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1.3 Benefits of Distributed Generation

What are the Potential Benefits of DG Systems?

Consumer advocates who favor DG point out that distributed resources can improve the efficiency of providing electric power.  They often highlight that transmission of electricity from a power plant to a typical user wastes roughly 4.2 to 8.9 percent of the electricity as a consequence of aging transmission equipment, inconsistent enforcement of reliability guidelines, and growing congestion. At the same time, customers often suffer from poor power quality—variations in voltage or electrical flow—that results from a variety of factors, including poor switching operations in the network, voltage dips, interruptions, transients, and network disturbances from loads.  Overall, DG proponents highlight the inefficiency of the existing large-scale electrical transmission and distribution network.  Moreover, because customers’ electricity bills include the cost of this vast transmission grid, the use of on-site power equipment can conceivably provide consumers with affordable power at a higher level of quality.  In addition, residents and businesses that generate power locally have the potential to sell surplus power to the grid, which can yield significant income during times of peak demand.

Industrial managers and contractors have also begun to emphasize the advantages of generating power on site.  Cogeneration technologies permit businesses to reuse thermal energy that would normally be wasted.  They have therefore become prized in industries that use large quantities of heat, such as the iron and steel, chemical processing, refining, pulp and paper manufacturing, and food processing industries.  Similar generation hardware can also deploy recycled heat to provide hot water for use in aquaculture, greenhouse heating, desalination of seawater, increased crop growth and frost protection, and air preheating.

Beyond efficiency, DG technologies may provide benefits in the form of more reliable power for industries that require uninterrupted service.  The Electric Power Research Institute reported that power outages and quality disturbances cost American businesses $119 billion per year.  In 2001, the International Energy Agency (2002) estimated that the average cost of a one-hour power outage was $6,480,000 for brokerage operations and $2,580,000 for credit card operations.  The figures grow more impressively for the semiconductor industry, where a two hour power outage can cost close to $48,000,000.  Given these numbers, it remains no mystery why several firms have already installed DG facilities to ensure consistent power supplies.

Perhaps incongruously, DG facilities offer potential advantages for improving the transmission of power.  Because they produce power locally for users, they aid the entire grid by reducing demand during peak times and by minimizing congestion of power on the network, one of the causes of the 2003 blackout.  And by building large numbers of localized power generation facilities rather than a few large-scale power plants located distantly from load centers, DG can contribute to deferring transmission upgrades and expansions—at a time when investment in such facilities remains constrained.  Perhaps most important in the post-September 11 era, DG technologies may improve the security of the grid.  Decentralized power generation helps reduce the terrorist targets that nuclear facilities and natural gas refineries offer, and—in the event of an attack—better insulate the grid from failure if a large power plant goes down.

Environmentalists and academics suggest that DG technologies can provide ancillary benefits to society.  Large, centralized power plants emit significant amounts of carbon monoxide, sulfur oxides, particulate matter, hydrocarbons, and nitrogen oxides.  The Environmental Protection Agency has long noted the correlation between high levels of sulfur oxide emissions and the creation of acid rain.  Because they concentrate the amount of power they produce, large power plants also focus their pollution and waste heat, frequently destroying aquatic habitats and marine biodiversity.  On the other hand, recent studies have confirmed that widespread use of DG technologies substantially reduces emissions:  A British analysis estimated that domestic combined heat and power technologies reduced carbon dioxide emissions by 41% in 1999; a similar report on the Danish power system observed that widespread use of DG technologies have cut emissions by 30% from 1998 to 2001.  Moreover, because DG technologies remain independent of the grid, they can provide emergency power for a huge number of public services, such as hospitals, schools, airports, fire and police stations, military bases, prisons, water supply and sewage treatment plants, natural gas transmission and distribution systems, and communications stations.  Finally, DG can help the nation increase its diversity of energy sources.  Some of the DG technologies, such as wind turbines, solar photovoltaic panels, and hydroelectric turbines, consume no fossil fuels, while others, such as fuel cells, microturbines, and some internal combustion units burn natural gas, much of which is produced in the United States.  The increasing diversity helps insulate the economy from price shocks, interruptions, and fuel shortages.

Table 1.1 Matrix of Distributed Generation Benefits and Services.


The benefits of distributed generation have been summarized well in a 2007 Department of Energy report, which can be found at http://energy.gov/sites/prod/files/oeprod/DocumentsandMedia/1817_Report_-final.pdf.   (U.S. Department of Energy, The Potential Benefits of Distributed Generation and Rate-Related Issues That May Impede Their Expansion [February 2007]).   The matrix above comes from that report (p. 1-11).

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