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At the Edge of the Grid

What do you think would have happened if, a hundred years ago, someone had invented a DC Power Transformer? Direct Current power in, electricity out -- any voltage, current, frequency, and phase. Would we have a DC Grid? A system where high voltage DC would be transmitted over the grid we have today, inverting power to AC when required by the occasional motor or AC load.

Perhaps, but in any case, today we have an AC grid, with a zillion little rectifiers loitering at its edges. Yes, a zillion. Every television, computer, cellphone, microwave, fluorescent lighting ballast, cordless phone. A zillion. And they're each sucking up a watt or two, often 24 hrs a day. Arthur Rosenfeld, head of the California Energy Commission, calls them our Energy Vampires.

And what's more, near the edge of the grid where these rectifiers convert from AC to DC to power our electronics, we're installing DC generators; solar photovoltaic cells, wind generators, fuel cells, and batteries. Each of these produces clean direct current, which we spend energy inverting to alternating current, synchronizing, avoiding islanding, and sending it into a transmission and distribution system that this rife with losses.

Finally, before it's used, this inverted power is rectified again, back to its original DC form. This round-trip journey to nowhere is expensive. The rectifiers were built with only economy in mind. They're cheap, hot, and inefficient.

So what?s going to happen?

First, centralized rectification. One rectifier, probably at the building's service entrance, will provide DC power through a separate, or even the same electrical systems. Currently, commercial fluorescent lighting systems powered by DC have a separate DC wiring system. It's easy to convert the AC lighting system wiring to DC. In the future, we'll see wiring systems that provide AC through the hot and neutral wires, DC through the neutral and ground. The patented outlet for this already exists.

The Nextek Power Gateway is such a centralized rectification system that takes power first from its DC buss, powered by locally generated energy (like solar photovoltaic), then, as needed, from the AC grid, rectifying only what's needed when clouds pass overhead or at night. An additional advantage of this architecture is that the system is not subject to anti-islanding laws and can continue to power the load during a power failure. For more information see the or

Second, the Universal Transformer. In development now are several designs for a solid state transformer that will provide whatever power is needed, at whatever frequency. The efficiency and flexibility of this device will cause dramatic improvements in the energy profile of the grid.

Next, the DC Grid. The feasibility and the necessity of a DC transmission system is an unresolved topic but there are significant benefits involved. These will be better outlined in an upcoming white paper soon to be released by EPRI.

The battle between AC and DC was originally fought by Edison and Westinghouse at the turn of the century. The invention of the AC transformer allowed Westinghouse to build the power plant at Niagara Falls in contrast to Edison's backyard generators. Westinghouse won, but Edison was Right.

Mark Robinson is VP Sales & Marketing for Nextek Power Systems of Long Island, NY. He is a licensed master electrician and a Microsoft Certified Engineer. Nextek Power Systems provides their Power Gateways to commercial buildings to power lighting systems and Variable Frequency Motor Drives with clean DC from locally generated sources.

By Mark Robinson



Enhancing Reliability and Efficiency Using Locally Generated DC Power: The Hybrid Building


Since Edison's day Alternating Current (AC) and Direct Current (DC) have co-existed by necessity: AC to make the trip from the generating plant and DC to power electronic loads. This has resulted in billions of electrical compromises in the form of the ubiquitous power supply, or a rectifier that must stand in front of DC loads to convert AC to DC.  As Arthur Rosenfeld, California Energy Commissioner calls them, our Energy Vampires.

But now, many buildings are generating power of their own, usually Direct Current energy. Is this wasteful back-and-forth conversion really necessary?  Just as the automobile industry has advanced to the hybrid car, buildings can use multiple sources of power to achieve dramatic increases in efficiency.


Edison and Westinghouse fought the AC/DC battles around the turn of the century. AC won because Tesla's transformer allowed AC voltage to be boosted for easy transmission from Niagara Falls into the city. Edison's DC network required unpopular 'backyard' DC generation stations every few miles. But where AC won in the transmission, it's DC that is now used inside almost all of our devices. You see, only DC can be precisely regulated to get the exact voltages we need for sensitive electronics. So our current building electrical systems are fed with AC that is converted to DC at every fluorescent ballast, computer system power supply, phone system, and other electronic device.

