In a January 2013 report, EEI said fast-growing distributed energy could undermine the utility business model. Wall Street is paying attention.
Distributed Generation: Hastening Genco Obsolescence?
DER: This final installment of Oak Ridge National Laboratory's series on distributed energy resources investigates efficiency, the environment, and generation displacement.
Distributed energy resources (DER) have been touted as a clean, efficient way to generate electricity at end-use sites, potentially allowing the exhaust heat to be put to good use as well. However, in a time when new combined-cycle (CC) plants are being mothballed and older plants retired because of high gas prices and lack of demand, does it make environmental sense to use DER? Does DER displace other, cleaner generation technologies, or does it compete against older, dirtier power plants instead?
If DER systems are built, then older generating plants may be retired sooner, removing some of the worst polluters. Or it may be that DER does not directly compete against either new or old plants at the capacity planning decision-maker level. If so, increased DER simply raises reserve margins and reduces the amount of time that various central plants operate, with a mixture of results.
A critical question for policymakers is whether DER results in more pollution or less. The key factor in answering the question is the type of power production displaced if DER is added. For every kilowatt-hour produced by DER, a kilowatt-hour (or more with losses) is not produced at other plants. Production from different plants will be reduced at different times. If enough DER capacity is created, some power plants will be retired or some plants will not be built, so not only their production but their capacity also will be displaced. The change in capacity will affect operating schedules at other plants. The complex interactions within the market over time make it difficult to claim that DER displaces any single other capacity type. Of course, the DER characteristics are also an important factor in determining the net impact of any displacement.
To address the multifaceted problem of DER displacement, the Department of Energy Distributed Energy Program recently asked Oak Ridge National Laboratory to examine the changes in an electric system resulting from the introduction of a relatively large amount of DER. We chose to model the Mid-Atlantic Area Council (MAAC), one of the reliability councils in the North American Electric Reliability Council. We used the Oak Ridge Competitive Electricity Dispatch model to simulate the addition of 2,000 MW of DER into the region with projected 2006 demands. We could then see how other plants changed their operations, and the consequent changes in energy use and air emissions.