Overview of State and Federal Incentives for the Use of Distributed Generation

This article1 presents a summary of some of the primary state and federal incentives that are currently available for the use of distributed generation (DG).2 Although there are various definitions for DG, in general it refers to the use of small-scale power generation technologies located at or near the point of use. At present, there are many important incentives available, from both federal and state sources, for the development and use of DG. Although not all states provide incentives for the development of DG, and many impediments to development remain, the rate of growth in this sector is impressive. In fact, it is hard to overestimate the importance of this energy sector. Not only does DG represent a significant new source of electric generating capacity, it is also changing the structure of the electric generating industry. As more businesses and homes produce much if not all of their own electricity, the demand for new large-scale generating projects and new transmission and distribution facilities is likely to be reduced as well. Today, DG developers in many states still confront problems when they attempt to connect with the utility transmission system or grid, seek to net meter, or struggle through a mountain of bureaucratic red tape in order to qualify for incentives. The good news, however, is that many energy policymakers have awakened to the promise and value of DG. This in turn is resulting in a growing body of new regulations and legislation that seeks to foster this important new energy sector.