The established system of electricity generation in the United States involves the use of large power plants transmitting power across distances (transmission) and then carrying it through local utility lines (distribution).

The practice of installing and operating electric generating equipment at or near the site of where the power is used is known as ``distributed generation`` (DG). Distributed generation provides electricity to customers on-site or supports a distribution network, connecting to the grid at distribution level voltages. DG technologies include engines, small (and micro) turbines, fuel cells, and photovoltaic systems.

Distributed generation may provide some or all of customers’ electricity needs. Customers can use DG to reduce demand charges imposed by their electric utility or to provide premium power or reduce environmental emissions. DG can also be used by electric utilities to enhance their distribution systems. Many other applications for DG solutions exist.

Commercial and industrial facilities can generate enough power to meet their needs using existing technologies. This also gives them the ability to have back-up power during times of blackout.

Distributed generation systems can provide an organization with the following benefits:
• Peak Shaving;
• On-site backup power during a voluntary interruption;
• Primary power with backup power provided by another supplier;
• Combined load heat and power for your own use;
• Load following for improved power quality or lower prices;
• To satisfy your preference for renewable energy

In conjunction with combined heat and power (CHP) applications, DG can improve overall thermal efficiency. On a stand-alone basis, DG is often used as back-up power to enhance reliability or as a means of deferring investment in transmission and distribution networks, avoiding network charges, reducing line losses, deferring construction of large generation facilities, displacing expensive grid-supplied power, providing alternative sources of supply in markets, and providing environmental benefits.

In recent years, DG has become an efficient and clean alternative to traditional distribution systems. And recent technologies are making it economically feasible.

Substantial efforts are being made to develop environmentally sound and cost-competitive small-scale electric generation that can be installed at or near points of use in ways that enhance the reliability of local distribution systems or avoid more expensive system additions. Examples of these distributed resources include fuel cells, small gas turbines, and photovoltaic arrays.

This report on Distributed Generation Technologies takes an in-depth look at the industry and analyzes the various technologies that contribute to distributed generation in today’s age. The report focuses on these technologies through case studies, examples, and equations and formulas. The report also contains analysis of the leading countries actively promoting distributed generation.

Executive Summary 6
Global Energy Usage and Forecasts 8
Market Profile 8
Global Energy Consumption 8
Oil 9
Coal 10
Natural Gas 11
Electricity 12
Nuclear Energy 13
Hydroelectricity 13
Value of the Global Energy Industry 15
Oil 15
Coal 16
Electricity 17
Renewable Energy 18
Hydroelectricity 18
Wind Energy 19
Trends in Energy Demand & Supply 21
Natural Gas 21
Oil 22
Energy Usage 23
Energy Prices 24
What is Distributed Generation? 25
Background 25
Definitions 26
DG Technologies 28
Reciprocating Engines 28
Simple Cycle Gas Turbines 29
Microturbines 30
Fuel Cells 31
Technology of Fuel Cells 31
Fuel Cell Applications 33
Renewable Technologies 34
Photovoltaic Systems 35
Wind 36
Potential Benefits of Distributed Generation 37
CHP Applications 38
Impact on Reliability 38
Impact on Network Losses, Usage, and Investment 39
Potential to Postpone Generation Investment 42
Potential Electricity Market Benefits 42
Potential Environmental Benefits 43
Offgrid and Remote Customers 43
DG Applications 44
Impact on the Market 48
Generating Equipment 48
Distribution Network 49
Under-Reaching of Relays 49
Over-Reaching of Relays 50
Regulatory and Technological Challenges 51
Economic Efficiency 51
Grid Interconnection 51
Electricity Market Reform and Distributed Generation 52
Market Structure 53
Market Operation 54
Pricing 56
Pricing and Location 56
Connection Charges 57
Operating Charges 58
Congestion Pricing 59
Net Metering 59
Environmental Protection 60
Air Quality 60
GHG Emissions 62
Energy Security 63
Energy Diversification 63
Reliability of Electricity System 63
DG System Installation 65
Challenges 65
Considerations 65
Price and Performance Assessments 67
General 67
Siting 68
Operation 68
Integrating Distributed Generation Technology into Demand Management Schemes 69
Demand Management Contracts 69
Distributed Generation 70
Distributed Generation vs. Demand Management Contracts 71
Conclusion 72
Future of Distributed Generation and Distribution Utilities 73
Generation Technology Research and Development 75
Implications for Electricity Network Design 76
Distributed Generation in Leading Countries 78
Japan 78
United States 80
The Netherlands 82
The United Kingdom 84
Case Studies 89
Environmental Protection Agency Energy Star projects 89
Distributed Generation Energy Services to Shift Demand in Peak Hours 91
Case Introduction 91
Business Scenario 91
Business Analysis 93
Small-Scale Hydropower Plants 95
Case Introduction 95
Business Scenario 95
Business Analysis 96
Distributed Balancing Services 98
Case Introduction 98
Business Scenario 98
Business Analysis 100
Active Management of Distribution Networks 102
Case Introduction 102
Business Scenario 102
Business Analysis 103
Appendix 107
Comparing Energy Consumption and Emissions from On-site CHP and Conventional Heat and Power Generation 107
Comparing Fuel Consumption and Emissions 107
Glossary 110


