Centralized Generation

Centralized Generation is bulk power generation.  It leverages economies of scale to minimize the cost of converting other forms of energy into electricity.

Historically, centralized generation was a necessity to access the hydro power from rivers and urban power plants.  As the electric grid expanded through high-voltage transmission lines, more and more centralized generation was able to be brought online and interconnected to meet America’s growing need for electricity.  Geographic barriers were eliminated as the transmission system was linked, and new connections were made. This enabled generators to be centralized to produce massive amounts of bulk power, while also diverse in fuel and location by sharing the load across expansive regions.

Today’s electric grid enables interstate power markets to reliably generate the lowest cost of energy for customers.  The power markets accept bids from centralized generators and others to supply power.  Depending on the demand for electricity, the power market dispatches the low cost generation and idles the expensive generation. Like the water that flows in the Mississippi comes from thousands of diverse sources including the Arkansas, Ohio, and Missouri rivers the electric energy in the electric power grid comes from thousands of diverse sources generating power.

Distributed Generation

Small-scale generating technologies – such as solar, wind, hydro or emerging technologies – that are connected to the electric power grid are identified as distributed generation (DG). DG systems allow customers to produce some or all of the electricity they need, for air conditioning and electronics, for example.
Customers with solar roof systems or other DG are still connected to and depend on the grid. The power grid is designed to accommodate solar panels and other DG systems, therefore customers still have a stake in a modern, reliable and well-maintained transmission system.


A microgrid is a local energy system that is capable of operating independently from the main transmission grid. Microgrids link distributed generators, storage (batteries) and/or renewable energy resources like solar panels. While they can function decoupled from the national grid, microgrids are not necessarily always stand-alone; for example, a military base with a microgrid might remain interconnected the majority of the time, but during a storm or an acute peak in energy demand, the microgrid could switch to autonomous operation. 


Is Distributed Generation the Answer?

Distributed generation has certain applications, but it alone is not a solution to the overall need for a modernized power grid to power our 21st-century economy. Microgrids, meanwhile, have a role to play – such as providing support in rural and/or isolated parts of the world – but are not able to provide the efficiency, reliability and market-related benefits of a modern national grid system.