Passing the Power Baton: Distributed Generation is in the Race

With rolling blackouts in California, rising electricity and natural gas prices, soaring demand for power and concerns about the viability of electric restructuring, one technological development promises to change the very underpinning of the electric industry: distributed generation (DG).A computer-based culture requires that electricity be delivered constantly and within very tight ran...

By Sarah McKinley, Contributing Editor June 1, 2001

With rolling blackouts in California, rising electricity and natural gas prices, soaring demand for power and concerns about the viability of electric restructuring, one technological development promises to change the very underpinning of the electric industry: distributed generation (DG).

A computer-based culture requires that electricity be delivered constantly and within very tight ranges. Even minor power anomalies can permanently damage digital equipment and appliances. In some manufacturing processes, “blips” in power from the local grid can cause millions of dollars in lost productivity. In addition, telecommunications companies and other industries that lose enormous amounts of money in the event of a power outage are increasingly willing to invest in redundant DG systems that guarantee 99.9999 percent—six nines—reliability.

Simply stated, DG is the opposite of central station generation, in which power is produced at very large facilities far removed from the point of use and “wheeled” to businesses and the general public through long transmission lines and through smaller distribution wires. DG is based on small generating units installed at or near the point of use.

Another term used for DG is on-site generation, or in Europe, localized power production. What’s more, the term currently in fashion is distributed energy resources (DER)—encompassing not only the equipment that produces power, but also related technologies, including storage systems, software power-management systems and communication and metering devices that allow DG to interface with the local grid.

DG is not a new concept, but it has been updated over the past decade due to a number of technological breakthroughs. These new developments will shape the future of energy, perhaps in ways that can’t be imagined today.

The DG Promise

DG offers versatility in meeting specific energy needs. The following are just a few examples:

  • Siting energy where it’s needed. The greatest growth in energy demand in the United States tends to be in densely populated urban areas—the very places where attempts to site large central-station generating plants or transmission lines meet the greatest political and practical resistance.

An office building in San Diego, for example, could install a building combined-heat-and-power (BCHP) system (see “Turning Heat and Wind into Power on page 22)—incorporating new lighting and other efficiency measures—and ensure that tenants have constant power, even in the midst of rolling blackouts. Installing enough BCHP systems in San Diego could reduce the number of blackouts.

  • Producing on-site power saves energy. The loss of efficiency from the journey of central-station power through transmission and distribution lines disappears in the DG scheme. A central-station plant must produce about 10 percent more energy than the end-user needs just to deliver the power. During times of high demand, these line losses can rise exponentially, as the wires and cables reach their maximum usage and become overheated.

  • Having more options means cost savings. In a deregulated electricity market, end-users need more power purchasing choices. A DG user can switch from its own source to the utility and back, as was the case for a McDonald’s franchise in the Midwest. The restaurant used a microturbine from 8 a.m. to 8 p.m., and then switched to the local grid. Time-of-day pricing from the utility brought prices down in the evenings. Moreover, the restaurant manager did not have to make these energy-buying decisions; a computer system switched the system on and off at the appropriate times.

  • Attaining emissions reductions. Air pollution is a double-edged issue for DG. Most densely populated urban areas that need power production are also likely to be designated as nonattainment areas under the Clean Air Act, which means that any new generation within their boundaries must meet more stringent standards. An analysis of DG, however—taking into account the combined energy efficiency of combined-heat-and-power and hybrid systems, along with energy savings in line losses—can demonstrate an overall savings in emissions compared with traditional power plants.

  • Gaining grid support. Electric utilities can probably become DG users themselves, saving money in infrastructure costs. This could be done by dropping in fuel cells or microturbines at substations to increase power delivery at the ends of their systems, particularly to bolster delivery during hours of peak demand. These solutions can defer expensive system-wide upgrades. In the same way, electric utilities may consider working with their larger industrial or commercial customers to install DG at sites with large demand in order to relieve congestion for the surrounding area. In Great Britain, these are called power islands, and are a preferred alternative to new transmission lines.

  • Serving remote locations. DG can also provide substantial infrastructure savings for remote locations. Installing fuel cells on ranches in rural Wyoming, for example, is much less expensive than laying miles of transmission lines to a few customers. Around the world, many countries could learn to provide cost-effective electrification to mountainous or desert regions without paying for transmission systems.