This model works fine until we bring back Edison's original idea and buildings begin generating power of their own usually DC power such as solar, fuel cell, and wind. The inefficiencies involved with inverting to AC, matching grid frequencies, and protecting linemen from hazards are all avoidable by creating a Hybrid Electrical System.

Inefficiencies in an inverted solar system:

The inverter model of the traditional solar system has several flaws:

  1. Inverter Efficiency. Rated inverter efficiencies rated between 90% and 95%, Actual field efficiencies are even less. Many inverters consume power at night. Several models do not turn on in low light conditions.
  2. Anti-Islanding For the protection of utility line workers, inverters are required to shut down in the event of grid failure. This means that, for most solar systems, there is no energy production during a power failure (when we need it the most).
  3. Net Metering. Power sent back into the grid is not always repurchased at full cost. Sending excess power back into a sometimes overburdened grid may not be the best way to manage the resource. Net-Metering, as a business practice for utilities, is not sustainable and is likely further erode the value of power sent back to the grid. Net-Metering agreements and the meters that they require can be expensive.
  4. Reconversion losses. Now that we've suffered the losses of inverting, additional losses are incurred converting back to DC in the electronic devices like fluorescent ballasts, computers, and more.

The Hybrid Solution The theory is simple: In a building that produces DC power of its own, use the DC power for the DC devices and use the AC power of the grid for everything else. If more DC power is needed then is available, take some grid power, convert it to DC, and use it to supplement the local source.

  • Efficiency gains come from the fact the locally generated DC power is never converted and AC power from the grid is only converted when necessary.
  • The system is more reliable because there are redundant sources of power. It is not necessary to shut down a DC system during a grid failure like it is with an AC system.
  • The system is simpler because no net-metering or utility interconnection agreements are necessary. The utility cannot even 'see' the system and, in most cases, does not even need to be notified.

Drawbacks of the Hybrid Solution The only drawback of the hybrid system is that there is no efficient provision to store excess electricity. It cannot be sent back into the grid and re-purchased later and storing excess power in batteries can be too expensive to justify.

The solution is to identify base DC loads that will always be on when the system is generating. If solar panels are the local DC source, then the local DC loads need to be on all day every day. An ideal example of this is commercial fluorescent lighting.

Example of a Hybrid Lighting System In this example (which can be seenlive at solar panels are connected to DC ballasts in the lighting.

Daytime: The solar power from the panels is sent directly to the lighting, with no conversion, at nearly 100% efficiency. Wiring losses are the only significant losses. The system is designed so that, at full sun, about 90% of the power needed for the lighting is supplied by the panels. The additional 10% is taken from the grid, converted to DC at the NPS1000 power gateway.

Clouds: When clouds reduce the PV production, more power is taken is taken from the grid and converted to DC. The system is using all available power from the panels (the least expensive source) and using the grid as the backup.

Night: When there is no solar power available, all the power is taken from the grid and converted to DC. As we discussed previously, a typical AC lighting system takes AC power from the grid and it is converted to DC at every ballast. In this DC system the conversion is handled centrally. The number of conversions is not increased.

Power Failure: In the event of a grid outage, the lighting system continues to be powered by the solar panels and, if needed by optional batteries. In a traditional inverter based solar system the inverter is required to shut down, shutting off the lights.

Other suitable DC loads in commercial buildings include telephone systems, motor controllers, computer server systems, and more. Current installations include grocery stores, offices, big-box retailers, and, most recently, a Frito Lay Distribution center in Rochester, New York.

Whole Foods, Berkeley

This 30k system powers the lighting and was installed with Powerlight Photovoltaics. One of the primary benefits of this system, besides increased efficiency, is the reliability aspect. Power failures are extremely expensive for grocery stores, not because of the freezers, but because 200 people with shopping carts full of frozen food abandon the carts and leave the store. This creates an expensive emergency for the store as the staff need to scramble around, reshelving the food by opening coolers which should really stay closed. This, as well as the lost sales cost the average small grocery store over $8,000 per five minute failure. Shortly after the installation, Whole foods experienced a brief power failure. The lights were powered by the solar panels and did not shut off. Customers remained in the store.

