The electricity system in the United States received renewed attention after the August 2003 blackout that affected more than 50 million customers across the Northeast United States and caused...
federal and state energy programs and certain state regulatory incentive programs are creating new opportunities for DER deployment. Applications have expanded and are now being pursued in three realms: end-use, grid support, and energy supply.
At the end of 2003, the United States had an estimated 234 GW of installed DER (defined as generation less than 60 MW). However, 81 percent of this capacity comprises small-to-medium reciprocating engines serving end-user needs for emergency/standby applications. Only 30 GW is interconnected with the electrical T&D system. DER capacity that functions as part of the grid (grid-connected) accounts for only 3 percent of the U.S. electric grid capability of 953 GW. 1
Figure 1 illustrates the total interconnected DER capacity in the United States, and Figure 2 illustrates how total DER capacity is distributed by technology type and application. Among the technologies, reciprocating engines dominate the current landscape, followed by combustion turbines. On the applications side, emergency/standby applications are in the majority, followed by combined heat and power (CHP). The United States has about 4.4 GW of installed wind generation and less than 0.5 GW of photovoltaic systems, and increasing trends for continued deployment over the next 10 years are due primarily to state-mandated renewable portfolio standards.
DER technologies are evolving toward decreasing costs, increasing efficiency, lower emissions, higher reliability, and more integrated and packaged systems, which are easier for plug-and-play interconnection.
Well-established technologies, such as reciprocating engines and combustion turbines, are making incremental improvements in cost, efficiency, and reliability, and are now able to achieve single-digit NOx emissions cost-effectively.
Energy storage technologies, which offer promising new options that span many future applications, are an important finding of the white paper. In some cases they may avoid the fuel cost and emission constraints of generation technologies. In addition, due to synergies with the transportation sector, development and improvement of energy storage technologies may be accelerated.
Costs and Benefits
The costs to design, purchase, and install DER remain critical-and often prohibitive-factors in the overall economics of distributed power options. Financing alternatives, high operational efficiency, and low- or zero-fuel costs can mitigate the upfront capital costs, but the fact remains that total capital equipment costs for DER are expensive and need to be significantly reduced for larger market impacts to occur.
Figure 3 summarizes the total cost of energy for several DER technologies, sorted from lowest-cost to highest. While in practice these costs are very site- and location-specific, the assumed costs are within a representative range of industry reported technology costs. The sensitivity range is driven by a combination of capital cost, financing cost, fuel costs, maintenance costs, and waste heat recovery. 2 These results also take into account capacity factors, which are based on a range of expected operations for each technology. This comparison confirms that, while the costs of DER do not compare with the all-in cost of a 500-MW combined-cycle gas turbine, some DER can be cost-effective in comparison to the delivered cost-of-energy to end-users (retail rates) depending on rate structure and level, as well as customer load factor. Also, given the