Distributed Utility Associates












A Distributed Utility (DU) includes small/modular generation, energy storage and geographically targeted energy efficiency and demand management systems used to complement central generation and utility power transmission and distribution systems. Distributed generation and storage technologies are often referred to as "distributed" resources (DR).

Distributed Utility Stakeholders


Using the Distributed Utility concept utilities can:

  • reduce cost of service to customers by deferring or avoiding expensive upgrades to the power infrastructure especially as usefulness and financial returns become less certain

  • tailor (and differentiate) types, quality, and price of service to customers

  • possibly reduce overall environmental impacts, depending on which kind of DRs are used, how they are used, and what energy sources they offset.

Utility Customers

In many cases, with DU technology energy customers will be able to:

  • manage and hopefully reduce overall cost of electric and/or all energy

  • increase power quality and/or reliability on-site, as needed

  • utilize more environmentally sound energy resources, and if applicable

  • use "waste" (i.e., excess) heat for process or domestic needs (cogeneration, or combined heat and power, CHP).

Energy Services Providers--ESPs

DU technologies and strategies provide important means for energy services providers (ESPs), also known as Energy Services Companies (ESCOs) to provide a full range of energy-related products and services. DU "building blocks" are alternatives to conventional solutions: central energy supply (i.e., natural gas and power generation) coupled with an electricity transmission and distribution infrastructure.

For example, ESPs could assist blocks of utility customers with high utility service cost if the ESP can aggregate the customer demand and then serve it with DU-based alternatives -- alternatives that reduce costs and/or increase benefits. The new DU alternatives may even enable entry of new ESCOs into the energy marketplace.


Finally, as deregulation of the electric utility marketplace continues, utilities are likely to be required to base the price of energy and related services on more precise allocation of costs (costs attributable to serving specific types of customers and/or customers in specific geographical areas) than they have traditionally. If that occurs, the risks and rewards associated with use of DU resources can be shared in a more economically fair and efficient way among all stakeholders.

Distributed Utility Technologies

Distributed utility systems are small and/or modular electric resources deployed in dispersed locations within electricity or natural gas distribution systems (i.e., at or near energy loads). In general, distributed resources (DRs) are deployed so they address energy (electric, fuel, thermal, or mechanical) and/or power delivery needs in a manner that optimizes value and/or minimizes cost.

Electric Power Generation

Leading DU technologies that convert non-electric energy to electricity are diesel, gasoline, propane, or natural gas fired internal combustion engines, combustion turbines and microturbines, fuel cells, photovoltaics, wind, and Stirling engines. Engines and combustion turbine DRs could also be used to provide mechanical energy (e.g., for air or refrigeration compressors or for industrial processes) in lieu of electric motors. Engines and combustion turbine DRs can also be used in a way that produces thermal (heat) energy that can be used.

Energy Storage

Devices that store energy can be valuable DRs if they are deployed so they significantly offset costs associated with:

  • purchase of electric energy (kiloWatt-hours)

  • adding or upgrading energy supply and/or delivery capacity (kiloWatts)

  • improving energy service reliability

  • improving the quality of electric power.

These include batteries, supercapacitors, superconducting magnetic energy storage (SMES), and flywheels.

Systems that store thermal energy also serve as distributed resources. Perhaps most important are systems that create and store "coolth" at night when electric rates are low -- for use during the day when cooling is needed and when electric rates are high.

Demand Side Management (DSM) and Energy Efficiency(EE)

DRs may include carefully targeted energy efficiency (EE) devices which reduce the need for: a) energy (fuel or electric) and b) capacity--equipment and infrastructure requirements for energy supply and delivery. DRs can be demand side management (DSM) technologies and programs specifically designed to limit maximum local electric demand (and thus capacity requirements upstream, within the grid).

Among others, DSM/EE DRs can be:

  • energy management systems (EMS)

  • time-of-use electric rates

  • direct load control (utilities can turn devices off at the customer's site, by arrangement)

  • interruptable or curtailable electric service options (customers are asked to shed load to reduce demand on the utility's infrastructure (supply and/or delivery) a few times per year, for short periods, in return for a reduced electric rate) or

  • utility dispatch of customer's grid-connected back-up power generation for local and/or for central power needs.

Distributed Utility Benefits

By deploying energy conversion, storage, management, or efficiency technologies at or near end-use locations with high marginal cost of service, several important advantages may accrue.

Potential DR Benefits for Utilities or other Energy Services Providers


  • Less energy supply capacity may be required for equal or better service.

  • Less energy distribution infrastructure capacity may be needed to provide equal or better service.

  • New infrastructure capacity can be added incrementally, only when and as needed; or, DR resources can be more easily "redeployed."

  • Local and/or systemwide utility service reliability may increase.

  • Energy losses associated with transmission and distribution are reduced.

  • Environmental impacts may be reduced.

  • Excess heat from power generation may be recovered and sold.

  • New products and services (relative to traditional utility offerings) may be provided, such a) premium quality power, b) "green" energy, c) thermal energy, and d) back-up power or high reliability electric service.

Potential DR Benefits for Energy End-users

  • Reduced energy and demand bills and enhanced "bill management" flexibility.

  • Service (level and types) can be adjusted/optimized with greater flexibility than with conventional alternatives.

  • Excess heat from power generation may be recovered and sold or used to offset fuel costs.

  • Potential for use of environmentally preferred energy technologies and resources.

  • Even the threat of customer sited DRs may be important negotiation leverage in the future as it becomes more common for customers to haggle over prices with utilities and other ESPs.






Related Sites

California Energy Commission (CEC)

National Renwewable Energy Laboratory (NREL)

Electricity Storage Association


Department of Energy

Office of Electric Transmission and Distribution

Recommended Readings

Risk and DR: Coin of the Realm

EPRI-DOE Handbook of Energy Storage for Transmission and Distribution Applications

DER Benefits Study Comparison, NREL 2003

CEC RFP Attachment 14: Electric Energy Storage Benefits and Market Analysis

Distributed Resources: A How-To Guide for Federal Facility Managers

Economic Analysis of Distributed Energy Impacts, DOE 2003

Congressional Testimony on DU

Texas Distributed Generation Interconnection Manual

Utility Owned Distributed Generation Market Potential

Analysis of the Economic and Environmental Benefits of Market Penetration of Distributed Generation

Bulk Energy Storage for Cooperatives

Innovative Business Cases for Energy Storage in a Restructured Electricity Marketplace, Phase II

Innovative Applications of Energy Storage In a Resrtuctured Electricity Marketplace, Phase III