Prospects for distributed renewable electricity generation in competition-based power markets

Publisher Summary In the face of liberalization, many electricity markets are currently being substantially reshaped. One feature of this change is a gradual shift from centralized to more localized systems for electricity production situated closer to the consumer. Distributed generation (DG) sometimes offers an attractive alternative to large-scale centralized capacity expansion, mainly due to lower initial investment costs and greater flexibility that allows a better match of supply capacities with actual demand. Moreover, there is plenty of scope for using renewable and environmentally less damaging energy sources—an important ingredient in any strategy to curb local pollutant and global greenhouse gas emissions. However, uncertainties introduced by the liberalization of the energy markets and a lack of suitability of traditional approaches to assess the economic performance of DG technologies, often make comparisons among different generations options a challenge. This chapter addresses the potential of DG in competitive power markets on a conceptual level. It is concluded that the combination of competition and new modular generation technologies will dramatically transform the energy supply business, and that DG can be expected to contribute significantly to the achievement of environmental, regulatory, and developmental challenges.