Editorial

How the pandemic will slow – and accelerate – grid modernization

Implementation delays continued to affect distributed energy resource (DER) deployments in the second quarter of 2020, but the pandemic is also boosting investment in some areas

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The second quarter of 2020 provided a clearer picture of the dramatic impact that Covid-19 is having on the grid edge sector in the United States and around the world.  

The restrictions imposed to fight the pandemic, coupled with the unfolding economic downturn, have created delays in grid edge project implementation schedules, according to our new quarterly Grid Edge update. 

This has in turn severely curbed growth trajectories for distributed energy resources (DERs) in the near term. 

Solar, storage, microgrids, residential electric vehicle (EV) charging, and other DERs have all been impacted. The recession is expected to further weigh on growth in 2020.  

However, momentum will pick back up for the grid edge sector over the next few years. We also find that the pandemic is providing an opportunity to accelerate some grid edge trends, such as EV penetration and grid modernization. 

Figure: The impact of Covid-19 on the distributed energy market by resource

Source: Wood Mackenzie Grid Edge Executive Briefing Q3 2020

Where COVID-19 is creating pockets of opportunity for DERs 

We find that coronavirus stimulus packages are a perfect opportunity to advance EV penetration and EV charging goals. 

The stimulus packages adopted in Germany, France and China all boosted subsidies to purchasing EVs and promoted the construction of EV charging stations. 

Conversely, the U.S. has not yet included any EV provisions in their coronavirus stimulus packages, but House Democrats have proposed a separate a $1.5 trillion infrastructure bill – The Moving Forward Act –aimed at updating the nation’s aging transportation system. 

The Moving Forward Act, among other things, would set aside hundreds of billions of dollars to the deployment of zero-emissions buses and alternative fuel charging infrastructure, as well as developing an EV charging network as part of a transformed electric grid and providing tax credits for purchasing zero-emission vehicles. 

The pandemic has also emphasized the importance of remote meter readings and of data analytics for grid forecasting amid shifting load patterns. As a result, COVID-19 could feasibly provide an argument for greater digitalization of power metering across U.S. distribution grids in the future. 

Our Grid Edge briefing notes that it is too early to say whether this will strengthen U.S. utilities’ case for advanced metering infrastructure (AMI) deployment with regulators. 

However, we expect AMI vendors to double down on their strategy of partnering with providers of analytics and automation solutions to offer utilities more advanced functionalities. 

Figure: Select partnerships between AMI and grid edge solutions vendors

Source: Wood Mackenzie Grid Edge Executive Briefing Q3 2020

Investment is down but not out in 2020 

Growing policy support to EV and EV charging infrastructure aligns with the fact that the sector continues to receive funding, even though overall venture and strategic investment in DERs slowed down significantly in Q2 2020.  

In fact, energy storage and EV charging vendors make up more than half of investment announcements in 2020 so far. 

In the second quarter of this year, Hevo Power, Freewire Technologies and Tritium together raised more than $75 million. These vendors offer either wireless charging or DC fast charging solutions. 

At the same time, COVID-19 has not stopped utilities from entering contracts for AMI deployments, even though shelter-in-place orders have delayed meters’ installation in the U.S. and many other countries.  

In the second quarter of 2020 utilities and vendors around the world announced that they contracted over 1.1 million new electric AMI meters, with Landis+Gyr disclosing the biggest number of deals – two with utilities in the U.S., and one in Sweden and Hong Kong.   

Quantifying the pandemic’s damage to the U.S. DER market 

Overall, DER investment and deployments continued to take place during Q2, though at a slower pace than in 2019.  

Supply chains have been mostly unaffected, as most products are sourced from Asian markets where factories are ramping back to full capacity given that the most severe effects of the virus seem to have passed. 

Deployment phases that require face-to-face interaction – such as customer acquisition and project implementation – have been most at risk of delays and/or complete stoppage due to the social-distancing measures adopted to fight the spread of coronavirus. 

We currently expect a V-shaped recovery of the overall DER market in 2021, after a 60% drop in aggregate DER capacity growth in 2020.  

Looking past this year, lower economic activity and higher unemployment will decrease both consumers’ disposable income and business investment in the early 2020s, reducing investment in non-critical purchases such as customer-owned or leased energy infrastructure. 

As a result, annual growth in DER capacity will not exceed its 2019 pre-coronavirus high until 2024 

Recurring Briefing

The Grid Edge Quarterly Executive Briefing: Q3 2020

Grid edge quarterly executive briefing: Q3 2020

Comprehensive update and analysis of the key themes and developments you need to know about the grid edge ecosystem
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