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CEIC-01-03

"Distributed Generation and Path Dependency"

Neil Strachan.

Abstract:
Distributed generation (DG) provides energy and emissions savings for a single installation, provided consistent electricity and heat loads are available. But unless DG has a significant market penetration, it cannot be an important tool in meeting energy policy goals. Widespread use of DG represents an alternative system architecture for the generation and delivery of electricity and heat. A green-field cost optimization of seasonally varying energy system demands, showed utilization of DG provided overall cost savings of around 25%. This model was used to investigate the implications of introducing DG into an energy system with existing generation plant. Sizeable penetration of DG for base-load application results in system cost and emissions savings. However, a reduced utilization of 46% for existing capacity suggests potentially stranded assets. Ongoing modeling investigates endogenous implications of DG penetration including mechanisms for compensating stranded assets, natural gas costs, evolving demand and DG economies of scale.

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