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Technology: Generating Electricity For Own Use - Is It For Everyone?

Nikhil Gandhi

High oil prices and the Energy Policy Act signed by President Bush have ignited interest in alternative energy resources. Renewable energy technologies such as wind power, solar energy, fuel cells, bio fuels and microturbines will be encouraged. These technologies can produce power at or near a user’s location instead of a centralized location (traditional power plants); therefore, these are often called distributed generation (DG) technologies. This article explains the concept of DG and its benefits, and provides guidelines for users to ask the right questions for selecting its appropriate application.

DG is not a new concept [1].  Emergency generators used for backup power generation are a form of distributed power generation, but they are used only in an emergency and remain an underutilized asset that does not benefit the electric distribution system or users. Policymakers have become interested in DG as the lead time to build a large new power plant has increased, electricity transmission and distribution (T&D) networks have become congested, and building additional T&D capacity has also become expensive. DG solves some of these problems because it can be installed faster and closer to the location where electricity is being used; thereby, alleviating congestion in the T&D infrastructure. For electricity users, generating own power improves the reliability of operation, lowers electric bills especially during the peak usage period, and fully or partially meets the heating and cooling needs. DG owners might be able to sell surplus power back to the utilities.

While benefits to users and electric distribution utilities are obvious, DG is not widely adopted yet because many obstacles remain that makes it appropriate only under specific conditions.

Despite the hype about new power generation technologies, not all of them are cost-effective today, and some are not mature enough for a wider use. Among renewable technologies, only wind power can be competitive with electricity produced by traditional power plants. Other renewable technologies are not competitive without substantial financial incentives from state or federal programs. Conventional technologies such as reciprocating engines, steam turbines, and gas turbines are proven and cost-effective but noise, emissions, average electric conversion efficiency (unless heat is usable), reliance on fossil fuels, and maintenance burden discourage their adoption. Finally, selling surplus power back to the grid requires regulations that would mandate electric distribution utilities to purchase DG power, but users must comply with the distribution utilities’ guidelines for interconnection with their T&D system.

There are, however, many applications where users can benefit from installing DG equipment. The questions they must ask are:

1.    Will I benefit from generating power year-round or only during the peak time when it costs more to use electricity?
2.    Can the heat generated during power production be used?
3.    Is secure backup power required all the time?
4.    Are cost-effective and mature DG technologies available?
5.    Can surplus power be sold to the distribution utility?
6.    Will the installation meet regulatory requirements?

It would be prudent to consult a professional before making a decision on installing distributed power generation equipment.


[1] California Energy Commission defines distributed generation as: “Distributed Generation is electricity production interconnected to the T&D system that is on-site or close to the load center.”

(Nikhil Gandhi is President of Strategic Energy Technologies, Inc.(SET) — an energy consulting firm in Acton, Massachusetts. He has over 21 years experience in consulting for electric and gas utilities on energy-related issues. He holds MBA from IIM, Ahmedabad, India, MSIE from Oklahoma State University, and BSEE from Gujarat University. He is an adjunct faculty in operations management at Bentley College. )

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