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Impact of Institutions on Distributed Generation

Distributed energy resources, in particular small electric power plants located at the point of demand, offer the potential for significant improvement in the delivery of energy services. Realizing this potential is particularly urgent in contexts where traditional large centralized utilities are inadequate, such as remote areas where the grid has not been extended or where grid power is unreliable. In practice, however, a host of regulatory and institutional factors often constrain distributed generation (DG) to narrow niche applications such as rural off-grid photovoltaics or self-generation at industrial facilities.

We are conducting a research project to determine how institutional contexts (e.g. regulations, market structures and financing arrangements) affect the development and deployment of DG technologies. For example, in some settings regulations prohibit the direct sale of power from a DG owner to another user across the grid. This study will explore the effects of such factors on the types of organizations that invest in DG and the technologies that they select. We will also orient our focus on policy reform and business strategy, examining the implications for the technologies, business models and policies that could have the greatest effect on DG prospects.

Whereas most research on these questions has focused on the advanced industrialized countries - and often focused on advanced technologies such as micro-turbines and fuel cells - this study will probe the opposite end of the spectrum: developing countries where weakness in the grid system creates the pressing need for technological and institutional solutions to meet basic requirements of availability, reliability and cost. The study's scope will cover the full range of potential DG applications, from the market for energy services among the very poor to the need for reliable power in the industrial and commercial sectors. It will include both renewable and fossil-fuel based DG technologies, as well as complementary devices for demand control and electronic interconnections between DG systems and the grid. The research will be conducted using a combination of surveys, case studies of business models, scenario analysis and computational modeling if necessary.