What is the Difference Between Central Station Generation and Distributed Generation?

In 1882, when Thomas Edison lit his first commercial light bulbs he used direct current electricity produced at a dynamo located across the street from building containing his new lighting fixtures. Edison attempted to maintain this business model, selling lighting systems throughout the world consisting a small generating source and a short distribution line going from the generating source to the point of use.

George Westinghouse, with the help of Nicola Tesla, saw the shortcomings of Edison’s system. They developed an alternating current system that relied upon remote central station generating plants whose electricity could be delivered long distances 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 have now become the standard in the industry. The following explains how electricity is generated at a central station power plant:

The following explains how the electric transmission system is used to deliver electricity from a central station power plant to a local distribution system for final delivery to customers:


Westinghouse’ system was, however, far from perfect. The fossil fueled central station generating stations emitted pollution and, because of their size, had to be added in large chunks, often before they were needed by the utility customers. And the transmission system required rights-of-way in controversial areas, was maintained by utilities with different levels of commitment to that maintenance, was subject to potential outages due to weather, faulty equipment and terrorist attacks and caused energy losses of as much as 10%. Even with these flaws, for more than 100 years, the system was the best method available for the delivery of reliable and affordable electric service.

That may, however, be changing. Distributed Generation (DG), 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 of remote central station plants and transmission network.

DG can come in the following forms:

  • Back-up generation used to ensure continued operation during an outage of the larger Grid. This type of DG 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 and none of the output is sold to the larger Grid.

See this FERC White Paper for a full discussion of the potential uses and benefits of DG.

DG is currently installed primarily by customers who see a benefit from such use. Their benefit may be in the form of back-up service in the event of an outage, a reduction in costs, or a desire to consume electricity that that is produced without carbon emissions.

DG 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. DG has not, however, historically been viewed very favorably by utilities. In fact, they have found ways to discourage their use by customers.

In recent years, regulatory agencies have imposed requirements on utilities that reduce their ability to discourage customer installed DG. And utilities are now well aware of the benefits that they can gain from this DG. The system-wide benefits will not, however, be fully realized until the utilities can fully incorporate the benefit of DG into their system operations and planning. And that will not occur until there is better implementation of the Smart Grid under which the utility will have complete information regarding the operational status of all DG on its system. The following is an example of how a utility can use DG and the Smart Grid to benefit its system.


David Rosenstein worked as an attorney and consulting engineer in the electric utility industry for 40 years. When he retired he wrote a book entitled Electrifying America: From Thomas Edison to Climate Change which describes the evolution of the electric industry from the time Edison invented the light bulb until today. Each of his posts in this Blog describe a different aspect of electricity, the electric industry or the issues currently faced by the electric industry.

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