US to add 217 GW of distributed energy capacity by 2028, Wood Mackenzie predicts

Brief description of the dive:

• According to a report by Wood Mackenzie, the capacity of distributed energy resources in the US will increase by 217 GW by 2028, which is 70% of the projected capacity additions in that period. June 20 Report.
• Constraint-based resources, such as flexible electric vehicle charging systems and building automation, will account for half of total U.S. DER capacity in 2028, while generation-based resources, including distributed solar and energy storage, will make up the other half, according to the consulting firm’s 2024 U.S. DER market forecast.
• The projections do not take into account a possible change in control of the federal government in 2025, which could result in a reduction or earlier sunset federal subsidies for clean energy and electrification — but those risks are likely to have little impact on DER growth until “the end” of the forecast period in 2028, said Ben Hertz-Shargel, global head of grid edge at Wood Mackenzie.

Diving Insight:

If Wood Mackenzie’s forecast comes true, additional DER capacity in the US in 2028 will easily exceed 160 GW the goal of the US Department of Energy’s top-notch report on the launch of a virtual power plantAccording to the DOE, tripling the current 30 GW of U.S. virtual power plant capacity to 60 GW could offset 10% to 20% of total peak-season energy demand by 2030.

If the projected 217 GW of DER capacity were to be saved in VPPs, “this resource is large enough to significantly offset peak load increase “without relying on new transmission or RTO connectivity,” Wood Mackenzie said in its DER forecast.

The prospects include three generation-based technologies — distributed solar, storage and fuel-based generation — and four curtailment-based technologies, including residential heat pumps, electric vehicle chargers, smart thermostats and building automation systems.

Combined residential, commercial and industrial fuel-based generation capacity will grow by 49 GW by 2028, nearly matching the expected 55 GW increase in distributed solar capacity, according to the forecast. Currently, fuel-based generation runs primarily on diesel, combustible natural gas and hydrogen or gas fuel cells, but could include a broader range of technologies in the future, Hertz-Shargel said.

The growth in fuel-fired power generation “(reflects) growing demand for backup power and, increasingly, primary power solutions for new large loads,” Wood Mackenzie said.

This data center boom could result in “gigawatts of capacity sitting idle on the grid, only used infrequently during power outages” that could be used to ensure the adequacy of grid resources and services, said Ryan Hledik, a principal at The Brattle Group specializing in distributed energy resource planning and regulation. Hledik was not involved in producing Wood Mackenzie’s 2024 forecast for U.S. DER.

With the right regulatory support and coordination between data centers and utilities, this additional capacity could help alleviate current electricity supply constraints, Hledik added.

“Data centers could be brought online faster, they could share the cost of backup generation with their suppliers, and as a result, they could potentially reduce electricity costs for all customers, to name a few of the benefits,” he added.

Meanwhile, flexible EV charging will have the largest impact among the four constraint-based sources, accounting for 25% of total additional DER capacity by 2028, the forecast said.

Because “it’s pretty clear that bidirectional (electric vehicle) charging is not going to be widely commercialized” in the next five years, Wood Mackenzie expects flexible demand for electric vehicle charging to be driven by constraints such as managed charging programs that shift electric vehicle loads outside of peak periods in the near future, Hertz-Shargel said.

Despite the “apparent possibility” that lower-cost EV models will drive rapid growth in EV adoption by consumers and fleets and the associated load growth, “the good news is that charging load is proving to be quite flexible, so it’s a valuable tool to help mitigate the resource planning challenges associated with it,” Hledik said.

Although building automation systems and residential heat pumps were expected to account for a smaller share of total DER capacity additions by 2028, they stand out as segments ripe for disruption, according to forecasts.

Recent demand-response aggregator efforts by Missouri, Michigan, and other Midwestern states have yielded promising results ease restrictions on high-use customers participating in third-party demand response programswhich could boost regional demand for building automation systems, Hertz-Shargel said.

Building automation is a “significant risk mitigator” compared to manual demand response processes, which are generally less reliable and can prevent participation in more profitable demand response programs that require faster response, he added.

Heat pump deployment is set to begin in New England due to the high cost of home heating, strong political support from regional governors and efforts Northeast States to Coordinate Air Use ManagementHertz-Shargel said. The NESCAUM coalition aims to make heat pumps meet 90% of the supply of air conditioning and water heating systems in homes in nine northeastern states and Washington, D.C. by 2040.

The high upfront costs of new heat pumps mean the technology will be slower to catch on in regions with less political support, such as the southeastern and south-central U.S. Wood Mackenzie predicts that by 2028, heat pumps will make up just 25% of home heating systems, even though they have lower operating costs than the electric resistance systems that are common in the region, Hertz-Shargel said.