Distributed Generation Benefits Outlined in New DOE Report

Date: 6 Mar 2007 | posted in: Energy, Energy Self Reliant States | 0 Facebooktwitterredditmail

The Energy Policy Act of 2005 required that DOE, in consultation with the Federal Energy Regulatory Commission (FERC), conduct a study of the potential benefits of cogeneration and small power production. The final report, The Potential Benefits of Distributed Generation and Rate Related Issues that May Impede Their Expansion, is now open for public comment until April 30, 2007.

The report was supposed to recommend a methodology for valuing the benefits of distributed generation (DG). DOE concluded that “This task is complicated somewhat because calculating DG benefits requires a complete dataset of the operational characteristics for a specific site, rendering the possibility of a single, comprehensive analysis tool, model, or methodology to estimate national or regional benefits highly improbable.” The report examines evidence on the potential benefits of distributed generation in six areas:

  • Increased Electric System Reliability
  • Reducing Peak Power Requirements
  • Ancillary service, including voltage support, regulation, operating reserve, and backup supply
  • Improved Power Quality
  • Reduce Land Use Effects and Rights-of-Way
  • Reducing Vulnerability of the Electric System to Terrorism and Providing Infrastructure Resilience

DOE was also charged to analyze the impact of regulatory mandates, tariffs, rate structures and similar policies on the proliferation of distributed energy technologies. Consistent with many other studies, the DOE found that in many states across the country grid-connected DG is subject to a variety of rate-related and other impediments that can ultimately hinder the installation of DG units. These impediments result from regulations and rate making practices that have been in place for many years. In the vast majority of instances these rate making practices are under the jurisdiction of the states.

The most common rate-related impediments that affect DG owners and operators include the potential for lost revenue on the part of utilities, and practices such as standby charges, retail natural gas rates for wholesale applications, exit fees, and sell-back rates. There are several other rate-related issues that are somewhat less common; these include payments for locational marginal pricing, capacity payments, co-generation deferral rates, and remittance for line losses.

There are also several non-rate related impediments that affect the financial attractiveness of DG and these include interconnection charges, application and study fees, insurance and liability requirements, and untimely processing of interconnection requests.


  • The Potential Benefits of Distributed Generation and Rate Related Issues that May Impede Their Expansion – issued by DOE, March 1, 2007
  • Submit comments in a MS Word attachment or in the body of an email including a cover page containing the reviewer’s name, affiliation, telephone number, mailing address, and e-mail address by 04/02/2007 to: EPACT1817@hq.doe.gov
  • DOE Office of Electricity Reliability and EnergyDelivery
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John Farrell

John Farrell directs the Energy Democracy initiative at the Institute for Local Self-Reliance and he develops tools that allow communities to take charge of their energy future, and pursue the maximum economic benefits of the transition to 100% renewable power.