Frito Lay, Rochester

One of the other benefits of low voltage DC ballasts is the ease at which they can be controlled. Each ballast has a phone wire-type connector which can be used to provide DC power to, and a light switch for an occupancy sensor. This reduces the installation cost of an occupancy sensor for $200.00 each to $75.00 each.

Target Stores, El Cajon, CA

This system uses the Nextek system for part of the store, and an inverter for the rest. This allows us to monitor each of the systems and compare the efficiency of both. Initial readings illustrate that the Nextek System is providing over 20% more power than the inverter based system.


The most efficient way to utilize locally generated power is to consume it all, where, when, and how it is generated. We can accomplish this by identifying DC devices in a building and powering them with the locally generated energy and use the grid as a backup.

Mr. Mark Robinson, LEED VP Sales and Marketing Nextek Power Systems



Photovoltaics: Distributed Generation or Energy Efficiency?

In the past, Photovoltaic Solar Panels have been a key part of a distributed generation program. It seems obvious, doesn't it? New technologies, though, are enabling solar electric panels to become a part of energy efficiency programs. This distinction can have a significant impact on the funding of, and the future of solar installations. The typical solar electric system consists of solar panels which create Direct Current (DC) electricity and an inverter which changes the DC to Alternating Current (AC) to be compatible with the grid. When the solar panels generate more electricity than the building is using, unused electricity is sent back to the grid. Utilities usually pay for this electricity through 'net-metering' programs. In effect, this system uses the grid as a place to 'store' unused electricity.

It turns out that this 'storage' of unused electricity is quite expensive. The cost of the inverter and its maintenance is a factor, as is the efficiency losses of the inverter. In addition, the net metering programs are expensive themselves and may not be sustainable for utilities in the future.

Inverting DC electricity to grid-compatible AC electricity is complex and expensive. To be compatible with the grid, the AC produced must meet strict requirements and the inverter itself must be capable of shutting down instantly in the event of a power failure. This regulation, called 'anti-islanding' protects linemen who might be working on a downed power line but also shuts off the whole solar electric system when you need it the most; during a power failure. Typical inverters consume up to 15% of the solar power generated and carry warranties of only five years, a quarter of the estimated life of the solar system.

Net metering is the great advantage of an inverter because it allows a building owner to sell back unused power. Systems can be designed so that, over the course of a year, the electric bill 'nets out' to zero. But is net-metering sustainable? Is it fair to the utilities to mandate net-metering? In effect, we're telling the utilities that they have to buy their own product from their customers at retail. Could a grocery store survive if it had to buy vegetables from local gardeners at the retail price?

Many utilities have gone to a more reasonable 'avoided cost' structure. This means that, if you generate electricity and send it back to the grid, the utility will credit you whatever it costs them to generate electricity, or wholesale cost. It's as if the grocer were paying you for your vegetables whatever they pay the farms. True, this sounds fair, but frankly, as a gardener, it would make more sense for me to eat my own broccoli then sell it to the grocer at half of what I'll need to buy it back for later.

The first point here is that storage is expensive. The most effective way to deal with power you generate is to avoid storage altogether and use it all, where and when it is generated. This means that an optimal solar electricity system will never generate more power than will be used. The challenge with this is that building electricity usage changes throughout the day, as does the availability of sun (except in California where it's always sunny).

The solution, at least for most commercial office and retail buildings, is lighting. In most offices and almost all large retail establishments, the fluorescent lighting is 'on' all day, every day, and often uses as much as 60% of the total building's electricity. The optimal solar system, then, provides just enough electricity to power the fluorescent lights.

The second point here involves the fluorescent lights themselves, and a fact that few realize. Each fluorescent light ballast contains a small, rather inefficient, AC to DC converter. This means that the fluorescent light itself is a DC device and can be powered directly from the solar cells without an inverter. If we can do away with the inverter (which is unnecessary anyway because we're not trying to put AC power back into the grid), we can avoid inverter losses, maintenance costs, and complexity. And because we don't have to shut the system down to comply with anti-islanding laws, we can keep the lights on during a power failure!

