Assessing the benefits of a provision of system services by distributed generation

Distributed Generation (DG) units are said to have the potential to become an integral part of the future power systems. Today, DG units are characterised by high specific investment costs, but nevertheless are politically promoted because of their high degree of energy efficiency and their capability of reducing the current dependency on fossil fuels. However, at longer term DG units have to become competitive if they want to participate in a fully liberalised energy market. Against this background, DG units have some valuable features that are not considered nowadays. These features are mostly based on the large flexibility of an electricity system with decentralised energy production and might help to master future challenges in power markets, e.g. the increasing degree of stochasticity in the power system through the introduction of wind power turbines on a large scale. This paper highlights the possibilities for DG units to use a local energy generation management and to participate on the market for balancing power. External benefits to the grid are also discussed, but only briefly. The potential of these benefits is assessed and quantified for a small Combined Heat and Power (CHP) plant using historical and forecasted data for German electricity prices.