Diesel generators’ vice-like grip on the building on-site generation market is loosening as emerging technologies increase in scale and maturity, and Fortune 500 companies commit to more sustainable operations. High-capacity factor options, such as fuel cells, will generate much higher volumes of electricity and heat than other options like solar and wind. However, solar and wind have lower upfront costs, and generate energy more economically. Broadly, each technology has its shortcomings – and struggles in a “base” scenario without incentives.
Multiple looming factors make the prospect of on-site generation increasingly attractive to adopters whether for commercial, industrial or residential purposes. Chief among them? Taxes on carbon dioxide emissions, capital expenditure reductions for generation equipment, and rising energy prices. Broadly – though not always the case – the strongest determinant of improved economics is lowered equipment capital expenditure. Given the lack of scale for fuel cells and biomass boilers, in addition to the price free-fall in solar, added potential for cost reduction should provide optimism for potential adopters that selective decisions today will lead to business-positive economics. Even small wind, which ranges from 2 kW to 40 kW in size, has potential from an economic perspective, although in the on-site aspect makes ‘not-in-my-backyard’ a quite literal adoption barrier. In fact, most emerging technology options can become viable within a short time frame, and for industry stakeholders, technology innovations remain critical. Those without a focus on cost reduction (or performance improvement at constant costs) will find themselves without a foothold in a market.
Plenty of bad decisions will still be made given that deployment of a viable technology in the right application and in the right geography are each required to drive adoption. Above all, executing on cost reduction is pivotal but, assuming this is delivered, developers and potential adopters should have confidence that selective decisions today will lead to business-positive economics tomorrow.