Distributed Power Generation

Remarks by
Robert S. Kripowicz
Acting Assistant Secretary for Fossil Energy
U.S. Department of Energy
To The
Distributed Power Coalition of America
2nd Annual Meeting
"Preparing for the Millennium of Distributed Generation"
November 12, 1998
Arlington, VA

Thank you, Wayne (Gardner, President of the DPCA). And let me express my appreciation to the Coalition for inviting me to share the podium this morning with my colleague, Dan Adamson. Dan and I have been spending some time together since his recent appointment in the Energy Efficiency and Renewables program, but this is the first time our private commitment to joint collaboration has been put on public display, and I'm glad it is before this organization...and on this subject.

You've heard the prediction before - I suspect it's largely why this Coalition was formed - but it bears repeating: Distributed generation has the potential to change the topography of this Nation's electricity supply. That change could be as revolutionary to the power industry as the introduction of the personal computer was to the computing industry.

As I said, I'm not the first person to draw that comparison. But I believe it is important to take the analogy a step beyond the obvious.

Certainly, you could say that the "wiring diagrams" of the two industries tend to look similar. In the computing business, an industry once dominated by centralized mainframes evolved into a distributed networks of various computing platforms - with the consumer having a choice of different makes and models of computers. Now, in the power industry, the business of generating electricity is on the verge of changing its traditional paradigm - evolving from large central station generators to a network of decentralized power suppliers, also likely to employ a variety of different technologies.

But the desktop revolution in computing did something more than just take computers out from behind their glass walls. It changed the way people thought about computers...and computing. In the span of a few remarkable years, computing technology changed from the abstract to the personal.

And that's what I think we should keep in mind whenever we talk about distributed generation.

Not only will it change the "wiring diagram" of this Nation's electricity supply, it will also change the way we think about electricity and who supplies it, and where it comes from, and how much it costs....and whether the way in which it is generated is going to be accepted in the region, or in the neighborhood or perhaps one day, in the basement.

I suspect that 90 percent of the American public have no idea what is connected to the "other side" of the electrical outlet in their wall. In a distributed power world, a lot more of them will. Because they will drive by the source of that power on their way to work or as the pull into the shopping center.

The old adage about the consumer who asks "why do we need coal or gas or nuclear when we have electricity?" won't be so common anymore. Consumers will know a lot more about where electric power comes from, how it is generated, and what are the trade-offs in having a power generator as a member of your community.

That means, in my opinion, public acceptance is going to play a major role in dictating whether distributed generation evolves from theory to reality. And public acceptance is not a foregone conclusion.

I've been associated with the Department of Energy's fossil energy program in some manner for the majority of the last 20 years - either inside the agency or on Congressional committees that had jurisdiction over the program. Twenty years ago, the Department of Energy installed a coal-burning fluidized bed combustor on the campus of Georgetown University - equivalent in size to about 10 megawatts but intended primarily to generate steam for the campus.

There was a reluctance to publicize the event back in 1978 - primarily because the college was concerned about how residents in one of the region's most affluent communities might react when they learned that coal was being burned in their backyard. So for years, the steam plant burned some of the dirtiest coal around and because of the new technology, it met the District's air quality standards. Nobody paid attention.

But a few years ago - some of you from around here may recall - there was a proposal to install natural gas turbines at the steam plant to generate power for the campus and to sell back to the grid. A large part of the Georgetown community rose up in opposition. And ultimately, they rejected natural gas turbines....ironic when for 20 years, they had been neighbors to a plant burning high-sulfur coal!

My point is that public acceptance is hard won. It takes effort. It takes education. And it doesn't happen overnight. Distributed generation will be driven by changes in the market....deregulation, restructuring, increased competition. But the pace at which it evolves - and where it evolves - and how it evolves....will be determined, in large part, by the way the public responds to it.

I was glad to see that in last week's elections, citizens in California rejected by a 70-30 margin a proposition to overturn the State's electricity restructuring efforts. Competition is something I believe most Americans intrinsically endorse. But embracing competition does not automatically swing the door wide open for distributed generation. It only lays out a pathway has been laid out. It establishes the opportunity.

And without a doubt, the opportunity is significant.

The Electric Power Research Institute - as I'm sure many of you are aware - forecasts a market of 2 to 3 gigawatts per year of new distributed generation capacity in the U.S. through 2010, or about 15 percent of total new capacity additions. GRI's estimates up that to 5 to 6 gigawatts per year.

But converting "market opportunity" into "markets captured" is going to require more than just changing the way power is bought and sold in this country. With restructuring as the backdrop, I would suggest that three things must happen before distributed generation achieves its full market potential.

First, appropriate technologies must be developed. Technology will profoundly affect the attractiveness of distributed generation. Here I believe the greatest opportunity exists for government-industry collaboration...both in the program I oversee as well as in Dan's.

