Utility-Scale Solar vs. Distributed Solar: Advantages and Disadvantages (Part 2)

Introduction

Solar photovoltaic (PV) has emerged as the most economical method of generating electricity. Competition, mass production, and technological advancements have reduced cost of electricity produced from solar PV by over 80% during the last decade. In particular, new large, utility-scale solar power projects connected to centralized power system have achieved a levelized cost of electricity as low as 1 US cent/kWh in recent years in some parts of the world. Distributed solar PV systems installed on-site, for example on the roof of a residential or commercial premises, have also witnessed significant cost reductions and become a choice for many electricity consumers compared to the grid supply.

In Part 1 (https://www.dhirubhai.net/pulse/utility-scale-solar-vs-distributed-overview-aftab-raza-gizfe/?trackingId=87bA9sRRR26wg8ffd1rHNA%3D%3D) of this series of articles, I have introduced the two options of using the solar PV, namely, utility-scale and distributed solar PV systems, with an overview of their business models, challenges, and some examples of countries that have a large amount of each option.

This Part 2 compares these options by describing their differences in detail and their advantages and disadvantages from the consumer’s and system’s perspectives.

Key Differences

Utility-scale solar projects and distributed solar PV systems have different characteristics and performance many respects:

• Cost: Utility-scale solar projects tend to have lower costs per kilowatt-hour (kWh) than distributed solar PV systems, due to economies of scale, standardized design, and optimized operation.
• Regulation: Utility-scale projects are subject to more regulation than distributed solar PV systems, as they need to comply with federal, state, and local laws and policies regarding environmental impact, land use, grid interconnection, PPAs, and market participation. Distributed solar PV systems are regulated by state and local authorities mainly to allow installation, and may benefit from net metering policies, tax credits, rebates, and other incentives.
• Reliability: Utility-scale solar projects can enhance the reliability of the power system by providing clean and low-cost electricity during peak demand periods and offer ancillary services such as frequency regulation and voltage support. However, they also face challenges such as intermittency, variability, and curtailment due to weather conditions and grid constraints. Distributed solar PV systems can improve the reliability of the distribution network by reducing peak load, increasing resilience, and providing backup power. However, they also pose challenges such as reverse power flow, voltage fluctuations, and protection issues.
• Time to develop: Utility-scale solar projects take longer (2 to 3 years) to develop than distributed solar PV systems, as they involve more complex and lengthy processes such as site selection, permitting, financing, construction, and commissioning. Distributed solar PV systems have shorter development times, as they are usually installed on existing rooftops or structures, and require less permitting and interconnection procedures.
• Contracting: Utility-scale solar projects typically sell their electricity to wholesale utility buyers through long-term PPAs, which specify the price, quantity, duration, and terms of the contract. PPAs provide revenue certainty and risk allocation for both parties, but also require negotiation and compliance. Distributed solar PV systems usually sell their excess electricity to retail utility customers through incentivised and simpler net metering or FIT arrangements, but also depend on regulatory support and grid availability .
• Pricing: Utility-scale solar projects face price competition from other generation sources in the wholesale market, which may fluctuate depending on supply and demand conditions. Distributed solar PV systems face price competition from retail electricity rates in the distribution market, which may vary depending on time of use, location, and customer class. Therefore, both utility-scale and distributed solar PV systems need to achieve low costs.
• Storage integration: Both utility-scale projects and distributed systems can benefit from integrating energy storage devices, such as batteries, to overcome their intermittency and variability issues. Storage can help balance the supply and demand of electricity, enhance the grid stability and resilience, and increase the value and revenue of solar energy. However, storage integration also poses technical and economic challenges, such as cost, efficiency, safety, regulation, and market design.?
• Grid upgrade: Both utility-scale and distributed solar systems require grid upgrade to accommodate their increasing penetration and contribution to the power system. Grid upgrade can involve enhancing the transmission and distribution infrastructure, implementing smart grid technologies, or adopting flexible market mechanisms. Grid upgrade can enable more efficient and reliable delivery and balancing of solar power, as well as provide new services and opportunities for grid operators and customers. However, grid upgrade also faces regulatory and financial barriers, such as lack of coordination, investment, and incentives.
• Environmental impact: Utility-scale projects may have more environmental impact as they require large land areas, which may affect the natural habitat, biodiversity, and landscape and cause water consumption, waste generation, and visual or noise pollution. Distributed systems have less environmental impact, as they use existing rooftops or structures, and have minimal water and waste requirements but may also cause glare, fire hazard, or roof damage.
• Global contribution: Interestingly, both utility-scale and distributed systems currently contribute almost equally to the global growth and deployment of solar energy, as they account for around 55% and 45% generation worldwide, respectively.

Advantages and Disadvantages

Based on the above differences, the following table summarizes the key advantages and disadvantages of utility-scale solar projects and distributed solar PV systems:

?Conclusion

Utility-scale solar projects and distributed solar PV systems are two main options for solar energy deployment in the energy transition. They have different characteristics, benefits, drawbacks, opportunities, and challenges in different contexts and regions. They also have different impacts and implications for the customer, the power system, the environment, and the society. There is no single or definitive answer to which option is better or worse, but rather a need for a balanced and holistic approach that considers the context, goals, and resources of each customer, country and region.

This series of articles would be helpful in a number of situations when deciding between the two options:

• When a government is planning or implementing its energy policy and strategy, and needs to decide how to allocate its resources and incentives to support different solar energy options.
• When a utility is managing or expanding its power system, and needs to evaluate how to integrate and balance different solar energy options into its grid.
• When a developer is designing or building a solar energy project, and needs to choose the most suitable and profitable option for its location and market.

Parts 1 and 2 touch on the comparison in terms of costs and business models but they deserve more detailed discussions. Stay tune for the next episodes of this series!