Distributed Generation and Transmission
Lewis Dale, member, IEEE
Abstract-This is a summary in support of a presentation by
the author on the interactions between distributed generation
(DC) and the high voltage transmission network. It uses the
electricity market and commercial arrangements in England and
Wales as a context for discussing issues concerning the economic
development and operation of the network as distributed
generation becomeswidespread.
Index Z’enns-Distributed Generation, Transmission Systems
I. INTRODUCTION
HIS paper discusses the interactions of distributed
T generation (DG) and high voltage transmission system
from a mainly economic and commercial viewpoint.
The reference example for this discussion is the author’s
‘home system’ in the UK. While certain aspects of this
example will be peculiar to someof the technical, institutional
and regulatory featuresof the UK, it is hoped that many of the
principles will be relevant to other situations.
In order to set the context for this discussion it is useful to
give a brief introduction to National Grid’s network in
England 8z Wales and the background reasons for an
increasinginterest in distributed generationin the UK.
II.THE TRANSMISSION SYSTEMANDELECTRICITY MARKET
INENGLAND& WALES
National Grid owns and operates the high voltage
transmissionnetwork in England and Wales. This network is
approximately 7000km of 400kV and 275kV lines connecting
some 70 power stations to a few large industrial consumers
and 12 distribution companies. More than 90% of the
generation capacity is connected directly to the high voltage
transmissionsystem.
England and Wales has a winter peak demand of just over
50,OOOMW and the transmission network carries
approximately 300TWh each year. There is a 12OOMWAC
interconnection to Scotland and also a 2000MW HVDC link
to France.
Since April 1990 there has been a competitive electricity
market in England and Wales. Initially this was based on a
pool system,but since April 2001, a decentralisedelectricity
market has been in operation called the New Electricity
Trading Arrangements (NETA). Generators and Suppliers
(the UK name for wholesale energy purchasers) agree firm
bilateral contracts either over the counter or through power
exchanges. The volumes (but not prices) of such contracts
must be registered with a central market administrator at gate
closure, currently 3.5 hours aheadof real-time delivery. The
central market administrator collects actual metered volumes
0-7803-7322-7/02/$17.00 © 2002 IEEE
132
0-7803-7322-7/02/$17.00 (c) 2002 IEEE
for each half-hour trading period and cashesout over-runs or
under-runsby market participants at imbalanceprices.
National Grid’s role as SystemOperator is to balancethe
systemby purchasing energy if the system is short or selling
energy if the system is long. The costs of these balancing
actions sets the imbalance prices used to cash out individual
market participants. National Grid is also responsible for
purchasing ancillary services to establish short-term reserves,
control frequency and voltage, resolve transmissionconstraints
and establish an emergency start capability. These costs are
passedto all market participants in a Balancing ServicesUse
of System(BSUoS) Charge. National Grid’s wires are funded
by a TransmissionNetwork Use of System(TNUoS) charge.
Generators larger than 1OOMW capacity are required to
register firm bilateral contracts with the market administrator.
Smaller generatorshave some additional options. They may
choose to register their metered output so that it reduces the
metered volume of one or more Suppliers. In this way they
can reduce the Suppliers exposure to wholesaleenergy prices,
balancing charges (BSUoS) and network charges (TNUoS).
Thesebenefits can be sharedbetween the small generatorand
the Supplier through non-firm bilateral contracts. However,
becausethe Supplier will need to purchaseother energy firm
through NETA, the Supplier will be exposed to imbalance
charges should the small generator fail to deliver. For this
reason, while small generators may be able to capture
‘embeddedbenefits’, they may also receive a lower energy
price than traded in the wholesale markets becausethey give
rise to an imbalancerisk.
IILDRNERSFORMORE DG INTHEUK
As has been introduced above, most of the generation
capacity in England and Wales comprises large units
connected directly to the transmission network. However,
smaller DG units have been installed for standby/backup
purposes and as part of Combined Heat and Power (CHP)
plants by industrial premises and some district heating
projects. As well as numerous small hydro units, some
400MW of other renewable DG has also been established,
mainly wind power but also somebio fuels.
