The electric power industry is composed of the generation, transmission, distribution and sale of electric power to general public. Existing energy architecture is a century old and inefficient, with generation segment dominated by centralised stations powered by polluting fossil fuel.
Fossil fuelled centralised station power has many negative externalities that are not effectively priced into the electricity they make. For example, cooling power plants is the single largest use of fresh water in the US at more than 50% of total consumption according to the National Atlas of the United States.
Then there are also the costs of new or upgraded transmission lines.
In addition, large towers, long cables, many sub-stations and susceptible distribution poles are always the first to give way during calamities such as earthquake leaving hundreds, thousands and even millions powerless.
The global energy complex is shifting towards renewables driving a new distributed energy architecture that encompasses clean tech solutions.
In one of the new energy distribution models, the renewable generation is on the customer side of the meter which is also more commonly known as Behind the Meter System (“BTM System”). A solar PV system on rooftop producing electricity for customer’s on-site usage is an example of a BTM system.
Economic storage of electricity is seen as the major catalyst for wider adoption of BTM systems. Storage costs are now falling fast. In 2015, US deployed a total of 221MW of energy storage capacity, more than the combined deployment in 2013 and 2014.
The non-residential segment in the US has accounted for most of the behind-the-meter energy storage deployments. These customers typically pay a big portion of their electric bills in demand charges – charges based on peak electricity consumption in a billing cycle. Energy storage can produce bill savings through peak demand reduction.
Australia is a leader in BTM generation having over 4.5GW in capacity installed through to 2015.
Businesses are also able to save from this system due to evolving financing solutions available. Various companies are already offering zero-upfront capex payment in exchange for securing long term power purchase agreement.
It is estimated in the US that commercial users can save up to 24% over the 20-year fixed-price PPA agreement, assuming grid rate increases 4% annually.
Another driver for growth in BTM markets is existing government incentives that reduce the overall cost of investment.
In California, the Self-Generation Incentive Program initiated in 2001 has recently been extended up to 2021. The program offers incentives to customers who produce electricity – with rebates for technologies using advanced energy storage system. Other countries like Australia provide financial incentives through its green energy certificates.
While the past decade’s uptake of BTM solar generation system relied heavily on subsidies and incentives, rapid growth in the future will be driven by economics and storage. This transition to a distributed solar power generation system looks unstoppable. It will produce evolution of both technologies and business practices. Incumbent players in existing energy architecture that do not adapt will at first drag and then dissolve.
Renewable utility generation will likely have a place in the new energy world order due to its ever decreasing cost of production, but it is apparent that renewable BTM generation is rapidly displacing centralized fossil fuelled generation.