Distributed generation

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Distributed generation, also called on-site generation, dispersed generation, embedded generation, decentralized generation, decentralized energy, distributed energy or district energy,[1] generates electricity from many small energy sources. Most countries generate electricity in large centralized facilities, such as fossil fuel (coal, gas powered), nuclear, large solar power plants or hydropower plants. These plants have excellent economies of scale, but usually transmit electricity long distances and can negatively affect the environment. Distributed generation allows collection of energy from many sources and may give lower environmental impacts and improved security of supply.

Local wind generator, Spain, 2010

Economies of scale[edit]

Historically, central plants have been an integral part of the electric grid, in which large generating facilities are specifically located either close to resources or otherwise located far from populated load centers. These, in turn, supply the traditional transmission and distribution (T&D) grid that distributes bulk power to load centers and from there to consumers. These were developed when the costs of transporting fuel and integrating generating technologies into populated areas far exceeded the cost of developing T&D facilities and tariffs. Central plants are usually designed to take advantage of available economies of scale in a site-specific manner, and are built as "one-off," custom projects.

These economies of scale began to fail in the late 1960s and, by the start of the 21st century, Central Plants could arguably no longer deliver competitively cheap and reliable electricity to more remote customers through the grid, because the plants had come to cost less than the grid and had become so reliable that nearly all power failures originated in the grid.[citation needed] Thus, the grid had become the main driver of remote customers’ power costs and power quality problems, which became more acute as digital equipment required extremely reliable electricity.[2][3] Efficiency gains no longer come from increasing generating capacity, but from smaller units located closer to sites of demand.[4][5]

For example, coal power plants are built away from cities to prevent their heavy air pollution from affecting the populace. In addition, such plants are often built near collieries to minimize the cost of transporting coal. Hydroelectric plants are by their nature limited to operating at sites with sufficient water flow.

Low pollution is a crucial advantage of combined cycle plants that burn natural gas. The low pollution permits the plants to be near enough to a city to provide district heating and cooling.

Distributed generation plants are mass-produced, small, and less site-specific. Their development arose out of:

  1. concerns over perceived externalized costs of central plant generation, particularly environmental concerns,
  2. the increasing age, deterioration, and capacity constraints upon T&D for bulk power,
  3. the increasing relative economy of mass production of smaller appliances over heavy manufacturing of larger units and on-site construction, and
  4. Along with higher relative prices for energy, higher overall complexity and total costs for regulatory oversight, tariff administration, and metering and billing.

Capital markets have come to realize that right-sized resources, for individual customers, distribution substations, or microgrids, are able to offer important but little-known economic advantages over Central Plants. Smaller units offered greater economies from mass-production than big ones could gain through unit size. These increased value—due to improvements in financial risk, engineering flexibility, security, and environmental quality—of these resources can often more than offset their apparent cost disadvantages.[6] DG, vis-à-vis Central Plants, must be justified on a life-cycle basis.[7] Unfortunately, many of the direct, and virtually all of the indirect, benefits of DG are not captured within traditional utility cash-flow accounting.[2]

While the levelized generation cost of distributed generation is more expensive than conventional sources on a kWh basis, this does not consider negative aspects of conventional fuels. The additional premium for DG is rapidly declining as demand increases and technology progresses,[citation needed] and sufficient and reliable demand may bring economies of scale, innovation, competition, and more flexible financing, that could make DG clean energy part of a more diversified future.[citation needed]

Distributed generation reduces the amount of energy lost in transmitting electricity because the electricity is generated very near where it is used, perhaps even in the same building. This also reduces the size and number of power lines that must be constructed.

Typical distributed power sources in a feed-in tariff (FIT) scheme have low maintenance, low pollution and high efficiencies. In the past, these traits required dedicated operating engineers and large complex plants to reduce pollution. However, modern embedded systems can provide these traits with automated operation and renewables, such as sunlight, wind and geothermal. This reduces the size of power plant that can show a profit.

Grid parity[edit]

Grid parity(or 'socket parity') occurs when an alternative energy source can generate electricity at a levelized cost (LCoE) that is less than or equal to the price of purchasing power from the electricity grid. Reaching grid parity is considered to be the point at which an energy source becomes a contender for widespread development without subsidies or government support. It is widely believed that a wholesale shift in generation to these forms of energy will take place when they reach grid parity.

Grid parity has been reached in some locations with on-shore wind power around 2000, and with solar power it was achieved for the first time in Spain in 2013.[8][9][10] Deutsche Bank says, that in January 2014 already more than 19 countries are under grid parity for solar power and sees starting a second gold rush for solar power.[11]

Types of distributed energy resources[edit]

Distributed energy resource (DER) systems are small-scale power generation technologies (typically in the range of 1 kW to 10,000 kW) used to provide an alternative to or an enhancement of the traditional electric power system. The usual problem with distributed generators are their high initial capital costs.


