Pakistan Institute of Development Economics

P & R Vol.2 Issue 5
What’s next for distributed generation?
Publication Year : 2021

Planning for growth beyond net metering Distributed generation (DG) – also called on-site generation, dispersed generation, embedded generation, decentralized generation and distributed energy – generates electricity from small energy systems, at or near the point of consumption. Placed on roof-tops or ground-mounted, grid-connected distributed generators are typically used to offset an electricity customer’s own energy consumption, provide grid support through peak shaving, load shifting and ancillary services or sell power to a third party. Motivated by the environmental benefits and other advantages of distributed generation (DG) technologies (including the potential to mobilize private finance, reduce network losses and decrease transmission investments), many countries have adopted compensation mechanisms, such as Feed-in-Tariffs (FITs) or net metering, and other types of incentives to promote DG. Coupled with rapidly falling technology costs, these incentives have catalysed rapid growth in global DG investments. In 2019, nearly $52 billion were invested worldwide in distributed solar PV systems of less than 1 MW, adding more than 30 GW to global DG installed capacity.