Distributed generation (DG) refers to generation that is located at an end-use consumer site or that is connected directly to the distribution grid. The term “distributed” differentiates DG from generation that is connected to the bulk electric system (BES). Output from DG may be consumed internally by an end-use consumer or may be injected into the distribution grid.
There are multiple generation technologies that can be used as distributed generation resources. Technologies range from small backup diesel generators and rooftop solar photovoltaic (PV) systems to large community solar projects and wind farms that are connected at distribution voltages.
There are two key categories of DG that are based on the way the technologies interact with the electrical system. First are the various technologies similar to utility-scale turbine or engine-based synchronous generators. These include combined heat and power and reciprocating engines. The second category includes solar photovoltaic, wind, and fuel cells which require an inverter using power electronics to interface with the grid.
The late 2010s saw rapid growth in distributed generation in some regions driven primarily by growth in rooftop solar and community solar projects. In the five years from 2014 through 2018, output of distributed solar in the U.S. almost tripled. Growth rates for distributed solar are expected to continue to increase due to lower costs, consumer desires, and governmental policy support.
End-use consumers often invest in DG for the purposes of reliability and reduction of energy bills. And in limited cases, CHP projects can participate in wholesale markets. In the future, evolution of additional market opportunities for DG is expected. This could include participation of aggregated DG in wholesale markets as well as development of distribution level markets. In such markets, DG has the potential to provide capacity, energy, and ancillary services. DG may also provide resources for non-wires alternatives (NWAs) utilized by distribution utilities that avoid certain capital investments in the grid.