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Embedded Electricity Generation: Top 3 Benefits for Australia

on Wednesday, 10 April 2013. Posted in news

Embedded electricity generation is becoming more and more attractive as the disparity between base consumption and peak demand grows.  Discover the top 3 benefits of embedded generation and how it can help Australia meet its peak demand challenges.

Embedded electricity generation, also referred to as on-site generation, distributed generation, decentralised generation, dispersed generation and distributed energy, is the production of electricity at point of use. It often denotes the collection of many small sources of energy in contrast to traditional grid-supplied electricity which is sourced from one centralised point, generally a very large coal-fired power station. Distributed generation is becoming more and more attractive as a solution to Australia’s challenging peak demand management issue because of the growing disparity between base consumption and peak demand.

Why is embedded generation good for Australia?

1.Cheaper

Electricity generally costs $30 - $60 per megawatt hour in the wholesale market; however, during periods of peak demand, the price skyrockets to $12,900 (that price will rise in July of this year to $13,200). Electricity retailers must factor these peak prices into their general tariffs, ultimately charging customers high prices just to cover peak demand which occurs less than 1% of the time.

Distributed generation helps energy retailers shift energy loads off the grid during periods of peak demand. It helps mitigate their financial exposure to exorbitant peak prices, and that protection can in turn be passed on as savings to their customers.

Additionally, embedded generation helps avoid unnecessary investment of billions of dollars in new, large scale, reserve capacity generation plants – the costs of which are ultimately passed on to end users.

The result of embedded generation is, effectively, cheaper electricity in the long run for Australia.

2. More efficient

According to Australia’s Energy Networks Association, only about 25% of electricity produced at centralised coal-fired power stations ends up being used. The balance—75%—is lost as heat at the plant or in transmission and distribution.

“ENA recognises the scale and impact of line losses as electricity is transported by way of existing transmission and distribution networks, and the benefits which can be delivered over the long term by a move to more distributed, local generation”.[1]

When electricity generation is localised, losses are minimised or even eliminated, and that’s better for Australia’s atmosphere, ecosystems and economy.

3. Better for the environment

Australia is the greatest generator of carbon pollution of all developed nations, and coal fired power plants, being the largest source of manmade CO2 emissions, are the single greatest threat to our country’s environmental sustainability. The construction of new centralised power stations to meet peak demand that occurs less than 1% of the time is not an environmentally friendly or sustainable solution for our country. Distributed generation helps reduce or defer the construction of new power plants.

Embedded generation usually supports the use of renewable energy sources and other lower carbon alternatives. Velocity Energy’s embedded generation solution creates Smart Grid virtual power plants from the excess capacity of independently owned generators and encourages the switch from diesel to bio fuels. Even when diesel generators are used, greenhouse gas emissions are between 17% - 40% less than emissions from the grid.[2]

Velocity Energy are embedded generation specialists, creating Smart Grid virtual power plants that benefit energy distributors, energy retailers, generator owners and all of Australia. For more information about the environmental benefits of distributed generation over grid power, download a copy of our independently commissioned RPS Data report: "Comparison of the Impact of Carbon Pricing on the Use of Embedded Generators and Grid Supplied Electricity".



[1] www.ena.com.au, “Energy associations say distributed generation of electricity a ‘great opportunity’ for improved energy delivery”, May 26, 2010.

[2] www.velocityenergy.com.au/carbontax, “RPS Data Report: Comparison on the Impact of Carbon Pricing on the Use of Embedded Generators and Grid Supplied Electricity”, July 2011