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Distributed generation, or DG, describes a mode of electricity production that’s distinct from the centralized mode of electricity generation and transmission that has characterized the U.S. power grid for more than a century.
It’s easiest to understand distributed generation in contrast with traditional, centralized generation.
Since the introduction of electricity, consumers of electric power have typically purchased their power from a utilities company. Some of these utilities companies produce their own power with power plants they own and operate; others buy power from a power market or independent power producers. In either case, the production of electricity typically happens in larger “utility-scale” power plants that connect to the regional grid.
Centralized generation of electricity takes advantage of economies of scale: Large, specialized companies build and operate power plants, while utility providers manage the transmission of electricity to consumers whose consumption they meter and bill.
Distributed generation is different. DG relies on small-scale power generation systems that allow consumers near the power source to use the electricity it generates. For some consumers, a DG power system can reduce dependence on the electric grid to zero, because the power system they own can produce and store 100% or more of their energy needs. However, this doesn’t mean they’re completely disconnected from the power grid. These producer-consumers can still draw on the grid in the event their system goes offline, or if power needs surge above the system’s capacity. They can also sell excess power back into the grid when their own energy consumption doesn’t reach 100% of the system’s capacity.
Distributed generation can depend on a number of different strategies. By and large, the source of power is a type of renewable energy. The most familiar example is distributed solar generation.
Again, it’s easiest to understand distributed generation in contrast to centralized generation. Centralized solar power generation relies on large installations of thousands of solar panels across dozens or hundreds of acres of land. These utility-scale solar installations produce the majority of solar electricity generated in the United States.
In contrast, distributed generation relies on multiple small-scale power systems distributed across a wider geographic area. Although these systems may be very small, and produce as little as 1 kilowatt of energy per year, in aggregate these systems can produce significant amounts of electricity. The developing commercial & industrial solar segment, for example, could meet as much as 10% of U.S. electricity demand by developing solar assets on the rooftops of commercial buildings.
Another example of distributed generation is community solar. In a community solar project, subscribers pay monthly dues that support the operation of a solar power installation. The electricity produced by the community solar project is then sold back to the grid, and subscribers receive credits on their utility bills in exchange for their contributions to the project.
Community solar projects allow people who would otherwise not be able to take advantage of renewable energy—for example, because they live in a house or a building that is unsuitable for solar panels—to support the use of renewable energy in their communities.
Distributed generation comes with several important advantages:
By locating electricity generation closer to consumers, DG reduces stress on the electric grid. In the U.S. the electric transmission grids suffer from outdated technology as well as grid congestion, which is when demand for electricity causes power lines to be overloaded.
In some cases, as with residential solar and C&I solar, the owner of the renewable DG asset uses the electricity it produces to reduce the amount of electricity they need to draw from the grid. This leads to lower electricity bills and, for companies that must publicly report their emissions, a more sustainable business.
Large-scale blackouts occur when power lines are damaged or rendered inoperable, often as a result of severe weather. Distributed generation minimizes disruptions in consumers’ power supply by multiplying and dispersing the sites of power generation.
In the U.S., the power grid is a source of national security concern. An attack on the power grid by a foreign adversary or terrorist could lead to disruptions in the power supply that inconvenience or endanger Americans. Long-lasting disruptions could also have other national security implications, as well as economic consequences.
Distributed generation does not remove these threats, but it can reduce the scale of any potential consequences by distributing the production of electricity across many smaller-scale producers.