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Distributed Generation: Who Benefits?

Distributed Generation
Fortnightly Magazine - March 2005

reliability for the university, and especially for the hospital. It also enhanced the reliability of the local distribution system, as was demonstrated in 1998. At that time, the local electric system suffered a short period when a number of distribution lines were loaded near capacity and therefore experienced low voltage and were close to tripping. To circumvent a power outage to the entire Nashville Electric Service system, the utility asked Vanderbilt and other DER customers to generate as much power as they could and reduce their load to the utility. The system collapse (tripping of lines on overloading) was averted, at least partially because of these DER resources. The utility recognized that its system benefited from the DER installations during this occurrence. However, the utility felt that the benefits would have been greater had they had control over these DER generators, such as their location, size, and operation.

This final case study clearly demonstrated that DER can provide critical peak load support to a grid-constrained system and thus prevent outages to a localized region that extends beyond the DER system owner's boundary.

This overview has identified two major categories for DER. Many systems were installed to meet base-load growth or replace central generation; these typically employed cogeneration and were recognized as reducing overall energy costs. Others were installed to meet peak loads, sometimes by a customer to avoid peak demand charges and sometimes by a utility to meet peak demand and defer transmission system reinforcement. Reliability benefits were cited by many DER owners in both categories. Economic benefits to society are indicated by the frequent discussion of using DER to achieve a measure of price stability and by the overall economic efficiency reflected by these significant investment decisions. Environmental benefits are complex and may not occur in the same geographical location as the DER. They depend on the selected DER technology, fuel, and efficiency; the displaced central production technology, fuel, and efficiency; and the relative locations of these two competing power sources.

The case studies demonstrate the difficulty of determining the value of DER benefits that accrue to anyone other than the owner. Most current market structures are incapable of reflecting the ancillary benefits that DER can supply. The case studies also demonstrate a reluctance on the part of utilities to recognize or acknowledge the benefits to their systems, even when there is clear evidence of a grid deficiency or when a DER operator increases its output in response to a utility's request. In addition, utility input is crucial in determining the value of location-specific transmission and distribution deferrals due to DER installations. In the next stage of this project, a regional model, with a census of available power plants and a comparative technology database, is used to assign market values to both reliability and environmental benefits.

Endnotes

  1. Joseph A. Orlando, Cogeneration Design Guide, American Society of Heating, Refrigerating and Air-Conditioning Engineers, Inc., Atlanta, 1996.
  2. F. William Payne, Ed., Cogeneration Management Reference Guide, Fairmont Press, Inc., Lilburn, GA, 1997.
  3. Etan Z. Gumerman, et al., Evaluation Framework and Tools for Distributed Energy Resources,