Our Distributed Energy Future

Karam Kang

An insight into the progressive development of distributed energy resources worldwide. JD Ross Energy explores the challenges and benefits of implementing distributed energy and how plans in China, the biggest emitter of carbon emissions and largest investor in clean energy can influence the development of distributed energy plans worldwide.

Distributed Energy Future.

Distributed energy resources (DER) involve a resource that is placed close to the customer so it can provide all or at least some of their immediate energy and power requirements. It is a resource that can reduce overall demand and provide a supply to meet energy capacities. Many industry experts view distributed energy as an energy efficient process enabling utility businesses and customers to reduce their needs and demands for energy in a cost-effective manner.

Growing climate challenges and plans to improve energy security mean more nations are increasing their focus on renewable energy, which often leads to significantly higher levels of distributed generation. With a decrease in technology costs, renewable energy investment has started to dominate installations. According to the International Energy Agency (IEA) accounts for over 60% of power generation investment in the last five years. Many countries are now developing supportive policies to expand distributed renewable energy and in particular progress the construction of distributed solar systems.

Progressive changes in technology are rapidly transforming the distributed energy landscape. Due to the modular nature of solar PV, technology used in large-scale systems can also be applied to and benefit smaller installations. This transition of technology within solar systems is a key reason for the rapid decline in costs associated with the industry. Battery storage technology has also experienced a similar decrease in costs and combined with solar PV, the potential for an increase in distributed energy systems is significantly higher.

Distributed Energy Systems (DES) can play a critical role in the transformation of energy systems. A more service-focused and integrated approach will generate opportunities to improve efficiency and transform the relationship between the customer and business.

From an economic point of view, distributed energy can generate potential value streams and alter financial flows within a conventional utility system. Changes to the system will bring opportunities but can create new challenges for more established businesses in the market. New companies, third-party aggregators and energy service businesses will create an increased level of competition within a market that historically has experienced little.

Industry experts suggest that new policies and regulations will be required to balance this growth of new competition in the industry. They also suggest that historically, regulations have created significant barriers to the development of DER. For example, CHP has experienced a range of challenges due to a lack of strategic planning for heating and cooling infrastructure, as well as market conditions with energy prices that do not reflect the cost of generation. Tackling issues like these and creating new models that work for both customers and service providers will be essential for the development of DER.

UK business focus on distributed energy

The progression of distributed energy systems is represented clearly by the major utility company Centrica, and their long-term plan to focus on the development of DER. In a response to recent revenue results, Centrica announced that they intend to improve their performance with a stronger focus on distributed energy services.

From a financial perspective, Centrica showed significant improvements at the end of 2017, which was largely driven by a series of acquisitions including Panoramic Power, ENER-G Gogen and REstore. Centrica is now focused on increasing its revenue by more than 50% for distributed energy this year. The utility conglomerate emphasised that they will continue to develop their capabilities within distributed energy, which the business suggest directly increased their revenue and attracted more customers last year.

A spokesperson for Centrica explains the recent procurement of new businesses will put Centrica in a strategically stronger position to expand and capitalise on the global movement towards distributed energy. The acquisitions will also support the creation of additional services and products that meet the needs of their customers.

Panoramic Power, a subscription-powered provide provides users with real-time information on their energy consumption and actionable insights. The business has over 50,000 sensors installed across 30 countries and collects significant data. Panoramic Power suggests their services have dramatically improved customer relationships and provided significant opportunities to cross-sell other energy services.

REstore, the leading demand response aggregator in Europe was also acquired by Centrica last year. This business focuses on energy optimisation and offers in excess of 850 MW of flexible energy capacity to grid operators.

The Energy Marketing & Trader business for Centrica operates within both the UK and European markets. The international Distributed Energy & Power business (DE&P) for Centrica has been created to provide distributed energy solutions to both businesses and larger energy users. The business already has in excess of 1000 customers located at over 3500 sites across the UK and US. Centrica state that collectively, the fleet of power facilities can produce enough energy to meet the demands of approximately 3 million households. The number of DE&P customer sites that are active has increased by over 20% in the last 12 months with significant growth experienced within the last part of 2017. Centrica has highlighted that they will continue to invest in this market and encourage growth further forward.

