Distributed Power: The Vast Global Opportunity
Posted on May 12, 2015
In most developed countries around the world we rely completely on an electric power grid as our main source of energy and rarely think twice about the infrastructure that makes it all possible. But behind our constantly connected lives is a utilities grid based on hub-and-spoke architecture of centralised power production that is becoming increasingly outdated and inefficient.
While the centralised design of power distribution works fine most of the time in developed countries, severe weather disruptions and vulnerabilities to cyber security attacks put it at risk. With energy distributed through wires from a single, central location, electricity must be transmitted over long distances, and much of the primary energy is lost before it ever reaches the consumer. The result is a terribly inefficient system. And in countries that are experiencing rapid economic growth (which translates to more homes and people connected to the grid), such as China, India and Brazil, the power grid can’t handle the load and as such there are often black outs that leave people powerless, affecting commerce, education and human connectivity.
One solution to address the power distribution challenges around the world is to establish a distributed power and generation infrastructure. Distributed power and generation, also called decentralised power, refers to power generation at the point of consumption. This “enables collection of energy from many sources and may lower environmental impacts and improve security of supply.”
The business case for distributed power is growing as the needs of modern society diversifies; power consumption is increasing with the growing population and proliferation of smart devices in this always-on connected era. “The World Bank found that for every 10 percentage-point increase in high-speed Internet connections in developing countries, there is an increase of 1.3 percentage points in economic growth.” And mobile is quickly replacing fixed line Internet use yet at least 1.1 billion individuals cannot get online because a mobile network does not cover where they live. In developed countries where mobile networks are established, unpredictable weather can bring down the grid on a moments notice -the first decade of the 21st century saw 3,496 natural disasters, nearly a five fold increase since the 1970s.
To meet the energy demands of the world’s growing and connected population requires asignificant investment in energy resources. Traditionally, economies have relied on a mix of fossil fuels and renewable energy sources such as solar and wind but the amount of power generated by renewable sources is intermittent as it relies heavily on the weather as its foundation.
India’s telecoms market is worth approximately $65 billion and has grown to become the world’s second largest market with over 881 million mobile users (as of 2011) generating 10 million jobs. However, over 70% of the country’s more than 400,000 telecom towers require at least 8 hours of backup power per day; a demand that is currently met by noisy and polluting diesel generators. Just recently, “more than half of the 500 mobile phone towers in Noida, India have gone off the grid after they ran out of back-up power.”
Similarly, in Brazil, an energy crisis is looming as a “severe drought has thrown its largely hydro-thermal electricity network into great distress.” Last year, the FIFA World Cup worsened soaring electricity demand, calling for power rationing. Now, as the government considers ways to reduce the “nation’s hydropower dependence, distributed power generation is one possibility.”
Even in a well-developed nation like the US, there is great opportunity for decentralised power. Take for instance, the aftermath of Superstorm Sandy during which the vulnerability and fragility of our current electric grid was showcased in an unfavourable light. Long Island Power Authority experienced outages for over 90% of its customers, and Con Edison’s told New Yorkers they should expect at least four to seven days without power in Manhattan and longer for the outer boroughs.
To create a more stable and reliable energy infrastructure around the world a greater investment in distributed power is needed. GE estimates that annual distributed power capacity additions will grow 4.4% from 142 GW in 2012 to 200 GW in 2020. During this period, GE also predicts the investment in distributed power technologies will rise from $150 billion to $206 billion. This represents an average annual growth rate of 3.3% t. Thus, through the end of the decade, distributed power capacity additions will grow at a rate that is nearly 40% faster than global power demand. This will still, however, not be enough to match said power demand, withAggreko predicting that the global shortfall of power will reach 140GW by 2020.
Generating power on-site, rather than centrally, eliminates the cost, complexity, interdependencies, and inefficiencies associated with transmission and distribution. The proliferation of distributed power systems will benefit nations, industries and people around the world because readily available power, where and when it is needed, is critical to human and economic development.