What are the drivers for Distributed Generation?
The drivers for Distributed Generation (DG) are multiple and symbiotic, however all have their basis in the common concerns to use primary energy as efficiently as possible, with the least possible environmental impact whilst ensuring that energy supply is secure, safe and supplied at an agreed quality universally and at a competitive cost.
What are the key advantages of Distributed Generation?
DG covers a broad range of technologies, including many renewable technologies that provide small-scale power at sites close to users. Highly efficient combined heat and power (CHP) plants, back-up and peak load systems are providing increasing capacity. All these technologies offer new market opportunities and enhanced industrial competitiveness.
On site production minimizes the transmission and distribution losses as well as the transmission and distribution costs, a significant part (above 30%) of the total electricity cost.
DG helps to bypass ‘congestion’ in existing transmission grids. In addition, it enables the use of waste heat (via CHP) improving overall system efficiency.
As the demand for more and better quality electric power increases, DG can provide alternatives for reliable, cost-effective, premium power for homes and business.
DG can provide customers with continuity and reliability of supply, when a power outage occurs at home or in the neighborhood, restoring power in a short time. In other words, convenience, security and peace of mind are potential major drivers after the several black outs experiences lately.
DG provides advantages also to customers with sizeable heat loads through the operation of CHP units and also to those with access to low cost fuels, for example landfill gas or local biofueland to those with favourable climatic conditions who can exploit renewable based units.
DG can also stimulate competition in supply; adjusting price via market forces. A DG operator can respond to price incentives reflecting fuel and electricity prices. In a free market environment DG operator can buy or sell power to the electricity grid - exporting only at peak demand and purchasing power at off-peak prices. DG can act as a physical ‘hedge’ against volatile electricity prices.
A liberalised market allows IPPs to contract with other producers and market actors for backup electricity, voltage or reactive power support, frequency responsive spinning reserve, black-start capabilities and other ancillary services.
DG can also offer additional value to the grid system operators by:
- Deferral of upgrades to transmission and distribution systems.
- Reduction of losses in the distribution system
- Provision of network support or ancillary services
Wide scale use of RES will reduce fossil fuel consumption and GHG emissions as well as noxious emissions such as oxides of sulphur and nitrogen (SOx / NOx ) therefore benefiting the environment.
From an investment point of view it is generally easier to find sites for RES and other DG than for a large central power plant and such units can be brought online much more quickly. Capital exposure and risk is reduced and unnecessary capital expenditure avoided by matching capacity increase with local demand growth.
The increased penetration of RES and other DG, together with higher energy efficiency will help security of supply by reducing energy imports and building a diverse energy portfolio.
The new technologies developed and the experience of implementing new energy management models will provide invaluable expertise and knowledge with immense export potential.
EU Policy towards the decentralised generation
- Meeting Kyoto Objectives: 8% CO2 reduction between 2008 and 2012 compared to 1990 level
- Liberalisation of internal market for electricity
- Improving Energy Efficiency
- Improving Security and Diversity of Supply
- RES and CHP Directives
- Towards the Hydrogen energy economy