With electricity prices going up and rolling blackouts on the rise in different parts of the country, some energy experts are asking whether it’s time to rethink the structure of the power grid. Although consumers have the power to choose their electricity provider in some states like Texas, you can’t easily choose your power grid or switch to a different one.  

Distributed energy resources (DERs) provide consumers and energy providers with more options. A distributed energy system can reduce the frequency of outages by drawing power from multiple sources, rather than a centralized power system.  

Here’s everything you need to know about distributed energy, including how you can install your own home generator or energy storage system. 

What Is Distributed Energy? 

Distributed energy refers to an electricity generation system that incorporates multiple small-scale devices rather than a centralized power plant and distribution network.  

Traditional power plants, including coal and nuclear power plants, are usually located far from population centers and require a complex system of transmission lines to distribute energy across a broad geographical area. These large electric grids are prone to failure and are expensive to maintain and operate.  

Distributed energy resources (DER) can include small-scale generators with less than 1 megawatt (MW) of capacity and utility-scale generators of up to 10 MW. DERs can operate independently as microgrids, or feed energy back into the central electric grid.

What Are Examples of Distributed Energy? 

Distributed energy resources include a wide range of electricity generation devices and facilities. These can run on either fossil fuels or clean energy sources.  

Examples of distributed energy systems include:  

• Wind turbines 
• Hydropower plants 
• Waste-to-energy plants 
• Solar photovoltaic panels 
• Natural gas fuel cells 
• Backup generators 
  

Large-scale solar arrays and wind turbines with a capacity greater than 10 MW aren’t typically considered DERs. Distributed energy resources are small-scale installations, such as rooftop solar panels installed at residential homes or industrial facilities. 

How Does Distributed Energy Work? 

Distributed energy generation starts off the same way as industrial power generation: the distributed energy resource produces electricity by burning fuel, converting solar power into electricity, or otherwise generating electric power from a fuel source.  

The key difference is that distributed energy resources operate on a smaller scale by first delivering energy directly to a facility or community, and then contributing excess energy into the main power grid. Unlike large-scale power plants, the energy doesn’t have to pass through a regional distribution system before it can be used.  

For example, a small business could install a microturbine on-site to act as a primary or backup power source. One case study found that a McDonald’s in Chicago saved $1,500 per month on electricity by installing a microturbine powered by natural gas. 

What Are the Benefits of Distributed Generation?

There are several reasons why consumers, small businesses, and local governments alike should consider distributed energy technology. Here are three key benefits: 

Energy Efficiency 

Distributed energy resources may be more efficient because electricity doesn’t have to travel as far to reach its destination. According to one Stanford University estimate, up to 6.8% of California’s electricity generation capacity is lost during transmission.  

Standalone DERs and microgrids are more responsive to supply and demand, while large grids like the Texas Interconnection require grid operators to maintain a stable voltage or risk widespread outages and grid failure.  

Distributed energy resources can also be used in cogeneration, or combined heat and power (CHP) systems, in which the energy produced by generators is used to provide heating and cooling to a commercial or residential facility. 

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Lower Costs 

Relying on distributed energy systems can be more cost-effective than getting electricity solely from the grid. Even if DERs don’t meet all of your energy needs, consumers with distributed energy resources are protected from rising energy costs, and can even get compensation for returning excess energy back to the grid.  
For example, residential customers who install rooftop solar panels can benefit from net metering, in which the energy you feed back into the grid is deducted from your energy usage and reduces your overall electricity bill. Some states also offer tax credits and other incentives for installing home solar panels or battery storage systems. 

Greater Reliability 

Distributed energy resources can provide improved functionality and reliability, especially in areas that are prone to disruption due to blackouts or wildfires. Facilities with sufficient energy generation and storage technologies can function entirely off-grid, or use DERs as a backup power source in an emergency.  

The energy industry as a whole benefits too by incorporating more flexibility into the electricity grid. Wind and solar power can be variable and unpredictable, so system operators can draw from distributed energy resources to balance the load. 

What Is Distributed Renewable Energy? 

