Wholesale Distributed Generation

What is distributed generation?

Distributed generation (DG) refers to generating energy close to where it is consumed, rather than forcing communities to rely on faraway fossil fuel plants and inefficient long-distance power transmission. An energy system built around DG is decentralized and more resilient when compared to centralized generation, which relies on a few large power plants located far from the communities that consume the energy.

What is wholesale distributed generation?

Wholesale distributed generation (wholesale DG) refers to distributed generation systems that connect to the distribution grid and sell the electricity they produce to the local utility to serve local energy demand (as shown below).

The three renewable energy market segments

What are the benefits of wholesale DG?

  • Wholesale DG serves only local load and avoids the expensive, inefficient, and environmentally harmful effects of long-distance transmission infrastructure.
  • Wholesale DG projects keep energy dollars close to home and grow local economies, driving economic stimulation, including job growth.
  • Wholesale DG projects come online quickly and avoid the lengthy and expensive process of building new, large, centralized power plants and transmission lines.
  • Wholesale DG projects democratize access to clean local energy by giving more parties the opportunity to participate, and not just homeowners or large corporate entities.

The most cost-effective solar is large wholesale DG, not central station due to significant hidden transmission and distribution costs

Lessons from Germany

Starting in 2000, Germany enacted a national feed-in tariff (FIT) that propelled the country to become the world’s clean energy leader. The nation experienced tremendous growth of local renewable energy because their FIT unleashed the wholesale DG market segment. The German FIT targeted the wholesale DG market by making it easy to build smaller local renewable energy projects in the built environment (on preexisting homes, buildings, and structures), connect them to the grid, and sell power to the local utility at a fixed rate using a standardized, long-term, and guaranteed contract. To date, Germany has integrated more than 38 gigawatts of solar photovoltaics into its grid — the most solar capacity anywhere in the world (see figure below). During the 10-year period following the introduction of its national FIT, Germany ran laps around the United States, including deploying over ten times more solar capacity than California (see figure below).

Germany’s solar deployments are almost entirely sub-2 megawatt projects in built environments and interconnected to the distribution grid

Germany has deployed over 10 times more solar than California in the last decade

Predictable, streamlined procurement and interconnection radically reduced the costs to build local renewable energy projects in Germany. Replicating Germany’s scale and efficiency in California would result in rooftop solar costing between 4-6 cents/kilowatt-hour (kWh), due to California’s better solar resource and applicable tax treatments.

Replicating German scale and efficiencies would yield rooftop solar today at only between 4-6 cents/kWh to California ratepayers | Source: Wind-works.org

Wholesale DG in the United States

In the U.S., there is a lack of policy support for the wholesale DG market segment. Existing policies have focused primarily on driving deployment of large-scale renewables through Renewable Portfolio Standards, as well as small, customer-sited renewables — like residential rooftop solar — through net energy metering (NEM). The critically underserved wholesale DG commercial-scale market segment must be addressed as it offers a tremendous opportunity for cost-effective clean local energy.

NEM is indisputably effective for deploying retail DG and works best for residential installations as it typically credits customers at their retail rate for any energy exported back to the grid. Unfortunately, it does not effectively address the commercial-scale solar segment. Los Angeles Mayor Eric Garcetti explained, “Until L.A.’s FIT was launched, 75 percent of our city’s rooftop market was ineligible for solar because of insufficient load or because so many buildings are non-owner occupied or multi-tenant.” For properties in any of these situations, net metering is not an effective policy. A policy that supports the development of wholesale DG projects is necessary to bring the vast majority of these commercial properties into play.

Success in Georgia and Gainesville

Georgia Power has emerged as a leading solar utility with roughly 900 megawatts (MW) of solar-generated electricity on its grid. The vast majority of this capacity came online through Georgia Power’s highly successful Advanced Solar Initiative, which was launched in 2012 and had a specific focus on expanding the wholesale DG market.

Georgia Power began the Advanced Solar Initiative by bringing 210 MW of solar online across the residential, commercial and industrial, and utility-scale segments. In 2013, Georgia Power increased the Advanced Solar Initiative to 735 MW. Of this total capacity, 190 MW were carved out for wholesale DG projects, and all of this capacity has been built.

In Gainesville, Florida, Gainesville Regional Utilities implemented a FIT in 2009 that drove more than a 3,500% percent growth in local solar capacity during the program’s first three years and created hundreds of local jobs.

Gainesville Regional Utilities (GRU) solar capacity boomed after implementing its FIT

Resources

Local Clean Program Guide

Further reading

Unleashing clean local energy through smart policy | Medium (March 24, 2017)