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The Value of Distributed Generation (DG) under Different Tariff Structures

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Ryan Firestone, Chris Marnay, Karl Magnus Maribu
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This report examines the standby tariff structures recently implemented in New York as a result of utilities feelings toward distributed generation (DG). DG is a practice whereby electricity is generated on-site and used to offset the purchase of fuel. It is economically favorable to the producer, particularly when it covers base-load electricity, and to utility customers in general, because it reduces overall grid congestion and leads to lower rates. However, some utilities complain that customers with DG capability are not paying adequately for their utility service and that they should pay for standby service instead.