The concept is called 'Direct Coupling' of DC generation to the load. Here's how a system works. It uses power where, when, and how (DC) it is generated: DC power from the solar panels is sent through a 'power router' directly to DC fluorescent ballasts in the lighting. When there isn't enough solar power being generated, the power router takes electricity from the AC grid, converts it to DC, and adds it to whatever is being produced by the solar panels. The power router takes all the electricity from the solar panels and whatever else is needed from the grid to keep the lights operating during the daytime, on cloudy days, and at night. If the grid fails, then power from the solar panels and, optionally, batteries, is used to keep the lights on.

A system designed like this is less expensive initially because the solar array tends to be a little smaller. It's ideal for retail use because it keeps the lights on (and customers in the store) during a power failure. Utilities tend to support the idea because it doesn't involve complex and expensive bi-directional interconnection to the grid; to them it's an energy efficiency measure, not energy generation. It's more efficient during the day because all of the solar energy gets used and it's at least as efficient at night because the centralized AC to DC conversion in the power router is better than a similar conversion at each fluorescent ballast.

It may be that the best way to design a photovoltaic system in a commercial building is to direct couple the lighting load. This system will have lower up-front costs, be more efficient, keep customers in the store during a power failure, and save the occupant the largest portion of his electrical expenses.

A graphic demonstration of this technology can be found at and at Nextek Power System's website at Direct Coupling Demo.

Mark Robinson is VP Sales & Marketing of Nextek Power Systems. Formerly, he was involved in the design and service of inverters for solar systems. He is a licensed master electrician and a LEED accredited professional.



The NY Blackout: What would Edison Do?

An Excerpt from The Energy Pulse

How can electricity consumers improve their lot? Federal Regulations for power distribution were developed to favor the centralized power plant in order to electrify the country. These giant generating stations have had the market locked-up, as the industry has put it “from wellhead to plug” until the recent advent of Distributed Generation.

Read the whole article to get the details about Distributed Generation.



Hybrid Cars Today, Hybrid Buildings Tomorrow

An Excerpt from the Energy Pulse

Politics and the economy, not environmentalism, are driving energy innovation. President Bush’s commitment to fuel cell research, driven by the threat of reduced fuel resources in the event of an Iraqi war, is legitimizing alternative power in a way that years of consciousness-raising environmentalism hasn’t been able to match. Since Bush’s State of the Union address on January 26, there’s been major press coverage on hybrid cars, hydrogen power and fuel cells.

Read more about the rise of hybrid technology.



Improving ROI in Solar PV with Nextek's Direct Coupling Technology

Nextek has experimentally verified the substantial improvement in efficiency of a solar PV system equipped with a Nextek Power Module. Nextek's Direct Coupling technology eliminates the DC to AC inverter which is required in standard solar PV systems and which results in losses of power produced by the Solar array and less power available to loads. With the Nextek Power Module, the same number of solar cells produces more power or fewer solar cells are required to produce the same amount of power. Either way Nextek customers realize a dramatic acceleration of the payback of PV-powered building applications. Two identical sets of solar arrays and electric loads were setup side-by-side. One set was connected with a best-selling high quality inverter and one set was connected with Nextek's Direct Coupling technology. Both solar PV systems were carefully monitored by making measurements using acurately calibrated true-power meters to read both instantaneous and integrated (accumulated) watt-hours. The object was to measure the amount of effective solar PV array energy reaching the loads through the two systems under the same solar irradiation conditions. A series of tests were performed so that a variety of weather conditions could be taken into consideration.

The viability of Solar PV systems using Nextek's technology is manifest because most commercial and industrial building lighting loads are intrinsically DC by virtue of the use of electronic ballast and converters built into all standard electronic ballast are required to convert the AC back to DC. In other Solar PV systems an inverter is required to invert the photovoltaically produced DC to AC (60 Hz ). Energy is always lost due to the inherent inefficiency of inverters. In conditions of lower solar irradiation such as clouds, the early morning and late afternoon sun there is not enough solar electric to operate an inverter and the solar power is totally wasted.

