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)
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
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
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
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
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
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
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