Economic Recovery & the Rise of DER in a Post-Pandemic World
As the world grapples with the dire consequences of COVID-19, many are trying to assess the impact the global pandemic, ensuing economic downturn, and social inequities, will have on renewables and the overall energy transition to a more sustainable future. Prior to COVID-19, the proliferation of behind-the-meter (BTM) distributed energy resources (DER), including rooftop solar, energy storage, and electric vehicles, was playing a pivotal role in the transformation of the energy industry to a more diversified, low carbon and resilient network.
For example, in the U.S. we saw record-setting increases in residential solar capacity in 2019, adding more than 2.8 GW, according to the solar energy industries association (SEIA). And projections indicate that by 2025 more than 25% of all behind-the-meter solar systems will include energy storage, compared to under 5% in 2019. Major retail brands and other companies have been looking to renewables plus storage to create savings on their utility bills and provide critical back-up power to prevent losses during blackouts.
IKEA recently reported spending $2.8 billion on green energy to lower its energy bills and uphold sustainability targets. In 2019 this commitment included one million solar panels on 370 of its buildings, 535 wind turbines, and two solar parks. More retailers have followed suit, including Target, Walmart, and Apple because in many cases it has been more cost effective to use locally generated renewable energy than to purchase power from the utility.
The threat of COVID-19 on economic recovery & clean energy
Despite all the momentum achieved throughout 2019, the coronavirus has impacted virtually every sector of our economy, and the renewable energy sector is no exception. Much of the focus, political will and investment in support of clean energy has been derailed as global leaders, governments and businesses react to the devastating impacts the pandemic has had on the health and economic well-being of people and communities. In the U.S. new data from the American Council on Clean Energy (ACORE) indicates we will lose 850,000 clean energy jobs by the end of June, and industry analysts have reported a bleak outlook for renewables resulting from social distancing measures with production, manufacturing, and projects coming to a grinding halt. Morgan Stanley is forecasting US solar installations will decline by 48, 28, and 17 percent in the second, third, and fourth quarters of 2020, respectively.
Industry analysts have been reporting bleak outlooks for the solar, wind, and energy storage industries resulting from disruptions in the supply chain from closures in China, to a slowdown in demand due to the global economy retracting with unprecedented declines in GDP and unemployment surging to depression-era levels. Additionally, we are seeing record declines in global energy demand with the IEA projecting a 6% decline in energy usage in 2020, which is the “equivalent of losing the entire energy demand of India, the world’s third largest energy consumer.”
What the industry analysts have missed
However, what the analysts have not necessarily considered is the crucial role distributed renewable energy combined with storage will play in creating a more resilient grid, providing power security for customers in homes, businesses, and communities around the world. COVID-19 has been a harsh reminder that we cannot always rely on our centralized distribution systems to deliver goods and services that protect us from shortages. People are scrambling for groceries, toilet paper, and facemasks as large, top-down centralized supply chains break down. Hospitals and even governments are still struggling to get vital medical supplies.
This and other recent crises demonstrate that we need local, alternative sources to make sure that in times of crisis, we can fulfill our basic human needs for food, medicine – and energy – with reserves that are independent of large, top-down centralized delivery systems, particularly when they fail. The remedy in the energy sector is customer-sited renewable generation and storage technologies that create critical reserves and the ability to generate, store and utilize power independent of the utility grid. It is for this reason that SimpliPhi Power is seeing an increase in demand for behind-the-meter energy storage, not just from individuals who want critical backup power, but from major utilities interested in upholding their mandate to provide reliable and safe access to power 24/7.
Bigger does not equal better
Historically, government and business-driven decarbonization goals, combined with declining costs in solar, wind, and energy storage have been the catalysts propelling alternative energy technologies forward. There is a myriad of other environmental and economic benefits of DER including local job creation, especially when compared to the oil and gas industry; a $1 million dollar investment in renewable energy infrastructure creates 2.8 times more jobs than an equivalent investment in fossil fuels. Prior to COVID-19, the renewable energy industry was one of the fastest-growing sectors in the country, with a 10.4 percent increase in jobs since 2010, accounting for more than 40% of America’s entire energy workforce. Residential and community-based DER have the added advantage of reducing costly transmission and distribution upgrades while minimizing the 10-30% energy losses incurred transmitting power over long distances.
While decentralization was already a growing trend, it is now gaining more traction as natural disasters continue to impact the reliability of our centralized power grid; and the threat of losing power in the midst of a global pandemic brings to light the economic and human costs of disruptions in power. Not having access to power can be a life or death situation for our nation’s most vulnerable populations, who rely on medical equipment or who cannot afford to replace food if spoiled due to the lack of refrigeration.
The path forward
For the first time in our modern history, we are witnessing a convergence of events that are calling into question the efficacy of our large centralized networks that we have relied on for so many years. With energy providers mandated to provide reliable and affordable power to their customers, many utilities are investigating new cost-effective ways to leverage innovative energy services such as customer-cited power generation plus storage.
This is why we are witnessing an uptick in projects in the U.S. where utilities are demonstrating the capabilities of owning smaller generation assets such as Delmarva Power, an Exelon Company, that announced a behind-the-meter virtual power plant (VPP) project to provide grid reliability and resiliency for residents in Maryland. At SimpliPhi Power, we are working on a similar VPP project with Southwestern Electric Power Co, an AEP company, to demonstrate the benefit of aggregating residential customer-sited solar plus energy storage in Shreveport, Louisiana.
Renewable and storage technologies were not included in the U.S.’s $2T CARES Act, nor the nearly $1T in additional emergency federal stimulus, while fragile oil, coal and fracking companies will benefit from a $750bn bond scheme, in spite of heavy industry losses prior to COVID-19. As U.S. elected leaders spend trillions to rescue the economy, they need to consider the economic drivers behind the promise to divest more than $11 trillion dollars from the fossil fuel industry in 2019, including the University of California which sold approximately $150 million in fossil fuel assets from their endowment fund because of underperforming stocks and the “long-term risk” they posed.
There is an unprecedented opportunity to rebuild our domestic energy economy, making it more efficient, resilient and cost effective, by further supporting the distributed renewable energy and storage technologies that keep the lights on, medical devices working, food and supplies moving, and people alive and healthy. Market forces have already proven out the economic value of moving toward distributed renewable generation with storage assets. We have a fiduciary responsibility to speed the growth of the clean energy sector, create new jobs and safeguard energy resiliency, all of which are fundamental to economic growth and a sustainable future – pandemic or not.