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While technology has helped change the economics of electricity production (in favor of renewables and distributed generation), this new dynamic can as easily be controlled by the incumbent utilities as the old paradigm of centralized fossil fuel power generation.


The Political and Technical Advantages of Distributed Renewable Power

While technology has helped change the economics of electricity production (in favor of renewables and distributed generation), this new dynamic can as easily be controlled by the incumbent utilities as the old paradigm of centralized fossil fuel power generation.

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A Long-Term Paradigm Shift


Electricity planning is based on 20-30 year predictions. Today, distributed generation is a very small part of our electricity presence. But assuming that current growth rates continue, within 20 years it will be a significant presence. Today planners are grappling with the question of how to integrate growing amounts of DG into grid system based on centralized generation and long distance transport of electricity. Future planners may grapple with the reverse: how to integrate centralized generation into a grid comprised primarily of distributed generation and storage.

Right now, the grid is based on meeting electricity demand by stacking power plants, as shown in the adjacent graphic. The lowest layer are coal and nuclear power plants. They are called “baseload” because they are run almost all the time at the highest possible capacity. The next layer are called intermediate because they ramp up production as demand (load) increases and ramp down as it decreases (e.g. up in daytime, down at night), but not as quickly as the top layer. The top layer of power plants are called “fast peaking” because they respond on short notice to peaks in power demand (such as air conditioners running overtime on very hot summer days).

A Paradigm Shift in Electricity Supply (David Mills/ABC News)

One problem for distributed generation integration is that long term power supply contracts from centralized baseload resources (e.g. coal) can cause variable (solar and wind) resources to be curtailed if there is no local load and no excess capacity on the grid. Thus today and in the short run, new renewables displace intermediate and peaking plants such as hydro generators or natural gas plants.

As more and more variable resources are interconnected, they will compete more directly with central station, baseload power plants in supplying our instantaneous energy needs. At this point, engineering challenges begin. Nuclear power plants can change output by up to 5% of total capacity on a minute-to-minute basis, but only if the power plant is already operating at a minimum of 50 to 60% of full capacity. For any baseload power plant, there are increased operations and maintenance costs associated with frequent adjustments to output.

As the nature of the grid changes, it will make more sense to change the nature of electricity planning rather than cramming variable, distributed generators into a centralized baseload plus peaking paradigm. For example, long-term planning processes need to effectively differentiate variability based on weather (clouds and wind) from variability based on time of day or season. As noted above, in a proceeding before the California Public Utilities Commission, one intervenor noted that without differentiating seasonal from daily variability, utilities will overestimate the amount and cost of backup generation needed to support distributed generation.

Solar and wind have no fuel cost, so they can always outbid fossil fuel power on the spot market. Instead of matching demand by stacking intermediate and peaking plants on top of baseload power plants, the new grid will take all available renewables first and then use demand management, storage, and intermediate/peaking fossil fuel power plants to match supply with demand. Unlike the current system of primarily inflexible generators, the new flexible grid will more easily accommodate the electricity generated at any given moment as wind and solar output changes based on wind speed and/or cloud cover.

In Germany, the tension between distributed and centralized electric paradigms has become intense as renewable energy – primarily distributed generation – has reached 17% of supply (up three-fold in a decade), peaking at over 30% at times.

Dr. Norbert Rottgen, German Federal Minister for the Environment, thinks Germany and in the future the United States, will have to make a choice.

It is economically nonsensical to pursue two strategies at the same time, for both a centralized and a decentralized energy supply system, since both strategies would involve enormous investment requirements. I am convinced that the investment in renewable energies is the economically more promising project. But we will have to make up our minds. We can’t go down both paths at the same time.

When we make additional investments in the electricity grid, we should no longer be spending money on the 20th century grid system, but should instead focus on the 21st century paradigm of distributed generation. The centralized model no longer fits the inherently decentralized nature of renewable energy supply and the economic and democratic advantages of distributed generation. The grid must change.

<<– Page 4: Backup & Storage

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Written By

John directs the Democratic Energy program at ILSR and he focuses on energy policy developments that best expand the benefits of local ownership and dispersed generation of renewable energy. His seminal paper, Democratizing the Electricity System, describes how to blast the roadblocks to distributed renewable energy generation, and how such small-scale renewable energy projects are the key to the biggest strides in renewable energy development.   Farrell also authored the landmark report Energy Self-Reliant States, which serves as the definitive energy atlas for the United States, detailing the state-by-state renewable electricity generation potential. Farrell regularly provides discussion and analysis of distributed renewable energy policy on his blog, Energy Self-Reliant States (, and articles are regularly syndicated on Grist and Renewable Energy World.   John Farrell can also be found on Twitter @johnffarrell, or at


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