Distributed Centralized Distributed Again

Distributed generation is not a new concept. Indeed, until electricity was introduced as a commercial alternative for the energy historically provided by steam, hydraulics, direct heating and cooling, and light, all energy was produced near the device or service requiring that energy.

From its inception as an industry, electricity has competed against gas for customers. Indeed, electric arc lighting, a mid-19th century stand-alone system located on the customer's premises, attempted to replace the less expensive but volatile gas lamps supplied with "town gas," a mixture of hydrogen and carbon monoxide. Gas production and delivery was the first centralized element in the modern energy industry, produced initially on the customer's premises and later in large gasifiers. By the 1870s, town gas was piped throughout virtually every major city in the U.S. and Europe. An early power plant is shown in Figure 1.1.

The economies of scale that made widespread municipal lighting possible, however, did nothing for the drawbacks of the product. The light was poor, tremendous waste heat made rooms smoky and hot, and the noxious elements of town gas mentioned earlier left room for a cleaner, cooler alternative in the marketplace, i.e., electricity.

Thomas Edison created the first electric utility system, mimicking the gas lighting industry but supplying energy through virtual "mains" to light filaments instead of via gas burners. The same reduction in capital cost per unit of power generated applied to electricity as it did to gas, and the inexorable trend toward centralized power generation, distribution, and system management began.

Initially, electric utilities were established in open territories without service, granting them de facto monopolies. The systems were isolated, without connection to other utilities. By the end of the 1920s, however, utility grids adjoined one another, and interconnection brought obvious benefits (e.g., sharing peak load coverage, and backup power). Through the 1920s, financing such private investor-backed ventures was relatively easy, until the Wall Street crash in 1929. The Public Utility Holding Companies Act of 1934 recognized the public goods element of electric, gas, water, and telephone companies, and outlined restrictions to and regulatory oversight of corporations that provided such services. The "Golden Age of Regulation" (described in Chapter 9) was ushered in and is only now undergoing substantial change for the first time in over 60 years.

Technological advances were not confined, however, to large-scale operations. Fuel cells were first developed for space flight, and aeroderivative gas turbines that powered jet aircraft found a market in stationary power. The pursuit of soft path, environmentally sustainable economies produced solar engineering and photovoltaic systems. Parallel advances in communications


Early power generation system.


Early power generation system.

and microprocessing — the digital age — created the monitoring and dispatching architectures requisite for this new generation of energy providers. Key to it all, the economies of mass production replacing those of scale may mean that centralized power generation and distribution systems are about to give way to a new energy landscape.

1.1.1 Regulatory Restructuring

The massive shift in the U.S. regulatory system for electric (and natural gas) utilities began with the Energy Policy Act (EPAct) of 1992, which required interstate transmission line owners to allow all electric generators access to their lines. In effect, transmission lines became common carriers. In its Order 888 in 1996, the Federal Energy Regulatory Commission (FERC) implemented EPAct with respect to electric transmission lines, ordering all transmission line owners to post open-access tariffs. Every qualified generator of electricity — utility-affiliated or independent — was given access to transmission lines to transport electric output. The objective of these initiatives at the federal level was to create competitive wholesale electric markets.

This initial deregulation of the wholesale market, though it spawned hundreds of new power marketers, did not affect the individual end user.

Another movement for deregulation of the retail market — consisting of the distribution system, the contracted energy provider for each individual energy customer, billing, metering, and energy efficiency services — turned the U.S. electric utility industry on its end.

Regional differences in electric rates (as much as a $0.11-0.13/kWh range) drive the restructuring agenda among policymakers, but technological advances make it possible. Dramatic improvements in the efficiency of gas turbine power plants have reduced the cost of producing electricity as well as the size of the plants needed to obtain these cost reductions. Scale economies are no longer a justification for monopoly power production. States with high prices relative to other states are more inclined to restructure with the expectation of improving efficiency, lowering costs, and then lowering prices. Lower energy prices attract investment and industry. Conversely, high energy prices can drive an industry to relocate.

Table 1.1 shows the status of state-level restructuring as of the year 2000, dividing states whose legislatures have enacted restructuring legislation and those whose regulatory commissions have issued sweeping restructuring orders. Fifteen states have enacted legislation restructuring their electric industries. Three state regulatory commissions have issued orders requiring restructuring of their electric industries. Most remaining states are investigating restructuring. Because of the dynamic state of restructuring legislation in the U.S., changes in the contents of Table 1.1 will occur often into the first decade of the 21st century.

Thus, after five years of intense debate, 30 of the 48 states under the FERC's jurisdiction still have not adopted legislation or commission orders to restructure their electric industries. In anticipation of a "patchwork" industry in which generally higher-priced states restructure while lower-priced ones


Status of State Electric Restructuring (2000)

State Legislation State Regulatory Order


Status of State Electric Restructuring (2000)

State Legislation State Regulatory Order


Date Enacted


Date Ordered


May 1998


Jun. 1997


Sept. 1996

New York

May 1996


Apr. 1998


Jan. 1997


Dec. 1997


May 1997


Apr. 1999


Nov. 1997


May 1997


Jul. 1997

New Hampshire

May 1996

New Jersey

Feb. 1999


May 1997


Nov. 1996

Rhode Island

Aug. 1996


Jun. 1999

delay, several federal bills mandating national restructuring have been introduced in the U.S. Congress since 1996. The Comprehensive Electricity Competition Act, proposed by the Clinton Administration in June 1998 and amended in April 1999, required retail competition — i.e., direct access to sources of electric supply — for all customers by January 1, 2003. However, states would be allowed to opt out of provisions of the legislation if it was felt that consumers would be harmed (Hill, 1995).

The outcome of this legislative/regulatory morass on retail restructuring is difficult to predict. However, there are three certain and undeniable trends in the electric industry: (1) de-integration, (2) convergence, and (3) globalization.

Solar Stirling Engine Basics Explained

Solar Stirling Engine Basics Explained

The solar Stirling engine is progressively becoming a viable alternative to solar panels for its higher efficiency. Stirling engines might be the best way to harvest the power provided by the sun. This is an easy-to-understand explanation of how Stirling engines work, the different types, and why they are more efficient than steam engines.

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