Distributed Generation Market

Market Definition

Distributed generation encompasses decentralized energy systems that generate electricity near the point of use and reduce reliance on large power plants. These solutions utilize solar photovoltaic panels, microturbines, and combined heat and power (CHP) units to deliver reliable and efficient power.

The market supports applications across residential, commercial, industrial, and community microgrid environments, where energy resilience, grid stability, and reduced transmission losses are priorities.

Distributed Generation Market Overview

The global distributed generation market size was valued at USD 287.66 billion in 2024 and is projected to grow from USD 318.51 billion in 2025 to USD 718.87 billion by 2032, exhibiting a CAGR of 12.33% during the forecast period. 

This market is expanding due to the growing need for energy security and system resilience, especially during grid disruptions or extreme weather events. Additionally, the increasing integration of energy storage solutions and virtual power plants (VPPs) is enhancing grid flexibility and enabling the efficient management of distributed energy resources, further accelerating market expansion.

Major companies operating in the distributed generation industry are Siemens, General Electric, Schneider Electric SE, ABB, Caterpillar Inc., Cummins Inc., Bloom Energy Corporation, Capstone Turbine Corporation, Wärtsilä, Mitsubishi Electric Corporation, Doosan, Ansaldo Energia, Vestas, Cisco Systems, Inc., and Iberdrola, S.A.

Advancements in renewable energy technologies and sharp declines in costs are driving the growth of the market. The International Renewable Energy Agency reported that the global average levelized cost of electricity (LCOE) from utility‑scale solar PV fell to US USD 0.044 per kWh in 2023, marking a 12 % year‑on‑year decline and an 89% drop since 2010.

Rapid reduction in the prices of solar photovoltaic panels and battery storage solutions is making decentralized energy production more accessible and economically viable. Households, businesses, and communities are increasingly installing on-site renewable systems to reduce reliance on traditional grid infrastructure. 

Distributed generation offers improved energy independence, reduced transmission losses, and enhanced resilience against power disruptions. Government incentives and policy support are further encouraging investments in localized energy solutions.

Key Highlights

1. The distributed generation market size was valued at USD 287.66 billion in 2024.
2. The market is projected to grow at a CAGR of 12.33% from 2025 to 2032.
3. North America held a market share of 36.43% in 2024, with a valuation of USD 104.79 billion.
4. The solar photovoltaics (PV) segment garnered USD 114.06 billion in revenue in 2024.
5. The on-grid segment is expected to reach USD 391.89 billion by 2032.
6. The industrial segment secured the largest revenue share of 45.63% in 2024.
7. Asia Pacific is anticipated to grow at a CAGR of 13.02% during the forecast period.

Market Driver

Rising Energy Security and Resilience Needs

Rising demand for energy security and system resilience is driving the adoption of distributed generation solutions across various sectors. Distributed generation systems provide critical backup power during grid outages, extreme weather events, and infrastructure failures by ensuring continuous energy availability. 

The increasing frequency of climate-related disruptions and aging grid infrastructure is prompting businesses and communities to invest in localized power sources. 

Distributed generation enables faster recovery and reduces dependency on centralized systems during emergencies. Hospitals, data centers, and emergency services prioritize resilient energy setups to maintain operational continuity.

• In October 2024, the California Energy Commission's Demand Side Grid Support Program enrolled 515 megawatts of capacity, which included over 200 megawatts from a virtual power plant utilizing customer-owned battery storage systems. These distributed resources were activated 17 times during summer to provide backup power and stabilize the grid during extreme heat events.

Market Challenge

Grid Integration and Technical Complexity

A key challenge in the distributed generation market is the integration of variable power sources into existing electrical grids. Aging infrastructure and inconsistent generation from renewables are creating technical difficulties in maintaining voltage levels, frequency control, and system protection. These complexities are raising concerns about grid reliability and long-term operational stability.

• In 2024 the U.S. had over 1,400 GW of solar, wind, and battery projects awaiting grid connections. This highlights significant bottlenecks due to aging and overloaded transmission and distribution infrastructure.

