Distributed Generation and Energy Management: Reducing Energy Costs

Abstract

We are entering a new energy era in the United States, one that is
forcing—or will force—end-users to become much more energy-minded,
efficient and more mindful of energy costs and uses. In other words, they
will need to become fairly sophisticated energy managers, or be willing
to outsource their energy purchasing needs. There are a number of driv-
ers to suggest that this scenario will, indeed, play out. Such drivers in-
clude:
• The Federal Energy Regulatory Commission (FERC) mega-Notice
of Proposed Rulemaking (NOPR RM01-12-000) issued in July, 2002
states that the FERC is placing equal weight on all potential electric
transmission solutions, including distributed generation.
• A formal or informal national energy policy that reflects the threat
of energy shortfalls within two decades. This strategy will equally
focus on conservation, efficiency improvements and alternative
energy as well as domestic production;
• Lack of investments in grid infrastructure (and subsequent events
such as the August blackout);
• The popularity of existing demand response programs;
• Volatile energy prices resulting in rising prices over time in some
energy markets;

• Market rules that require much more sophistication in order to
benefit from deregulation, including nominations and compliance
penalties;
• Automated meter reading (AMR) growth;
• Rapid adoption of internet-connected devices;
• Energy service companies’ continued growth; and,
• An emerging liability issue.
While the status of the FERC mega-NOPR is unclear, the demand
response aspect will likely gain acceptance in other forums. Together,
these drivers have the potential to help shape and deliver the long-
awaited distributed generation (DG) market 1 . Of course, the current
“hybrid” model of regulation—stuck somewhere between open and
closed markets—and other barriers (emissions, interconnect, etc.) will
continue to be the determining factors in the short-term. But, the overall
trend suggests that DG will, indeed, finally emerge as a resource ac-
cepted by all parties—regulators, utilities and end-users.
Notice that the majority of drivers are demand side focused, and
not supply oriented!
The strategy of the future is one of risk management. This is a
dramatically different business model from the one that is now in place
because it could lead to fewer operating hours (peaking vs. base load),
thus increasing paybacks. But, it could also lead to much wider accep-
tance of DG as one more solution to manage customers’ energy bills. The
enabling technologies for this transformation include new generations of
controls and energy management systems that will seamlessly bring DG
and load management together.
Winning products will include low-cost, hassle-free, plug and play
and clean DG/CHP; retrofit emissions controls; and sophisticated, reli-
able, affordable controls.