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DG Principles

This section provides background information on DG systems and applications. Note: If you haven't yet evaluated a DG system at your site and you want to skip this section for now click on Your Site Savings.

Click on the following links to review a few basic DG principles:

What is DG ? Distributed Generation (DG) is the generation of electricity at or close to its use. DG has been used for decades for emergency power in many commercial buildings, by some large commercial establishments like hospitals and colleges and by large industrial companies in certain industries (e.g., pulp and paper, chemical industries). Generators usually run on natural gas, gasoline or diesel fuel; however, green sources like methane from biomass can be used and solar energy is the energy source for photovoltaic systems.

Many DG installations use waste heat from the electric generation process as a source of energy for space, water heating , industrial process heat and even for air conditioning and dehumidification systems. These systems are often referred to as cogeneration or combined heat and power (CHP).

DG Technologies The most commonly used DG technologies include engines (similar to an automobile gasoline and diesel engines), turbines and microturbines (based on jet engine technology). More recently commercialized technologies such as fuel cells and stirling engines are also available on the market; however, they are currently more expensive than traditional technologies. Photovoltaics have been available for many years and while costs are declining, their use is primarily confined to remote off-grid applications (i.e., not connected to a utility system) and in a handful of high-electricity cost areas that also reflect attractive solar climates. DG technologies are described in more detail in the DG Technologies section.

What Does a DG System Look Like? DG systems come in all shapes and sizes. Prime movers generally reflect reasonably compact cabinet-like systems which can be sited outside the building or in equipment rooms within a building while components that use waste heat tend to require more room for piping and heat exchangers. Typically, a DG system requires less room than used for facility temporary waste storage (i.e., garbage bins) at most commercial and industrial sites.

Terms: kW, kWh, MW, MWh kW stand for kilowatts which is a measure of instantaneous electricity use, that is, electricity use at one point in time. An electric space heater that is rated at 1 kW (i.e., 1000 watts), uses 1kW at any point in time that it is running. kWh is a measure of electricity use over time. 1 kWh (Kilowatt hour) is the electricity use of a 1 kW space heater for one hour. Using the 1 kW space heater for 5 hours results in 5 kWh of electricity use (5 hours times 1 kWh use per hour). MW and MWh are megawatts and megawatt hours respectively and equal 1000 kW and 1000kWh respectively. The size of an electricity generator is measured by the instantaneous electricity use output of the generator. A 20 kW DG system generates electricity output of 20 kW. Running the 20 kW DG system for 2,000 hours generates 40,000 kWh or 40 MWh.

Generation Principles Since electricity generation benefits from economies of scale, larger plants convert fuels (coal, natural gas, oil) into electricity more efficiently than do smaller DG systems. For example a 500 MW utility generation plant can convert as much as 50 percent of the energy content of natural gas into electricity. Approximately 7 percent of this electricity is lost in transmission to customers, so overall central plant efficiency is about 46.5 percent (i.e., 46.5 percent of the energy content in the fuel used to generate electricity is delivered to the customer in the form of electricity).

A natural gas-driven 200 kW engine can convert about 40 percent of gas energy into electricity. Consequently, DG used only for electricity generation cannot generally compete with central utility plant economics for baseload (continuous) electricity generation.

However, when waste heat from the generation process is captured and used to provide (or supplement) water heating, space heating, air conditioning, dehumidification or industrial processes, DG economics change dramatically. The figure below provides a schematic of a CHP system (DG with waste heat uses) which captures 75 percent of the waste heat (i.e, 45 percent of energy input) providing an overall efficiency of 85 percent. Compared to the 43 percent of the central generation plant, this DG system is more efficient and less expensive to operate than the central utility plant.

DG used for peak shaving applications (see DG Technologies) can also provide onsite electricity generation for less than prices charged by utilities in peak periods. (Utility rates typically include a separate charge for maximum electricity use (kW) in the monthly billing period. Since utilities use more expensive "peaking units" to provide power at this time, the price of peak power is significantly greater than the average price).

