The value of distributed generation-policy implications for the UK

The purchase of a unit of distributed generation rather than a unit of centralised generation may provide a number of savings to distribution companies and suppliers. Distributed generation may also, if sited appropriately, avoid or defer reinforcement costs to the electricity system. Currently, distributed generators have to negotiate with their suppliers for payment of these savings. It is important that regulation and electricity trading arrangements ensure automatic payment of those benefits. This would be a fundamental change in the pricing methodology of electricity and as such it excites strong views and lobbies. In theory, being able to establish, and being paid the equivalent of, the value of distributed generation opens up new business opportunities for generators, distributors and suppliers. This, combined with more information about customer demand, should also make it easier and more attractive for new entrants to enter the electricity/energy services/utility markets. However, in order for this to occur, more information about the distribution system has to be in the public domain and electricity trading arrangements and utility regulation has to be established so that incentives are cost-reflective and do not discriminate against distributed power