The advantage of Nextek Solar PV system technology over standard practices is that the Nextek power module directly couples the photovoltaic DC source to the building lighting load. With the Nextek system all available PV is first absorbed into the load, with the remaining power requirement supplemented by the Nextek power module's high efficiency AC to DC converter. Solar energy and building AC are continuously blended to provide a highly regulated power source to the load. By eliminating the need for an inverter the Nextek approach dramatically reduces intervening losses when the sun is shining and in conditions of lower solar irradiation the solar power is still fully utilized.

The following graphs illustrate the dramatic benefits of eliminating inversion losses with the Nextek system and ability to collect and deliver PV energy to the load when compared to an inverter based system. In summary, these graphs exhibit Nextek's effectiveness in displacing far more grid power than conventional practice.

DISCLAIMER: These tests were conducted by Nextek's Engineering Research division at Nextek's facility, and were not conducted by an independent test firm. Data was collected under a variety of weather conditions using calibrated power meters for gathering both instantaneous and integrated (accumulated) watt-hours.

Solar watt/hrs Collected - Daily Totals

Date Inverter Nextek Conditions Improvement %
8/29/01 1375 3511 50% Cloudy 2136 155
9/05/01 2543 5761 50% Cloudy 1/2 day 3218 127
9/07/01 3375 5970 Clear 2595 77
9/26/01 3163 5421 Clear 2258 71
9/27/01 1416 3608 Cloudy 1/2 day 2192 155
10/02/01 3093 5375 Clear 2282 74
10/03/01 2649 4893 20% Cloudy 2244 85
10/04/01 2720 5017 10% Cloudy 2297 84
10/05/01 2728 5036 10% Cloudy 2308 85

Totals Over 9 Days

Inverter Nextek Conditions Improvement %
23062 44592 18.33% Cloudy 21530 93



Battery Load Management with the Nextek Power Module

The Nextek power unit offsets electrical load peaks with the use of its auxiliary battery input. This function allows power to be diverted from the battery, to the load, offsetting the AC input peak. The Nextek system is unique in its ability to reduce hardware costs and improve battery economics. However, the use of the commercial battery as a load leveler remains a strong function of what the electric energy supplier charges for electricity and the market cost of the storage battery. The simple question to ask today is "Has anything changed to improve the value of utilizing battery storage?" The answer to this is positive with regard to reducing balance of system cost and improvements in battery economics as influenced by Nextek's use of direct coupling methods. Nextek's approach also improves the economics associated with battery storage by influencing greater cycle life and power transfer efficiency.

As a historic review of the struggle to make load leveling an economical alternative illustrates, all previous approaches have required the use of an AC 60 Hz power inverter. Since the high cost of the inverter must be combined with the cost of the storage, the equations for return on investments have historically been poor. In addition, other balance of system hardware costs, such as switchgear connected to the power lines further aggravated any economic returns. The throughput losses of the inverter systems just added to the cost. Nextek has created the tool for incrementally reducing many cost-based handicapping factors, thus opening the door for addressing the battery for an economic load shifting system.

Once a Nextek lighting system is installed, there is no other balance-of-system cost, other than the battery, racking system and the external control electronics. This contrasts sharply with the inverter/battery/charger based load-shifting methods that consumed energy instead of conserving it. The projected external controls that guide the load shift are a small fraction of the overall cost of implementation and is the focus of this report.

Considering the many factors contributing to the practicality of load leveling approaches, Nextek's approach is better positioned to offset the perplexity of traditional approaches by reducing hardware costs, coupling losses, overall interface costs, and thereby the overall installed cost. In addition, the new regulatory environment, with its free-market energy pricing has generated interest in battery load leveling again as well as solar energy to mitigate daytime power peaks.

Based on the present situation in California, it is reasonable and prudent to assume that demand costs will remain high, (and increase). Care must be taken to make certain that the advantage promised by the Nextek system is not compromised by the misapplication of the battery storage. To avoid this, Nextek has carefully studied battery economics and developed suitable control schemes. For example, there is a diversity of commercial, lead-acid, rechargeable storage batteries satisfying a relatively high value-added market domain. Similarly, not all lead-acid batteries will prove acceptable for building applications do to environmental, safety and maintenance issues even if satisfactory from a cost/performance standpoint.

