Distributed generation and distribution utilities

Distributed (co)generation (DG) represents an alternative paradigm of energy supply and the opportunity for significant CO2 emission reductions. This paper investigates the adoption of the DG technology of internal combustion (IC) engine cogeneration in the Netherlands and UK from 1985–1998. This detailed comparison was motivated to understand why the Netherlands installed 20 times as many units and 40 times as much DG capacity (per capita) compared to the UK. The primary finding of this study emphasizes the win–win partnerships between DG adopters and utilities. While both governments promoted DG as part of their CO2 reduction goals, only distribution utilities in the Netherlands were primed to support greater DG penetration. Crucially, Netherlands utilities offered high electricity buy-back rates which enabled innovative utilization of DG. Flexible operation modes allowed investment in larger units, benefiting from economies of scale due to fixed components in maintenance costs, and extended DG use to the much larger set of sites with limited electricity base-loads. The win–win partnerships between distribution utilities and DG adopters for cost savings also facilitated improved management of the electricity network. A final consequence was a virtuous circle of maintenance cost reductions from geographic concentration of DG units, resulting in improved returns and hence more DG unit sales.