Small-Scale Distributed Generation Technologies

Distributed generation, Fuel cells, Generators and renewable energy, Microturbines

Small-scale distributed generation (DG) provides potential benefits such as backup generation, price hedging, improved power quality, improved reliability, and peak-management applications in the commercial and industrial sector. Small-scale DG technologies range in size from several watts to megawatts (MW). This topic covers four of the more common technologies: fuel cells, microturbines, reciprocating engines, and Stirling engines.

What are the options?

Figure 1 summarizes the major small-scale DG options.

Figure 1: Options for distributed generation

There are significant differences in cost, performance, and commercial readiness among DG technologies.
Table showing differences in size, efficiency, waste-heat quality, and cost. Technology: reciprocating engine. Size range: 1 to 5,000+ kW. Electrical efficiency lower heating value (%): 25 to 45. Waste-heat quality: high. Current equipment cost: $500 to $1,000. Contact E Source at 1-800-376-8723 for more data.

Fuel cells

Unlike most other DG technologies, fuel cells rely on a chemical reaction to produce energy—like a battery—while most other DG technologies use combustion. Unlike a battery, fuel cells don’t need recharging and don’t run down over time. Fuel cells are a highly scalable technology, which makes them capable of serving a variety of end uses. Fuel cells can provide energy for:

  • Distributed power, such as backup power, primary power, and even combined heat and power (CHP) systems (which recapture waste heat from the generation process)
  • Transportation, such as fuel for automobiles, buses, forklifts, and other vehicles
  • Auxiliary power units and portable electronics

Fuel cells can use various domestic fuels including biogas, diesel, hydrogen, methanol, natural gas, and propane to efficiently produce low- to zero-emission energy—as in the case of hydrogen. Most fuel cells currently derive hydrogen from another fuel using a “reformer” that’s either integrated inside or installed right next to the unit. The reforming process creates pollutants, such as trace amounts of nitrogen oxide and carbon dioxide, but it’s still cleaner than DG technologies that combust fossil fuels to produce energy. By using rejected (waste) heat from a fuel-cell system, you can boost the thermal efficiency of the system to 80% or higher.

Noise from fuel cells is also lower than the noise that their fossil-fuel-powered DG cousins produce. Fuel cells generally produce noise from only air blowers and water pumps in the cooling module. Currently, there are five common types of fuel cells commercially available; see figure 2 for our comparison of these different technologies.

Figure 2: Fuel-cell technology comparison

This table from the Department of Energy’s Fuel Cell Technologies Office compares five of the more common fuel cell technologies.
Table comparing fuel cell types by common electrolyte, operating temperature, typical stack size, electrical efficiency, applications, advantages, and challenges.


Microturbines, like fuel cells, are a highly scalable technology, thanks to their modular design. With units ranging in size from 30 kilowatts (kW) to over 300 kW, microturbines can easily be packaged together as a modular system and exceed 1,000 kW of generation capacity (figure 3).

Figure 3: Microturbines

Microturbines have emerged as a viable alternative to reciprocating engines. Some models have just one moving part, so they have lower maintenance requirements than reciprocating engines. They also produce far fewer emissions than reciprocating engines. This figure shows two 60-kilowatt microturbines from Capstone Turbine.
Photograph of two microturbines from Capstone Turbine.

Microturbines are known to have high power reliability, though they have a steep efficiency curve and provide the best economic performance when running at full capacity. Additionally, microturbines produce exhaust heat that’s suitable for some CHP processes; the exhaust heat can either be used directly or through a heat-recovery boiler. You may even be able to use the exhaust temperature from microturbines for absorption cooling equipment that can be driven by exhaust heat or low-pressure steam.

Microturbines have several advantages for niche applications, partially due to their flexibility with fuel sources. In most CHP processes, microturbines use natural gas as fuel, but they can also use a variety of liquid and gaseous fuels to generate low-emission energy. They’re good at handling low-quality gases, such as “sour gas” at oil- and gas-resource recovery sites, and biogas from landfills, wastewater treatment plants, and agricultural livestock operations. Also, their exhaust gas is clean and hot enough to be used directly in greenhouses (the carbon dioxide boosts plant growth) or in industries with drying processes such as brick, grain, or chemical drying.

Microturbines are currently the most cost-effective alternative to reciprocating engines for small-scale generation. With fewer moving parts than reciprocating engines—in some cases only a single part—they have the potential for longer lifetimes with lower maintenance requirements. Individual units are compact, making them easy to transport and install, even in confined spaces.