In this study, a Power Sonic PS-121000, 12 Volt lead-acid battery was chosen for this benchmark. It has a proven track record for good performance and a relatively low cost. It is capable of approximately 85-ampere hour (AH) of storage at a 17-amp rate. This means it will deliver 17 amps for approximately 5 hours if deeply discharged. Two such batteries in parallel would effectively double the discharge time to the deep cycle limit. However, it is undesirable to deep cycle a battery since it will limit its cycle life. The above parallel combination might best serve a 5 or 6-hour discharge period.

To help put some of the issues in perspective and build a better understanding, we may configure a load shifting system using the Nextek's NPS1000 power unit. Such a system can be expanded indefinitely to accommodate any size application.

Guided by the capacity limits of the unit it would support typically a 17 amperes lighting load. Storage for about 6 hours of sustained load support is eight 12-volt battery units placed in series to satisfy the nominal 48-volt voltage requirement of the power unit. The expected cost of these batteries is about $80 each for a total of $640 per power unit. This bank of batteries is expected to sustain full lighting for 6 hours from a fully charged condition. The batteries would occupy a volume of about four to five cubic feet per power unit and have at least 500 cycles before replacement will be necessary. Management and control conditions will optimize battery life by:

  • Preventing the battery from being used below a minimum state of charge.
  • Not allowing the battery to remain in a discharged state for extended periods
  • Optimizing the charge rate.

This modular system is shown in the layout diagram below. Each power unit will support 14 twin fluorescent lamp fixtures at full lighting output. This corresponds to approximately 1200 square feet of lighted area. Each power unit will displace approximately 1100 watt of AC peak during periods when it is operating from the battery. Given 30,000 square foot building space, this would correspond to a maximum load shift of (24,000/1000) X 1100 watts = approximately 26,400 watts or 26.4kW for up to 6 hours for a total of 158.4 kWh.

  • Lighted service area     30,000 ft2
  • Nominal power consumption     24 kW
  • Maximum energy displacement per charge    26.4 KWH Max 158.4
  • Number of power units required    24
  • Number of 12 volt batteries * required    192
  • Total cost of the batteries *     $15,360

Nextek power units may be applied to a simple load management scheme, whereby the interruption of the AC line to the power unit causes the power to the lighting to be supported by the storage. This displaces AC line power, thus mitigating a portion of the AC load peak. In principle, load peaks can be displaced in proportion to the number of similar systems in the field. The batteries are normally maintained at the float potential for long stationary life. The battery is 'direct coupled' to the load with high throughput efficiency. Nextek's system does not require a 60 HZ inverter, therefore threshold and throughput losses are avoided.

The Control System

The micro-controller used by Nextek is a digital device capable of sophisticated programming and has become a common solution for low cost control applications. This device treats information computationally, which is an essential part of decision making. For example, should load shifting take place or not. Several kinds of opportunities exist that might economically justify load shifting to battery storage. They include:

  • Demand charges
  • Variable supply pricing
  • Time-of-day rates and
  • Available-on-demand rates

The controller can determine the shift in all cases; however, controlling on building-side load demand will be the most difficult. This is because demand peaks must be discriminated from a base line load condition and compared for economic value in a load shift. This is a difficult task because if the control point for the shift is too generous, battery storage will be depleted prematurely with little left for the major peaks. The result is a demand penalty at the end of the month and negation of the batteries system's value.

The described control system is intended as an example and relates to supply-side variable pricing. Here the control must make a simple decision between the cost of storage and the cost of service. If the service price is higher than the equivalent price of storage reserve, then the decision will be made to shift to battery until the price for the electricity drops below the storage cost per kWh. Another decision will have to be made as to the price (timing) to charge the batteries.

In this control model, it is assumed that the real-time service price for electricity is readily accessible on a real time basis. This may be derived, for example, from the Internet web site authorized to display such real time pricing. Other means of inputting and influencing load-shifting instructions are also to be considered.

A program is included in the controller to derive the conditions suitable to commit a load shift. The program includes other rudimentary functions to assess battery charge condition and capacity. Battery diagnostics are also performed with the appropriate algorithm in the controller.