Distributed cogeneration sources use steam turbines, natural gas-fired fuel cells, microturbines or reciprocating engines[12] to turn generators. The hot exhaust is then used for space or water heating, or to drive an absorptive chiller [13][14] for cooling such as air-conditioning. In addition to natural gas-based schemes, distributed energy projects can also include other renewable or low carbon fuels including biofuels, biogas, landfill gas, sewage gas, coal bed methane, syngas and associated petroleum gas.[15]

Delta-ee consultants stated in 2013 that with 64% of global sales the fuel cell micro combined heat and power passed the conventional systems in sales in 2012.[16] 20.000 units where sold in Japan in 2012 overall within the Ene Farm project. With a Lifetime of around 60,000 hours. For PEM fuel cell units, which shut down at night, this equates to an estimated lifetime of between ten and fifteen years.[17] For a price of $22,600 before installation.[18] For 2013 a state subsidy for 50,000 units is in place.[17]

In addition, molten carbonate fuel cell and solid oxide fuel cells using natural gas, such as the ones from FuelCell Energy and the Bloom energy server, or waste-to-energy processes such as the Gate 5 Energy System are used as a distributed energy resource.

Solar panel[edit]

A primary issue with solar power is that it is intermittent. Popular sources of power for distributed generation are solar heat collection panels and solar panels on the roofs of buildings or free-standing. Solar heating panels are used mostly for heating water and when the water is heated into steam it can effectively and economically be used in steam turbines to produce electricity.

The production cost for electricity produced from photovoltaic panels ranges from $0.99 to 2.00/W (2007) plus installation and supporting equipment unless the installation is Do it yourself (DIY) bringing the cost to $0.525 to 0.750/W (2010).[19] This is comparable to coal power plant costs of $0.582 to 0.906/W (1979),[20][21] adjusting for inflation. Nuclear power is higher at $2.20 to $6.00/W (2007).[22] Some "thin-film" solar cells have waste-disposal issues when they are made with heavy metals such as Cadmium telluride (CdTe) and Copper indium gallium selenide (CuInGaSe), and must be recycled, as opposed to silicon solar cells, which are mostly non-metallic. Unlike coal and nuclear, there are no fuel costs, operating pollution, mining-safety or operating-safety issues. Solar power has a low capacity factor, producing peak power at local noon each day. Average capacity factor is typically 20%.

Wind turbine[edit]

Another source is small wind turbines. These have low maintenance, and low pollution, however as with solar, wind energy is intermittent. Construction costs are higher ($0.80/W, 2007) per watt than large power plants, except in very windy areas. Wind towers and generators have substantial insurable liabilities caused by high winds, but good operating safety. In some areas of the US there may also be Property Tax costs involved with wind turbines that are not offset by incentives or accelerated depreciation.[23] Wind also tends to complement solar. Days without sun there tend to be windy, and vice versa.[citation needed] Many distributed generation sites combine wind power and solar power such as Slippery Rock University, which can be monitored online.


Future generations of electric vehicles may have the ability to deliver power from the battery in a vehicle-to-grid into the grid when needed.[24] An electric vehicle network could also be an important distributed generation resource.[citation needed]


Municipal solid waste (MSW) and natural waste, such as sewage sludge, food waste and animal manure will decompose and discharge methane-containing gas that can be collected and used as fuel in gas turbines or micro turbines to produce electricity as a distributed energy resource. Additionally, a California-based company, Gate 5 Energy Partners, Inc. has developed a process that transforms natural waste materials, such as sewage sludge, into biofuel that can be combusted to power a steam turbine that produces power. This power can be used in lieu of grid-power at the waste source (such as a treatment plant, farm or dairy).

Integration with the grid[edit]

For reasons of reliability, distributed generation resources would be interconnected to the same transmission grid as central stations. Various technical and economic issues occur in the integration of these resources into a grid. Technical problems arise in the areas of power quality, voltage stability, harmonics, reliability, protection, and control.[25] Behavior of protective devices on the grid must be examined for all combinations of distributed and central station generation.[26] A large scale deployment of distributed generation may affect grid-wide functions such as frequency control and allocation of reserves.[27] As a result smart grid functions, virtual power plants and grid energy storage such as power to gas stations are added to the grid.

Cost factors[edit]

Cogenerators are also more expensive per watt than central generators.[citation needed] They find favor because most buildings already burn fuels, and the cogeneration can extract more value from the fuel . Local production has no electricity transportation losses on long distance power lines or energy losses from the Joule effect in transformers where in general 8-15% of the energy is lost[28] (see also cost of electricity by source).

Some larger installations utilize combined cycle generation. Usually this consists of a gas turbine whose exhaust boils water for a steam turbine in a Rankine cycle. The condenser of the steam cycle provides the heat for space heating or an absorptive chiller. Combined cycle plants with cogeneration have the highest known thermal efficiencies, often exceeding 85%.

In countries with high pressure gas distribution, small turbines can be used to bring the gas pressure to domestic levels whilst extracting useful energy. If the UK were to implement this countrywide an additional 2-4 GWe would become available. (Note that the energy is already being generated elsewhere to provide the high initial gas pressure - this method simply distributes the energy via a different route.)


