Distributed generation: An empirical analysis of primary motivators

What was once an industry dominated by centralized fossil-fuel power plants, the electricity industry in the United States is now evolving into a more decentralized and deregulated entity. While the future scope and scale of the industry is not yet apparent, recent trends indicate that distributed generation electricity applications may play an important role in this transformation. This paper examines which types of utilities are more likely to adopt distributed generation systems and, additionally, which factors motivate decisions of adoption and system capacity size. Results of a standard two-part model reveal that private utilities are significantly more inclined to adopt distributed generation than cooperatives and other types of public utilities. We also find evidence that interconnection standards and renewable portfolio standards effectively encourage consumer-owned distributed generation, while market forces associated with greater market competition encourage utility-owned distributed generation. Net metering programs are also found to have a significant marginal effect on distributed generation adoption and deployment.