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Distributed Generation: Implications for Restructuring the Electric Power Industry

Fortnightly Magazine - June 15 1995

(em which are expected to operate at much higher efficiencies, generate lower emissions, and produce higher grade recoverable waste heat than PAFCs. Although utility-scale demonstration projects are scheduled to come on line late this year, serious commercialization is not expected before 2000.

Finally, a number of third-generation technologies are being actively pursued. An intriguing example is the solid oxide fuel cell (SOFC). Compared to carbonate fuel cells, SOFC technologies appear inherently less complex, more modular (potentially in sizes that will permit household applications), more efficient, and capable of producing higher-grade useful heat. The technology lags a few years behind carbonate fuel cells, but SOFCs could be to central power plants what the PC is to mainframe computers.

Advanced small gas turbines with more efficient, less polluting designs are generating considerable interest. Several demonstration projects are expected in the next two or three years. Targeted product sizes range from 200 Kw to more than 20 Mw, but there are also plans to develop modular combined-cycle units of 1 to 5 Mw. Because of their high power density, small GTs are ideally suited for mobile resource applications. The new technology could prove quite effective for peak-shaving applications and cogeneration projects.

New energy storage systems are evolving in three distinct directions: batteries, supermagnetic energy storage systems (SMES), and flywheels. Two advanced battery technologies seem most suited for utility applications (em the sodium-sulfur and zinc-bromine systems. Both systems promise improved performance (80 to 85 percent round-trip efficiency), two to four times the energy density of current battery technologies, and lower operating and maintenance costs. Certain technical problems remain, however, including component reliability and safety concerns.

SMES technology offers high-efficiency storage (90 to 95 percent), high reliability, extended durability (30+ years), relatively safe operation, and considerable size flexibility. Its principal drawbacks are high capital cost and low energy storage density. Flywheel technology might soon combine the desirable qualities of SMES systems with an energy storage density that may well exceed the most advanced battery system. The future of flywheel utility applications has been significantly enhanced by the development of high-temperature superconducting materials, advanced power electronics, and high-strength composite materials.

Strategic Industry Impacts

The potential impacts of distributed generation on the future of electric utilities can be explored in terms of two bounding scenarios.

Scenario 1: The vertically integrated utility persists and manages to absorb a substantial increase in distributed generation projects. Most of the generators are independently owned and recruited through competitive bids. To minimize the cost of service, utilities will have to integrate their distribution and subtransmission investments with modular resources. Gradually, the system becomes too complex and increasingly difficult to manage. Further, regulatory oversight becomes regulatory micromanagement; commissions are increasingly drawn into the local distribution planning process.

The utility can improve matters by reorganizing into autonomous geographic units. This process will mark the birth of the horizontal utility. However, internal reorganization is not likely to deter regulatory micromanagement. Regulators will continue to oversee the determination of resource needs, system upgrades, and future avoided costs at the distribution level. Commissions will face nagging problems in ensuring