Decentralized Renewables Fuel Sustainability

Sprawling wind farms and giant solar collection facilities may seem like the future of renewable resources. Yet, as organizations venture deeper into sustainability and look for ways to further reduce their carbon emissions, many are learning that it pays to think small. 

Decentralized renewables -- things like rooftop solar, small wind turbines, micro-hydropower, geothermal, and biogas -- are tilting the sustainability equation in new directions. They’re helping companies better manage power consumption and costs internally while improving energy utilization across an extended supply chain. 

“There’s economic and environmental value that comes from decentralized renewables, battery storage, and microgrids. There’s an opportunity for organizations to gain greater control over their carbon footprint,” says Marc Kolb, a partner and associate director for Boston Consulting Group. 

As companies, educational institutions, and government agencies look to dial up sustainability, it’s crucial to examine how, when, and where decentralized renewables can play a role. Although these technologies have advanced and costs have dropped in recent years, it’s vital to understand where they make sense -- and how they can maximize dollars. 

Power Plays 

The shift toward renewable energy is gaining steam. Today, about 30% of electricity derives from renewable resources. By 2030, the figure is expected to hit about 50%, according to the International Energy Agency’s World Outlook 2023. As a result, factories, transportation systems, and manufacturing methods are undergoing fundamental changes. 

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Decentralized renewables, also referred to as distributed energy resources (DERs), produce power on a smaller scale and closer to the point of consumption. They swap cleaner energy for fossil fuels and decrease the need for long-distance power transmission. Unlike public infrastructure, a company owns and operates a system. With a battery system in place, it’s possible to store electricity for later use. 

Amid high fuel prices, geopolitical conflicts, supply chain disruptions, and extreme weather events, decentralized renewables deliver greater flexibility, resilience, and sustainability. “Organizations benefit from a cost perspective, but they also gain a more dependable power supply with emergency power during natural disasters such as a hurricane or earthquake,” says David R. Bernier, senior vice president of energy for Stantec Engineering, a firm that specializes in decentralized renewable installations. 

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Practical and economic conditions are changing -- and acceptance for decentralized renewables is growing. DERs are particularly attractive in remote communities and industrial sites, where the cost of building out the grid or the logistics of conventional energy delivery can be challenging or cost prohibitive. In addition, some proposed industrial sites now require decentralized power sources to get permitted, Bernier says. 

According to a 2022 report from consulting firm EY, DERs and smart grids are key to getting the world to net zero by 2050. A separate report from We Market Research predicts that the market for decentralized renewables will grow from approximately US $12.4 billion in 2023 to US $21.4 billion in 2033.  

At the center of the renewables universe is onsite solar. “Distributed solar is an increasingly important part of the energy transition,” observes Zoë Gaston, principal analyst for US Distributed Solar at sustainability consulting firm Wood Mackenzie. It now accounts for 18% of all new electricity-generating capacity and it is growing at a 6% annual rate, she notes. 

Beyond the Grid 

Yet it isn’t only solar that’s illuminating a path to greater energy independence. The economics for decentralized wind power, hydro, biogas, fuel cells, and other renewables are increasingly favorable, Kolb says. While they can’t yet replace conventional energy sources and the public grid, they can fundamentally alter the power balance. “Companies can offset consumption, save money on their retail utility bill and introduce a more stable and predictable framework,” he explains. 

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The concept is especially attractive to hospitals, factories, datacenters, fire stations, and other facilities that require an ultra-high level of resilience -- and where disruptions and downtime are costly. For example, Kaiser Permanente has built a renewable energy-fueled microgrid at a 50-bed acute care facility at its Richmond, Calif. medical center. It uses solar panels installed atop a parking facility to deliver 365,000 kilowatt hours of electricity annually, along with three hours of emergency generation capacity. 

Not surprisingly, a growing array of vendors are charging into the renewables space. This includes Siemens Gamesa, Siemens Fluence, Nexterra, MSR, and Schneider Electric. In addition to offering solutions built around both conventional renewables and decentralized renewables, they’re introducing virtual power plants (VPPs) and microgrids that can automatically switch to the best power option, based on availability and cost. 

The rise of decentralized renewables, battery storage, and microgrids is also having a significant impact on global supply chains. These technologies support greater resilience, fair trade practices, and broader sustainability initiatives, especially in developing countries. In regions lacking large-scale power plants and traditional grids, decentralized renewables can introduce much-needed stability while creating jobs and improving the quality of life for citizens. 

“The use cases for decentralized renewables are becoming clearer and the cost curve is dropping,” Kolb says. “It’s also becoming easier to install and use these technologies. The goal isn’t necessarily to power your entire operation with solar or another renewable but have an immediate impact on your power bill and the environment. As companies look to boost the use of cleaner energy and hit reduction targets, onsite generation makes sense.” 

Plugging into Progress 

The biggest challenge, for now, is ensuring that solar, wind, and other decentralized renewables align with an organization’s operational needs and fits with existing infrastructure. It’s critical to conduct a detailed analysis and, if decentralized renewables are an attractive option, undergo operational upgrades. “There are considerations for onsite solar versus energy coming from a solar farm,” Kolb points out. 

Depending on the geographic location of a facility and how much energy an organization requires, there’s also the issue of how to manage electrical generation -- and associated regulatory issues. For example, it isn’t unusual for power generation to exceed consumption at certain times of the day or during certain months of the year.  

How this energy is stored or used matters. For instance, if net metering exists, the price of energy exchanges to and from the grid will be equal. Many states have already established such a framework. However, lacking this mechanism, the price of buying back energy might not match the sales price, Kolb points out. In addition, some states impose fees for onsite power generation.  

The upshot? “It’s possible that the ROI is favorable at one site but not another,” Kolb explains. As a result, a detailed analysis is typically required. “Things can get complicated because you may have to look at each site side by side, understand the impact of different renewables, plug in utility rates and regulatory structures, and take into account structural upgrades required to accommodate onsite generation,” he says. 

Examining options across a wide spectrum of technologies and opportunities can help an organization plug into decentralized renewables -- and achieve greater energy autonomy. “The value associated with renewables, including decentralized renewables, is increasing,” Kolb says. “It is changing the energy landscape.”