Nextek uses an AC electronic switch between the AC line and the Nextek power unit. This will be an ACT part #RF314. It operates from signals derived directly from information superimposed on the AC power line. When this device is signaled to "turn-off," the power unit will be isolated from its AC power and automatically service the lighting load from the battery bank. Similarly, if the device is signaled to "turn-on", the power unit will be activated again providing power to the lighting load and charge to the battery bank. Code signals from the controller can turn 'on' and 'off' selected power units through the interrupter.

The proposed system will incorporate line carrier communications. This means that the power lines become the means for carrying the signal information from the controller. The controller communicates to the power line through an interface (ACT product #I103-RS232) that connects from the serial port on the controller to at least one power line connection. Complementing this device is another device called a Coupler Repeater, (ACT product #CR334) for insuring that all phases of the power wiring are capable of carrying information.



Values and Methods of Integration: Distributed Generation at its Best


For many years the developers and manufacturers of distributed generation (DG) technologies focused on perfecting promising technologies, that offered the hope of a greener and secure energy future, less dependent on foreign oil. To facilitate this, many of the developers of these technologies received grants, contracts and other forms of public subsidies. This approach to renewables and other technologies development began aggressively in the Carter administration and has continued largely unabated since that time. DOE and state energy offices lined up their programs to distribute funds to various technologies, by types, forcing the technologies to compete with one another for subsidies. The technology developers' efforts were focused on making a public policy case for their technology and fitting it into the funding priorities of targeted agencies.

Over the years, the game has changed; more emphasis is placed on private capital and with it, attendant pressures to perform for lenders and shareholders. Smaller DG startups were bought by large companies and frequently spun off, sometimes being purchased again. The focus shifted from getting "deliverables" to a government-funding agency to bringing products to market. With the exception of certain applications such as cogeneration, where efficiencies were high and costs reasonable, the market itself was soft, filled largely with early adopters who are not price sensitive.

Today, increasing wholesale costs of electricity in many regions of the country, concerns over reliability, continuing environmental issues and the experiment with "instant deregulation" in California have had a dramatic and immediate effect on bringing these DG technologies to market. Two new drivers have emerged. The first of these has not been evident before - market demand. The second, a function of the first, is a vigorous interest from the investment community. In combination, these new drivers have shaken the developers of DG technologies out of their comfort zones and begun a race to market. The developers are now becoming, or creating alliances to building/project designers, installers and specifiers. As an industry, we are coalescing into associations and beginning to speak for distributed generation, not just for a specific technology.

I believe that we can now clearly see a product cycle for DG that operates in each technology type. These phases proceed at different rates within technology families. However, in some cases, they overlap and are concurrent.

An Emerging Product Life Cycle

Phase One: Technical Product Development The first of these phases is technical development of DG products to the point of being commercially viable. This effort concentrates on increasing efficiency and on reducing pollution and cost. Photovoltaics are still in this phase, even as they are beginning to be installed in greater numbers. Efficiencies are rising, and as designs improve and methods of manufacture become more automated, costs have moved sharply downward. We have seen this phase also in micro turbines that are now just emerging into the marketplace. This phase has largely been de-emphasized for reciprocal engines - although there is still significant work being done on pollution reduction and synchronization with the grid.

Phase Two: Integration

The second phase is what I call an integration phase. It emphasizes siting, permitting, interconnection and compatibility with building systems. This phase is a thicket of issues that each technology and manufacturer works through to develop replicable successes for installations.

Phase Three: Optimization

The third is a phase that focuses on optimization of the DG resource for the best benefit of the customer. As new distributed generation technologies emerge in the marketplace, manufacturers and installers look to optimizing these technologies. The elements of this phase are:

  • Use of DG and DSM technologies to optimize load management and reduction opportunities both to make best use of the on site generation and to reduce grid dependency.
  • Installation of multiple DG technologies to facilitate an optimal air quality profile usually a mix of renewables, like solar and internal combustion technologies.
  • Use of DG and DSM technologies to enable customers to optimize load shape for both real time pricing as well as tariff conditions for grid power.
  • Deployment of multiple technologies that use diverse fuels to assist in mitigating impacts of fuel price spikes on a customer's electrical costs.
  • Identification of interface technologies that reduce or eliminate unnecessary conversions from the DG to the end use appliance or device - or that make such conversions as efficient as possible.

