Distributed Generation – an Old Idea Reconsidered

Development of Central Station Generation

In 1882 Thomas Edison lit his first light bulbs in a office building in New York’s financial district. His source of electricity, a dynamo located close the point of use, was an early form of distributed generation. Edison hoped to “light the world” with duplicates of this model. However, Edison’s use of multiple small generators was expensive and inefficient.

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

George Westinghouse saw the shortcomings of Edison’s system. With the help of Nicola Tesla he developed an alternating current system that relied upon large remote central station generating plants whose electricity was delivered with transformers and transmission lines to multiple customers. Because Westinghouse’ system was much more efficient than Edison’s he won the War of the Electric Currents.

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

This current system relying on large central station power plants 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, for more than 100 years, Westinghouse’ system has been the best method available 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, that is small scale generation located close to the point of use, and 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 used to ensure continued operation during an outage of the larger grid. This type of distributed generation has historically been used by health care facilities but has recently be expanded to more and more residential and commercial facilities.
  • A combination of generation sources (possibly including small scale thermal generation along with one or more renewable resources) that 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 and can be operated 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 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. None of the output from these systems are sold to the larger grid.†††
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

Distributed generation is currently installed primarily by customers who see a personal benefit from such use. But, distributed generation can also provide benefits to the overall utility system in the form of reduced losses during long distance transmission, reduced pollution from central station thermal plants and improved system reliability.  Distributed generation has not, however, historically been viewed very favorably by utilities. In fact, they have found ways to discourage its use by customers.

In recent years, however, regulatory agencies have reduced the utilities’ ability to discourage customer installed distributed generation. And utilities are now well aware of the benefits that they can gain from this distributed generation.

Utilities will not, however, fully realize the system-wide benefits until they can fully incorporate the benefit of distributed generation into their system operations and planning. And that will not occur unless they fully implement the Smart Grid under which they will be able to monitor and control the operational status of all distributed generation on their system. See the Post entitled What is the Smart Grid? for further discussion regarding 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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