Prime Movers

All of the possible benefits of DG are a direct result of decades of research and demonstrations to improve existing power generation and develop new generating technologies. The new and improved power-generating technologies are commonly known as prime movers. The following are some of the most significant technological developments that have affected DG:

Diesel and internal combustion (IC) engines. Improvements in traditional engine designs have netted substantial increases in energy efficiency, reductions in air emissions and savings in operating and maintenance costs. The simple truth is that diesels aren’t the dirty little engines in the basement anymore, and they are the least-cost energy solution on the market today. In addition, some ultra-clean IC engines meet the stringent air-quality standards of California; the most advanced have emissions that are so low they are hard to measure.

Industrial gas turbines. Most power plants built in the United States over the last two decades have been natural-gas-fired turbine units. The development of turbines has reversed the historic trend toward larger and larger central-station coal and nuclear plants. Because the smaller turbines are more economical, economies of scale have been moving in the opposite direction—toward smaller and smaller units.

Today, gas-turbine packages—either single- or double-cycle—are available in units down to about 1.2 megawatts (MW), appropriate for many DG applications. In addition, the advanced-turbine systems (ATS), developed through a partnership between the U.S. Department of Energy (DOE) and private companies, has produced a 5-MW unit that is about 30 percent more efficient than the traditional turbine, which makes it very economic for use as a peaking unit.

Microturbines. Traditional gas-fired turbine technology and advances from the automotive industry, have combined to produce microturbines, now being developed by a number of companies worldwide in sizes that range from 25 kilowatts (kW) to 300 kW. In Europe, these units are already being sold in CHP packages. In the United States, they appear to be ideal for small commercial and industrial sites, where they can be ganged together as needed to meet the energy demands of individual businesses.

Microturbines can also be installed readily at utility substations to improve grid reliability. Although microturbines could run on almost any fuel, natural gas is the fuel of choice. Research on microturbines aims to improve efficiency to the 40-percent level for standalone use, reduce NO x emissions to 7 parts per million (ppm) and lengthen time between system overhauls.

It is anticipated that installation costs will also drop with an increase in sales volumes.

Fuel cells. The fuel cell creates electricity through a catalytic process. They come in a variety of types and sizes, including molten carbonate, phosphoric acid, proton-exchange membrane (PEM) and several varieties of solid-oxide fuel cells. The phosphoric-acid fuel cell has been sold internationally for a number of years, while most new companies have focused on PEM technology, which can be manufactured in smaller, stackable units and is considered ideal for the smallest commercial and residential applications.

Current installation costs are high, but fuel cells offer very reliable power. Telecommunications and other companies are using them in integrated systems with diesel backup and storage to ensure absolute reliability.

Solar electric. Photovoltaic units on rooftops are still expensive, but have steadily decreased in price over the last 20 years. They are most economical in areas with very high electric bills. However, combined with more traditional electric generation, they offer environmental benefits by lowering the overall emissions for the site, which may help energy-service providers obtain permitting for on-site generation. Thermal dish stirling systems capture heat from the sun, which fuels a stirling—external-combustion—process. Originally designed for central-station operation, the technology is being considered for smaller applications such as rooftop units for buildings.

Wind turbines. Wind turbines, particularly in sizes greater than 50 kW, are now considered to be potentially cost-effective. The electricity they produce has the added benefit of commanding a slightly higher price on today’s market, as it is deemed “green power.” Although the turbines must be carefully sited to take advantage of good wind, some projects have successfully competed with other technologies for cost-effectiveness.

What surprises is the number of technologies that are now being worked on and that may appear on the commercial scene in the future. These include producing power from ocean waves, geothermal sources and even common friction.

Barriers to DG

Given the high potential of DG, it may be surprising that more units have not already been installed across the country. The deployment of this new technology, however, requires a major shift in legal, institutional and regulatory policy to accommodate it. There are several barriers to DG adoption.

  • Interconnection. One of the first barriers to be addressed by state regulators has been the rules governing interconnection between DG units and local utility systems. All utilities were required under previous federal guidelines for qualified facilities to have interconnection rules in place. (See “Interconnection: The Need for Consistent Standards” on page 24.)

Today, interconnection proceedings are underway in Nevada, Virginia, Pennsylvania, Ohio and elsewhere. Within the next five years, interconnection standards should be in place in most regions.

  • Technical standardization. Industry-wide technical standardization of equipment is also being addressed by the Institute of Electrical and Electronics Engineers (IEEE) committee working on the IEEE 1547 standard, which covers distributed-power grid interconnection. Rules are expected to be published this year, although refinement of the rules may well continue for the next 20 years. When adopted, these rules are likely to be incorporated into state interconnection rules already in effect.

