In its energy evolution, the United States hit a milestone last year when solar power accounted for over half of all new electricity-generating capacity added to the grid for the first time. The utility-scale sector led the way by providing the majority of the solar capacity, setting a record of 22.5 GW. Residential projects also continued to be popular, with 6.8 GW of installed capacity marking a fifth consecutive annual record. Furthermore, the distributed generation (DG) industry had a remarkable year. With the easing of supply chain constraints and decreasing system costs, the commercial solar sector grew by 19% compared to the previous year, installing 1.9 GW of new capacity in 2023. Moreover, the community solar segment added 1.1 GW of capacity.
Although the utility-scale segment is the main force behind the growth of solar energy in the United States in terms of overall capacity, distributed generation (DG) is a vital element in our shift towards clean energy. DG offers a more flexible and efficient approach to solar adoption, making it an indispensable component in our transition
Utility-scale brings the gigawatts
The acceleration of renewable energy deployment is shaped by societal and market forces, as well as regulatory policies like the Inflation Reduction Act. However, the growth of each type of renewable energy installation is restricted by its unique set of challenges.
For the foreseeable future, utility-scale projects will continue to dominate solar deployment. These projects typically exceed 100 MW in size, whereas DG projects, such as commercial rooftop projects or parking canopies, are generally around 1 MW. The larger system sizes of utility-scale solar projects result in lower costs of development, engineering, procurement, and construction on a dollar-per-watt basis, allowing them to generate electricity at a lower cost per kilowatt-hour compared to DG or residential installations.
It is undeniable that the future of solar energy lies in utility-scale projects, which are capable of generating most of the gigawatts needed for a 100% clean grid. However, it is important to recognize that utility-scale solar projects also have their limitations. These projects are often faced with challenges such as long interconnection queues and a lack of transmission capacity, which are essential for the transition to a cleaner grid. Due to their large size and the extensive infrastructure required, utility-scale projects are subject to lengthy approval processes and overcrowded interconnection queues, with some areas experiencing queues of up to five years or more. In fact, the number of utility-scale solar and wind projects waiting in interconnection queues currently exceeds the total capacity of existing power plants in the United States. While efforts are being made to deploy utility-scale projects as quickly as possible, it is clear that the pace of deployment is ultimately determined by the speed of the interconnection queues.
Despite the potential of utility-scale projects to meet the energy demands of a clean grid, it is evident that they are not without their challenges. The lengthy approval processes and overcrowded interconnection queues pose significant obstacles to the rapid deployment of utility-scale solar projects. As a result, it is important to acknowledge that the transition to a cleaner grid will require a comprehensive approach that addresses the constraints faced by utility-scale projects. While utility-scale projects play a crucial role in the future of solar energy, it is essential to consider alternative approaches and solutions to ensure that the transition to a clean grid is achieved in a timely and efficient manner. By addressing the challenges faced by utility-scale projects, we can work towards a future where renewable energy sources play a central role in meeting the energy needs of society.
Distributed generation achieves climate goals faster
Distributed Generation (DG) projects offer a more efficient and quicker alternative to utility-scale projects. By being connected to the distribution grid, DG projects can be deployed in a shorter timeframe, typically within one to two years. This rapid deployment allows for the generation of carbon-free energy for over three decades, reducing the reliance on utility-scale generation that may take multiple decades to transition to 100% carbon-free.
One of the advantages of DG projects is the lower upfront interconnection costs due to utilizing the existing distribution grid. Most DG projects require minimal or no upgrades to the grid, enhancing the reliability of the local grid while maximizing the deployment of clean electricity generation within the current infrastructure. This sustainable approach reduces the necessity for new equipment and promotes efficient energy generation.
Furthermore, DG projects contribute to land conservation by utilizing underutilized sites such as rooftops, parking lots, landfills, and brownfields. Unlike utility-scale installations that demand vast amounts of land, DG projects blend into existing architecture and make use of spaces that would otherwise remain unused. This approach not only minimizes environmental impact but also aligns with the growing preference for community solar projects, which are gaining support from policymakers and regulators for their sustainable development practices.
A concerning policy trend derailing distributed solar deployment
Policy advocacy has unfortunately taken a negative turn by vilifying DG policies due to the fact that the economic advantages of DG projects primarily benefit wealthier homeowners and large corporations, leaving non-solar customers to bear the fixed costs that are distributed among all ratepayers. While it is true that large corporations are often the most financially capable entities to afford and benefit from rooftop or onsite solar projects, it is crucial to recognize that they are not the sole customers pursuing DG projects. Public schools, universities, municipalities, hospitals, religious institutions, and non-profits are also actively embracing DG adoption. Furthermore, it is essential to acknowledge that the energy generated on the rooftop of a large corporation’s warehouse provides the same societal benefits as energy generated elsewhere on the same grid, ultimately contributing to a positive impact on the community as a whole.
In order to promote the deployment of more DG, it is imperative to design net-metering programs that accurately reflect the costs and benefits of exported solar energy in the compensation rate. Community solar programs should be structured to deliver savings, particularly for low-income ratepayers, compensate projects based on their economic and societal benefits, and encourage development in built environments rather than open land. States should establish incentive programs to bolster the deployment of distributed generation projects and expand the availability of financing methods, such as power purchase agreements, to broaden the market for these projects.
Complementary approaches in the clean energy transition
Moving forward towards achieving a fully clean electric grid, it is imperative that distributed generation (DG) projects are recognized for their crucial role. These projects will not only contribute to the increase in renewable energy capacity but also aid in transitioning communities towards cleaner energy sources. As utility-scale projects gradually replace fossil fuel power plants, DG projects will continue to play a significant role in the ongoing transition.
Despite the inconsistent nature of policy interventions in recent times, the solar industry appears to be heading in the right direction. Projections from SEIA indicate a substantial growth of 19% in the commercial solar sector by 2024, along with a 15% increase in community solar installations. The demand for onsite solar solutions remains high as customers seek to reduce utility costs and meet sustainability targets. Developers are actively seeking out new opportunities, whether it be in established markets or emerging ones, highlighting the importance of collaboration across all solar project types, including DG, in paving the way towards a sustainable future.