Other major businesses focus their attention on distributed energy systems

The multinational conglomerate, GE has also shown their support towards distributed energy systems. GE has developed an energy storage platform that provides a range of custom battery storage systems for distributed power facilities. The platform uses innovative technology from the GE-based Global Research Centre, integrating plant controls, power electronics and battery management systems.

The 1.2 MW reservoir storage unit is the essential section that integrates GE’s battery blade design and provides the safety, life and the production of each battery blade. The unit provides up to 15% battery life and reduces the fault currents by nearly five times. The unit incorporates control technologies known as Predix and Edge, supporting data insights that allow energy operators to enhance their systems via the Internet of Things (IoT).

Figure: GE Energy Storage Facility

The new, modular system has multiple installation and cabling options. The system reduces the operation and maintenance expenses of project life with an efficient and all-weather cooling facility. The system has also been tested to decrease overall project installation time and costs. A representative at GE explains that the Global Research Centre allowed the business to utilise technologies at the centre and create a prototype and tested storage platform. The new system incorporates new technology and systems expertise from across the Global Research Centre.

GE has emphasised that the energy market is rapidly changing. The combination of continued growth of renewables, decentralisation of power and increase of new technology creates a range of challenges and opportunities for how energy is produced, transmitted and distributed. GE believes their reservoir facility provides an energy system that customers are looking for to support their future energy requirements.

Eric Gebhardt, the Vice President and Technology Officer of GE Power says the reservoir platform provides a cost-effective distribution, storage and the development of a cleaner and more efficient source of energy where and when it is required. Gebhardt explains that the new facility can integrate into the majority of centralized grid systems, in remote areas and communities. The reservoir also offers energy businesses added flexibility to manage and ensure they get the most out of their energy assets.

Distributed energy outlook in the US

The continued progression of distributed energy resources is encouraging multiple changes to utility planning. A recent US-based report named The Role of Energy Efficiency in a Distributed Energy Future emphasises how energy efficiency has a vital role in the development of distributed energy. Data from the report indicates that the majority of utility businesses are not using energy efficiency within the planning of distribution systems. The report suggests, however, that businesses are starting to use efficiency to replace conventional distribution infrastructure and integrate further renewables into the grid.

Utility businesses have been integrating energy efficiency for many years and at the distribution side, energy efficiency has the potential to reduce or eliminate the requirement for new infrastructure, as well as decreasing the demand and energy needs at particular homes and businesses.

Figure: Forecasted growth of distributed energy resources in the US (Source: Navigant Global Energy)

Whilst some utility business are integrating energy efficiency savings into demand forecasts, most utility companies are not using energy efficiency as a resource within distribution planning. Both California and New York are leading the development of energy efficiency and other distributed energy resources in planning but are in fairly early stages of developing regulations to tackle these issues.

Through the Reforming the Energy Vision (REV), New York is planning to create a collective portfolio of energy products and services for customers to utilise the available distributed energy resources on the grid. Whilst it is in the early stages, the REV has shown interesting insights into how energy efficiency can be used to reduce the requirement for larger projects on the distribution system. For example, the Brooklyn-Queens Demand Management Project (BQDM) managed by ConEdison is a good representation of how energy efficiency can be integrated to reduce the overall demand in a bound area and impede the substation upgrade.

A large extent of reductions in demand has been achieved by the adoption of a series of energy efficiency programs that are focused on reducing overall energy demands in surrounding buildings.

The Public Utilities Commission in California is pushing plans to formalise distributed resource planning, supported by three of the region’s largest utility companies. Southern California Edison has created a project referred to as the ‘Preferred Resources Pilot’ which uses energy efficiency to decrease local demand levels and prolong the requirement to upgrade a regional substation. Southern California Edison is utilising energy efficiency to meet a large portion of the demand reductions.

Other regions including Washington State, Oregon and Connecticut are developing their own regional projects to utilise energy efficiency and improve the planning process as an alternative to developing new distribution system infrastructure. These states, along with California are demonstrating insights into how energy efficiency can result in demand reductions. Each project is a valuable case study to other regions on how to integrate energy efficiency as a distributed energy resource.

Energy efficiency is likely to become a significant area in future planning as regulators and utility businesses continue to develop the distribution system and combine with additional distribution energy resources. Efficiency will essentially reduce costs to utility systems and allow current facilities to provide more energy and save money for customers.

