Distributed energy moves from backup to baseload

By Dana Bacciocco, Associate Editor

Distributed energy (DE) may get a shot in the arm from interested businesses in the next two years, and it won’t be from deregulation newbies, but from veterans. DE in this case is not just backup generators or glorified uninterrupted power supply (UPS), it’s use as an alternative to grid power looms on the horizon.

“To a certain degree [energy] companies are perplexed by distributed energy and customer responses,” said Nicholas Lenssen, senior director of distributed energy at Primen, and principal author of a new Primen study.

The study, Distributed Energy at the Tipping Point: Customers’ Growing Receptivity to Grid-Alternative DE, found that more than 10 percent of U.S. and Canadian businesses in five key business sectors identified themselves as “strong candidates” for baseload DE applications during the next two years. Nearly half of those same businesses said they are already actively evaluating DE options.

According to the survey, the hottest prospects for DE are those experienced in deregulation, and increased reliability, not cost savings, seems to be the top attraction of DE.

“By and large, reliability is still a big driver,” said Lenssen. When asked about prices, respondents, even likely adopters, could not fully appreciate the pricing scenario, but they knew they were interested in a 3- to 4-year payback. Lenssen opined DE as making it as a bundled or outsourced deal-a full service solution with “technical” support that would prove lower prices than commodity markets.

“Plain economics exists in a lot of places, but once you begin to look at standby fees and exit fees, interconnection requirements and charges, it becomes far more expensive and less competitive, and also far more risky in terms of investment decisions,” Lenssen told EL&P.

The sector most encouraging-and relatively sophisticated in the area-is continuous process manufacturers who need high reliability and power quality. The second highest was not the digital sector-content with UPS-but companies with heat recovery potential. Susceptible to high natural gas prices and seeking efficiency, these companies can find inroads to efficiency via co-generation.

The study also found the best prospects were more likely to already have standby generators than other companies, and that they are excellent targets for load dispatch programs-94 percent of these companies said they were willing to dispatch their generators to cut peak loads.

Customers prefer to obtain DE services from companies that specialize in DE, or energy service companies specializing in DE, followed by operators of larger power plants and natural gas utilities.

There has been activity in the provider space. Typical new market entrants are coming from outside the energy sector with focused technology, and market and service objectives. For example, Johnson Controls provides building control systems and services and energy management through integrated facility management.

Findings were based on telephone surveys and in-depth interviews with 627 industrial companies and commercial businesses that use between 10 kW and 5 MW of electricity, representing a market of more than 400,000 North American firms. Lenssen can be reached at NLenssen@primen.com.

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