Distributed Generation Market Poised to Grow Substantially due to Increasing Adoption of Renewable Energy Resources

 


Distributed generation refers to the production of electricity from multiple small-scale energy sources that are located close to the point of use. They include small-scale solar photovoltaic (PV) systems, wind turbines, reciprocating engines or fuel cells. Distributed generation provides several advantages over centralized power generation such as less transmission and distribution losses, improved power quality and reliability. It also helps in reducing carbon emissions. The increasing demand for reliable and uninterrupted power coupled with supportive government policies around the globe promoting the use of renewable energy have spurred the adoption of distributed generation systems in recent years.

The Global distributed generation market is estimated to be valued at US$ 364.46 Billion in 2024 and is expected to exhibit a CAGR of 14.% over the forecast period 2024 to 2031.

Key Takeaways

Key players operating in the distributed generation are Siemens AG, General Electric (U.S.), Schneider Electric SE, Mitsubishi Motors Corporation, and Capstone, Activ Solar GmbH, Ballard Power Systems Inc., Fortis Wind Energy, GE Power & Water, Juwi Inc., Sharp Corporation, Cummins Inc. (U.S.), Caterpillar Inc. (U.S.). Distributed generation helps in improving energy security by reducing dependence on conventional centralized power grids. It also aids in addressing power outages and energy crises as on-site power generation can operate independently. The global expansion of key distributed generation players through foreign direct investments and acquisitions will also contribute to market growth. Geographic expansion into emerging markets like Asia Pacific, Middle East and Latin America presents substantial opportunities for distributed generation market players owing to the increasing focus on rural electrification in these regions.

Market Drivers

Supportive government policies and incentives promoting renewable energy adoption is a key driver favoring the distributed generation market growth. Many countries offer subsidies, tax credits and net-metering provisions to encourage distributed generation deployment. Rising concerns around environmental sustainability is another crucial driver as distributed generation reduces the carbon footprint through utilization of clean energy sources like solar and wind. Ongoing technological advancements leading to decline in capital costs of renewable energy systems make distributed generation economically attractive. Remote and off-grid areas without access to centralized power infrastructure present new growth avenues.

Market Restraints

High initial installation cost of distributed generation projects remains a key barrier, especially in price-sensitive developing markets. Interconnection challenges associated with integrating distributed generation units with the main power grid is another hindrance. Policy and regulatory uncertainty pertaining to tariffs, purchase agreements also restrain large-scale commercial and industrial deployment.

Segment Analysis

Distributed generation involves producing electricity near the point of consumption from multiple small-scale renewable or non-renewable energy sources. The distributed generation market is dominated by solar PV sub segment as it is the most viable decentralized renewable energy technology available. The decreasing costs of solar panels and related equipment in recent years has made it an attractive proposition for both residential and commercial users to generate their own electricity from solar energy.

Global Analysis

The Asia Pacific region is the fastest growing as well as dominating region in the distributed generation market. Rapid industrialization and urbanization in countries like China and India has significantly increased energy demand in the region. At the same time, governments in Asia Pacific are promoting renewable energy adoption through various incentives and policy mechanisms to meet this growing demand through decentralized clean energy sources in a sustainable manner. Countries like Japan, South Korea and Australia are also major contributors to the distributed generation market in the Asia Pacific region due to supportive regulatory policies and high awareness among consumers about utilizing renewable energy. Europe is another major regional market for distributed generation driven by stringent emission reduction targets of the European Union.

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