Distributed generation (DG) has been much talked about and seldom deployed since the end of the 1970s energy crisis. The largest barrier to its widespread adoption is poor economics . The cost must be justified by something more than the price of a kilowatt, with very few exceptions.

Near-total power reliability drives most investment in distributed generation. That's not always the case, however. Power quality is just as important as reliability when it comes to electronics, particularly computing and communications. Business down time of any kind is very costly for some sectors. And in specific situations it is economically beneficial to generate power on site.

Technology Triad

Three intertwined technologies are part of any discussion of distributed generation.

Three intertwined technologies are part of any discussion of whether DG is practical, desirable and conscionable. The two symbiotic sisters of DG are demand management and alternative energy.

Demand management-- Controlling consumption has a role in energy efficiency, a cost-saving initiative that generally cannot be achieved through DG. In peak load management and demand response, however, the goal is to relieve the utility of peak loads and grid congestion. Efficiency alone is as beneficial (or more so), but the efficiency "resource" will be tapped out sooner than later.

Most potential participants in demand-response programs are not willing or able to shut down, but those with DG can continue operations. DG makes demand response viable for more businesses, which in turn postpones large capital investments in centralized generation and grid infrastructure. To utilities, generators for demand response aren't competition -- they're a savings account.

Alternative energy-- Whether for public good or private reliability, we don't want to solve the problems of the grid by installing thousands of fossil-fueled generators. It accelerates pollution and fuel scarcity, while making a company vulnerable to fuel prices and unstable supply.

Alternative energy, particularly renewables, can be a superior long-term solution, but near-term they are less economical. Even though wind and solar have the greatest potential as new large-scale alternative energy sources, they're not as practical for DG on a smaller scale. Off-grid applications such as radio towers are the rare exception.

Renewables work best in conjunction with energy storage, which is far from being perfected. One philosophy of renewables is to view the grid as a big battery. It requires interconnecting to the grid, selling power when it is plentiful, and relying on the grid when the renewable source is not as abundant. That last bit -- reliance on the grid -- is often the downfall of renewables as a DG source.

Suitable DG Alternatives

Truly renewable DG sources should be our ultimate goal. While we're waiting for the problems to be worked out, there are energy sources that are suitable for solving the reliability and quality issues addressed by DG.

Hydrogen-- The limitations of renewables are why hydrogen fuel cells are most often discussed as the next ideal DG energy source. Hydrogen today isn't really "renewable" in the same sense as hydropower or wind.

In fact, hydrogen for fuel cells is a form of stored energy. Any source of electricity, whether renewable or grid, can be used to get hydrogen from other fuels or water. The hydrogen is then used to power a fuel cell, with the advantage of silent operation and zero pollution.

The cost of fuel cells is at the point where they make sense for reliable, high-quality power for small loads -- network operating centers, call centers, emergency rooms, air traffic control towers. For larger loads, DG from hydrogen is farther down the road .

Byproducts-- Some industries produce a byproduct that can be used to fuel on-site turbines. Examples are sawmills, pulp and paper mills, and petrochemical processors. Other industries such as metals manufacturing and cement kilns generate heat that can produce energy directly without additional fuels.

These businesses were the earliest adopters of DG because of its favorable economics. Unique cost benefits are derived from the ability to baseload their DG, rather than using it only for backup power.

Cogeneration-- More such businesses are looking seriously at tapping their process byproducts for energy, combined with the byproduct of energy itself: heat. Combined heat and power (CHP) is being perfected on a large scale for gas-fired utility power plants. That technology has reached the private sector and will become more practical in the coming years for DG from conventional fuels, byproducts, renewables or hydrogen, in that order.