Study Shows Big Untapped De Residential Market

Study Shows Big Untapped De Residential Market

Dec 12 - Power Engineering

Distributed energy (DE) is making inroads into residential markets in North America and beyond. This may come as a surprise to many, as the market for on-site power generation has long been focused on the commercial and industrial sectors. However, new research from Primen, a subsidiary of EPRI, finds that in a recent 12-month period, nearly one million on-site generators were sold to households for either primary residences or vacation homes.

Still, only 6% of U.S. households currently have an on-site generator, most of which are portable models used exclusively during power outages and require manual start-up. But, a growing number of homeowners are purchasing permanently mounted, automatic systems, and nearly one in six households surveyed expressed high interest in an on-site power system that would provide most of their electricity needs. All told, about 22% of households would be interested in some form of DE, either for backup, baseload generation, a utility dispatch leasing program, or some combination thereof. These and other findings are part of a new Primen study based on an online survey of 1,301 households in the U.S. and Ontario, Canada.

The study, called "Residential Distributed Energy: Customer Views and Outlook," provides an up-to-date examination of the market for residential on-site generation, including recent trends, customer views and market summaries by census regions, household income and other attributes. The report also reviews the growing markets for residential on-site generation in Europe and Japan, and the efforts by some European and Japanese companies to bring their products to North America.

"Companies in Europe and Japan are already making bets that residential DE is taking off," says Primen Senior Director Nicholas Lenssen. "The world's largest investor-owned utility, Germany's E.ON, recently signed a contract to buy 80,000 units of a residential power generation system to sell in European markets over the remainder of this decade." Meanwhile, Honda has sold some 4,800 residential systems in Japan over the past fiscal year, far more than the planned 1,000.

Such systems are only beginning to be commercialized in parts of North America, where, on the surface, the economics for residential baseload on-site generation are likely to make for a tough sell. "But given that some households are already paying $5,000 or more for backup generation systems, the incremental cost of a baseload system may be less challenging to justify than supposed," says Lenssen, "particularly for applications that can take advantage of the heat produced by these generators for space or water heating."

Primen found that many homeowners are willing to accept fairly lengthy paybacks for their investments in baseload DE. Among households with $100,000 in annual income, 36% say they would accept a payback of five years or longer, while for the general population, 22% are willing to accept a similar return on investment.

North American utilities have so far been relatively inactive in the marketplace for residential DE equipment. That could change, however, if efforts to use residential DE for demand response prove successful or if equipment vendors start actively selling baseload systems to households.