Therefore, market players are focusing on deploying advanced grid management software, smart inverters, and energy storage systems to support stable integration. They are also investing in modernizing grid infrastructure and enhancing real-time monitoring capabilities to manage distributed energy flows more effectively.

• In June 2024, Huawei introduced its first Cell‑to‑Grid Smart String & Grid‑Forming ESS platform, an energy storage system with built‑in grid‑forming inverter capabilities and full-grid support features, which can boost renewable energy output by up to 40% in weak grid settings.

Market Trend

Integration of Energy Storage & Virtual Power Plants (VPPs)

A major trend in the market is the increasing integration of energy storage systems and virtual power plant (VPP) platforms. Companies are using advanced storage technologies to capture excess energy and release it based on real-time grid demands. 

VPP platforms are combining distributed energy resources to operate as coordinated, flexible power units across the grid. This approach is improving load balancing, enabling demand response, and supporting the stability of renewable-powered systems. 

Operators are using smart, AI-led software to manage distributed assets more efficiently and respond to fluctuations in consumption and supply.

• For instance, in April 2025, Virtual Peaker and NeoVolta launched a joint virtual power plant solution by integrating NeoVolta’s residential battery energy storage system with Virtual Peaker’s AI-driven VPP software. The platform aggregates distributed energy storage units and dynamically controls their charge/discharge cycles based on real‑time grid needs.

Distributed Generation Market Report Snapshot

Segmentation	Details
By Technology	Solar Photovoltaics (PV), Wind Turbines, Reciprocating Engines, Others
By Application	On-Grid, Off-Grid
By End User	Commercial, Industrial, Residential
By Region	North America: U.S., Canada, Mexico
	Europe: France, UK, Spain, Germany, Italy, Russia, Rest of Europe
	Asia-Pacific: China, Japan, India, Australia, ASEAN, South Korea, Rest of Asia-Pacific
	Middle East & Africa: Turkey, U.A.E., Saudi Arabia, South Africa, Rest of Middle East & Africa
	South America: Brazil, Argentina, Rest of South America

Market Segmentation

• By Technology (Solar Photovoltaics (PV), Wind Turbines, Reciprocating Engines, and Others): The solar photovoltaics (PV) segment earned USD 114.06 billion in 2024, due to its rapidly declining installation costs, scalability across residential and commercial applications, and strong policy support driving widespread adoption.
• By Application (On-Grid and Off-Grid): The on-grid segment held 58.43% of the market in 2024, attributed to its cost-efficiency, ability to feed excess power back into the utility grid, and widespread adoption in urban and industrial areas with established grid infrastructure.
• By End User (Commercial, Industrial, and Residential): The industrial segment is projected to reach USD 281.39 billion by 2032, owing to its high and continuous power demand, which drives the adoption of on-site energy solutions to ensure reliability, reduce operational costs, and maintain productivity during grid instability or outages.

Distributed Generation Market Regional Analysis

Based on region, the global market has been classified into North America, Europe, Asia Pacific, the Middle East & Africa, and South America.

The North America distributed generation market share stood at 36.43% in 2024, with a valuation of USD 104.79 billion. The North America electrical grid, which was constructed several decades ago, has become unreliable and expensive to maintain.

• In December 2024, the North American Electric Reliability Corporation (NERC) reported that more than half of North America faces a risk of energy shortfalls in the next five to 10 years due to aging infrastructure and rising demand. NERC's 10-year summer peak demand forecast has grown by more than 50% over the last year.

Frequent blackouts, deteriorating transformers, and outdated transmission infrastructure are driving utilities, businesses, and communities to turn toward distributed generation solutions such as rooftop solar, microturbines, and small-scale wind systems. These decentralized energy options help reduce reliance on the fragile central grid, offering a more resilient and sustainable alternative across the region.

Asia Pacific is poised for a significant CAGR of 13.02% over the forecast period. This growth is largely driven by the rapid urban expansion across the region, particularly in semi-urban and rural areas where access to centralized power remains limited. 

