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Distributed Generation: Who Benefits?

Distributed Generation
Fortnightly Magazine - March 2005

the value of ancillary services that are available from DER (, serving as spinning reserve, supplying variable reactive power to the system). Thus these would not be included in any customer's list of DER benefits, although they might be appreciated by a utility owner. The answers covered a broad range, as shown in Table 1.

These results were examined with respect to ownership category, as shown in Figure 4. The third-party category and customer classes were strongly influenced by the opportunity to use cogeneration and reduce costs. Some of the third-party systems were older ones installed under Public Utility Regulatory Policies Act (PURPA) regulations. Others were newer systems that were installed and operated by service companies on the customers' sites, typically providing a combination of thermal and electrical energy to the customers.

In addition to using cogeneration, customers were focused on improving reliability. Approximately 10 percent of the customers cited the need to meet peak demand, guard against variable energy prices, and increase their generation capacity. Some of the customers installed their DER systems as a part of an overall increase in plant capacity, or as a part of a broader renovation project required to meet environmental regulations or to upgrade or expand the plant. Some of the customers realized additional savings by switching to lower-cost interruptible rate schedules, relying on their DER unit for power during any such interruptions.

Utility owners were most strongly motivated by four major reasons: meeting peak demand, improving reliability, protecting themselves from price instabilities, and meeting grid constraints. Many of the utilities' peak-demand installations were classed as emergency generators, and they were often leased units. Other utility-owned units were located at customer sites, providing back-up power to those customers but dispatchable by the utility to meet operational needs. In a few cases, customer-owned units were controlled by utilities in a similar fashion.Because the larger review focused on the DER system owner/operators, it could not reveal benefits to other parties. Therefore, four in-depth case studies were conducted to explore benefits that are typically outside the scope of a DER cost-benefit analysis. For each of these cases, the DER technology, load, and alternative utility choices were characterized. The system costs, including both capital and operating expenses, were examined. Associated risks, such as the uncertainty of future fuel supplies or shifting environmental regulations, were explored. Considering all these factors, the benefits to the system owner/operator, to local utilities, and to other ratepayers were addressed.

The first case study described a narrow coastal island where summer vacationers increase the population by a factor of six for two to three months per year, and the summer peak load during most years is about 250 percent of the average daily peak. Exacerbating this seasonal load swing is a weather cycle that leads to a peak every third year that is about 50 percent higher than the peak during the other two years. An aging subtransmission system used to serve this island, composed of five 23-kV submarine cables, was very near its maximum load during these summer peaks; and contingency requirements could not