Benjamin K. Sovacool
Centre on Asia and Globalisation,
Lee Kuan Yew School of Public Policy,
National University of Singapore,
469C Bukit Timah Road,
Singapore 259772, Singapore
e-mail: bsovacool@nus.edu.sg
Distributed Generation „DG… and
the American Electric Utility
System: What is Stopping It?
Despite the immense environmental, technical, and financial promise of distributed gen-
eration (DG) technologies, they still constitute a very small percentage of electricity
capacity in the United States. This manuscript answers the apparently paradoxical ques-
tion: Why do technologies that offer such impressive benefits also find the least use?
Going beyond technical explanations of problems related to system control, higher capi-
tal costs, and environmental compliance, this paper focuses on sociotechnical barriers
related to utility preferences, business practices, regulatory bias, and consumer values.
The approach helps us understand the glossing over of DG technologies, and identifies
the impediments that policymakers must overcome if they are to find wider use.
DOI: 10.1115/1.2824296
Introduction
For the past three decades, the American electric utility system
has faced immense challenges. Once viewed as a stable and se-
cure consortium of publicly regulated monopolies that produce
and distribute electricity, the system has weathered market restruc-
turing only to face the ever-present risk of natural disasters, price
fluctuations, terrorist attacks, and blackouts. Despite the conven-
tional wisdom learned by policymakers during the energy crises of
the 1970s, the modern electricity sector continues to face many of
the same problems that existed 30 years ago: increasing levels of
pollution, growing vulnerability and inefficiency of transmission
and distribution networks, and rising electricity prices related to
disruptions and interruptions in fuel supply.
Distributed generation DG technologies offer policymakers a
unique way to respond to these challenges. DG technologies pro-
duce decentralized and modular power close to its point of con-
sumption. Advocates often portray such technologies as serving
the needs of society because they produce fewer harmful by-
products. Some system operators have begun to deploy DG sys-
tems to relieve congestion on the transmission grid, and DG tech-
nologies can minimize normal transmission losses because they
generate electricity close to the end user. A few of these new
technologies even produce power at lower prices than do conven-
tional technologies. The greater use of DG technologies could
therefore play an important role in the nation’s overall energy and
foreign policies.
Yet, despite their promise, such generators still constitute a very
small percentage of electricity generation capacity in the United
States. While the U.S. Department of Energy DOE estimates
that more than 12 10
6
DG units are installed across the
country—with an aggregate capacity of 200 GW—most of these
provide electricity only during emergencies when grid-connected
power is unavailable 1. While users operate around 82,000 MW
of this capacity for functions in addition to the provision of
backup power amounting to approximately 8.6% of U.S. genera-
tion2, less than 1% of industrial DG systems are used to pro-
duce electricity to meet peak demand or operate continuously 3.
The Energy Information Administration estimated that overall
only 0.9 GW of DG capacity operates continually in the United
States 4. Similarly, penetration forecasts using the Energy Infor-
mation Administration’s National Energy Modeling System
project that DG technologies intended to provide continuous
power will grow to just 3.0 GW of power in 2025, or 0.25% of
total estimated U.S. capacity 5. Tom Casten, former Chair and
Chief Executive Officer of Primary Energy, a manufacturer of fuel
processing cogeneration steam plants, notes that even though DG
technologies can reduce energy costs for industrial firms by more
than 40%, such generators remain “the exception instead of the
rule” 6.
This paper attempts to answer the apparently paradoxical ques-
tion: If DG technologies really offer the electric utility industry so
much, why are they the least used? An examination of the history,
culture, and social interests facing the community of electricity
producers and users helps explain why the new technologies have
seen little use. Instead of emphasizing only the technical aspects
of energy systems, this manuscript focuses on how utility manag-
ers, system operators, business owners, and ordinary consumers
view DG technologies. The study’s approach not only helps us
understand the reluctance to employ DG technologies but also
suggests ways of overcoming the barriers faced by their advo-
cates.
Conceptualizing Distributed Generation
The notion of “DG” refers to an approach to generating power
and a wide variety of electrical generating technologies. As an
approach, DG entails producing power on-site and close to the
end user 7. Such a technique emphasizes the deployment of
small-scale generating facilities, often having installed capacities
ranging from a few kilowatts providing emergency backup power
to fifty megawatts powering thousands of homes. DG technolo-
gies tend to be owned not just by utilities or traditional power
providers but also by a variety of stakeholders including residen-
tial owners, commercial enterprises, and industrial firms. In the
Netherlands, for instance, DG technologies are classified as dis-
persed production units that are small from 10 kW up to about
10–20 MW and located near the consumption of energy 8.
Madlener and Wohlgemuth further distinguish DG technologies
by their objectives, modes of operation, and location. They note
that DG units can provide power for almost any objective and
from any location compared to centrally generated and bulk trans-
mitted power. They can utilize many modes of operation, running
as base-load generators, peaking units, or emergency backup fa-
cilities. They can be placed almost anywhere on the transmission
system, from the low-voltage end of distribution system to place-
ment at or near load centers 9.
Contributed by the Petroleum Division of ASME for publication in the JOURNAL OF
ENERGY RESOURCES TECHNOLOGY. Manuscript received May 25, 2007; final manu-
script received September 1, 2007; published online January 25, 2008. Review con-
ducted by Dan Flowers.
Journal of Energy Resources Technology MARCH 2008, Vol. 130 / 012001-1 Copyright © 2008 by ASME
Downloaded 27 Jan 2008 to 128.173.127.127. Redistribution subject to ASME license or copyright; see http://www.asme.org/terms/Terms_Use.cfm