Extending the national grid to these regions involves high costs and extended timelines. As a result, distributed generation solutions such as solar mini-grids, biomass generators, and small-scale wind systems are being adopted as cost-effective and practical alternatives to meet local energy needs.

• In September 2024 the World Bank announced its USD 2.5 billion "Accelerating Sustainable Energy Transition Program" across East Asia and the Pacific. This initiative is expected to add 2.5 GW of renewable energy capacity and provide new or improved clean electricity access to 20 million people.
• In October 2024, the Asian Infrastructure Investment Bank proposed a USD 1.1 billion program in Maharashtra, India, to promote off-grid solar-powered water pumps for farmers. The initiative aims to alleviate financial pressure on the state's electricity distribution company and reduce cross-subsidy burdens on commercial users.

Regulatory Frameworks

• In the U.S., distributed generation is governed by the Public Utility Regulatory Policies Act (PURPA), which mandates utility interconnection and fair compensation for small generators. State-level Renewable Portfolio Standards (RPS) and net metering policies further support DG by requiring utilities to buy excess electricity at retail or near-retail rates.
• The European Union governs DG through the Renewable Energy Directive (RED II/RED III) and the Electricity Directive (2019/944). These laws require Member States to support consumer energy generation, ensure transparent grid access, and enable energy sharing between prosumers.
• China’s distributed generation regulations focus on centralized planning and large-scale deployment targets set under its Renewable Portfolio Standard (RPS) and Five-Year Plans. The government offers feed-in tariffs, priority grid access, and subsidies for solar PV, small wind, and biomass systems. Pilot programs support rooftop solar aggregation in urban areas. Policies are guided by national goals for peak carbon emissions and clean energy capacity by 2030 and 2060.
• India regulates DG through the Electricity Act of 2003, which allows captive generation and open access to the grid without licensing. The Central Electricity Regulatory Commission (CERC) sets feed-in tariffs, Renewable Energy Certificate (REC) mechanisms, and forecasting norms under the Deviation Settlement Mechanism (DSM).

Competitive Landscape

Major players in the distributed generation market are increasingly adopting strategies such as regional partnerships, the deployment of advanced solar and battery storage technologies, and targeted investments in underserved markets. 

Companies are also focusing on expanding their footprint through joint ventures, particularly in regions with growing energy access needs. Ongoing research and development aimed at improving the efficiency and scalability of distributed systems is helping drive innovation.

• In May 2025, TCL Solar partnered with Grid Africa to roll out distributed renewable energy solutions in Zimbabwe and Zambia. The initiative focuses on using advanced solar photovoltaic and battery storage technologies to enhance regional energy security and promote economic development. Under this partnership, TCL Solar has pledged to support the installation of 100 MW of distributed solar and storage capacity across both countries.

List of Key Companies in Distributed Generation Market:

• Siemens
• General Electric
• Schneider Electric SE
• ABB
• Caterpillar Inc.
• Cummins Inc.
• Bloom Energy Corporation
• Capstone Turbine Corporation
• Wärtsilä
• Mitsubishi Electric Corporation
• Doosan
• Ansaldo Energia
• Vestas
• Cisco Systems, Inc.
• Iberdrola, S.A.

Recent Developments (M&A/Expansion/Product Launch)

• In March 2025, GE Vernova introduced its latest generation of mobile aeroderivative gas turbines, which are compact and transportable power plants designed to deliver dependable and efficient electricity in grid-connected and off-grid locations. The newly launched TM2500 Dry Low Emissions (DLE) unit is a 34 MW waterless mobile power solution that achieves up to 39% efficiency while significantly lowering nitrogen oxide (NOx) emissions and minimizing waste.
• In June 2024, EDPR NA Distributed Generation acquired Renewable Properties’ community solar portfolio in Illinois. The acquisition included four community solar projects totaling 20 MW AC, which are expected to generate approximately 42 GWh annually, supplying over 5,000 Illinois homes.
• In May 2024, Lodestone Energy announced plans to build three solar farms in Canterbury, New Zealand. These projects are part of its partnership with HES Aotearoa and follow the completion of its first solar farm, Kohirā, in February 2024.