Dive Brief:
- U.S. distributed energy resource capacity will grow by 217 GW through 2028, equivalent to 70% of anticipated bulk generation additions during the period, Wood Mackenzie said in a June 20 report.
- Curtailment-based resources such as flexible EV charging and building automation systems will account for half of total U.S. DER capacity in 2028, with generation-based resources including distributed solar and energy storage accounting for the other half, according to the consultancy’s 2024 U.S. DER outlook.
- The forecasts do not account for a possible change in control of the federal government in 2025 that could cause a reduction or early sunsetting of federal clean energy and electrification subsidies — but that risk would likely have little impact on DER growth until the “tail end” of the forecast period in 2028, said Ben Hertz-Shargel, global head of grid edge at Wood Mackenzie.
Dive Insight:
If Wood Mackenzie’s forecast pans out, additional U.S. DER capacity in 2028 would comfortably exceed the 160 GW high-end target of the U.S. Department of Energy’s Virtual Power Plant Liftoff Report. A tripling of the current 30 GW to 60 GW of U.S. virtual power plant capacity could offset 10% to 20% of total peak load demand by 2030, according to DOE.
If the projected 217 GW in DER capacity were to enroll in VPP programs, “this resource is at the scale to meaningfully offset peak load growth without relying on new transmission or RTO interconnection,” Wood Mackenzie said in its DER outlook.
The outlook covers three generation-based technologies — distributed solar, storage and fuel-based generation — and four curtailment-based technologies, including residential heat pumps, EV chargers, smart thermostats and building automation systems.
Combined residential, commercial and industrial fuel-based generation capacity will increase by 49 GW through 2028, nearly equaling the expected 55 GW increase in distributed solar capacity, according to the outlook. Today, fuel-based generation largely runs on diesel, combusted natural gas and hydrogen or gas fuel cells, but could incorporate a wider range of technologies in the future, Hertz-Shargel said.
The increase in fuel-based generation “[reflects] increasing demand for backup power as well as, increasingly, prime power solutions for new large loads,” Wood Mackenzie said.
The data center boom could result in “gigawatts of capacity sitting idle on the grid, used only rarely during outages” that could be tapped for resource adequacy and grid services, said Ryan Hledik, a Brattle Group principal specializing in distributed energy resource planning and regulation. Hledik was not involved in the production of Wood Mackenzie’s 2024 U.S. DER outlook.
With appropriate regulatory support and coordination between data centers and utilities, that additional capacity could help relieve current power supply constraints, Hledik added.
“Data centers could be brought online faster, they could share in the cost of the backup generation with their utility, and electricity costs for all customers potentially could decrease as a result, among other benefits,” he said.
Meanwhile, flexible EV charging will be the most impactful of the four curtailment-based resources, accounting for 25% of total additional DER capacity through 2028, the outlook said.
Because “it is pretty clear that bidirectional [EV charging] will not be widely commercialized” within the next five years, Wood Mackenzie expects near-term flexible EV charging demand to be curtailment-based, such as managed charging programs that shift EV loads away from peak periods, Hertz-Shargel said.
Despite a “looming possibility” that lower-priced EV models will drive a rapid increase in consumer and fleet EV adoption and related load growth, “the good news is that charging load is proving to be pretty flexible, so that’s a valuable tool to help mitigate the associated resource planning challenges,” Hledik said.
Though expected to account for smaller shares of total additional DER capacity through 2028, building automation systems and residential heat pumps stand out as segments ripe for disruption, according to the outlook.
Demand response aggregators have seen promise in recent moves by Missouri, Michigan and other Midwestern states to loosen restrictions on large-load customers’ participation in third-party demand response programs, which could boost regional demand for building automation systems, Hertz-Shargel said.
Building automation represents “a significant derisking factor” relative to manual demand response processes, which are generally less reliable and may preclude participation in more lucrative demand response programs that require faster action, he said.
Heat pump adoption is poised to take off in New England due to high home heating costs, strong policy support from regional governors and the efforts of Northeast States for Coordinated Air Use Management, Hertz-Shargel said. The NESCAUM coalition aims for heat pumps to account for 90% of home space conditioning and water heating system shipments across nine Northeastern states plus Washington, D.C. by 2040.
High upfront costs for new heat pumps mean uptake will be slower in regions with less policy support, such as the southeastern and south-central U.S., where Wood Mackenzie expects heat pumps to represent just 25% of home heating systems by 2028 despite having lower operating costs than the electric resistance systems prevalent in the region, Hertz-Shargel said.
