April 20, 2024

Distributed Generation Market is Expected to be Flourished by Government Incentives for Adoption of Clean Energy Solutions

Distributed generation refers to the use of smaller-scale power generation technologies located close to the end users of the power. Distributed generation systems are used for a variety of purposes including peak shaving, standby power, grid support, and remote or off-grid applications. Among the various distributed generation technologies, solar PV systems are witnessing tremendous growth owing to declining prices and supportive government policies promoting renewable energy. Solar photovoltaic (PV) systems along with combined heat and power (CHP) systems, wind turbines, reciprocating engines, fuel cells, and microturbines are commonly used distributed generation technologies.

The global distributed generation market is estimated to be valued at US$ 364.46 billion in 2024 and is expected to exhibit a CAGR of 14.% over the forecast period 2024 to 2031, as highlighted in a new report published by Coherent Market Insights.

Market Dynamics:

Government incentives for adoption of clean energy solutions is one of the major drivers fueling growth of distributed generation market. Various countries globally are offering subsidies, tax credits, and other monetary incentives to promote adoption of solar and other clean distributed energy systems. For instance, the US government offers an investment tax credit (ITC) of up to 26% of the project cost of solar systems until 2022 which is further boosting installations of small-scale rooftop solar PV systems across homes and business establishments. Similarly, growing environmental concerns and stringent emissions norms have led many governments and corporations to shift towards cleaner distributed energy sources to reduce their carbon footprint and dependence on conventional diesel generators which is further propelling the distributed generation market growth over the forecast period.

Segment Analysis

The global distributed generation market is dominated by the solar photovoltaic segment. Solar photovoltaic systems convert sunlight directly into electricity and dominate as they offer seamless integration and scalability. Their declining costs and government policies supporting renewable energy have further increased their adoption over other emerging technologies.

PEST Analysis

  • Political: Favorable government policies promoting renewable sources of energy through tax credits and net metering have facilitated the growth of distributed generation. The government aims to meet its commitment towards reducing carbon emissions.
  • Economic: Declining costs of renewable energy technologies have made distributed generation increasingly viable for commercial and residential sectors. On-site power generation helps reduce electricity bills.
  • Social: Consumers prefer distributed generation due to reliability it offers during outages and to support clean energy development. Increased awareness about climate change has driven social acceptance of renewable technologies.
  • Technological: Advancements in battery storage systems, power electronics and smart inverters have enhanced the viability of integrating renewable sources into the grid. Technological progress has improved the efficiency and lifetime of systems.

Key Takeaways

The global distributed generation market is expected to witness high growth over the forecast period driven by supportive policies and declining costs of renewable technologies. The global Distributed Generation Market is estimated to be valued at US$ 364.46 Billion in 2024 and is expected to exhibit a CAGR of 14% over the forecast period 2024 to 2031.

The Asia Pacific region dominated the market in historical years led by China due to robust investments and capacity additions in solar PV projects. North America is anticipated to be the fastest growing market attributed to increasing solar PV installations, mainly driven by the U.S. where supportive national policies like solar investment tax credit are promoting solar adoption.

Key players operating in the distributed generation market are Vestas Wind Systems, General Electric, Siemens, Mitsubishi Heavy Industries, Caterpillar, and Kawasaki Heavy Industries. Players like Tesla and Panasonic are also expanding into energy storage to integrate better with distributed generation assets.