Distributed Generation – A Solution or Challenge?

On-site or decentralized generation is commonly referred to as distributed generation. It supplies electricity from sources that are at or near the point of consumption rather than that from large, centralized sources such as utility-owned coal, natural gas, oil, or nuclear power plants. The majority of these distributed systems include:

• Renewable energy sources such as sunlight, wind, rain, tide, and geothermal heat which do not emit carbon dioxide or diminish any finite supply in the process of generating energy, or
• Combined heat and power (CHP) application, also referred to as cogeneration plants, that generate electricity and provide process or space-conditioning heat as an integrated system. In recovering the heat that is normally lost in conventional power generation, the combining of heat and power applications can provide efficiencies in the range of 80 percent as compared to 45 percent with conventional methods.

While distributed generation technologies lack the the economies of scale offered by centralized plants, the do offer some unique benefits, including:

• Further reduced energy losses from transmitting and distributing energy over long distances, and
• Fewer and smaller power lines.

Factors Impacting Viability of Distributed Generation

Despite the economic and environmental benefits inherent to distributed generation, there are a number of factors that vary by state or jurisdiction that must be addressed with to promote widespread distributed generation. Specifically, policies related to:

• Air Emissions, where utilities are experiencing a shift from input-based regulations (i.e. those that define limits on the amount of emissions per unit of fuel) to output-based regulations (i.e. those that define limits based on the amount of pollution per megawatt-hour). To the extent that there has been a shift to preventing pollution through process efficiency, the argument for distributed generation is more compelling.
• Interconnection, which is the ability to purchase backup power from the electric grid and sell excess electricity back to the grid, is a key element in offsetting the costs of distributed generation technology and deployment.
• Net Metering, which allows customers to either receive credit for excess production of electricity, or more preferred, be compensated for excess generation at either the utility’s avoided cost or higher retail rates. The specific framework and the countering effects of possible net metering fees all factor into the business case for distributed generation.
  

  Smart Meter

• Standby Rates, which come into play when a distributed generation system experiences scheduled or emergency outages, can be somewhat inflated as the utility not only receives compensation for the actual energy provided to the system; it also recovers the cost of providing capacity to meet the facility’s peak demand. The extent to which utility regulator approve these demand charges can impact the economics around opting for distributed generation.

1. Sandy LeonVest says:

   October 4, 2010 at 5:16 pm

   Distributed Generation (DG)may well be a challenge, but ultimately, it will also prove to be the solution to the multiple challenges we face with respect to energy generation, transmission and distribution. Highly centralized generation of electricity from carbon-emitting fossil fuels and transmitting that electricity long distances is an outdated model. A centralized grid will certainly need to be part of our nation’s infrastructure, but, for my money, DG is the ultimate energy vision for the 21st century.
2. Colleen says:

   October 24, 2010 at 6:25 pm

   This quote from Tom Casten, chairman of Recycled Energy Development and a leading expert on distributed generation, really sums the whole thing up: “We really need to understand that the issue is our utility and regulatory system. Utilities got to 34% efficiency when Eisenhower was in the White House. They’re at the same level today. We throw away two-thirds of the energy and it causes many of the problems we have. You [need to] build power plants where you can recycle the heat the way Edison did. Efficiency has to be the fuel of the future.”