Distributed Generation – an Old Idea Reconsidered

Development of Central Station Generation

In 1882 Thomas Edison brought electric light to an office building located in New York’s financial district. He used electricity generated at a dynamo located close the point of use. While he did not know it at the time, his use of a small generator located close to the point of use would one day be referred to as “distributed generation.”

Edison's first form of distributed generation
Edison’s Pearl Street Generating Station
Source: alchetron.com

Edison hoped to “light the world” with duplicates of his business model. However, his use of multiple small generators was expensive and inefficient. George Westinghouse saw the shortcomings of Edison’s system. With Nicola Tesla’s help Westinghouse developed an alternating current system that used large remote central station generating plants. Westinghouse used transformers and long distance high voltage transmission lines to deliver the electricity generated by these plants . Because Westinghouse’ system was much more efficient than Edison’s he won the Electric Current War.

Remote central station power plants using a complex delivery system of transmission lines are now the standard in the industry.  And distributed generation fell out of favor for more than 100 years.

Flaws of the Central Station Model

The current system is not, however, without its own problems. The fossil fueled central station plants emit pollution and greenhouse gases. And, because of their size, the central station plants must be added in large chunks, often before they are needed by utility customers.

The transmission system used to deliver the power is also an issue. It requires rights-of-way in controversial areas, is maintained by utilities with varying levels of commitment to that maintenance, is subject to potential outages due to weather, faulty equipment and terrorist attacks and results in energy losses of as much as 10%. Even with these flaws, however, for more than 100 years, Westinghouse’ system has been used for the delivery of reliable and affordable electric service.

Reconsideration of Distributed Generation

Reliance on large central station generation may, however, be changing. Distributed generation, similar to what Edison used in his early lighting systems, may be an efficient substitute for at least some portion of the current system.

Distributed generation can come in the following forms:

  • Back-up generation that ensures continued operation during an outage of the larger grid. Many health care facilities have historically used this type of distributed generation. But more residential and commercial facilities are starting to adopt its use.
  • A combination of generation sources (possibly including small scale thermal generation along with one or more renewable resources) that can provide service to a major institution such as a university, a hospital or a government campus, as well as the surrounding community. This is sometimes referred to as a micro-grid. It can operate either along with, or independent from, the larger grid.
  • Site specific generation, such as an industrial facility’s cogeneration plant or residential roof top solar panels where a portion of the energy generated can be sold to the larger grid.
  • Behind the meter generation where the output is used solely to reduce the owner’s purchases from their local utility.
Rooftop solar as distributed generation

Source: weforum.org

The United States Department of Energy paper entitled The Potential Benefits of Distributed Generation and Rate-Related Issues That May Impede Their Expansion provides a more detailed discussion of the various forms of distributed generation.

Distributed Generation Can Provide Both Individual and System Benefits

Customers who see a benefit are likely to install distributed generation for their own use. But, distributed generation can also provide benefits to the overall utility system in the form of reduced losses, reduced pollution from central station thermal plants and improved system reliability.  There should be a way to encourage installation of distributed generation to provide these benefits. But, utilities like to rely on their own large scale generation plants. So, historically, they have discouraged customers from installing distributed generation.

In recent years, however, regulatory agencies have reduced the utilities’ ability to discourage customer installed distributed generation. And utilities seem ready to capitalize on the potential benefits.

Utilities will not, however, fully realize the system-wide benefits of distributed generation until they fully incorporate their operation into their system operations and planning. And that will not occur until they fully implement the Smart Grid.


I. David Rosenstein worked as a consulting engineer and attorney in the electric industry for 40 years. At various times during his career he worked for utility customers, Rural Electric Cooperatives, traditional investor owned regulated utilities and deregulated power generation companies. Each of his posts in this blog describes a different aspect of the past, present or future of the electric industry. 

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