  • Precertification or type testing. Another issue that has emerged is the need to precertify specific pieces of DG equipment to help speed the interconnection process. New York and other states already have a procedure in place. In the future, this may shift from individual pieces of equipment to the precertification of packaged systems, allowing easy installations of integrated systems.

  • Utility ratemaking. Traditional utility ratemaking also poses a very real economic barrier to deployment. Most DG operators want to remain connected to the grid and use utility service as a backup. Many utilities, however, have responded by setting backup fees and standby rates so high that DG becomes uneconomical. In some cases, DG users have been charged the same amount for backup service that they would have paid to purchase their power from the utility to begin with.

New York has instituted a proceeding to determine reasonable fees for these services. In most states, however, the issue will be battled in utility rate cases, company by company.

Exit fees and competitive transition charges (CTCs), which pay for the stranded costs that utilities incurred to move into electric restructuring, are also a barrier to deployment. The good news is that CTC charges, in most states that have already restructured, will be gone within the next five or six years, or reduced to an amount that will be manageable.

End-users may still face exit fees if they choose to leave the system. However, utilities facing system constraints may be harder pressed to justify exit fees in the future—when departing customers can legitimately argue that they are relieving congestion on the line.

  • Siting and permitting. Small systems, in general, have not faced stiff environmental permitting. This may be changing, however. California has already passed air regulations for small generators, and the Texas Natural Resource Conservation Commission is considering similar measures.

On the other side of the country, the entire East Coast will be subject to the Ozone Transport Commission (OTC), which will take up the issue this year. The OTC’s actions, however, will be geared toward eliminating the dirtiest of the diesel units, while offering incentives for clean DG technologies.

It’s likely that air-pollution permitting concerns will dictate the pairing of CHP and hybrid systems with renewables, where combined operations will lower the overall emissions numbers to acceptable levels.

  • Building and fire codes. One of the final barriers may be the local code inspector, who is now likely to reject a fuel cell in a new office building because nothing in his code book matches the new technology. The DOE and national organizations are leading efforts to encourage the development of new codes and standards. Again, this may take a few years, but the payoff is enormous for equipment manufacturers and energy-service providers.

DG’s future

The real question is how quickly the regulatory and institutional changes can be made to allow the American public to reap the benefits of these new technologies. If California’s energy crisis is a bellwether, however, the driving force behind change is likely to be end-users and building owners.

In California, legislation that sought to encourage DG was advocated by real estate interests, whose investments in commercial property are directly and immediately threatened by rolling blackouts. These large corporations want DG—and they own property everywhere in the country.

Sarah McKinley is an independent consultant and former executive director of the Distributed Power Coalition of America.

From Pure Power, Summer 2001.

Turning Heat and Wind into Power

Combined heat and power (CHP) refers to operations that create energy efficiencies of 70 percent or greater by using waste heat from power production for industrial purposes, or by transferring waste heat from one electric-generating system into a second cycle to create additional power.

CHP sometimes involves the use of waste heat from an industrial process to produce electricity. It also goes by the name cogeneration. However, this term is closely associated with past federal rules that forced utilities to buy expensive power from independent operators.

Building combined heat and power (BCHP) refers to integrated energy systems designed for office buildings, hotels, shopping centers and other large spaces, where power production is combined with heating, ventilating and air-conditioning equipment. In the future, BCHP will probably include integration with other building requirements as well—including security devices and sprinkler systems.

A hybrid system usually means the combined use of renewable technologies with fossil-fuel systems, such as a wind-turbine system with a diesel backup unit, or a natural-gas-fired fuel cell combined with a microturbine. Hybrids offer the combined efficiency of using the two technologies together. In the case of the wind turbine, power is produced—with no emissions—while the wind blows, and electric demand is ensured at other times by the diesel unit. In the case of the fuel cell and the microturbine, high temperatures produced as a byproduct of the catalytic process in the fuel cell can be used to help the microturbine operate more efficiently, resulting in combined energy efficiencies of more than 40 percent.

Interconnection: The Need for Consistent Standards

Some utilities have produced a five-page handout, while others have created 300-page handbooks. The need for consistent standards across multiple utility systems prompted states like New York, Texas and California to initiate collaborative regulatory proceedings among the major parties. The interconnection rules that are emerging include a number of elements addressing technical, commercial and operational issues:

Technical guidelines for the physical interface between the DG systems and utilities.

Standard commercial contracts between DG operators and utilities.

Operational procedures for handling interconnection requests, including standardized request forms and set deadlines for approval.

A standardized procedure to evaluate when, and if, studies need to be performed before approval can be granted.