% of project costs – return to the downward price curve that prevailed until mid-2020. Prices exceeded $300 per kilowatt of generating capacity in late 2021, but have now fallen below $240/kW before delivery and will rise to $200 per kilowatt in 2025.
DG systems will take the crown again from 2031, hitting 63% of all new installations in 2050. Both are growing, and although hundreds of gigawatts in the deserts of Australia and Chile alone use green hydrogen, DG’s potential is even greater. energy prices.
There are so many cost drivers to distributed solar that the price spike in polysilicon—which still accounts for more than 25% of module costs—did little to change the financing formula, allowing small-scale solar to dominate. Many countries have boosted rooftop solar with new policies, but they are only riding the wave, not causing it.
In 2027, utility-scale solar energy will once again enjoy a 57 percent share of new installations before the pandemic. Since then, several long-term trends have worked in favor of distributed solar—one of them being the solar industry’s “next big limiter” shift. In 2031, the two sectors return to parity as the divided prepares to take over for the second time.