Certainly as we look over the portfolio of government-supported technologies - and begin addressing how that portfolio will change in the coming years - we see distributed power systems becoming much more prominent.

Advanced gas turbines are a good example. Our advanced turbine program is raising the bar on turbine efficiency and environmental performance. When the program began in the early 1990s, state-of-the-art efficiencies for utility-scale combined cycles was hovering around 50 to 52 percent. Now, we are seeing utility systems being introduced with 58 percent efficiencies, largely because of the spinoffs from this program.

By this time next year, we hope to be readying the first full-size test engines capable of operating in the 2600 degree Farenheit range and achieving 60 percent or greater efficiencies in combined cycle operations.

Our focus to date has been on turbines sized at the 400-megawatt scale. Proceeding in parallel has been the industrial-scale turbine development in the Energy Efficiency program, sized in the 5 to 15 megawatt range. And there has been significant progress in this program, also.

As many of you are aware, Solar Turbines has announced the introduction of their Mercury-50 product line - the result of their advanced turbine development program with the Department. In the fall of 1999, we hope to see the first demonstration unit installed at Rochelle, Illinois.

Allison Engine is also involved in this program and has progressed into the component demonstration phase. And both companies are working on demonstrations of ceramic components that could be retrofitted into these new machines at later dates.

Now, with the goals in sight for both of these development efforts, we are exploring future directions for turbine technology.

It is clear from the meetings and workshops we have had with industry, there is a need for a new, mid-sized machine in the range of 30 to 200 megawatts.

We see considerable potential for more efficient, mid-size turbines beginning to displace older, less efficient plants, and moving into new applications such as self-generation, cogeneration, and dispersed power markets.

We also see microturbine technology coming to the forefront at the lower end of the capacity spectrum -- certainly if technical hurdles can be overcome and costs can be made competitive. In a range of 24 to 100 kilowatts and, in some cases, sized no larger than an office desk, we see these power units fitting into such applications as remote power, or standby power, or perhaps in grid support.

Recently, our Energy Efficiency program has been examining the state-of-the-art in "market entry" microturbines. From this effort, we will identify development needs with a goal of pushing the current 23 to 30 percent efficiencies of this small power systems up into the 40 percent or greater range....and, at the same time, bringing emissions down into the single digit range.

We also see fuel cells playing an important role in distributed power generation...again, if costs can be brought down.

Phosphoric acid fuel cells are now establishing the first toe-hold in the market - with over 160 units, each sized at 200 kilowatts, now installed in the U.S. and overseas.

Polymer electrolyte membrane cells are making the transition from automotive applications to stationary power plants - with a prototype already operating on the BC Hydro grid and the first commercial order in this country taking place earlier this year (Cinergy purchasing Ballard Generation systems 250-kw PEM unit).

The first field demonstrations have been conducted for molten carbonate fuel cells, and now new, more compact and less expensive stacks tailored specifically for commercial markets are being tested.

Solid oxide technology is progressing from its initial 100-kilowatt field test through a scale-up program that will culminate in a prototype megawatt-class power unit.

So progress is being made. But is it being made fast enough? And will it get us to our goals? I think the next couple of years will be critical in our fuel cell program.

It may turn out that the system that offers the most potential is neither a standalone fuel cell nor a gas turbine - but a hybrid of the two. More and more, it is looking like the most attractive systems - both economically and environmentally - may be configurations that integrate fuel cells with micro- or high-efficiency advanced gas turbines. Both solid oxide and molten carbonate fuel cells operate at temperatures and pressures that are very compatible with turbines in the 20- to 100-megawatt range.

Last December, we announced the selection of three projects to begin exploring the hybrid concept. M-C Power, Fuel Cell Engineering, and Westinghouse were the fuel cell vendors - all teaming with Allison Engine Company to develop either molten carbonate or solid oxide systems. But as in many of our programs, we had more good project proposals than we had money to fund, so while three projects were approved, some very good ones were not.

Today, I'm pleased to tell you that the situation has changed. I think it is indicative of the potential we see in these hybrid concepts that our colleagues in the Energy Efficiency program decided to become co-investors in this program. Because of their funding contribution, earlier this fall we were able to add two more projects to the conceptual study program.

One is with McDermott Technology, who will team with Northern Research Engineering Corporation to explore a planar solid oxide fuel cell linked to a micro-turbine. The other is with Siemens-Westinghouse who will join with Solar Turbines to design a solid oxide - advanced turbine system combination.