 A distributed energy future in China

China is well known in the energy industry as being the largest consumer coal and produces the most carbon emissions than any other country. It also is the second largest consumer of oil after the USA. Despite its abundant use of fossil fuels, the nation is also the largest investor in clean energy and is leading the way in the development of clean technology. Through restructured policies, subsidies and other industry incentives, China has invested more in clean energy than the EU and North America combined. According to Bloomberg New Energy Finance, in 2017, China invested over $130 billion into the clean energy market.

China’s energy industry is undergoing substantial change and seeking a new balance for its entire energy system. This not only means reducing its heavy reliance on coal but also finding more efficient and smarter ways to meet its energy needs, and as a result distributed energy is receiving increased attention. This transformation in China is featured quite prominently in its 13th five-year-plan. Whilst China is making significant plans to move away from fossil fuels, further efforts are needed to clarify what exactly distributed energy will look like for China and for the world.

Energy industry experts emphasise that we need to move away from traditional approaches to unravel the full potential of technology and innovation in this industry. Experts suggest that we should be focusing on creating distributed energy systems that offer an integrated solution that combines clean energy options with energy efficiency, focusing on the requirements of customers.

Figure: The coal industry continues to decline in China with a further push towards distributed energy systems.

To implement and transform the energy industry in China and worldwide, international collaborative efforts and sharing of best practices will be essential. China became part of the International Energy Agency (IEA) group as an associate nation in 2015 which strengthened its collaboration with other nations. Understanding the importance of China in the global energy system and working together are highlighted by many energy professionals as essential steps that need to be taken.

China is exploring new methods of economic development whilst at the same time facing a series of environmental challenges, namely in relation to exceptionally high air pollution levels. Creating a more efficient and smart way of improving their energy supply and consumption is critical to meeting their targets and significantly reducing air pollution levels. The economic transition, combined with rapidly declining costs of distributed energy resources and technological progress in the energy market is producing new opportunities to deliver distributed energy systems (DES) in China.

Development and Challenges facing distributed energy in China

China has recognised the benefits of DES and the ability to generate high levels of energy efficiency through combined heat and power for many years. Despite this recognition, the predicted increase in distributed energy during the 12th five-year-plan, between 2011-2015 did not occur. By the end of 2015, approximately 120 Distributed Natural Gas projects had been developed, with a total installed capacity reaching 1.4GW. The targets set by the Government of China were not met and experts suggest that this was due to a series of economic, technical and regulatory challenges that slowed the growth of the DES market.

From an economic perspective, clean energy options are still costlier than coal. On the technology side, previous DNG projects have not included correct assessments for differing energy services, which results in a poor balance between installed systems and demands, and ultimately low utilisations and poorer project economics. On the regulation side, providing transparent and constant access to electricity, gas and district heating continues to be a frequent challenge.

As DES creates a diverse set of energy resources, the integration of supply and demand policies and strategies for different energy businesses is critical. Coordination between government and businesses responsible for DES technology system have tended to slow progress with DES. Whilst these challenges continue, recent developments including the enhanced availability of gas, pricing reforms and low equipment costs are positive. China has recently experienced the fastest increase in solar PV capacity ever recorded.

What distributed energy development can bring to China

Industry analysts suggest that if the right policy, market, and regulations can be implemented, then the uptake and increased development of distributed energy systems in China can continue. Analysts believe that changes to the economic structure in China will have favourable impacts for DES development. An economy that includes a stronger element of commercial and services sector will also involve higher distributed energy demands. This includes the reduction of reliance on larger centralised industries and higher demands for smaller, distributed facilities.

DES can assist in tackling the critical environmental challenges, namely air quality and carbon emissions that are facing China. Distributed energy resources can significantly reduce the amounts of sulphur dioxide (SO2), nitrogen oxides and particulate matter that are exceptionally high within coal-based facilities. Natural gas plants provide considerably lower emissions and renewable energy systems, such as distributed solar PV, which is growing rapidly in China have zero emissions.

DES can reduce carbon emissions by promoting a combination of low-carbon and carbon-free energy alternatives. The ability for DES to decarbonise heating and cooling is another significant environmental benefit. At present, heading demand accounts for nearly a third of energy-related carbon emission worldwide, with half of this heat being consumed in buildings.

