Alternative energy and distributed generation (DG) are terms that can mean different things to different people, not only encompassing small systems that utilize renewable energy sources but also including all generators up to any size smaller than a typical central generating station.  For the purposes of this feasibility research document, we are investigating any generator that is small enough to interconnect with a medium voltage (several kilovolt) electric power distribution system, while focusing mainly on PURPA-qualifying systems, those (usually renewably-powered) systems that utilities are required to interconnect with in many jurisdictions.

Traditionally, the high cost of alternative energy systems deterred people from installing them where there was utility power available, and systems tended to be installed only in remote locations, not interconnected to a utility power distribution system.  However, in recent years, prices of inverters and control systems have fallen while their efficiency and quality have risen. Prices of the actual energy-generation components, such as photovoltaic modules, have also steadily decreased. Many recognize the benefits of generating energy from renewable resources, and all these factors have led to increased consumer interest and regulatory pressure to interconnect renewable alternative energy systems with the existing distribution grid.

For the reasons mentioned, DG is already being interconnected, while utilities struggle to incorporate it into a sustainable and sensible business plan.  Possible applications for DG include:

·   Peak shaving

·   Renewable generation

·   Transmission and distribution upgrade deferral

·   Emergency or standby power

·   Reserve power

·   Reactive support

·   Voltage support

·   Local area security

Note that some of these applications will require DG to be operated in a different manner from current standards.  For example, local area security, or increased reliability supported by local generation, is only possible by intentional islanding, allowing a small area or microgrid to operate autonomously if the usual power source becomes unavailable.  This would only be feasible with much more DG on the system than is currently connected, and with a new distributed control paradigm. 

Smart Energy Source seeks to optimize alternative energy benefits for three segments:  the utility, the customer and the community.  Smart Energy Source partners are exploring the possibilities of how they can optimize deployment jointly, increasing the overall value proposition for alternative energy.

Business Process Challenges and Requirements
Technology is known for being disruptive to an organization, and the advances in alternative energy technology are no exception. New technology and more widely implemented distributed generation (DG) mean new processes and procedures to reach a new desired efficiency.

Business Organization Challenges and Requirements
As distributed generation penetration increases, major changes will be required to the conventional transmission and distribution system topology and methods of operation.

Business Customer Challenges and Requirements
While customers in general demand affordable and reliable power, without concern where it comes from or how, customers who have taken an interest in their own generation systems generally have different motivations, whether it be a higher level of environmental consciousness, or merely a curiosity and desire to learn how electricity may be generated.  Among customers in a pilot project in Germany, it has been shown that DG system owners have been willing to cooperate with the distribution system operator in modifying their generation and consumption patterns, in return for a small economic benefit and the understanding that they can contribute to improving the environment. Although such customers, having an understanding of power generation and use issues, may be more understanding of interruptions and service quality issues, it remains a challenge to work with all types of customers, and integrate DG into a grid serving many who see cost and reliability as most important.

Business Data Challenges and Requirements
Under the current interconnection protocols, data collected is only used for basic research. Therefore, the utility does not always collect data for every interconnected generation facility. If distributed generation is to be used to address voltage support, local area security and other such distribution grid issues, then the data will have to feed into a system operation algorithm, and control signals and/or data will have to be pushed back to the generation sites and/or load-controlled sites to ensure that the amount of power being generated is equal to the amount being consumed.

Business Application Challenges and Requirements
If distributed generation is to be used to address voltage support, local area security, and other such distribution grid issues, then DG systems will need to be planned and located in optimal locations, and there must be some means of controlling a large fraction of the DG systems so that they can provide energy on demand, instead of at random times.  This is possible, for instance, by installing energy storage with DG, or by limiting uncontrollable sources like solar and wind to a small fraction of the resources available. An alternative to trying to control the output of distributed generation, especially renewable generation like solar or wind, which must be used when it is available, is to control the level of consumption.  Often, utilities find it more acceptable to make use of intermittently available resources by incorporating the power-generation data into a load control algorithm, telling loads to switch on or off according to the availability of the renewable resource.  For example, in Washington state, where a large amount of wind generation is installed, water heaters are automatically turned up when there is a surplus of wind power available.

Business Technology Challenges and Requirements
Many of the technological challenges associated with alternative energy are related to islanding, a term describing the formation of a local area (or island) that continues to operate autonomously when the usual centralized source of power is interrupted or becomes disconnected.   If the interruption of the normal supply occurs at a time when local area consumption and production are closely balanced, then an island can be unintentionally formed.  Continued operation under these conditions introduces problems and dangers to the islanded area, including loss of voltage and frequency regulation, and the possibility of injury due to contact with wiring assumed to be de-energized. Protection against unintentional islanding can be provided by enhanced sensing within the inverter, or by developing communication standards to allow inverters to get data from other nearby DG sites.

If communications protocols are developed allowing inverters and control systems at various DG sites to coordinate with each other, it may become possible to allow islanding to take place intentionally, in a controlled and safe manner.  Several distributed energy resources could work together to become a virtual power plant, perhaps with some ability to be centrally controlled, but also with the capability for intentional islanding.  Challenges remain in developing such control paradigms, but they have been tested in laboratory experiments.