The Must-Know Energy Sector Trends in 2024 for EPCs
The need for sustainable yet cost-effective solutions to enhance resilience sits at the forefront of the energy industry, and 2024 will see this sector continue its wide-reaching transformation as the country decarbonizes and upgrades its aging energy infrastructure. This dynamic landscape presents challenges and opportunities for Engineering, Procurement, and Construction (EPC) firms.
From an increased focus on distributed energy resources (DERs) and demand response programs to the growing importance of virtual power plants (VPPs) for aggregation, understanding and adapting to these changes will be imperative for EPC firms to remain competitive and foster growth in the new year and beyond.
Below, we dive into the must-know trends on the horizon for EPC firms operating in the dynamic distributed energy landscape.
Distributed Energy Resources (DERs) on the Rise
DERs, such as solar PV arrays, generator sets, and battery energy storage systems (BESS), are rapidly becoming a cornerstone of the energy industry and business energy strategies.
Several factors are contributing to the accelerated deployment of DERs. Technological advances, including improved battery storage performance and decentralized controls and optimization, have significantly enhanced the efficiency, reliability, and cost-effectiveness of power generation and consumption, enabling enhanced resilience. These energy assets now have robust financial support from historic investments and incentives from the Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act (IIJA).
The Solar Energy Industries Association (SEIA) projects the addition of 1,700 MWdc of commercial solar capacity nationally this year, with a projected growth to 2,442 MWdc by 2028. Additionally, SEIA revised its 2023 outlook for community solar installations, increasing it by 13% due to solid growth in 2023. Despite a 6% market contraction in 2023 reported last quarter, the association now envisions flat year-over-year growth, surpassing the national installed capacity of 1.1 GWdc.
Meanwhile, the U.S. storage industry achieved a record in Q3 2023, installing 7,322 MWh of capacity, the highest in any quarter. The cumulative capacity installed between Q1 and Q3 of the same year reached 13,518 MWh, surpassing the total for all 2022 (11,976 MWh). The Community, Commercial, and Industrial (CCI) segment is poised to double in 2024, driven by California’s community solar and storage program. Furthermore, commercial and industrial storage is expected to play a more significant role in the market from 2025 onward.
Integrating DERs into a microgrid with a decentralized control and optimization platform allows system owners to disconnect from the primary grid and continue operating during major grid outages. The systems provide businesses and communities with greater resilience in the face of grid disruptions and can easily integrate renewable resources to help achieve decarbonization goals.
These promising forecasts signal the potential for plenty of opportunities for EPC firms that can easily deploy optimized and scalable microgrids.
Participation in Demand Response Programs Growing
2024 marks the fourth anniversary since the Federal Energy Regulatory Commission (FERC) published Order No. 2022, facilitating DER aggregation, participation, and competition in regional energy markets. Since then, control platforms using advanced algorithms and sophisticated software have significantly enhanced the efficiency and reliability of DER systems, but importantly, they have also optimized the economic benefits.
As the need for grid flexibility grows, the demand response programs enabled by FERC 2022 have emerged as a viable solution in balancing supply and demand. Automated demand response with communication networks allows businesses to adjust energy usage in response to real-time signals from the grid, which helps stabilize the grid during peak demand and provides economic incentives for participants.
Designed to modify electricity usage patterns, including the timing and level of electricity consumption, FERC’s 2023 Assessment of Demand Response and Advanced Metering showed that enrollment in demand response programs is becoming more ubiquitous nationwide, although growth is staggered throughout different regions.
Demand-side management programs include direct load control, interruptible, bidding or buyback, emergency demand response, capacity market, and ancillary service market programs. Dynamic pricing programs, also known as time-based rate programs, include time-of-use (ToU), real-time, variable peak, and critical peak pricing, as well as critical peak rebate programs.
Demand-side management programs: National enrollment in retail demand response programs increased by over 740,000 customers, or 7.6%, from 2018 to 2022.
Dynamic pricing programs: Nationwide enrollment in dynamic pricing programs has increased by more than 5.4 million customers, or 58.8%, from 2018 to 2022, including an increase by more than 20% collectively across all Census Divisions.
At the same time, new statewide policies highlight the trend toward leveraging customer-sited DERs to address the challenges of the growing penetration of variable energy resources, particularly as electric vehicle (EV) ownership increases.
Last year, the California Energy Commission (CEC) adopted a goal to develop 7,000 MW of load flexibility by 2030 to meet the state’s decarbonization policy goals, facilitate smarter clean energy usage, and reduce net peak electrical demand. Meanwhile, Michigan, Minnesota, and Missouri have initiated proceedings to reconsider allowing third-party aggregators of demand response resources to participate in organized markets.
Utilities and state governments will continue to increase enrollments in programs designed to leverage customer participation in cost-saving programs. EPCs will be at the forefront of empowering business customers to take advantage of these economic benefits.
The Growth of Virtual Power Plants (VPPs)
In response to the growing demand for participation in demand response programs, VPPs are gaining prominence for their ability to aggregate various distributed energy resources into a single, coordinated system.
VPPs have become more sophisticated, integrating a diverse mix of renewables, energy storage, and demand response resources. This allows for decentralized energy trading with optimized operations and predictable energy generation and consumption patterns to ensure a reliable and resilient energy supply.
Depending on the definition, the U.S. Department of Energy (DOE) estimates between 30 GW and 60 GW of U.S. VPP capacity, mainly composed of demand response programs. Importantly, DOE noted the potential for $10 billion a year in grid costs by increasing VPP capacity from 80 GW to 160 GW by 2030 while redirecting spending on peaking power plants to DERs at a lower cost.
The emergence of VPPs is transforming how energy is generated, distributed, consumed, and traded. EPC firms will be instrumental in designing and deploying VPPs that aggregate and optimize diverse energy resources, including renewables, storage, and demand response. Challenges include interoperability issues, cybersecurity concerns, and the need for robust predictive analytics to maximize the efficiency of VPP operations.
Opportunities for EPCs in 2024
EPC firms must diversify service offerings as the energy sector advances to capitalize on the growing demand for sustainable and resilient energy infrastructure.
EPC firms are tasked with developing sophisticated solutions that enable end-users to participate actively in energy markets. This involves deploying advanced infrastructure, smart grid technologies, and demand-side management systems. The challenge here is ensuring seamless integration with existing infrastructure while meeting stringent regulatory and cybersecurity requirements.
One thing is certain: New technologies, solutions, and regulations will ensure the energy sector continues evolving. This means that exploring new partnership opportunities with technology and solution providers will be critical for success.
That’s why the Heila Technologies Partnership Program supports EPC firms in driving success with DERs and microgrid projects.
Interested in boosting your energy expertise so you can empower your C&I customers to meet energy savings, resilience, and sustainability goals while diversifying your offerings and growing your EPC business? Learn more about Heila’s EPC Partnership program and let’s see how we can work together in 2024.