In a recent report by Wood Mackenzie, it has been projected that the Distributed Energy Resource (DER) market in the United States is poised for significant growth. The report highlights that the capacity of the US DER market is expected to nearly double from 2022 to 2027, with an estimated annual capital expenditure of around $68 billion.
Wood Mackenzie’s analysis predicts that approximately 262 gigawatts (GW) of new DER and demand flexibility capacity will be installed during the 2023-2027 period, coming close to matching the expected 272GW of utility-scale resource installations during the same timeframe.
The growth of the US DER market is attributed to several factors, including federal incentives such as tax credits from the Inflation Reduction Act and grants from the National Electric Vehicle Infrastructure program. Additionally, the failure of system operators to reduce interconnection time and costs is driving utilities and corporations to adopt distributed resources to meet reliability and clean energy goals.
Homeowners and business owners’ concerns about grid security are identified as the strongest driver for demand, leading to a projected 240% growth in the distributed fuel-based generation market and a remarkable 460% surge in the distributed storage market, which is expected to reach nearly $10 billion per year.
Another noteworthy finding from the report is that the annual installed capacity of Electric Vehicle (EV) chargers will surpass that of distributed solar in 2023, reaching 41 GW by 2027. As a result, the EV charging infrastructure market is anticipated to reach $20 billion by 2027, primarily driven by residential Level 2 and public DC fast-charger segments.
Despite a projected 13% price decline in the next five years, distributed solar will still account for 46% of DER capital expenditure through 2027. However, the report notes that California’s Net Billing Tariff will have mixed effects on solar providers, causing a temporary market contraction in 2024 but increasing storage attachment rates.
The growth of demand flexibility in different sectors varies due to factors such as low capacity prices and policy support. For instance, the summer flexible capacity from smart thermostats is expected to double from 2022 to 2027, reaching 34 GW. However, advanced heat pump technology and mini-splits are not yet demand response-enabled, resulting in limited winter capacity. Meanwhile, the grid-interactive water heater market is projected to grow eightfold, driven by energy efficiency policies in western states. Industrial and manufacturing flexibility is expected to surpass commercial building flexibility, while small building flexibility lags behind due to low penetration of building automation systems.
Overall, Wood Mackenzie’s report provides valuable insights into the anticipated growth and dynamics of the US DER market, highlighting the key drivers and challenges faced by different sectors within the industry.
 market, with capacity expected to nearly double by 2027. Discover the key catalysts, including federal incentives and grid security concerns, driving this growth. Electric Vehicle (EV) charger capacity is set to surpass distributed solar installations, while demand flexibility and storage markets are poised for significant expansion. Get insights into the evolving landscape and potential challenges facing different sectors within the industry.){kind=link}