Distributed Generation Coming Into Focus

Issue 4 and Volume 106.

By Douglas J. Smith IEng,
Senior Editor

The ultimate breadth of scope of distributed generation remains unknown,but market opportunities are coming into focus.

Click here to enlarge image

Distributed generation is not a new concept. The first power plants, including Thomas Edison’s Pearl Street Power station, were essentially distributed generation and constructed to serve a local area. It was some years before the concept of central generation was established. However, with the need for transmitting electricity over longer distances, central generation power plants started to replace distributed generation.

Since the 1920s the majority of new generation capacity has been supplied by central power plants. Nonetheless, as we enter the 21st century we are now seeing an emerging market for new distributed generation. According to a U.S. Department of Energy (DOE) report the transition from large-scale, centralized power generation to small, distributed power generation plants has come from the deregulation of electric generation. These plants can be grid connected or operated independently, Figure 1.


According to Robert Lorand, senior program manager, Science Applications International Corporation, distributed generation represents approximately five percent of the current electric generating capacity in the U.S. However, further growth will depend on how well manufacturers of distributed generation systems do in meeting product pricing and performance targets, reports the DOE.

Because most distributed generation projects are below 5 MW, the market for reciprocating engines will continue to grow. On the other hand, until the capital costs of fuel cells are reduced to $1,000-$1,500/kW, they will have limited market potential. Figure 2 shows the predicted reduction in capital costs, and increases in efficiencies, of gas and diesel reciprocating engines, microturbines and fuel cells by 2020.

Click here to enlarge image

For the period 2005 through 2015 the potential market for distributed generation is forecasted to range from a low of 10,000 to a high of 16,000 MW, says Lorand.

One of the best markets for distributed generation is expected to be in areas such as Silicon Valley, where companies have a need for high reliability and quality of supply. Distributed generation will also find a market in areas where the cost of retail electricity and transmission and distribution are high.

Lorand believes that the market will be particularly good in areas where high reliability and disruptions are a problem. Figure 3 shows some high profile power outages that occurred in the U.S. in 1999 and 2000.

Benefits of Distributed Generation/Resources

Even though distributed generation systems can have capacities of hundreds of MWs, many only generate a few kilowatts. Using a variety of small, modular generating technologies, distributed generation plants supply base-load power, peaking power, backup power, remote power and/or heating and cooling. In some instances these plants supply higher quality power.

The use of distributed generation benefits the end user and the electric utility. From the electric utility’s perspective, distributed generation avoids costly transmission and distribution upgrades, reduces the necessity for the purchase of on-peak power and in some instances improve the grid’s reliability. On the other hand, distributed generation benefits the customer by reducing their overall energy costs. This is particularly true if the distributed generation is a cogeneration plant.

Click here to enlarge image

However, distributed power technologies in general cannot compete on a level playing field where the cost of energy is the only consideration. Nonetheless, there are many benefits to distributed generation and an economic analysis of a project will determine if a project is viable. Table 1 (see corrections at bottom of article) compares the different characteristics of distributed generation technologies: Reciprocating engines, microturbines, combustion turbines and fuel cells.

Who is Installing Distributed Generation?

The Los Angeles Department of Water and Power (DWP) is in the process of establishing a distributed generation implementation program. The aim is to install a variety of distributed technologies throughout the city. DWP expects Los Angeles to have 70 MW of distributed generation in operation by 2010.

Two technologies that DWP is looking at are microturbines and fuel cells. Because microturbines are small, have few moving parts and are compact and light in weight, they make attractive technology options for DWP. Microturbines are also more efficient, have lower emissions and lower electricity costs than other technologies. Another advantage, according to DWP, is that microturbines are able to use renewable fuels such as landfill and sewage treatment gases.

Click here to enlarge image

Over the next few years DWP has plans to install and test several microturbines. Recently the utility installed a 250 kW fuel cell at its downtown office building. The unit is being used to test the technology’s reliability and operating characteristics. This information will be used by DWP to identify and implement future fuel cell applications at customer sites and DWP’s own facilities.

In August 2001, DWP dedicated what it says is the world’s largest microturbine power plant to run exclusively on landfill gas. The landfill gas is supplied from the adjacent Lopez Canyon Landfill. The plant, with a total capacity of 1.5 MW, uses fifty 30 kW Capstone Turbine Corporation microturbines. According to DWP, the plant will eliminate 10,000 pounds of NOx per year.