Distributed energy isn’t necessarily renewable energy. After all, a microturbine or generator that runs on fossil fuels isn’t any more renewable that a coal-fired power plant.  

Still, distributed energy systems tend to rely on renewable resources such as wind and solar power. DERs may also use biomass — such as wood, vegetable oils, and even household waste — or fuel cells, which function a lot like batteries.  

By shifting energy generation toward renewable resources, distributed energy systems can play a role in reducing emissions and improving sustainability at the local level. 

What Is a Distributed Energy Company? 

Distributed energy resources can be installed by companies large and small — from major electric utility providers to small businesses and even housing co-ops.  

The U.S. Navy teamed up with energy company Ameresco to develop a $173 million distributed energy project at the Norfolk Naval Shipyard in Portsmouth, Virginia, and another $58 million project at the Portsmouth Naval Shipyard in Kittery, Maine.  

These projects use combined heat and power (CHP) and battery storage systems to improve energy efficiency and reduce reliance on external electricity services.

What Are the 3 Types of Power Distribution? 

Historically, there have been three ways to distribute electric power: radial, loop, and network systems. The three types of power distribution all have their own pros and cons, and are useful in different settings. 

Radial 

Radial systems consist of a single power generation plant that’s connected to multiple consumers along a central transmission line. The radial system is best for rural areas because it can supply energy over long distances at low cost. But because there’s only one generator and transmission line, outages can be costly and time-consuming to fix. 

Loop 

A loop network is more like a ring: it delivers power to multiple consumers along the ring, and is usually connected to more than one power source. Since electricity can travel along the ring in both directions, it’s easier for the system to switch from one power source to another or change the direction of travel. Loop systems are more reliable, but the extra switches and transmission lines make them more expensive to install. 

Network 

Networks are essentially made up of multiple loop systems linked together, with even more power sources feeding into the system. This allows for extra redundancy in the event of a power outage or failure, with little to no interruption to service. Network systems are mostly used in dense urban areas, where higher energy usage justifies their higher cost. 

What Are the Advantages of Distributed Energy Production vs. Centralized? 

Radial, loop, and network systems differ in several key ways, but in most cases, they still rely on large-scale, centralized power plants to supply electricity to consumers. As we’ve seen during recent scenarios like the 2021 Texas storm and California wildfires, extreme weather events can wreak havoc on a centralized energy system.  

Distributed systems aren’t widespread enough to replace the existing power grid, but they can help mitigate some of its weaknesses. According to the International Energy Agency, distributed energy systems can improve demand response, which helps to keep the grid balanced and at less risk of an overload.  

Plus, the modular nature of DERs makes them ideally suited to both urban and rural locations. In cities, they can generate power in close proximity to users, without the pollution or large geographic footprint of an industrial-scale power plant. In rural areas, they can provide backup power or streamline distribution to areas that are far from central transmission lines. 

What Are Microgrids? 

A microgrid is a distributed energy system that has its own set of controls. Unlike solar panels that simply connect to the main grid, a microgrid is a fully independent grid with a full set of transfer switches and inverters.  

According to the National Renewable Energy Laboratory at NREL.gov, it can “connect and disconnect from the grid to operate in grid-connected or island mode.”  

Microgrids are often used to power small communities over a limited geographic area. One example is the microgrid on the island of Ta’u in American Samoa. This grid uses over 5,000 solar panels and 60 Tesla batteries. It can store enough power to provide energy for three days even when there isn’t sufficient sunlight. 

Why Is Distributed Energy Important? 

Distributed energy resources are important because they can help lower energy costs and improve the functionality and reliability of the electric grid. Because DERs include solar panels and other renewable energy sources, they can help to reduce emissions and improve the sustainability of the energy industry overall.  

DERs also put more power into the hands of consumers. Backup generators, energy storage systems, and electric vehicles (EVs) are all examples of distributed energy. By installing DERs at home, consumers can become more resilient in the face of a power disruption, and can lower their energy costs by contributing energy back to the grid.  

Learn more about ways to improve your energy efficiency so yu can use less energy and spend less money.  

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