Technology is also assisting in the development of DES. New technologies can enhance the understanding of demand, improve system performance and offer new services. The growth of digital sensor and control technology, combined with big-data services, as well as electric vehicle industry development are transforming DES. The availability of accurate data on energy consumption provides vital records to support to DES and meet the requirements of each customer. Furthermore, better management of supply and demand technologies and smart controls will improve overall systems efficiency and decrease overall costs.

With the growth of technology, new business models are developing to utilise the potential of DES in China and worldwide. Combining a range of supply and demand technologies can offer customers an efficient range of energy services. The combination of local and national political support are generating new prospects for DES in China. The government of China has implemented a set of targets that imply its commitment towards the development of DES. The 13th five-year-plan includes a set of technological targets that form the basis for the development of DES. Solar PV is the focus of distributed energy development during the five-year plan, with a target of achieving 60 GW of distributed solar energy by 2020.

Local governments are also implementing supportive policies to promote energy efficiency and tackle air pollution levels.

Supporting the progression of distributed energy in China

System reform and supportive policies are viewed as essential for China to achieve its ambitious targets laid out for distributed energy in it’s 13th Five Year Plan. Creating policies that provide clear access of DES to applicable infrastructure are essential in the short term. If the Government can implement clear technical standards that provide accessible data then this will encourage investor confidence in the market. In particular, local government can play a critical role in developing DES, due to the localised character of DES. Local governments can integrate DES into urban and energy development plans and local policies in a coordinated manner.

Industry experts suggest that further long-term reforms are needed in specific disciplines such as in oil and gas, carbon trading and the electricity system. Analysts highlight that changes to these areas will create a more balanced approach for DES in China and allow DES to contribute towards the transformation of the energy market.

The International Energy Agency (IEA) states that China now has over 30% of the world’s wind market and over 25% of the global solar capacity. The IEA also highlight that 6 of the leading 10 solar PV manufacturers and 4 of the ten leaders in wind turbine construction are based in China. The nation has established a strong position in the electric vehicle market, selling more electric vehicles than the rest of world combined. In December last year, the nation confirmed the launch of what is predicted to be the biggest carbon-trading scheme in the world.

Whilst there have been significant movements in the energy market, the advances within renewable energy are still relatively small, with alternatives to fossil fuels only contributing just over 10% of the total energy mix in China. Securing fossil fuels is still a top priority for the nation, negotiating deals and agreeing with oil and gas producers in the Middle East, China, and America. The significant priority is to reduce the reliance on coal, and industry experts suggest the increase in shale in the US may be a positive move. In the last year, LNG imports in China increased by nearly 50%. Last month, China National Petroleum Corporation, confirmed the first long-term contract to purchase LNG from an US-based supplier.

Whilst many western nations are a little sceptical about China’s position in the development of renewable energy technology, there is no doubt they have invested heavily into the clean energy market and have a strong vision of decentralising and decarbonising their supply of energy.

Shanghai-based Jinko Solar began business 11 years ago and since then has rapidly progressed into becoming the largest solar PV panel manufacturer in the world. The head of sales at Jinko Solar explains that the success of the business is down to continued investment into new technology and widening their marketing efforts on a global scale. The Chinese government actively support new research and development projects managed and operated by Jinko Solar.

Envision, the largest wind-turbine developer in China has created turbines that operate at low wind velocities so they can be positioned closer to urban areas, rather than in the remoter north-western region of the country. Envision explains that the new structures provide an operating system that would allow businesses to manage locally produced or distributed energy assets more effectively.

China is introducing new regulations to support clean energy development. Bloomberg New Energy Finance (BNEF) suggest that distributed solar energy accounts for over 30% of the total solar capacity that was installed in the country last year. This came as quite a surprise to many as most prior renewable energy projects had been installed in remote regions on a utility scale.

The development potential of distributed energy in China

Distributed energy is seeing a significant increase in demand and decreasing costs are supporting the development of new renewable energy projects. More households are now considering distributed solar PV systems as a new service. Solar PV systems are now becoming more popular in rural areas to alleviate energy poverty in certain regions of China.

China has transformed its focus from being a significant PV-manufacturing nation into a country that leads the global demand for solar PV. The outlook for solar development in the 13th five-year-plan highlights that installed solar capacity will exceed 110 GW by 2020.

