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Historical Analysis of the Move Toward Distributed Generation

In 2000, the Helios Centre obtained comprehensive data on each of the roughly 13,500 power plants brought into service in the United States between 1920 and 1994. Using this data, Helios analyzed of the evolution in power plant size and energy sources through the better part of the 21st century.

The results of the Helios Centre analysis were revealing:

• Following World War I through to World War II, average unit size rose steadily at an average annual rate of just under 5.5%.
• Beginning around 1950, massive economies of scale pushed plant size rapidly upward. By the late 1970s, average plant size had increased by an astonishing 1072%, as large-scale nuclear plants became the technology of choice.
• The late 1970s capped the height of the movement to increased scale, as average plant size topped 150 MW. Excluding plants of less than 25 MW each, average size neared 300 MW.
• Yet since the late 1970s, the U.S. has witnessed a radical paradigm shift. Not only has growth in plant size halted, negative growth has completely reversed the size gains of more than three decades. Indeed, from roughly 1980 to 1995, average plant size has plummeted more than 80%, back to its lowest level since just after World War II.

Other aspects of the analysis revealed the extent of more changes to the electric utility industry, including the evolution in preferred energy sources. Indeed, examination of new capacity installations revealed the extent and speed of the rise and fall of nuclear power as the generation technology of choice. Data also provide clear illustration of the recent return to natural gas, as well as the steady ascent of new renewables and other energy sources, all at the siginificant expense of traditional power sources like coal and hydroelectric power.

The results of the Helios Centre analysis, published in the international journal Cogeneration and On-Site Power Production, have provided concrete evidence of the intuitive notion of declining economies of scale fuelling a move to smaller, more modular power projects.

At the Helios Centre, we believe that the mutually-reinforcing confluence of four fundamental issues is at the heart of this sudden change, and will continue to be for the foreseeable future. These are:

• Technology. To a surprisingly large extent, new gas turbine technology has allowed for the miniaturisation of power plant technology with relatively few losses in conversion efficiency, especially given cogeneration and trigeneration opportunities. This has led to a significant reduction in economies of scale, paving the way to standardized, 'off-the-shelf' power units and, ultimately, decentralization of generation. Order-of-magnitude improvements in wind turbines and other renewable energy technologies have added to the market acceptability of increasingly modular and distributed generation energy options, a trend that is bound to be accelerated in the future by the advent of fuel cells.
• Market restructuring. What losses in efficiency do stem from smaller-scale units can now be counter-balanced by the added value of reliability gains, the ability to bypass some transmission and distribution charges and the avoided costs of emissions reductions (compliance). Indeed, as competition brings an end to supply-demand planning, and as competitive pressures force some remaining utilities to cut back on reliability-related investments, the value of on-site power will only increase. Meanwhile, rate unbundling has brought increased price transparency - and volatility - to the cost of using transmission and distribution assets, which small-scale plants can avoid.
• Environmental imperatives. Over the past thirty years, environmental concerns have had significant consequences for the electric power industry: local opposition adds tremendous cost, complexity and practical barriers to siting new transmission lines; increasingly stringent air pollution permitting regulations (including cap-and-trade allowance markets) negatively affect the economics of coal plant expansions and may lead to early retirements; and climate change concerns will strongly favour both natural gas plants and renewable power sources. All of these concerns lead toward small-scale, natural gas fired cogeneration or trigeneration (producing electric power, heating and absorption chilling) as well as renewables-fuelled plants.
• Economic imperatives. Finally, as the transformation from a resource- to a knowledge-based economy continues, the added value of reliability takes on greater significance. This holds true both for information-dependent industries (such as financial markets) and for users of industrial equipment that is increasingly sensitive to power quality. A recent EPRI study, for example, pegged economic losses from power outages in the U.S. alone at nearly $120 billion USD/year. These "special needs", "digital quality" clients are likely to emerge as the early niche markets for what ultimately will be the mass marketing of individual, small-scale power generation and conditioning plants.

As the confluence of technological, market and societal changes continues to revolutionize the energy industry, the Helios Centre will maintain close coverage of events and provide, as it has in the past, research and analysis as to the regulatory and market mechanisms required to advance environmentally-preferrable, distributed energy technologies.

*Note: This is only one example of Helios' work on distributed energy technologies. For more information, please visit our publications pages or contact us directly.

REFERENCE:

P. Dunsky, 1920-1995 and Beyond: Trending Downwards. COSPP Journal, Nov.-Dec. 2000, 6 pages
[PDF file: 480KB].