Distributed power generation offers promising infrastructural support for existing centralised power systems, which have been under immense pressure in recent years.
Failures from the ageing energy system have made headlines throughout 2024, from increasingly frequent natural disasters, such as the US’s record-breaking hurricanes, to ongoing geopolitical conflicts like Russia’s repeated strikes on Ukraine’s utilities leaving millions without power.
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Distributed power provides a buffer for power supply against such threats while enhancing reliability and efficiency.
At its core, distributed power is a relatively simple solution: locating small-scale energy production facilities closer to energy consumption sites, often facilitated by energy storage systems. Distributed energy resources (DERs) help overcome the weak spots of centralised energy, including inflexibility in meeting rapid demand changes, slow recoveries from damage and a lack of modularity.
Arguably the most appealing aspect of distributed power, however, is that energy consumers have the opportunity to produce their own electricity for self-consumption and even feed the surplus into the grid. Known as prosumers, they can act individually or as part of a cooperative to build and share in renewable energy systems.
“Ironically, this was the way power systems first developed before grids as people generated and consumed energy locally. We’re moving back towards that model, but now on a grid as well,” says Dr Jon Hiscock, CEO of grid voltage control solutions provider Fundamentals.
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By GlobalDataThe most popular DERs for prosumers is wind and solar photovoltaic (PV) cells. Power Technology’s parent company GlobalData finds distributed PV systems “exhibit the most significant potential for growth, attributable to their favourable economic profile and minimal initial costs,” with estimates to represent approximately 40% of the global solar PV market by 2050.
As the global energy transition gains pace and nations consider what the future of energy systems holds, the availability of DERs and rates of implementation by prosumers offer improved energy security, greater connectivity and lessened environmental impact.
However, complex market, regulatory and financial challenges stand in the way of prosumers driving a true equilibrium between centralised and decentralised power.
Power to the people: the challenges and opportunities
Prosumerism is not a new concept, but the advancement of the transition and development of renewable energy solutions have boosted the control individuals, communities and commercial players have over generation and consumption.
Both commercial and public prosumers typically have high rates of self-consumption to meet the energy needs of households, schools, hospitals or supermarkets. Prosumers benefit from having more control and assurance of their power supply, not having to rely on a centralised system.
The localisation of distributed energy also enables the capture of energy and heat that would otherwise be lost during transmission and distribution, known as line loss. This can then be redistributed for uses such as heating or cooling across households or industry operations.
For residential prosumers, behavioural factors are key, especially in the midst of the climate change crisis. Implementing DERs allows communities to control the production of their own clean energy and lower carbon emissions instead of being passive consumers.
Meanwhile, industrial prosumers can benefit from reduced manufacturing costs, resilient on-site power supply to avoid operational disruption and additional revenue by exporting excess energy to the grid.
For the broader energy market, however, an over-proliferation of prosumers or ‘energy citizens’ poses some risks.
Hiscock highlights the tricky balancing act between prosumers and distribution network operators (DNOs). “From a utility perspective, DERs connected by prosumers are non-dispatchable energy that DNOs have no control over. This creates a hugely dynamic system that can be hit or miss with varying voltage conditions if, for example, one prosumer has a solar PV panel and another has an electric vehicle charger on the same street.”
The rise of prosumers could also have knock-on effects of reduced investment in centralised grids and increased bills for consumers who don’t produce their own energy.
Maintaining a mutually beneficial relationship between prosumers and operators is key. On a high load day when a grid is struggling, a prosumer can adjust their DER output and be paid to support the centralised energy system within a flexibility market.
Energy tariffs, net metering and discounts on the installation and maintenance of DER equipment such as panels or turbines are ways that utility companies can support prosumers in turn.
Regulation has a big part to play in sustaining this relationship. However, Michael Bergey, president of the Distributed Wind Energy Association (DWEA) and CEO of Bergey Windpower, explains: “Utility companies in the US, being the comfortable monopolies that they are, have the power to increase the fair rates that prosumers pay.”
Decentralising future power systems: supporting prosumers
Beyond the government helping foster a fair relationship between prosumers and DNOs, comprehensive regulatory frameworks are crucial for prosumers to grow alongside distributed power systems.
First, an agreed-upon legal definition of prosumers remains uncertain. For instance, the European Union (EU) recognises ’self-consumers’ but definitions vary between EU member states and a separate regulatory framework for prosumers exists only in Greece and North Macedonia.
A consistent legal definition for prosumers would ensure consistent application of equitable regulation and support. The European Parliament has called for “a common operational EU definition of prosumers and new energy legislation to provide measures for encouraging investment into self-generation capacity” for this reason.
In the UK, Hiscock asserts that the regulatory path to facilitating distributed energy and prosumers revolves around “the perennial question: how do we create an environment for private investment?”
“Of course, the Labour government has created GB Energy to pump public money into these areas. There are all sorts of markets for developers and prosumers to take part in, but it’s complex. Simplicity and accessibility would help,” he says.
For industrial prosumers in particular, Jessica Savoie, policy officer at the Association for Decentralised Energy, highlights challenges in “installation, geographical limitations, increased capital expenditure and mixing technologies”.
“The UK government doesn’t love industry becoming prosumers,” says Savoie. “They’d rather big industrials be part of the grid so there’s lots of licensing restrictions and administrative barriers in the way. You can get into weird territory over who owns what if there’s microgrids everywhere.”
While it is easier for governments to monitor industrial use of centralised energy systems, reducing licensing restrictions would move industrial prosumers beyond a dependency on grid connectivity and fossil fuels, supporting national decarbonisation targets. A report by the UN Industrial Development Organisation highlights a range of additional benefits, including economic sustainability and skilled employment creation.
In regards to mixing DERs, research points out that coordinating diverse distributed renewables “which have different capabilities and characteristics (e.g., energy capacity and time response functions) is not well understood yet”. Bergey says that even though distributed solar and wind are complementary, “what we’ve found is that customers either do one or the other”.
Given future weather and climate variations that will require a range of energy solutions, governments could help ensure fair competition between different renewables markets through targeted auctions or grants supporting research and development into generation mixes.
Overall, Bergey calls for “policies that protect the right for people to install DER equipment and ensure that a fair rate is paid for excess power.”
Momentum for distributed power led by prosumers is growing globally, especially those supported by strong regulatory frameworks.
Leading the charge is Asia-Pacific (APAC), which is set to triple renewables by 2030. Hiscock cites Australia as a hub for distributed solar: “The amount they’ve connected is colossal and they’ve done it relatively quickly [thanks to government support], so it is a case study for what’s possible.”
GlobalData also forecasts significant DER deployment in China, India and Southeast Asia, with Indonesia, Malaysia, the Philippines and Singapore having implemented extensive net-metering for prosumers.
With the combined force of DER growth and vital prosumer support, bolstered by government backing, APAC is set to showcase the possibilities of distributed power and prosumerism for the rest of the world to follow.
Distributed power is the future of energy systems. As the Regulatory Assistance Project asserts, “the old [centralised] model assumes energy is created only to meet demand; the new one must encourage and allow energy to be created, used and stored at the optimal times for household flexibility and grid reliability.”
Effective coordination among prosumers and the strategic deployment of distributed energy resources, underpinned by robust regulatory frameworks, will achieve the successful decentralisation of the energy landscape.
