L10: Decentralized of Power Generation

The most common means of generating electricity in most countries around the world is via centralized generation. This electricity is generated large scale and then transmitted at high voltage via transmission lines over long distances. De-centralizing power generation would have several effects for the market.

Decentralizing power generation provides several environmental benefits by displacing electricity that is generated by large scale centralized  power plants. It would also generate power were it is needed, increasing the efficiency of the resource use. This would also open the doors to more local renewable energy power generation.  However, decentralized power generation may also have disadvantages. According to the International Energy Agency it has higher unit capital cost per kilowatt than a large plant. It has lower fuel economy and uses a more limited selection of fuels. For photovoltaic systems, operating costs are very low but high capital costs make it uncompetitive. “Studies by the Congressional Budget Office and the U.S. Department of Energy also point to higher costs as a possible disadvantage (Karger, 2009).

I believe that local renewable energy power generation businesses evolving in this changing landscape, as well as would be a business I can see myself creating to serve this market.


Karger, Cornelia, Hennings, Wilfred. Sustainability evaluation of decentralized electricity generation. Renewable and Sustainable Energy Reviews. Volume 13, Issue 3, April 2009, Pages 583-593.

3 thoughts on “L10: Decentralized of Power Generation

  1. Hi Bret, I think your post highlights some of the difficulties in determining costs and benefits from energy projects. How do you tell which has more value, the low operating costs or the high capital costs? I think most people who want to see renewable energy grow would argue that the long-term environmental benefits and costs saved will outweigh any costs today. But again, that’s really hard to prove.

  2. Hi Bret,
    Excellent post, as well as clear writing. I really appreciated the data about the CBO and the ultimate findings to be potential “nay” on smaller decentralized sustainable power generation simply because it’s not yet cost competitive. I’m left with one conclusion: Either CBO’s data is inaccurate or the IPCC is wrong. Because and correct me if I’m wrong please, eventually if we don’t change to a more sustainable system globally we are in for much higher cost in the end due to weather damage, loss of life, insurance costs, not to mention the extremely high cost for fossil energy if no change in course is made. We also only have an estimated 100 years of shale oil in the States, that’s not all that long, 25 years from now and 25% of it will be gone or more due to exponential population growth. Why can’t the CBO just find the money like they do when
    government needs to fund something else, like say War?

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