Reciprocating engines

Reciprocating engines, also known as reciprocating internal combustion engines, are one of the most mature DG technologies available. Reciprocating engines drive the vast majority of on-site generation and can be used to power transportation and other processes. They’re globally mass-produced, cost less than other DG technologies, and have an extensive sales, maintenance, and repair infrastructure in place. All of these factors—combined with market familiarity, decreasing exhaust emissions, extended service intervals, and long engine life—continue to make reciprocating engines the most commonly used DG technology in the world.

Some reciprocating engines can be packaged or retrofitted with CHP systems. Reciprocating engines provide four sources of usable waste heat: exhaust gas, engine-jacket cooling water, lube-oil cooling water, and turbocharger cooling water. Generally, the hot water and low-pressure steam produced by CHP systems based on reciprocating-generator sets meet low-temperature process needs, provide space heating and potable-water heating, and run chillers that provide cold water, air-conditioning and dehumidification, or refrigeration. Using what would otherwise be waste heat boosts the system’s overall efficiency considerably.

Reciprocating engines come in various sizes, ranging from 1 kW to 10 MW, and, due to their ability to efficiently perform at full and partial capacity, are well suited for base-load and load-following applications. These engines have a low start time and, as a mature technology, have high reliability. All reciprocating generators have two main components: an internal combustion engine that burns diesel, propane, natural gas, or gasoline and an electrical generator that converts the shaft power of the engine into electricity. Electrical conversion efficiencies for natural gas–fired reciprocating engines in the 5-kW range are about 24%. For larger engines in the 250-kW and higher range, efficiency can exceed 33%. If thermal energy is recovered from the exhaust gas and the engine-cooling jacket and put to use, overall system efficiency can approach 80%.

Generators of just a few kW are typically portable, have an attached fuel tank, and are intended to supply power for just a few hours. Above about 7 kW, generators tend to be semipermanently or permanently installed and connected to a separate fuel supply, such as a diesel or propane storage tank or natural gas supply line. Businesses often choose to connect only the most mission-critical circuits to a backup generator, so the power level you need for your business may be well below your building’s peak power level.

It’s important to note that there are two primary designs for DG reciprocating engines: compression-ignition diesel-cycle engines and spark-ignition Otto-cycle engines. Although these function primarily the same, they differ in how the generators ignite the fuel. Otto-cycle engines use a spark plug to ignite the fuel, which is a mixture of fuel and air that has been premixed before entering the combustion chamber. The diesel-cycle engines combust their fuel differently. These compression ignition engines pressurize the air in the engine combustion chamber to a pressure that raises the temperature of the air to the autoignition temperature of the fuel that’s going to be injected at high pressure.

Stirling engines

Stirling engines are becoming more popular because they can support an aging energy infrastructure and reduce fossil-fuel emissions. They fall under the heat engine classification because they generate electricity by harnessing the energy generated from the expansion and compression of a gas, known as a working fluid. These engines function under the basic principles physics: as matter is heated, it expands; as matter cools, it contracts. In these engines, the working fluid is chilled (and compresses) in one portion of the engine, and, in another portion, it’s heated (and expands). This change in pressure and temperature is used to generate electricity.

Stirling engines require little maintenance, give off low levels of emissions, and are appropriate for various applications. They vary in size from small generators, running on standard fuels like diesel, to stationary power generators fueled by biofuels, like the 45-kW PowerUnit from Stirling Biopower (figure 4).

Figure 4: Stirling engines

Stirling Biopower’s Stirling engines fueled by biofuels with combined heating and power systems are sold to commercial and industrial customers in the United States.
Photograph of a Stirling engine from Stirling Biopower.

Stirling engines can use energy from any source to heat the working fluid, and because of this, they can be combined with solar collectors to create cleaner versions of the technology. Cool Energy has a designed a solar collection system that powers the Stirling engine with solar energy; solar thermal collectors capture solar energy, feeding that energy into a proprietary engine that uses Stirling engine principles. Cool Energy’s newest generator, the ThermoHeart Sterling Engine, can use a lower input heat to power the engine and uses nitrogen as the working fluid. These adjustments can lead to a generation source that is less fuel intensive.