It is expected that the amount of distributed generation in
the UK will significantly increase in the coming decade. To
meet the UK’s Kyoto and internal green house gas reduction
targets,the UK government has set targetsfor 10% of energy
to be provided by renewables and for 1OGWof CHP plant to
be establishedby 2010. A number of support measureshave
beenestablishedto encouragethis growth:
l Electricity provided by renewableand CHP generationis
exemptfrom a carbon tax which industrialfcommercial
 consumersare obliged to pay. This exemption benefits B. System control/service availability issues
qualifying generatorsby g4.3OlMWh The increasing penetration of distributed generation in a
l Suppliers will soon be obliged to buy a certain proportionsystem with little expected underlying load growth will
of their energy from certified renewable sources. The inevitably mean that large grid connectedgeneratingunits will
governmenthas said it will set this obligation so that it is
ceaseto operate. Such generatorsare currently the principle
larger than the installed capacity of renewablegeneration.
providers of flexibility within the market and balancing
This will cause the market price for renewable energy to servicesto the systemoperator.
rise to a price cap off 30iMWh. Technically, there are options for other providers to come
l Certain renewable generators, such as off shore wind forward and supply replacement services. National Grid
turbines, will benefit from tax relief on capital already has someexperienceof aggregatingsmall demandside
expenditure. providers and distributed generation to provide frequency
control and reserve.It is possible that co-ordinated action with
Other technology changesmay also be important: distribution network operators and other service aggregators
l Domestic CHP installations may be brought to market. could provide a full range of ancillary services. Uhimately,
One design replacesa central heating boiler with a Stirling whether it is better to incentivise large generatorsto remain in
engine and induction generator. service or encouragenew providers to emergeis an economic
l Photo voltaic installations may becomeestablished. * question. A feature of the NETA market is the potential for
l Fuel cells in transport and stationary applications may flexible generation or demand to obtain a premium. In this
becomeimportant. mannerthere is an incentive to provide the required flexibility.

IV.TECHNICAL INTEXACJTIONSWRH THE TRANSMISSION

SYSTEM
We have consideredthe interactions betweendistributed
generationand the transmissionsystemin four main areas,as
describedbelow:
A. Variability/intermittency issues
Frequency control and tine balancing of the Scotland,
England and Wales synchronous ‘island’ are critical tasks for
the system operators. While the small size and independent
activity of many distributed generation units do not raise
concerns,the potential for significant correlated variation from
wind turbines is an issue. (Great Britain is small enough that it
is regularly subjectto the effectsof a single weathersystem).
Using historic wind data to calculate the expected total
output of large wind portfolios (e.g. consistent with providing
most of the 2010 UK renewable target from wind) shows that
output is likely to vary from zero to almost full capacity with
an average load factor of around one third. Clearly, other
generation and responsive demand will need to vary to keep
the systemin balance.
This requirement can be managedin two ways. Firstly, by
the properties of the electricity market, and secondly, by
residual balancing by the systemoperator. Under NETA, the
operatorsof wind turbines (or their counter-partiesin non-firm
bilateral agreements)will need to predict the wind output and
trade to minimise imbalance.
At gate-closure,the market position is effectively frozen and
balancing becomes the sole responsibility of the system
operator. Fortunately, the size of this task is contained by the
statistical propertiesof wind fluctuations over short timescales.
On the basis, we expect that the additional frequency control
and balancing services we will need to purchaseare relatively
modest for wind portfolios consistent with UK Government
targets.
C. Interfacing issues (between the transmission and
distribution networks)
Compared to the present situation, with almost all energy
flowing from the transmission network through distribution
networks to consumers,any distributed generationis likely to
reduce flows acrossthe transmission to distribution interface.
This will reduce the need for reinforcement of these
substationsand may result in someloss savings.
A significant amount of distributed generation may, in
certain circumstances, require some action to be taken to
manage short circuit levels or even reinforce the interface
substation to carry power exports. In most cases, such
concerns will be far more prevalent deeper in the distribution
network and these engineering requirements are beyond the
scopeof this paper.
The reduction in flows at the interface, even to nominal
balance at certain times of the year, will not remove the need
for all assetsat the substation. Capacity will be required to
meet local peaks and perhaps local export conditions. It will
also be needed to provide backup in the event of generation
breakdownsor demandsurges.
It is likely that decisions concerning the capacity and
security of thesesubstationswill need to be basedincreasingly
on the observed statistical distribution of flows resulting at
theseinterfaces.
D. Network capacity requirements
It is a common expectation that distributed generationwill
reduce flows at the interface substationsbetweentransmission
and distribution systems and throughout the transmission
network. This does not necessarilyfollow. The flow patterns
on the main transmission network are a function of the
geographic distribution of all generation sourceswith respect
to demand, and the voltage of connection does not affect this.
There may be many reasonswhy bulk transferscontinue even
though many areas may be near regional balance at certain
times.