List of Figures & Tables
Figures
Figure 1: Generating Plants Costs Curves Concerning Power (1930-1990) 25
Figure 2: Recuperated Microturbine System 31
Figure 3: The Construction of the Low Temperature Fuel Cell PEMFC 32
Figure 4: Security of Supply Example with DG 39
Figure 5: A Simple Distribution Network 40
Figure 6: Power Flows without DG 40
Figure 7: Power Flows & Usage with G Producing 400 kW 41
Figure 8: Orders for Engines and Turbines, 1-30 MW, for Peaking or Continuous Use, 1998/99 – 2000/01 48
Figure 9: Model 38kV Radial Network with Distributed Generation 49
Figure 10: NOx Emissions from Distributed-Generation Technologies (kg/MWh) 60
Figure 11: CO2 Emissions from Distributed-Generation Technologies (in kg/MWh) 62
Figure 12: Comparison of Costs of Distributed Generation & Demand Management Contracts 71
Figure 13: Financial Comparison of Different DG Technologies 94
Figure 14: Networked Business Model for Local DG Production in Norway 96
Figure 15: Value Model for a DG-Supported Distributed Balancing Service 100
Figure 16: Supplier Revenues in the Balancing Services Business Model for DG 101
Figure 17: Value Exchanges Between Market Parties in Active Management of Distribution Networks 103
Figure 18: Variation of DG Profitability with Wholesale Tariff 105
Figure 19: Variation of DG Profitability with Cost of Active Management 105
Figure 20: Variation of DG Profitability with Connection Charge 106

Tables
Table 1: Microturbine Overview 30
Table 2: Cost & Thermal Efficiencies of Distributed Generation Technologies Inclusive of Grid Connection Costs and Without Combined Heat and Power Capability 34
Table 3: Emission Profiles of Distributed Generation Technologies 35
Table 4: Distributed Generation Technology Costs Inclusive of CHP Infrastructure 38
Table 5: DG Application Types & Characteristics 47
Table 6: Estimates of “Embedded Benefit” to Distributed Generators in the UK (in USD per MWh) 55
Table 7: New South Wales (Australia) Distribution Loss Factors 58
Table 8: Japanese NOx limits on Cogeneration Systems 61
Table 9: Examples of NOx Limits in the US Applicable to Distributed Generation (in kg/MWh) 61
Table 10: Economics of Gas CHP in Japan 78
Table 11: Cogeneration System Capacity (in MW) by Sector & Generator Type as of March 2005 79
Table 12: Data for Analyzing Shifts in Peak Demands 93
Table 13: Changes in Network Tariff 97
Table 14: Expected Profitability, Accounting for Possible Changes in Network Tariffs 97
Table 15: Estimated Revenues for the Energy Supplier 101
Table 16: Base Data for Analysis of the Active Management Scenario 103
Table 17: Cash Flows for Various Actors 104