Picture of a local microgrid, the Sendai Microgrid, located on the campus of Tohoku Fukushi University in Sendai City in the Tohoku district in Japan

A microgrid is a localized grouping of electricity generation, energy storage, and loads that normally operates connected to a traditional centralized grid (macrogrid). This single point of common coupling with the macrogrid can be disconnected. The microgrid can then function autonomously.[29] Generation and loads in a microgrid are usually interconnected at low voltage. From the point of view of the grid operator, a connected microgrid can be controlled as if it were one entity.

Microgrid generation resources can include fuel cells, wind, solar, or other energy sources. The multiple dispersed generation sources and ability to isolate the microgrid from a larger network would provide highly reliable electric power. Produced heat from generation sources such as microturbines could be used for local process heating or space heating, allowing flexible trade off between the needs for heat and electric power.

Micro-grids were proposed in the wake of the July 2012 India blackout:[30]

  • Small micro-grids covering 30–50 km radius[30]
  • Small power stations of 5–10 MW to serve the micro-grids
  • Generate power locally to reduce dependence on long distance transmission lines and cut transmission losses.

Modes of power generation[edit]

DER systems may include the following devices/technologies:

Communication in DER systems[edit]

  • IEC 61850-7-420 is under development as a part of IEC 61850 standards, which deals with the complete object models as required for DER systems. It uses communication services mapped to MMS as per IEC 61850-8-1 standard.
  • OPC is also used for the communication between different entities of DER system.

Legal requirements for distributed generation[edit]

In 2010 Colorado enacted a law requiring that by 2020 that 3% of the power generated in Colorado utilize distributed generation of some sort.[31][32]

See also[edit]


  1. ^ District Energy and CHP, www.clarke-energy.com, retrieved 16 September 2013
  2. ^ a b DOE; The Potential Benefits of Distributed Generation and Rate-Related Issues that May Impede Their Expansion; 2007.
  3. ^ Lovins; Small Is Profitable: The Hidden Economic Benefits of Making Electrical Resources the Right Size; Rocky Mountain Institute, 2002.
  4. ^ Takahashi, et al; Policy Options to Support Distributed Resources; U. of Del., Ctr. for Energy & Env. Policy; 2005.
  5. ^ Hirsch; 1989; cited in DOE, 2007.
  6. ^ Lovins; Small Is Profitable: The Hidden Economic Benefits of Making Electrical Resources the Right Size; Rocky Mountain Institute; 2002
  7. ^ Michigan (Citation pending)
  8. ^ http://www.forbes.com/sites/peterdetwiler/2012/12/26/solar-grid-parity-comes-to-spain/
  9. ^ http://oilprice.com/Latest-Energy-News/World-News/Spain-Achieves-Grid-Parity-for-Solar-Power.html
  10. ^ http://www.conergy.com/desktopdefault.aspx/tabid-136/281_read-831/
  11. ^ Deutsche Bank "Deutsche Bank: Second goldrush starts for solar power" 8. Januar 2014.
  12. ^ Gas engine cogeneration, www.clarke-energy.com, retrieved 9.12.2013
  13. ^ Cogeneration with absorptive chiller
  14. ^ Trigeneration with gas engines, www.clarke-energy.com, retrieved 9.12.2013
  15. ^ Gas engine applications, www.clarke-energy.com, retrieved 9th December 2013
  16. ^ The fuel cell industry review 2013
  17. ^ a b Latest developments in the Ene-Farm scheme
  18. ^ Launch of new 'Ene-Farm' home fuel cell product more affordable and easier to install
  19. ^ Solar panel production costs
  20. ^ Osti 1979
  21. ^ Coal power plants future
  22. ^ How much?
  23. ^ [1] Retrieved on 20 October 2010
  24. ^ How electric vehicles are a part of distributed generation
  25. ^ Tomoiagă, B.; Chindriş, M.; Sumper, A.; Sudria-Andreu, A.; Villafafila-Robles, R. Pareto Optimal Reconfiguration of Power Distribution Systems Using a Genetic Algorithm Based on NSGA-II. Energies 2013, 6, 1439-1455.
  26. ^ P. Mazidi, G. N. Sreenivas; Reliability Assessment of A Distributed Generation Connected Distribution System; International Journal of Power System Operation and Energy Management(IJPSOEM), Nov. 2011
  27. ^ Math H. Bollen, Fainan Hassan Integration of Distributed Generation in the Power System, John Wiley & Sons, 2011 ISBN 1-118-02901-1, pages v-x
  28. ^ How big are Power line losses?
  29. ^ Stan Mark Kaplan, Fred Sissine, (ed.) Smart grid: modernizing electric power transmission and distribution... The Capitol Net Inc, 2009, ISBN 1-58733-162-4, page 217
  30. ^ a b [2]
  31. ^ "Going Solar Is Harder Than It Looks, a Valley Finds" article by Kirk Johnson in The New York Times June 3, 2010
  32. ^ "Colorado Increases Renewables Requirements" blog by Kate Galbraith on NYTimes.Com March 22, 2010

Further reading[edit]

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