The overall outlook for wind industry development in the five-year-plan suggests that by the end of 2020, installed capacity of wind power will likely exceed 210 GW. This is a significant increase from a previous figure of 129 GW back in 2015. Whilst typical installations tend to consist of large-scale developments, the construction of smaller-scale wind turbines located close to the load systems is gaining further popularity in China.

Recently, China has commenced a series of pilot projects into carbon emissions trading and plans to create a national carbon emission trading market this year. China intends to give priority to projects that are generally quicker to commence and include a carbon emissions trading market. The development of a national carbon emissions trading market, combined with the introduction of green electricity power trading certificates can support the development of the renewable energy industry further. Whilst distributed solar PV is not included in the proposed green electricity certificates, it will nonetheless encourage the development of renewable energy which is critical to expanding distributed solar systems.

Distributed Energy Initiatives in Australia

The Australian Renewable Energy Agency (ARENA) has confirmed an initial funding of just under $10 million USD into a series of pilot research and development projects to integrate distributed energy resources into the electricity system. The new initiative will focus on supporting the development of solar PV and batteries and assist with the progress of DER in both household and businesses to improve grid reliability.

Figure: ARENA is making plans to optimise the rise of rooftop solar and battery systems across Australia.

DER includes behind-the-meter facilities such as rooftop solar, batteries, electric vehicle charging infrastructure and smart energy systems. The CEO for ARENA, Ivor Frischknecht, stated that this will be the first targeted initiative that focuses specifically on distributed energy resources. Frischknecht believes that DER is likely to play a significant part in the future of Australia’s energy industry. Instead of just developing large-scale storage and generation projects, ARENA is focused on how we can integrate and implement behind-the-meter services, including household battery systems and rooftop solar.

In excess of 1.6 million households in Australia have rooftop solar facilities, which is the equivalent of a fifth of the national population. Additional households and businesses are investing in battery technology and smart energy systems. The current developments within the industry suggest that customer operated services are likely to play a more significant role in the future energy market of Australia. ARENA hope the new funding project will focus on improving the value of customer-owned distributed energy resources and provide essential information on enhancing behind-the-meter assets like household batteries and rooftop solar.


rischknecht explains that ARENA is working on a series of virtual power plants as well as a distributed energy market project. He suggests that these projects have already shown the potential value increase of DER for the customer and national grid system. ARENA aims to create a secure and reliable energy system with all of the demand being met from a combination of behind-the-meter services such as batteries, demand management and rooftop solar.

ARENA is now calling for applications for pilot projects focusing on the integration of DER and enhancing network hosting capacity. An allocated funding of just under $6 million USD is being utilised to explore methods of increasing network hosting capacity through a range of monitoring and control schemes. A further $4 million will be allocated towards studying and modelling how to integrate high penetrations of DER. Successful projects are due to be awarded the funding later this year.

Progression in digital technologies, big data and the Internet of things.

Continued innovation, digitalization and the rise of new technology will allow the energy market to continue to progress and transform. The development of distributed trading technology, such as blockchain services will potentially allow distributed energy to operate independently from centralised trading system in the years to come.

Distributed energy provides multiple opportunities for technology and innovation. The development of emerging technologies will prove challenging to existing business models but will also provide great opportunities within a range of energy sectors. The improvement in smart energy systems, such as sensors, software, and data analytics have been significant in recent years.

The technological developments remains a key driver for energy system progression and as a result continues to shape the energy system of today and our future. Today’s DES have been created through innovation and new technology. Being responsive to new technology means distributed energy is in an ideal position to be part of this energy transition.

The future of distributed energy systems

Energy management and development is a global challenge and creating a clean and distributed energy system is a common preference for many countries discussing a global energy transition. Distributed energy development has been taking place for many years, with nations such as Denmark and Germany making significant progress and gaining experience in DER. Being the biggest energy consumer and emitter of carbon emission, China is a considerable focus of global energy development plans and the future progress in DER.

International collaboration on energy choices will no doubt play a critical part in the transformation of the energy market. China is actively involved in global energy policies and has both the capabilities and power to strengthen its progress by creating cooperative programs with other governments, organisations and research bodies around the world. Furthermore, the success and experience of distributed energy in leading clean energy investors like China, particularly within energy access through distributed energy can provide vital information for other developing nations.