Distributed Generation and competition in electric distribution market

Advances in distributed generation (DG) technology offer substantial potential benefits to consumers, but the rate and extent of DG implementation have yet to be determined and there are some potential costs of DG use as well. DG also faces potential discrimination in connecting to the grid from vertically-integrated, incumbent suppliers in light of DG's potential to increase competition in generation, transmission, and distribution. Realizing these potential benefits may depend upon the Central Power Utility Controls (CPUC's) affording DG a fair market test. A fair market test requires technical interconnection rules allowing DG units to connect to the T&D system without undue discrimination and unnecessary technical requirements left to the discretion of incumbent generation and T&D suppliers.The introduction of competition into the electric marketplace has driven the development of new electrical generation technologies. Most technologies being developed for distributed generation applications are currently too costly, and can only be utilized in niche applications. However, it is anticipated that with advances in the technologies and a greater demand for distributed generation, costs will be reduced and more installations will take place. This paper reviews the implementation of the DG, with respect to the installation and interconnection of such units with the classical grid infrastructure. In particular, the status of technical standards to improve the interconnection situation, the conditions necessary for a fair market test of DG and, longer-term questions of distribution competition, commission's role in facilitating the optimal use of DG, how would the integrity, reliability, safety, and efficiency of the T&D system be affected by a more competitive electric distribution, the potential costs of promoting competition in distribution and/or DG, and how the potential costs and benefits should be analyzed and quantified, and also what procedural steps should be pursued, are addressed.