Certainly whenever you mention distributed power technologies, much of today's discussion centers on turbines and fuel cells. But obviously, we shouldn't overlook technologies like photovoltaics, where we're seeing some dramatic cost reductions. In 1984, installed photovoltaic systems cost $17,000 per peak kilowatt. By 1996, the cost had dropped to $6,000, and now there are projections that by 2002, the cost of a grid-connected installed rooftop PV system could be around $3,000 per kilowatt. The President's Committee of Advisors on Science and Technology - PCAST - predicted that it could be feasible to reduce PV system costs to $1,500 per kilowatt or less by 2010 and to $1,000 per kilowatt by 2020. The 2020 goal equates to about 7 cents per kilowatt-hour with corporate financing or less than 5 cents per kilowatt-hour with home mortgage financing.

And I also don't want to rule out other systems - even including those that burn coal. On the campus of the University of Alaska at Fairbanks, we are preparing to demonstrate an 18 cylinder diesel engine, sized to generate about 6.4 megawatts, and modified to operate on a slurry of Alaskan subbituminous coal. Construction began this past June and by this coming March we should be in the testing phase. We see the possibility for mature commercial units of this type being installed at costs of around $1,300 per kilowatt. In the U.S., the diesel market is projected to exceed 60,000 megawatts through 2020. The world market, however, could be 70 times the U.S. market.

And I also don't want to leave the impression that distributed generation technology is only about the power generation device. If distributed power is going to be accepted, we also must be concerned with backup batteries and other storage technologies such as flywheel technology.

These will be necessary to provide ride-through capability during momentary power disturbances and to maintain critical loads during the few seconds it takes to switch from grid to on-site power or vice versa. And, of course, they will be essential to photovoltaics, wind, and other types of intermittent power sources.

That brings me to my second major priority for distributed generation. For distributed power to be accepted in the future, it must become rock-solid reliable. Here again, I think there are some common threads with our computer analogy.

The Internet, as many of you know, was based on the concept that a disruption in one part of the network would not bring down the whole system. In fact, the system would be self-healing - rerouting bits of data through alternate routes so that ultimately, they arrived at their destination intact.

Distributed power networks will have to function in much the same way. We could, for example, ultimately see a collection of small, interconnected generators and other devices linked together - a "power web," you might call it.

But before that vision can become a reality, we are going to need greatly improved interconnection technologies that link dozens, if not hundreds or thousands, of small generators together in a network.

Certainly, inverter technology will be key. It's a major part of the installation costs, for example in fuel cell systems, and that's why we have focused a lot of our R&D effort on reducing the costs of inverters.

But the inverter is only one of the devices that must be improved before distributed generation takes hold. Even more challenging may be the development of "smart interfaces" - devices that communicate with each other in real time, transmitting everything from system status to market prices back and forth.

Communication and control will be critical needs. Tomorrow's power web must incorporate the capability to automatically disconnect and reconnect and synchronize power units or power islands. It should be capable of automatic dispatching power based on economics. And above all, it must be reliable.

I believe that, for distributed generation to achieve its full potential, we must move toward a uniform set of interconnection requirements.

Today, we have vendors who can produce very high quality power equipment. But in the distributed power industry of the 21^st century, those vendors will have to know how that equipment is going to interact with other devices - perhaps with other power islands - all linked together in this future power web. Impossible? Probably not. Challenging? Absolutely.

I think EPRI can - and will - play a major role in addressing the interconnection issue. And we are willing to work with them in developing not only the technology but the requirements, the procedures, and the education that will be needed.

And that brings me to my final point -- which was really my first point: Distributed generation must ultimately be accepted....and accepted as a positive step forward by a lot more people than in the past...people who are willing to have a power plant in their backyard, or close to it.

For that to happen, customers are going to have to see distributed power as safe, reliable, affordable, and clean - in other words, as a good neighbor.

They are going to have to see distributed power as the preferred environmental option. Photovoltaics and fuel cells are a step in the right direction.

For gas turbines, ultra-low NOx performance will be essential. That is why, in our advanced turbine program, we have emphasized that NOx emissions be kept in the single digit parts-per-million range. And for smaller turbines - in 50-megawatt or smaller sizes - that's why new types of catalytic combustion controls are important.

I saw a quote a while back from Dan Rastler, EPRI's manager for distributed generation systems, that I thought said it best. "Customers don't buy technologies, they buy solutions."

If distributed power providers are going to succeed, it will be because they offer their customers packaged "plug-and-play" systems that are tailored to meet specific needs. That ultimately, I believe, will be the most important selling point for distributed generation.

So to sum up, distributed power will be a technological change wrapped inside a cultural change. Both changes are underway. And this coalition can play a valuable role in providing the momentum for each. Change always needs an advocate...a visionary. We are working to restore that role in the Department of Energy. But ultimately, the most persuasive voice will be from those who are turning paper promises into commercial realities.

Our objective in government is a simple one: put into place the laws, the regulations, and in partnership with the private sector, the technologies that can give consumers the most efficient, the most affordable, and the cleanest power possible.

If we can do that, then I believe those in the private sector who are pioneering distributed generation have a very bright future.

Thank you for your attention.