Dispersed Generation - Future Evolution of Distribution System

Published: 5 Nov 2004

By Balaji R, Research Analyst


Can Centralized Power Plants Stand-Alone?

The United States of America is the world's largest energy producer, consumer, and net importer. It also ranks eleventh worldwide in reserves of oil, sixth in natural gas, and first in coal. The energy sector is the key sector in the U.S. economy, as it contributes $475.63 billion to U.S. GDP as on 2003. Energy consumption is expected to increase more rapidly than domestic energy production through 2025. According to the Energy Information Administration (EIA), the demand for energy is expected to grow by 43 percent through 2025. The Distributed Energy and Electric Reliability Program (DEER) of the Department of Energy (DOE), has set a national goal for DEER to capture 20 percent of new electric generation capacity additions by 2020 (Office of Energy Efficiency and Renewable Energy 2000).

Competition as a result of deregulation is driving utilities and consumers to seek out alternate means to reduce the cost of electricity. The centralized model is losing its viability on the account of large-scale investment and deregulation. It becomes an uphill task to supply electrical power with high reliability in the conventional power system structure. The utility industry is expected to shift generation slightly away from the traditional central station philosophy to decentralized generation.

Decentralized Generation

Decentralized Generation is the production of electricity at or near the point of use, irrespective of size, fuel or technology. Decentralized electric generation will reduce capital investment, lower the cost of electricity, reduce pollution, reduce production of greenhouse gas, and decrease vulnerability of the electric system to extreme weather and terrorist attacks. Decentralized Generation can be distributed or dispersed and can be powered by a wide variety of fossil fuels.

  • Distributed power generation is any small-scale power generation technology that provides electric power at a site closer to customers than central station generation.

  • Dispersed generation is a decentralized power plant, feeding into the distribution level power-grid and typically sized between 10 and 150 MW.

Distributed generation is used mainly for onsite power generation. Dispersed generation is strategically located on the transmission grid to overcome bottlenecks in the transmission and distribution system and to improve the stability of the system.

Features of Dispersed Generation

Dispersed generation reduces both power transfers between regions of the power system and power imbalance in each region. Dispersed generation also allows for a uniform distribution of the overall system by responding fast to demand variation. Dispersed generation offers more flexibility and can be dispatched in incremental blocks of power as needed. It provides reliability and stability to the system. Total failure can be avoided when the load centres are supported by dispersed generation. A major outage such as the one experienced in August 2003 could have been avoided with the help of dispersed generation powered by reciprocating engines, by bringing power back online within 10 minutes.

Drivers and Challenges for Dispersed Generation


  • Low cost of electricity -. The fact that the consumer is benefited with low cost of electricity could well be the key driver for dispersed generation.

  • Geographical factors- Existence of transmission congestion and high price in major metropolitan areas provide ample potential for dispersed generation.

  • Saving on outage cost - The rising demand for premium power may force many industrial and commercial consumers to switch to dispersed generation to protect against the risk of power outages (Figure 1).

  • Increasing demand in intermediate sector - Flexibility to meet intermediate load accelerates the demand for dispersed generation.

  • Low payback period- as utility providers are worried about investing for long-term, dispersed generation calls for lesser investment and lower payback period.















    • Utility attitude- As utility owners are worried about the recovery of stranded assets, they offer resistance in implementation of dispersed generation

    • Consumer perception -As there are a few success stories concerned with dispersed generation in the United States, consumers are apprehensive about the future of dispersed generation.

Industry Challenges

  • Government regulations (state and federal) – Future development of dispersed generation markets largely depends on the regulator’s policy and framework.
  • Grid interconnection issues - various issues like safety, lack of uniform standards, impact on grid snags dispersed generation.

Wärtsilä’s Activities in Dispersed Generation

Capitalizing on the potential available in North America for decentralized generation, Wärtsilä Corporation has set up many dispersed generation plants. The hot and dry conditions in mountain states and existence of transmission congestion and high price in major metropolitan areas provide ample potential for Wärtsilä’s dispersed generation. One of the success factors for Wärtsilä’s Plains End project is its reciprocating technology, which demonstrated consistent heat rate and output at the ‘mile-high’ elevation. The engine remained less susceptible to change in ambient condition. During the performance test at the site, Plains End units achieved 44.2 percent efficiency (LHV) at full load, and 39.7 percent efficiency (LHV) at 50 percent load. Wärtsilä’s core competencies such as a high-level standardization, fast-track delivery and full-service capabilities, enabled Wärtsilä to capture a significant share of the North American market for dispersed generation peaking plants

The Future

While decentralized generation is unlikely to replace central power entirely, the share of decentralized generation in U.S. power generation will increase dramatically in coming years, with important benefits to all segments of the population and significant environmental benefits. While dispersed generators are unlikely to compete with central power station, customers will be attracted by, the desire for reliable power that could be the driving factor for the future of dispersed generation. As the quality of the centralized power system as a whole, and its ability to transmit power to the load where and when needed is questioned, a diverse portfolio including dispersed and distributed generation will serve to supplement and increase the reliability of the overall system.



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