Another application is concentrated solar power (CSP), in which specially designed solar dish systems reflect sunlight directly into Stirling engines. Sandia National Laboratories has collaborated with companies on these dish-engine units, which can achieve peak capacities up to 25 kW and convert solar energy to electricity with an efficiency just over 30%. For comparison, typical photovoltaic (PV) systems today have an efficiency of 10% to 20%. Like all solar electric systems, the availability of sunlight and space limits the application of CSP.

The prices of Stirling engines vary considerably depending on the size of the engine and the application. Traditional stationary units begin at around $1,000 per kW, whereas the newer CSP applications will cost several thousand dollars per kW.

How to make the best choice

Determine your power needs The best way to choose the right size and type of generator is to identify the end uses you want the generator to supply and add up the power consumption of those end uses. You’ll typically find the power draw of each piece of equipment on its nameplate. If a significant fraction of the load that the generator will supply is made up of motors, be sure to explain this to your generator vendor, because motor-start-up current requirements may necessitate the purchase of a larger generator. Also, be sure to consider whether you want to purchase additional generator capacity for future expansion.

Consider the impact on power quality and reliability The power quality and reliability markets for DG are already quite large—more than 14 gigawatts of reciprocating-engine generators sized between 10 kW and 2 MW are sold worldwide each year into these markets. DG was once only of interest to equipment manufacturers, their dealer networks, and specific third-party companies. Now, regulated utilities, their unregulated subsidiaries, and independent companies are starting to use DG in service offerings that provide enhanced power reliability and quality. At the same time, end users are deploying increasingly sophisticated automated control systems and data-storage technologies that need premium power to ensure the quality and integrity of their processes.

Match the DG technology to heating and cooling applications Most of the DG technologies described here produce heat that can be harvested to create CHP systems, greatly improving the economics of DG projects. Reciprocating engines, microturbines, fuel cells, and Stirling engines produce heat that can readily be used for water and space heating. Waste heat from solid oxide fuel cells is hot enough to serve as input to a gas turbine for the generation of electricity. In addition, it can be used in high-temperature industrial processes or to meet steam needs. You could also use the waste heat from these DG technologies to power an absorption chiller.

DG installers typically recommend that CHP systems be sized to appropriately meet a facility’s thermal load rather than its electric load. This method provides the opportunity to meet both heating and electrical needs with the possibility of selling any excess electricity back to the grid. Vendors also say that facilities that have a simultaneous electric and thermal demand for at least 4,000 hours per year are better candidates for CHP, although the economics for buildings with 2,000 hours of demand per year can sometimes work.

Consider new technologies in areas with strict requirements on air emissions Although emissions from reciprocating engines are decreasing as technologies improve, other options still produce fewer emissions. Fuel cells are quite clean, and solar dishes with Stirling engines and PV systems are the cleanest of all. Microturbines also produce lower emissions than comparably sized reciprocating engines.

Look for grants and incentives At the federal, state, local, and utility levels there are several grants and incentives available for DG technologies, especially the cleaner technologies like fuel cells and PV. A partial list of available grants and incentives is available online at

Familiarize yourself with state and local regulations Many state and local governments have rules that restrict the hours of use, emissions, or allowable noise levels for generators. Before purchasing a generator, be sure to learn about all the regulations your generator will have to comply with.

Select a quality service plan Maintenance requirements and frequency vary from one manufacturer to the next. Service intervals typically range from 2,000 to 4,000 operating hours; regular maintenance generally involves changing the oil, oil and air filters, spark plugs, and spark plug wires and adjusting valves. Choose a dealer who offers a service plan that includes yearly visits. Dealers typically offer warranties that cover parts and labor for at least two years from the date of purchase, but pay attention to the provisions of the warranty: Some are comprehensive, but some cover only certain parts of the generator. Pricing for a service plan will vary according to the size and type of generator you select.

What’s on the horizon?

Numerous companies are pouring research and development funds into DG technologies. In the coming years, look for refinements in reciprocating engines, an increasing number of sites using microturbines, and the mass commercialization of products from the manufacturers of fuel cells. As costs decline, we’ll likely see a significant increase in fuel cell powered vehicles and facilities in the coming years.

Who are the manufacturers?

The following is a sampling of companies that offer commercial or very-near-commercial DG products. It’s not meant to be a comprehensive list.

Fuel cells


Reciprocating engines

Stirling engines

Neither this list nor any mention of a specific vendor or product constitutes an endorsement or recommendation by the authors, nor does any content in the Business Energy Advisor constitute an endorsement or recommendation, explicit or otherwise, of the technology-related programs mentioned herein.

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