DG: Threat or opportunity for utilities?


Will new distributed generation (DG) technologies such as fuel cells and microturbines be equivalent to the next personal computer, or will DG remain an application appealing to the few businesses willing to pay for 100 percent reliability?

DG does indeed have the potential to totally reshape the retail energy industry. And the coming years are critical, as experts predict that emerging DG technologies will be widely available by about 2005.

Energy companies’ attitudes toward DG run the gamut, according to Eric Prouty, vice president and senior energy technology analyst for San Francisco-based Robertson Stephens. “We’ve seen utilities that are trying to squash distributed generation and view it as a competitive threat. And we’re seeing cutting edge utilities-which understand that the industry is changing-want a piece of the action.”

Distributed generation “can be viewed, and has been typically viewed, as a threat,” said Richard Tate, president of Tate Research Associates of Lawrenceville, Ga. “But given the supply-side scenario and the specter of the potential of deregulation, it’s certainly an opportunity for customers and providers.” Tate believes the key is utilities with knowledge of the technology partnering with customers to site and operate the equipment. And that, they are.

Chartwell in its latest in-depth industry research report on DG discovered that more than 100 energy providers already have relationships with fuel cell, microturbine and genset developers, manufacturers and distributors.

These energy companies’ involvement so far constitutes making investments in DG technology companies, signing on with them as distributors-which requires some sort of investment-and conducting field tests or demonstration projects, which also usually requires a monetary investment.

On a smaller scale, Chartwell conducted in-depth interviews with officials at 31 different energy companies. Chartwell editors purposely homed in on energy companies active in DG to profile.

How energy companies and end users view the attractiveness of DG depends on a number of factors. As part of their multi-client study “Understanding the Economics of DG,” Arthur D. Little looked at some of the variables that appear to influence the attractiveness of DG.

For regulated utilities, DG will be most economically attractive to electric utilities in cases where the utility is faced with system constraints, particularly in T&D. DG at the customer’s site can provide benefits such as T&D deferral, reduced T&D losses and voltage support.

Certainly, if just a fraction of the many predictions about DG come true, the utility business will be dramatically changed. But predicting the societal impact of DG at this embryonic stage is like forecasting the weather a year in advance.

What we do know is that this is a time of great change in the utility business, and change usually begets more change. Also the collision of deregulation, economic growth and advanced technology will create new circumstances and opportunities. And, finally, any significant change in how power is generated and delivered will, by definition, alter the entire industry.

With more than 30 case studies, 42 in-depth profiles of manufacturers and distributors, an in-depth industry analysis, and a complete listing of DG installations, The Chartwell Guide to Distributed Generation is available at www.chartwellinc.com or by calling 404-237-9099.

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