A growing challenge from the evolution of energy resources—especially from solar arrays that now are starting to be enhanced by backup battery storage—is causing electric utilities to rethink the projects they build and the technologies they use to design, construct and operate them.

The incremental installations of distributed generation are starting to add up. Solar power, while still a small fraction of the nation's installed base, is the fastest-growing form of new power generation, and that's a trend with implications for the power industry.

DODSON

"The grid is constantly evolving to address the new generation, as well as the challenges associated with renewables," says Tom Dodson, Amec Foster Wheeler vice president of construction, power and process, Americas. "Storage and peak shifting will receive increasing attention over the next few years," he predicts.

Currently, the contribution of rooftop solar installations is minor compared to utility-scale solar farms. Home- and building-mounted systems are rated in kilowatts, while the utility-grade arrays are measured in megawatts. Excluding hydroelectric power, renewable generating sources, such as solar and wind, comprise only 7.5% of the country's 1.1-million-MW capacity, according to Dept. of Energy data. Wind power contributes the largest share, at 5.4%; solar, at 6,492 MW installed, delivers roughly a tenth, at 0.6%, of wind's share of U.S. capacity. But solar is starting to rapidly expand, according to data from a trade group, the Solar Energy Industries Association. Of all new generation capacity installed in the U.S. in 2014's first three quarters, 36 percent was solar, the association claims.

The ‘Death Spiral’

Meanwhile, DOE data shows the total amount of electricity generated from all sources is falling. It fell 2.4% between March 2014 and March 2015, while residential electric prices rose 0.9% during the same period. That trend stokes fears of a utility "death spiral," which would begin when the cost-benefit analysis favors installing solar panels on homes: The panels supply electricity so the utility sells less power, even though the home still depends on the grid for backup. The utility revenue shrinks; fewer customers share the cost of building and maintaining the system, so rates go up. Higher rates make solar more attractive, encouraging customers to install more solar panels for another whirl of the death spiral.

In addition to sapping retail sales, distributed solar also may reduce the need to build new plants to meet demand during peak periods, such as heat waves. In an era of flat overall demand, growing peak loads have been one of the few areas which have enabled utilities to increase revenue by adding to the rate base, according to industry analyst Hugh Wynne of Sanford C. Bernstein & Co.

While not everyone buys the death-spiral scenario, the discussion highlights the need to adjust and the business opportunities that may arise. "The industry has continually been changing how it plans, designs and executes ever-more complex projects," says Scott Feuerborn, business consulting director of Burns & McDonnell's business and technology services division. "Change in itself always brings opportunity."

Adds Amec's Dodson, progressive utilities are embracing the challenge by looking at utility-scale solar, wind generation, community solar and various customer incentives. "They're focused on efficiency ... upgrading the grid, looking at the requirements on the utility-scale solar projects. They're really looking at how each one of those discrete entities and generation facilities works with the disruption."

"Distributive generation has been around for a long time," adds Steve Moore, a division scheduling manager at Robins & Morton. "However, companies like Tesla are promising to bring nearly affordable, localized energy storage to the masses, which will make self-generation more feasible." He says this would produce more customers who can be independent of the grid or who can buy energy during off-peak hours and store it for use during more expensive peak times. "I see this effect being more dramatic in regions like California, where energy costs are much higher than other parts of the country. This movement may gradually begin to reduce the demand for centralized, large-scale power-generation facilities."