By: Alan Lee, Thomas Flochel, Mohua Mukherjee
Ready or not: countries must prepare for the world’s fastest-growing local energy technology
One-third of global new renewable energy capacity in the coming five years may well come from distributed photovoltaics (DPV)—solar systems installed on rooftops or near sites of electricity consumption. This distributed technology contrasts with utility-scale power transmitted in bulk over long distances. DPV is forecast to grow as much as utility-scale solar and more than all other renewable technologies combined.
Installing DPV can take a mere few weeks, not months or years like bulk power plants. And as photovoltaics costs fall, more consumers are investing to generate their own electricity, reduce their power bills, and even feed extra solar power into the grid. As a result, DPV use has exploded globally, from less than one gigawatt (GW) two decades ago to over 500 GW in 2023. This growth is happening bottom-up, with or without government support, in countries of all sizes and incomes from China to Haiti and beyond. DPV will be key to achieving the World Bank and African Development Banks’ shared goal of providing 300 million people in Africa with electricity access by 2030.
While DPV has many benefits, deployment by consumers connected to a grid raises various questions. Poorly managed DPV can pose financial and technical risks for the utilities that operate the grid. Moreover, many low-income households and small enterprises lack building space or financial means to host their own solar system on site. So how can countries design energy programs that mitigate the risks and optimize the benefits of DPV?
These questions are examined in “From Sun to Roof to Grid,” a report series recently completed by the World Bank’s Energy Sector Management Assistance Program (ESMAP). Across three volumes, the series offers a menu of approaches for different stakeholders from government energy leaders to utilities, planners, and regulators. Together the reports show how energy programs that include DPV in the mix can be designed and implemented to benefit as many consumers as possible, while contributing to secure grid operations and sound sector finances.
DPV has at least 9 distinct use cases for country energy strategies
Drawing on over 10 years’ experience in World Bank projects with grid-connected DPV, the series identifies nine use cases, or applications, of DPV that address typical problems faced in low or middle-income countries. Use cases can be mixed and matched, as illustrated in this infographic from the series’ first report, Distributed PV in Energy Sector Strategies (ESMAP 2021), aimed at energy ministries and other decision-makers.
Bill Reduction is the primary use case driving global growth of DPV. Two other applications are common in places that suffer blackouts: Least-Cost Backup, where DPV plus batteries can help consumers cope with grid outages while reducing backup generator use; and Box Solution, where preassembled DPV plus a battery system provides power for urgent local needs, like during a crisis when the grid goes down following a disaster.
These three use cases benefit consumers fortunate to have their own DPV systems. But other use cases support broader power system and social objectives.
Four strategic applications are already emerging in different countries:
- DPV may be part of a country’s Least-Cost Generation mix, especially where land is limited or where losses are high of electricity over long networks. In this way, DPV can also support expanded access and electrifying transport, buildings, and industry to decarbonize the economy.
- For utilities and large commercial or industrial consumers, DPV can contribute to a Transmission and Distribution Alternative. By helping meet local daytime demand, it can defer costly grid upgrade investments.
- For a group of low-income households, a large DPV system can serve as Community Social Support. Targeted consumers can reduce electricity bills indirectly, such as with a subscription, as is happening in India.
- Governments can also plan DPV for Financial Loss Reduction, installing systems to serve consumers in chronic arrears to the power utility or who pay below-cost tariffs. By easing financial pressure on such consumers and the utility, Pakistan has pursued this use case to help escape circular debt.
Two additional use cases represent frontier opportunities to explore.
- Utilities in a vicious cycle of poor-quality supply and low bill collections can use grid-connected microgrids with DPV as a bootstrap to improve service reliability, expand access, and increase revenue. Examples in Nigeria show promising results.
- Finally, DPV systems feature programmable inverter electronics. Utilities and regulators in all kinds of countries can harness these for ancillary grid services such as to help manage voltage across distribution feeders.
While DPV offers diverse possible benefits, unlocking these benefits depends on appropriate planning, investments, and operations, suited to the local context.
Well-planned technical measures can make distributed PV ‘grid-friendly’ at low cost
Power grids can face technical challenges from unplanned DPV growth. Measures to keep grids operating safely are presented in the series’ second report, Power Systems and Distributed PV (ESMAP 2023).
An important message from this volume is that all countries can benefit from plans and grid connection rules that reflect expected growth of distributed energy resources. Smart design and operation of the grid and DPV systems can allow high levels of DPV with minimal additional investment.
Utilities can help balance local supply with demand, and enhance the capacity of a grid to host DPV, through measures including:
- Mandate smart use of inverters (the electronic component of DPV) to harness low-cost services.
- Optimize the size of inverters to facilitate larger PV systems with more energy output while keeping peaks within safe limits.
- Locate large DPV systems strategically near distribution substations and load centers to help with voltage control.
- Use digital systems to monitor and control DPV and link other resources – like demand-side management and e-mobility – to create a "virtual power plant."
Policy packages with distributed PV can strike a balance across stakeholder interests
When designed and implemented properly, DPV can yield substantial benefits not just for consumers but also electric utilities and the economy. The third report, The Economics and Policy of Distributed PV (ESMAP 2024), walks through key steps of a framework to design and implement policy packages with DPV.
This report pays special attention to potential economic benefits and challenges for utilities. Key considerations for program design and implementation include:
- Screen all use cases for a given country in combination with other distributed energy resources, and bear in mind job creation and gender impacts.
- Consider different business and financing models for private sector involvement with strategic public support. Partnerships between developers, utilities, government (at municipal and higher levels) and consumer groups can unlock mutual benefits.
- Inform regulation with economic analyses at system and project-level, including how to meter, price, and bill DPV. Tariffs and other regulations can encourage investment in DPV but need careful design to ensure that total revenues covers network costs and that benefits are shared fairly among stakeholders
- Continuously monitor and evaluate programs as DPV and related markets change rapidly.
Together, the reports show how low-cost, low-emissions, and modular DPV technology, can complement other energy resources to help countries meet development goals provided DPV is introduced in an orderly way by following appropriate strategies, technical planning, and policy packages.
Read the infographic.
Upcoming event: On September 26, 2024, join us for a webinar to discuss the key findings of this report series. Register here.
For more information, visit: www.esmap.org/From_Sun_To_Roof_To_Grid_Series