Distributed Energy Resources – Is it Threatening the Existence of Traditional Utility Business Models
The world has witnessed the rapid development of gigantic power grid lines that are powering houses and industries across the globe. The world’s first central power station was built in Pearl Street, Manhattan, by Thomas Edison, but had problems scaling economically to a larger geographic area as it needed installation of numerous power stations nearby. […]
The world has witnessed the rapid development of gigantic power grid lines that are powering houses and industries across the globe. The world’s first central power station was built in Pearl Street, Manhattan, by Thomas Edison, but had problems scaling economically to a larger geographic area as it needed installation of numerous power stations nearby. This problem was solved by Nicola Tesla’s idea of using alternating current to supply electricity over large distances efficiently. However, over time, this system has proved inefficient, as it cannot effectively scale-up or scale-down, as the power demand surges or goes down. To tackle such problems, distributed energy resources have been looked up as a promising alternative.
Why Distributed Energy Resources?
Distributed energy resources are being used as an alternative to tackle the increased demand for electrical power systems, power blackouts, power quality problems, and electricity price hikes posed by distributing power through large power stations. Instead of constructing large, expensive central power plants and high-voltage transmission lines, distributed energy resources offer consumers a low-cost option which is highly reliable with increased energy efficiency providing them energy independence. For instance, by using a solar or photovoltaic (PV) system, homes and business owners can offset the electricity costs by reliably producing electricity. Additionally, these power sources are local and renewable, providing significant environmental benefits.
Distributed Energy Resources Challenges
Currently, there are numerous distributed generation technologies ranging from solar, wind turbines, microgrids, and gas-fired microturbines for backup power generation and energy storage. Amongst these, solar power and wind turbines output are dependent on an intermittent resource, making it difficult to predict the amount of power that will be available at any given time of the day. The other problem with this technology lies in the distributed energy resources management system, as the system accounts for a higher percentage of system losses in comparison to higher-voltage transmission systems. Apart from the technical factor, distributed power generation requires a high amount of investment from each individual user along the network. For instance, installing solar power system for a regular home can cost anywhere in the range of $25,000-$35,000, with a payback period of 20 to 25 years. Despite the challenges posed by distributed energy resources, many analysts and consumers are optimistic that technology cost reduction will increase penetration of this model, threatening the existence of traditional utility business models.
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