133
0-7803-7322-7/02/$17.00 (c) 2002 IEEE
 In the UK the transmission systemcarries a north to south operator. The communication and other transaction costs for
power flow throughout the year. This is chiefly a result of usually unmanned distributed generation units may also
coal-fired power stations located on coalfields in the north prohibit their individual use for systembalancing and control.
supplying large demand centres in the south in preference to However, market agents who aggregate such services can
more expensive oil-fired southern generation. New gas-fired reduce transaction costs by sharing infrastructure and trading
generation has located in both the north and south, but there facilities. They can also harness the statistical benefits of a
has been a northern bias due to capacity restrictions in the gas portfolio of providers. As distribution networks become
network and the relative difficulty of obtaining consentsin the increasingly active there will be more scopefor harnessingthe
south. various servicesdistributed generation can provide.
Gas fired distributed generation (such as domesticand small As a commercially incentivised system operator, National
commercial CHP units) offers the possibility of improved Grid has a strong interest in developing market arrangements
regional balance, provided that there is a proportionate and using whateverproviders are most economic.
installation in southern demand centres. However other
C. Providing locational signals for economic development
distributed generation technologies may continue north to
south power flow patterns. The best choice of location for distributed generationis
In the UK the most concentrated wind resourcesare in the anywherewhere its developer (perhapsan existing consumer)
north and west. New bio fuel plantations are also likely to be finds it economic to develop given its capital and operating
remote from the main urban demand centers. These costsincluding any embeddedbenefits. If the network charges
geographictrends, together with imports from interconnections avoided by establishing the generator accuratelyreflect the
and some remaining large-scale electricity production may locational costsof transmissionthat would otherwisehave
well see bulk transfers continuing and perhaps may require beenincurred for servicing the load then this will provide a
some network reinforcement in critical areas. The following suitable locational development signal.
section examines the roles for price information in the
generationsiting/network reinforcementprocess. As a result of regulatory agreement,National Grid’s current
TNUoS tariff includes a long-run locational charge element.
V. COMMERCIAIJREGULATORY CONSIDERATIONS This establishes a North to South transmission price
differential for both generation and load customersof up to
The technical issues identified above have highlighted the &lS/kW. In helping a local supplier to avoid these charges,
importance of economic/commercial considerations in distributed generationreceives the samelocational messageas
determining the most effective location and use of distributed large generators. The UK regulator has recently published
generation. For example, how much should distributed suggestionsfor improving these locational signalsby reflecting
generation be rewarded for reducing network reinforcement the short-run operational costs on market participants through
requirements and losses? Should it bear the costs for new transmissioncapacity auctions.
balancing requirements or be rewarded for providing new
services?Where should it be located, perhapsas a compromise VI. CONCLUSIONS
between fuel availability and network costs? The following
sections explain the approach of National Grid and the
relevant featuresin electricity market in the UK. This paper has introduced the interactions between
distributed generation and transmission systems. These
A. Recognising costs and benefits brought by distributed interactions result in the potential for costs and benefits to
generation ( ‘embedded benefits ‘) accruefrom the use of distributed generation. A description of
Recognition for avoided transmission network costs are the market arrangements in England and Wales has
realised by the so-called ‘embedded benefits’ that can be concentrated on those features that seek to ensure the
obtained by distributed generatorswhen they enable suppliers economic development and operation of the network as
to avoid balancing and network ‘wires’ charges. distributed generationbecomesmore widespread.
In so far as a distributed generatorbrings an uncontrollable
or non-diversifiable risk to a supplier due to its variability, it VII. BIOGRAPHIES
will impose imbalance costs on the supplier and, all other
things being equal, will tend to receive a lower value for its
Lewis Dale is the Regulatory Strategy
energy. The premium prices that flexible plant can achieve in Manager for National Grid in the UK. He
short-term balancing markets is intended to incentivise the holds a BSc and PbD in Electrical and
economic provision of the balancing services neededto meet Electronic Engineering from the University
systemrequirements. of Bath and is a Cbartcred Engineer. He
has held a number of posts within National
B. Facilitating DG Participation in Balancing and Grid as a power system engineer and as
Ancillary Service Markets team leader of planning and market analysis
teams. He was responsiblefor the review
Although there are low minimum size requirements for and rewriting of National Griid’s transmission planning and operational
individual service providers, some distributed generators security standards and has represented National Grid in a joint
industry/govemmen&gtdator v forking group on distributed generationin tlte
would be too small for individual call-off by the system UK.

134
0-7803-7322-7/02/$17.00 (c) 2002 IEEE