These areas represent a set of significant refinements in the deployment of DG. In combination, they offer the ability to provide electric consumers with a sound and reliable energy future with significant benefits to the grid, creating environmentally cleaner projects and cost effective use of DG.

Let us spend a moment on these elements; using DG and appropriate DSM technologies for load reduction and load shaping has two distinct purposes. The first of these is to reduce grid dependence in a manner that increases utilization of the DG resource and facilitates its amortization. The second is to shape building loads in a manner that reduces the costs for the grid power that is used. The latter issue holds great interest.

Load shaping is a critical issue. It is unclear how we will be charged for electricity in the coming months and years. The two generic choices, with significant variation in each, are tariff-based rates and market pricing. Whichever model a customer is presented with or chooses, electric costs will likely be tied to peak use and demand. Whether it is to avoid utility demand charges, time of day-based peak rates, or escalation clauses for peak power in long term purchase agreements - load shaping is critical to the economic equation of DG.

Load Shaping is achieved through a mixture of strategies that include switching discrete electric loads to storage at critical times. Use of thermal storage is also a possible approach in many climates. The use of combined heat and power (CHP) is also becoming more sophisticated. It is likely that we will see, if it is not already being done, the "heat side" of CHP being used flexibly, for low priority uses much of the day, like hot water in restrooms and then diverted to use for space conditioning when electric pricing is more critical. This requires a more sophisticated installation, but could be cost justified based on the cost of peak electric power.

Cost effective storage is also becoming a critical component concern to many of these strategies. In order for storage to be cost effective, it must have reasonable first cost, price per kW/h stored, and have minimal losses getting the electricity into and out of storage and to the load. In its ideal mode, this means moving DC electricity into the storage and out to loads without unnecessary conversions.

Air quality impacts of development are becoming a key element of concern in many areas of the country. To the extent that DG projects can use a mixture of very low or zero emission technologies, it is possible that an emissions credit will result. SB 1298 authored by Senator Bowen of California begins to address this issue by setting a standard for DG emissions. As developers are required to mitigate vehicle trip ends, some DG could be a practical mitigation. In the future, we may consider that one of the elements of optimized value for DG will be its favorable contribution to project permitting.

For decades, we have depended upon the electric utilities to generate or purchase power in an optimum mix that balanced sources for reliability, cost effectiveness and environmental protection. In the more recent past, DG has been deployed as a singular technology. And while we may still see this in some applications, like natural gas fired co-generation, it is more likely that customer will emulate the utilities? Balancing on-site generation to optimize the mix in these areas as well. In particular, I expect that we will see concern for use of differing fuels. If a principal rational for use of DG is to reduce reliance on the grid because it is a single cost-based commodity to the customer, it only makes sense that customers will seek diversification of cost bases in their on-site generation alternatives. This speaks not only of cost, but also of reliability.

A final component of optimization is delivery of electricity to loads without unnecessary conversions and their accompanying losses. In order to best understand this, it is critical to understand that an increasing percentage of our loads are truly DC. Telecommunications, computing, fluorescent and HID lighting and other digital appliances and devices are inherently DC. DG is in the best position to reduce loss through conversion inefficiencies because of two key factors; DG is on-site, and traditional concerns about the safety of long distance high voltage DC transmission are eliminated. Perhaps more importantly, many DG generation technologies are inherently DC. Photovoltaics and fuel cells fall into this category. Other DG technologies, such as micro turbines use a DC cycle in their power electronics and for certain applications use this cycle before its final inversion for traditional distribution within a building or vehicle (as is the case for Capstone's micro turbine-powered electric busses).


Closing the gap between the source of generation and its end use is going to increasingly become the business of those who manufacture and deploy DG. Enhancing power quality, reliability, efficiency and environmental quality will become a preoccupation of the DG industry in the coming years - driven by a need to maximize the value equation for their customers. As a final comment, you are invited to see how one firm is addressing several of the issues optimization at

Comments at CADER 2000 of Patrick McLafferty, Vice President - Business Development, Nextek