Computing DG Economics While the example above describes a straight-forward economic evaluation, actual DG system economics are more difficult to calculate. The following issues must be quantitatively reflected in computing DG economics for a specific site.
Hourly loads Hour-by-hour electricity loads must be considered along with hourly loads of waste heat uses (space and water heat, air conditioning, dehumidification and industrial processes). These loads are used, along with other factors, to determine size, configuration and operation of an optimal DG system.
Electric and fossil fuel rates Avoided electric and and fossil fuel costs must be considered along with the costs of fuel used in onsite generation. Electric rates for all but the smallest customers typically include both energy (kWh) and peak demand (kW) charges and require more complicated calculations.
System characteristics and operation Generation efficiency, available waste heat, part load characteristics, system configuration and operating strategies must all be considered in evaluating system design and costs.

How Much Money Can I Save With a DG System? Actual savings from DG system installations vary considerably; however, a typical "good candidate" can reasonably expect to reduce energy bills by as much as 35 percent and achieve paybacks within 2-6 years.

Why Isn't Everybody Installing a DG system? Tens of thousands of distributed generation systems are already being used to reduce individual utility customer's energy costs; in the past, these applications have been primarily focused on larger customers and in certain market segments. Within the last several years, several factors have extended the benefits of DG to other electric utility customers. Higher electricity prices, reduced DG equipment costs, advances in DG system designs to take advantage of waste heat, standardization of the DG interconnection process and encouragement, including subsidies and tax credits, by state and federal governments make DG an option that should be considered by every utility customer.

Do I Have to Be a Large Site to Use DG? No! Each customer's hourly electric and thermal (space heating, etc) loads and their electric and natural gas rate structures are the primary determinants of DG economics at each site. Many smaller utility customers can significantly reduce electric bills with "peak-shaving" DG systems which automatically start up when electricity use peaks during the day.

Do I Need an Engineering Background to Consider DG? Considering a DG installation is, in many ways, no different than considering installation of air conditioning, refrigeration, heating or even computer systems. You don't have to understand the technical equipment details to make an informed choice which can save you money. A variety of resources are available in the What's Next section to assist in understanding technical aspects of DG projects.

How Much Hassle is Involved in a DG Installation? Getting a DG system installed at your site can be surprisingly hassle-free. Some DG integrators will design, install and maintain DG equipment and even guarantee monthly savings. For instance, if your electric bill averages $40,000 per month, you might agree to pay the integrator $35,000 every month while the integrator agrees to pay your actual electric bill and the gas bill for running the DG system. An actual agreement would have automatic adjustments for weather variations based on your previous bills; however, the process is the same. In this case you save $5,000 per month in operating expenses without undertaking any of the installation activities yourself.

On the other hand, a DG project can be completely managed by a site owner/manager. A variety of companies and other resources are available to assist in the DG installation process. Installation options and the steps involved in this process are described in the What's Next section of DG Marketplace.

Other DG Benefits Besides saving money on energy bills, DG provides benefits in the following areas :
Power quality and reliability- If you have sensitive equipment (computer equipment, manufacturing process equipment) or if power outages could seriously impact your business, DG can be used to improve power quality and reliability.
Security - While backup generators are in place at many commercial and industrial sites, these power sources are usually designed to meet fire and safety standards and usually support minimal applications including emergency lighting and hvac equipment. A DG system can provide added security by maintaining power to critical operating areas which would otherwise be affected by utility power outages.
Environment - Many DG installations reduce total emissions levels by using energy resources more efficiently, replacing heating and water heating fossil fuel combustion emissions and in some cases displacing more damaging central plant emissions.
Other - By installing your own generating capacity, you are helping avoid future expansions of transmission and distribution networks in your area.

(c) 2005 Jerry Jackson Associates, Ltd. All rights reserved.