Distributed Generation (DG) is an approach that many electricity consumers are now considering when addressing their generally increasing total electricity costs. Distributed Generation is a small-scale electric generating facility that is located at or close to the end-user’s point of delivery.This is opposite of most centralized models where power is transmitted at a high voltage over transmission lines for customers’ consumption. Distributed generation includes multiple, local, small-capacity generators that produce the power where it will be used. They can be connected to, or separate from, the larger power grids, and can handle loads as small as 3 to 5 kilowatts. There are many types and sizes of DG, including but not limited to, Combined Heat and Power (CHP) plants, installed wind turbines, and increasingly, photovoltaic solar with battery storage. In a December 2013 report, the Energy Information Administration (EIA) said that growth in solar photovoltaic capacity and other types of distributed generation has been a factor in generally flat electricity sales. It further added that “growing installed capacity of behind-the-meter sources of generation (largely from rooftop solar) is displacing some electricity sales that would otherwise occur.”
While Distributed Generation can over time reduce a customer’s direct electricity costs, there is the added benefit of improved reliability and security from the instability of an aging electricity grid infrastructure. It also offers customers the opportunity of increased flexibility to respond to price signals from the grid in areas where a pool price is disseminated in a transparent form, using distributed generation when grid prices are at their highest. Additionally, it can also help a customer reduce their capacity rating which is important in an environment where capacity costs are becoming a larger component of a customer’s electric bill. There are many issues to consider when contemplating the installation of distributed generation and each circumstance will have its own cost curves, logistics, possible tax credits and a particular payoff timeline. We just want our readers to be aware that distributed generation installation is becoming more cost-effective and that a review of a distributed generation solution should be something larger electricity users should consider as part of a risk management strategy when addressing their ongoing energy needs.