Energy grids have traditionally been designed in a hub-and-spoke model, with large centralized power-generating plants providing electricity to a vast consumer base connected via long transmission and distribution lines. The idea was that the bigger you build the power plant, the more effective the electricity system will be.
Over a long period, that logic held true. However, now with the urgent need to pursue decarbonization, the increasing share of intermittent renewable energy on the grid, the expensive nature of energy storage, declining costs of decentralized generation, and the need for greater grid resiliency, the situation has changed. Decentralized power generation is increasingly being recognized as a vital tool for a country’s energy transition.
Discrete or decentralized power generation takes many forms largely due to the many needs it serves. These include off-grid electricity for countryside and island communities; reliable, high-quality power for remote off-grid industries such as mining; and providing peak power to ensure the stability of grids that have a large share of renewable power generation capacity.
The most common size of decentralized power generation plants is in the 50 MW to 100 MW range that serves either a single manufacturing plant or an industrial park in a remote location. Across the American continent and Sub-Saharan Africa, as well as parts of Asia, these plants are situated in areas without grid access or with low-quality access, or in cases where it is beneficial to have one’s own captive supply of reliable power.
For example in North America, data centers are increasingly using decentralized generation to meet their enormous energy needs, while some customers and communities in North America and beyond are exploring decentralized power generation as a way to enhance the resiliency of power grid infrastructure in the face of hurricanes, floods and fires.
In Southern America, Australia, Sub-Saharan Africa, and parts of Asia, these power plants are often catering to industries such as mining, textile manufacturing, cement manufacturing, and fish processing. The higher capacity electrical motors and reactive electrical power needs of these manufacturing operators and other off-takers require stable and secured supply.
Decentralization challenges
While some G20 countries, such as Australia and those in Europe, have implemented policies to encourage or mandate hybrid-decentralized generation, most of the world has not. That makes selling lower-carbon solutions more difficult. It’s not always an economical decision to say ‘yes’ to a hybrid or smaller microgrid project, with no long-term proof of service and anticipated losses from being the first mover.
The complexity of decentralization is a challenge for the sector, whether for a large grid with lots of renewable power, conventional plants, and peaking power plants or for small microgrids and the CHP ( Combined Heat and Power) community systems that needs innovative software to manage the multiple supply and demand components. These latest set of systems need tons of software, intelligent algorithms, and smart programs. It can be a test to convince designers and policy makers familiar with single-technology plants that the benefits outweigh the added complexity.
Across the world, centralized energy systems based on fossil fuels have long been supported by large capital projects through state investments and loans from private non-governmental actors. This has led to higher energy prices from increasing demand, a certain misalignment with the achievement of sustainable development goals (SDGs), and the exposure of countries to Energy Return on Investment Risks (EROI) from conventional energy trajectories.
Also, the centralized, ageing and outdated power grid set-ups are many times not maintained by governments, which in some nations ends up causing frequent blackouts with crippling socio-economic consequences.
Dynamic transition
It’s evident that decentralized power generation is playing a significant role in moving communities large and small toward a more sustainable future, as engineers and researchers develop the technologies that will decarbonize the global economy.
The present technological knowhow is sufficient to drive the next 30 years, and give us sufficient time to develop more ecologically friendly technologies. There’s no doubt this is an exciting time for the energy sector and decentralized power generation in particular. Solar energy, together with other renewables, is often coined as a clear solution to greening our energy system and the mitigating the CO2 emissions. However, renewables aren’t enough: focusing on energy descent and decentralization is as, or even more important.
Avoid-Shift-Improve (A-S-I) needs to be our mantra for achieving our climate targets. Firstly, we need to stop believing in technological fixes (current or yet to be discovered) that will solve environmental problems while believing we won’t have to change anything in the way we live. There is a strong argument that could be built that states that climate goals can’t be achieved without substantially modifying consumer behavior. Hence, the biggest reduction in our energy impact needs to come from reducing the energy we need.
The second part of the mantra is something that we are already working towards, i.e., shifting our fuel dependency from fossil fuel to renewable energy sources. However, rather than thinking of solutions in a piecemeal fashion, it might be useful to think of them as bundles. There are multiple technologies with high degrees of complementarity that needs to be ‘bundled’ together to form a feasible solution. For decentralized energy solutions, it may be off-grid RE systems, advanced batteries, BMS (Building Management System) etc.
Lastly, it needs to be understood that energy systems are ever-evolving. The theme of energy decentralization is a very important piece of the larger puzzle of what our energy transition strategy should comprise of. With improvements in technologies, not only will energy efficiency and service provision rates improve; but over time with anticipated technology disruptions, the aforementioned face of the puzzle may change altogether.
From the G20 perspective, it is important that member countries move from centralized, capital-intensive mega projects to decentralized and smart small-scale energy production projects. With a consumption of 80% of global energy, the G20 should increase its efforts in energy resilience while modernizing the energy market to align with the low carbon system. Indonesia’s G20 should leverage previous G20 legacies, such as the International Monetary Fund’s Resilience and Sustainability Trust, which specifically looks at support for vulnerable countries. This can help decentralize the power grids thereby giving energy a reach to the farthest population.
(Views expressed are the author’s own and don’t necessarily reflect those of ICRIER.)
