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Distributed Generation: Last Big Battle for State Regulators?

Fortnightly Magazine - October 15 1999

services, separate DG from distribution services, or take other measures to mitigate vertical market power.

Many stakeholders filed comments attempting to separate DG and distribution competition (DC) in the debate because they say DG can be solved more quickly than the DC argument.

Reliability: A Need for


SCE says that too many different types of DG would degrade the reliability of the system. Reliability of the distribution system ultimately depends upon SCE's controlling every meaningful aspect of design and construction, the utility says in comment filings.

But SDG&E asserts that degradation of safety can be prevented by simple adherence to common design, construction, operation and service standards.

Furthermore, Ake Almgren, president and chief executive officer at Capstone Turbine Corp., says interconnection requirements need to be standardized across the state and streamlined. In addition, he says, these requirements need to reflect both the interconnection technology and the size of the unit being interconnected to the grid.

"Interconnection of small distributed generators (less than 300 kilowatts) can be made in a safe and simple manner given modern technologies such as a solid-state digital power controllers," Almgren states in comment filings. "This technology [used by] Capstone enables the interconnection to the grid to be controlled by a microprocessor, which can be programmed to meet a full range of protective requirements. Moreover, in grid-connect mode, this technology is configured to use the grid as its voltage source. Islanding cannot occur because the generator will not operate without a voltage source supplied from the grid."

Almgren says interconnection of DG to the grid should be simple and the interconnections should be tested against a specified standard, rather than going through time-consuming case studies.

However, critics of forced standardization fear a hodge-podge of rules driven not by technical requirements, but resulting from outdated regulatory policies.

According to one analyst, "Most of the requirements were developed in response to section 210 of the Public Utility Regulatory Policies Act of 1978 that required the UDCs to interconnect with [qualifying facilities], namely, cogenerators and small power producers meeting the Federal Energy Regulatory Commission's ownership, operating and efficiency standards."

He adds, "These standards were developed in the early to mid-1980s, and they still rely on expensive electromechanical devices that are no longer state-of-the-art. Tremendous advances in power electronics and computer systems can allow system designs that are an order of magnitude less costly than the specified equipment."

Yet Kurt E. Yeager, president and chief executive officer of the Electric Power Research Institute, asserts that local generation is "transforming today's radial, electromechanically controlled, open access, smart network."

Stranded Assets: Is the Grid Next?

Distributed generation could render obsolete billions of dollars worth of utility distribution networks in California, say analysts, but not without a fight from utilities. In fact, UCAN's Shames says that the stranded-cost wars over generation will pale in comparison to what we can expect if DG renders distribution networks obsolete.

Is the CPUC responsible for the viability of utilities?

"You have just raised the ugly head of Stranded Cost II. It is not a pretty picture to envision a