In remote areas of the world where the expense of constructing transmission lines to supply power from a central plant is prohibitive, distributed generation has always been the only source of electricity. For more than 25 years Northern Power Systems has been involved in the design and construction of distributed generation plants to provide remote areas with electricity. Northern States Power has installed wind, photovoltaic and diesel-hybrid technologies for customers that have no access to grid supplied power.

Tanadgusix Corporation (TDX), an Alaskan native corporation, owns and operates several facilities on the island of St. Paul in the Bering Sea. All of these facilities receive power from the St Paul power grid. However, to reduce costs and to have better quality and reliable electricity, TDX contracted with Northern Power Systems to design and construct a wind/diesel hybrid system at one of their facilities. The site, known as the POSS Camp, includes an airport industrial complex with airline offices, equipment repair and storage facilities.

The plant has been designed to maximize the production of electricity from wind. Once the wind turbine’s output exceeds the facility’s load requirements the diesel engine is shut down. Any excess wind energy is used to heat water used for heating the complex’s offices and workshops.

For many years the community of lobster fishermen on Monhegan Island, 10 miles off the coast of Maine, were supplied by electricity from diesel generators. However, over the years these generators became more unreliable. Eventually the generators failed completely and emergency temporary rental generators had to be installed.

Today, the island is supplied by electricity from a new 300 kW diesel-fired power plant. The plant was designed and constructed by Northern Power Systems for the Monhegan Plantation District. The plant has two 120 kW and one 74 kW diesel generators that have been sized to provide the most efficient combination of generating capacity to meet the island’s load. In addition to being more efficient than the old diesel generators, the new generators have also been more reliable.

Although the plant has been designed and sized to meet the island’s current load, the design allows for the integration of a wind hybrid system in the future. A wind metering station has been installed to monitor and collect wind data for a 12-month period. This information will be used to evaluate adding wind power to the island’s generating mix.

Aggregation Reduces Cost

Aggregation of distributed generation involves the collection of assorted generating assets and collectively making their output available to the power market. According to Electrotek Concepts, the key to making aggregation work is the ability to dispatch the electricity. It is also important to have a program in place that makes sure the generators are available when needed.

Electrotek Concepts uses a web-based power monitoring and management platform to monitor individual site generators to determine and ensure their availability. The generators can be automatically activated if the electric utility or independent system operator has an emergency or if less expensive electricity is required. To date the company has aggregated more than 25 MW of backup generation.

In January of this year, the National Rural Electric Cooperative Association’s Cooperative Research Network (CRN) awarded Electotek a contract to study the feasibility of aggregation and dispatch of customer and/or third-party owned on-site generation plants. The study will look at on-site generation primarily installed for back-up power. It will also allow the cooperatives to determine the value of the existing backup generators and if aggregation would reduce electricity costs.

Studies carried out in Delaware, Maryland and New York by Electrotek have shown that backup power in rural areas can be used to supply more than 10 percent of peak demand.

In the northwest, Bonneville Power Administration (BPA) and Celerity Energy are seeking BPA customers interesting in participating in using internet-based technology to aggregate and network distributed energy resources. The project is part of BPA’s “Energy Web 2010 Vision.” BPA defines Energy Web as the transition from centralized energy systems that rely on large-scale generation, and one-way energy transmission and distribution, to more localized, smaller generation and consumer demand management.

Under the contract with BPA, Celerity Energy will first identify consumer based distributed energy resources in the region. Although the project will target resources of 500 kW or more, smaller units may be included. However, this will depend upon the type of technology used and its application.

Once the resources have been identified, Celerity Energy will work with BPA and its customers to determine networking and control interface costs for integrating the distributed resources into BPA’s transmission and distribution systems.

Phase 2 of the project will be the aggregation of the identified energy resources. “By aggregating resources such as cogeneration, wind, microturbines and curtailable loads, we can overcome some of the intermittent operational issues of renewables by alternatively operating more controllable resources,” says Dennis Quinn, senior vice president, Celerity Energy.

Because BPA and its customers will mutually benefit from aggregating, it is anticipated that both parties will invest in the program. The benefits to BPA will be improved voltage support and local system reliability while the end users will gain a new source of electric power to meet their peak demands, says Quinn.

Correction to Table 1:
Total maintenance costs (including fixed costs) in cents/kWhr:

  • Reciprocating engines (diesel) – 0.5 to 1.5
  • Reciprocating engines (natural gas) – 0.7 to 2.0
  • Microturbines – 0.4 to 1.0
  • Combustion gas turbines – 0.3 to 0.8
  • Fuel cells – 0.19 to 1.53