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Distributed Generation: Hype vs. Hope

Separating myth from reality in identifying DG applications.
Fortnightly Magazine - June 1 2002

their customers. But over-selling DG as a universal alternative is dangerous, since the greater the hyperbole, the more likely that expectations for DG will be unmet. Such a situation could result in wholesale rejection of DG, even when its benefits are clear.

We believe the best approach for utilities, regulators, and customers will be to identify those situations where DG applications can have the most value and focus development efforts there. Our work has shown that, when load uncertainty is great but the overall trend in load growth is relatively small, DG is likely to have the greatest benefits. In this era of increasing competition and greater energy market volatility, we expect those conditions increasingly to be found.

  1. , Opinion No. 01-5, October 26, 2001.(N.Y.P.S.C.)
  2. Oddly enough, in the 2002 legislative session, a bill was introduced that would defined some fossil-fueled DG applications as "renewable energy" sources.
  3. The approach we use is called "dynamic programming." It is a mathematical optimization technique that forms the basis for the solution of virtually all dynamic investment problems, and which is often used in "real options" analysis.
  4. For a description of this model, see S. Chapel, C. Feinstein, P. Morris, and M. Thapa, . 1999. EPRI. See also, C. Feinstein, P. Morris, and S. Chapel. "Capacity Planning Under Uncertainty: Developing Local Area Strategies for Integrating Distributed Resources." , Special Issue on Distributed Resources. 1998, 85-110.
  5. A complete discussion can be found in C. Feinstein and J. Lesser. "Defining Distributed Resource Planning." , Special Issue on Distributed Resources. 1998, 41-62.
  6. An analysis of the difference between this approach and the avoided cost method is given in J. Lesser and C. Feinstein. "Electric Utility Restructuring, Regulation of Distribution Utilities, and the Fallacy of 'Avoided Cost' Rules." 15:93-110 (1999).
  7. See also C. Feinstein, Strategic Role of Distributed Resources in Distribution Systems, EPRI, Palo Alto, CA: 1999, TR-114095.

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