Distributed generation has captured the interest of federal and state policymakers, excited potential developers and users and is becoming a part of the business strategies of utilities and other energy service providers. It has the potential to change the structure of electric power generation and distribution and redefine how electric services are delivered to customers. Yet while the regulatory environment remains uncertain, distributed generation faces difficulties in introducing new technologies and practices to the market.
Many benefits of distributed generation are overlooked in the context of the traditional economics of power production and regulation. These benefits include: emissions reductions, improved efficiency and reliability, consistent power quality, flexibility in meeting demand growth and that distributed generation is a least-cost method of addressing transmission and distribution constraints.
These present a powerful value proposition to cities across the country. Any metropolitan area that must confront the issues of air quality non-attainment, rapid load growth or deteriorating electricity service may find distributed generation can play a major role in solving environmental and reliability problems.
This study evaluates the emerging role for distributed generation and finds two metropolitan areas, Chicago and Austin, Texas, provide the best opportunities for development of distributed generation. Both cities face unique environmental issues and constraints that offer opportunities to integrate distributed generation into urban planning strategies, and policymakers and regulators in both areas appear to understand the benefits of distributed generation. Other cities considered, but found to have unfavorable climates for distributed generation, include Albuquerque, N.M.; Las Vegas, Nev.; San Diego, Calif.; Detroit; and New York.
By using Chicago and Austin as examples, this study created an "Urban Distributed Generation Profile" containing six indicators that can be used to analyze the potential benefits of distributed resources for other urban areas. They are:
- Need for new capacity;
- Constrained power delivery system;
- Environmental/air quality restrictions;
- Electric rate structures favorable to distributed generation;
- Availability of natural gas; and
- Regulatory incentives.