I have asked Benjamin K. Sovacool, a Research Fellow in the Energy Governance Program at the National University of Singapore, for a recap of why we need to move towards distributed energy.

This is an area which we follow on our wiki here, where you’ll find a number of introductions.

Here is Benjamin’s editorial:

“Today, the technological basis for the electric utility system remains in flux. Large-scale generation and transmission technologies no longer offer prized economic benefits, and some policymakers and system operators have identified security and reliability threats to a society that increasingly depends on electricity. In such a complicated environment and quickly changing environment, advocates of distributed generation (DG) technologies have seen opportunities to reconfigure the existing electricity environment to their advantage.

The notion of DG, also called “distributed power” and “micro-power,” refers to an approach to generating power as well as a wide variety of physical electricity generators. As an approach, DG entails producing power on-site and close to the end user, emphasizing the deployment of small-scale generating facilities.

As a technology, the term “DG” often encompasses three classes of generators: combined heat and power (CHP) systems that produce thermal energy and electricity from a single fuel source, distributed renewable energy generators such as wind turbines and solar panels, and distributed non-renewable energy generators such as reciprocating engines, stirling engines, natural gas turbines, micro-turbines, and fuel cells.

A significant amount of new evidence suggests that DG systems strengthen the reliability of the power grid and decrease transmission congestion. They reduce the capital needed for energy production and displace power plant and T&D construction. They help conserve the amount of land needed for power generation and transmission facilities, and improve overall system efficiency.

Consider just two of these advantages: reliability and modularity.

First, and focusing on reliability, deploying DG systems in congested areas can provide an effective alternative to constructing new transmission and distribution lines, transformers, local taps, feeders, and switchgears, especially in congested areas or regions where the permitting of new transmission networks is difficult. One study found that up to 10 percent of total distribution capacity in ten years in high growth scenarios could be cost-effectively deferred using DG technologies. The International Energy Agency has even noted that “by moving portable power generators to distribution substations, utilities have been able to cope with rapid load growth more quickly than by upgrading distribution facilities.”

‘Pacific Gas & Electric Company (PG&E), the largest investor-owned utility in California, built an entire power plant in 1993 to test the grid benefits of a 500 kilo-watt (kW) DG plant. PG&E found that the generator improved voltage support, minimized power losses, lowered operating temperatures for transformers on the grid, and improved transmission capacity. The benefits were so large that the small-scale generator was twice as valuable as estimated, with projected benefits of 14 to 20 ¢/kWh.

Since modern DG technology enables utilities to remotely dispatch hundreds of scattered units, they also improve the ability of system operators to handle peak load and grid congestion problems. Another PG&E analysis, comparing fifty 1-MW distributed plants to one 50-MW central plant in Carissa Plains, California, found that the grid advantages (in forms of load savings and congestion) more than offset the disadvantages (in terms of high capital cost and interconnection) of installing the new generation.

DG systems can provide utilities and system operators with a variety of important ancillary services as well, including system control (how operators control generators on the grid), reactive supply (the injection of power needed to maintain required voltages), and spinning reserves (alternating existing generation capacity to offset load imbalances). Because of their smaller size, DG technologies can be started up more quickly and deployed more easily than centralized systems. Smaller units have lower outage rates, decreasing the need for reserve margins and spinning reserves. Since DG technologies can be constructed more quickly, they enable utility managers to respond better to supply and demand fluctuations, especially when used with advanced functions like real time pricing and net metering.

Second, and focusing on modularity, classic grid systems are “lumpy systems” in the sense that additions to capacity are made in primarily large lumps (gargantuan power plants, new transmission plants). These plants have long lead times and uncertainties, making planning and construction difficult, especially when the balance of supply and demand can change rapidly within a short period of time. They can also be extremely capital-intense: a typical 1,100 MW light water reactor can cost as much as $8 to $16 billion when licensing and construction expenses are included.

In contrast, DG technologies tend to have quicker lead times—taking between a few months to five years to implement. The quicker lead times for DG enable a more accurate response to load growth, and minimize the financial risk associated with borrowing hundreds of millions of dollars to finance plants for 10 or more years before they start producing a single kW of electricity. John Ravis, a project finance manager for TD BankNorth, recently told industry analysts that utility-level PV systems can come online in as little as two months if the panels are available.

Utilities and investors can cancel modular plants easier, so abandoning a project is not a complete loss (and the portability of most DG systems means recoverable value exists should the technologies need to be resold as commodities in a secondary market). Smaller units with shorter lead times reduce the risk of purchasing a technology that becomes obsolete before it is installed, and quick installations can better exploit rapid learning, as many generations of product development can be compressed into the time it would take to build one giant power plant. In addition, outage durations tend to be shorter than those from larger plants and repairs for reciprocating gas and diesel engines take less money, time, and skill.

In both cases—power reliability and generator modularity—smaller, distributed units hold many advantages over large, centralized ones. As the prized economist E.F. Schumacher has written, when it comes to generating power, “small can sometimes be the most beautiful.”

For more information:

Readers that would like to learn more are invited to sample Benjamin’s other writings:

Benjamin K. Sovacool, “Distributed Generation (DG) and the American Electric Utility System: What is Stopping It?” Journal of Energy Resources Technology 130(1) (March, 2008), pp. 16-25.

Benjamin K. Sovacool, “Distributed Generation in the US—Three Lessons,” Cogeneration and Onsite Power Production 10(1) (January/February 2008), pp. 69-72.

Benjamin K. Sovacool, “Coal and Nuclear Technologies: Creating a False Dichotomy for American Energy Policy,” Policy Sciences 40(2) (June, 2007), pp. 101-122.

Benjamin Sovacool and Richard F. Hirsh, “Energy Myth Six – The Barriers to New and Innovative Energy Technologies are Primarily Technical: The Case of Distributed Generation (DG),” chapter in B.K. Sovacool and M. Brown, eds., Energy in American Society–Thirteen Myths ( Springer, 2007), pp. 145-69.

Benjamin K. Sovacool, “Using Distributed Generation and Renewable Energy Systems to Empower Developing Countries,” The International Journal of Environmental, Cultural, Economic, and Social Sustainability 2(3) (2006), pp. 77-86.

Benjamin K. Sovacool and Richard Hirsh, “Technological Systems and Momentum Change: American Electric Utilities, Restructuring, and Distributed Generation,” Journal of Technology Studies 32(2) (Spring, 2006), pp. 72-85. )