Back to top Jump to featured resources
Article filed under Energy, Energy Self-Reliant States

Smaller Generation Incites Largest Renewable Energy Gains

| Written by John Farrell | 2 Comments | Updated on Apr 14, 2011 The content that follows was originally published on the Institute for Local Self-Reliance website at

While seeming counterintuitive, a focus on smaller-scale distributed generation enables more and faster development of cost-effective renewable energy.

Last week I wrote about the illusion that we can “move forward on all fronts” in renewable energy development; rather, a bias toward centralized electricity generation in U.S. policy reduces the potential and resources for distributed generation. 

Solar Economies of Scale Level Off at 10 Kilowatts

In contrast, distributed generation provides unique value to the grid and society, and its development can also smooth the path for more centralized renewable energy generation.

First, distributed generation is cost-effective.  Economies of scale for the two fastest-growing renewable energy technologies (wind and solar) level off well within the definition of distributed generation (under 80 megawatts and connected to the distribution grid).  Solar PV economies of scale are mostly captured at 10 kilowatts, as shown in this chart of tens of thousands of solar PV projects in California.  Wind projects in the U.S. are most economical at 5-20 megawatts, illustrated in a chart taken from the 2009 Wind Technologies Market Report.   

Besides providing economical power relative to large-scale renewable energy projects, distributed renewable energy generation also has unique value to the electric grid.  Distributed solar PV provides an average of 22 cents per kWh of value in addition to the electricity produced because of various benefits to the grid and society.  The adjacent chart illustrates with data coming from this analysis of the New York electric grid.  Grid benefits include peak load shaving, reduce transmission losses, and deferred infrastructure upgrades as well as providing a hedge against volatile fossil fuel prices.  Social benefits include prevented blackouts, reduced pollution, and job creation.

Distributed wind and solar also largely eliminate the largest issue of renewable power generation – variability.  Variability of solar power is significantly reduced by dispersing solar power plants.    Variability of wind is similarly reduced when wind farms are dispersed over larger geographic areas.

Not only are integration costs reduced, but periods of zero to low production are virtually eliminated by dispersing wind and solar projects over a wide area.

As mentioned at the start, distributed generation also scales rapidly to meet aggressive renewable energy targets.  Despite the conventional wisdom that getting big numbers requires big project sizes, the countries with the largest renewable energy capacities have achieved by building distributed generation, not centralized generation.  Germany, for example, has over 16,000 megawatts of solar PV, over 80 percent installed on rooftops.  Its wind power has also scaled up in small blocks, with over half of Germany’s 27,000 megawatts built in 20 megawatt or smaller wind projects.  In Denmark, wind provides 15-20 percent of the country’s electricity, and 80 percent of wind projects are owned by local cooperatives.

With all these benefits, distributed generation can also smooth the way for centralized renewable energy, in spite of energy policies that favor centralized power.  When distributed generation reduces grid stress and transmission losses by provided power and voltage response near load, it can defer upgrades to existing infrastructure and open up capacity on existing transmission lines for new centralized renewable energy projects.  A focus on distributed generation means more opportunity for all types of renewable energy development.

It may seem counterintuitive, but distributed renewable energy should be the priority for reaching clean energy goals in the United States.

Tags: / / / / / / / /

About John Farrell

John Farrell directs the Energy Self-Reliant States and Communities program at the Institute for Local Self-Reliance and he focuses on energy policy developments that best expand the benefits of local ownership and dispersed generation of renewable energy. More

Contact John   |   View all articles by John Farrell

  • J4zonian

    I realize I’m coming late to this party but this seems like an important resource we should all refer to again and again. So here are just a few more of the many other reasons decentralized (distributed) solar and wind (and other installations) are better.

    1. Because economic democracy equals political democracy. One cannot survive without the other, and the more some people accumulate of those interchangeable commodities money and power, the less of them others will have. Jeffersonian democracy is democracy of the small entrepreneur, and as we can see in the world today we absolutely need limits on what one person or group can own or control. Household and small business energy production encourages true democracy.

    2. Because local control also equals democracy. The smaller the group, the more say each person has in it. Personal, family and small community control over the necessities of life is a basic way to preserve freedom to choose, and if the necessities are locally generated: food, water, energy, basic tools… we are all more free, more responsible and more able to be mature people. (Note–air doesn’t work that way, so we also have to have control over global decisions, but that also is made easier when corporations and large governments either don’t control our lives by controlling our necessities, or in the case of large corporations, don’t exist.)

    3. Because we need to stop destroying nature. New York City and Philadelphia together have 100,000 acres of rooftops available for a combination of energy production, food gardens and water collection.* That’s not even including parking lots, roads, etc. that could also be covered with solar panels, used for water collection, fruit and nut trees, etc. Imagine how much acreage the entire US has for those applications, and imagine not needing any other land than we’re already using, to produce all the energy, fruits and vegetables and water we need, as well as all the eggs we could want. It’s already wrecked land; using it for something that would make us more ecological and fair without destroying anything else is the best use of our resources. In permaculture it’s called “stacking functions”.

    4. Because decentralization makes us safer, from technical failures or terrorism, the bugaboo and raison d’être of the modern security state. Simple, small-scale repeated systems are less vulnerable in almost every way than large, complex centralized systems are, and the consequences are far less serious when a household’s wind generator fails than when a nuclear reactor does. The alternative to decentralization of wind and solar are long transmission lines (at $1.5 million/mile*) pumped or other forms of storage, etc.–all leading to significant decreases in efficiency and increases in cost.

    5. Because a free market, that conservative obsession, depends on easy entry to and exit from the market. How many people in your neighborhood have $2 billion to get into the solar thermal plant business or the $17 billion required now for the nuclear reactor business? ***

    * Permaculture Activist Magazine, 2 articles in the latest issue? which I can’t find at the moment.

  • Rick Chamberlin

    John and friends,

    Thanks for this provocative and important report and for your work to expand renewable distributed energy production. I’d like to suggest you add a key point to your Key Points page:

    -Distributed energy makes communities more resilient by helping them adapt to the impacts of climate change, which can include but are not limited to failures of the grid caused by the increasing number of severe weather events. (Here in Wisconsin the number of severe weather events has doubled since the 1950s.)

    Keep up the good work.

    P.S. You might be interested in a blog post I wrote last August (A Tale of Two Towers) in which I talked up distributed energy and the Institute for Self Reliance.