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Engineering, Electrical & Electronic
Electricity plays a vital role in modern life, and its demand has experienced steady growth worldwide due to population growth, economic development, and urbanization. The electricity systems, based mainly on centralized generation and intensive use of fossil fuels, face significant energy security, sustainability, and climate change challenges. These challenges have driven the search for more sustainable and decentralized solutions for energy generation and distribution, such as distributed generation (DG). DG refers to producing electricity on a small scale and close to the point of consumption, using renewable and non-renewable energy sources. DG has become increasingly popular worldwide due to its multiple benefits, which include reducing losses in power transmission and distribution, decreasing reliance on interconnected power systems with large-scale centralized generation, and promoting clean and renewable energy adoption.
- distributed generation
- net metering
- residential self-supply
- renewable energy
1. Introduction
Electricity can be generated in two main ways: through renewable sources, which are those that can be naturally regenerated, such as solar and wind energy; and through non-renewable sources, which are those that are depleted as they are used, such as fossil fuels [2,4]. Transitioning to cleaner and renewable energy sources is an important goal in working to decrease greenhouse gas emissions, decarbonize the world’s energy generation matrices, and achieve long-term sustainability. Distributed generation (DG) can be realized through various technologies, such as solar panels [7,8], wind turbines [2], thermal cogeneration systems [9], hydro microturbines, and biomass combustion systems [4]. These smaller-scale, renewable energy sources are more sustainable and less polluting than traditional fossil fuel power plants.
The residential sector is one of the primary energy consumers in South America and represents an area of great interest for DG application. Energy self-supply in the residential sector can reduce demand on electricity grids, promote energy efficiency, foster local development, and improve the population’s quality of life. In addition, residential DG can favor social and energy inclusion in rural and remote areas where access to the power grid is limited [10]. Despite the potential of DG in the residential sector, its implementation in South America faces several challenges. These include the lack of adequate policies and regulatory frameworks [5,11], limited availability of financing [11,12], technical barriers [13,14], and the need to increase the awareness and education of the population regarding the benefits and opportunities of DG. Moreover, the geographic, economic, and cultural diversity in the region poses specific challenges for the adoption of DG in each country. The study of DG applied to the residential sector in South America is of utmost importance to understand and address the challenges and opportunities in the region.
2. Distributed Generation Technologies in South America
2.1. Distributed Generation
Although there is no single definition, the concept of DG has been proposed by several international organizations, such as the International Energy Agency (IEA), the International Council on Large Electric Systems (CIGRE), the Electric Power Research Institute (EPRI), and the Institute of Electrical and Electronics Engineers (IEEE) [3,29]. DG refers to the production of electrical energy through small generation plants located close to consumption points [3] as opposed to centralized generation in large power plants, often far from consumption points. DG uses non-conventional renewable energy sources (NCRE) such as solar, wind, biomass or hydroelectric, cogeneration, and energy storage technologies [29]. This form of power generation can improve energy efficiency, reduce transmission and distribution losses, increase grid resilience, and decrease greenhouse gas emissions [11,30].
In this regard, DG in South America is oriented towards micro-scale application. According to its power, DG is classified as micro DG (1 W to 5 KW power), small DG (5 KW to 5 MW), medium DG (5 MW to 50 MW), and large DG (50 MW to 300 MW) [3]. It is only in micro DG that consumers can create generation microgrids for self-consumption; larger distribution networks will always exist in the rest of the classes [2]. Microgrids are especially relevant because they seek to integrate renewable energy sources to meet energy demand, thus reducing local dependence on fossil fuels and other conventional energy sources [30]. Microgrids allow local communities, commercial entities, and campuses to quickly and efficiently increase the total electricity supply through local generators, photovoltaic cells, wind turbines, and other means [31,32].
2.2. DG Energy Sources Used in South America
Several NCRE technologies are found in the literature. Among them are solar photovoltaic energy [11,27,29,33,34,35], wind energy [27,28,36], geothermal energy, hydrothermal energy [34], biomass (incineration) [27,33], biogas (anaerobic digestion) [3,29], tidal (or ocean) energy [2,34], low-capacity hydroelectric energy [37], and cogeneration [11]. All of them have been and are being implemented or regulated as a response to the social, economic, and environmental problems linked to the use of fossil fuels in electricity generation, as well as to the vulnerability to climate change of countries that depend mainly on water sources for energy production [26,30].
South America’s trend towards using DG as part of the countries’ regular electricity generation system has been growing. Evidence of this is the increasing development of regulatory policies and incentives for investment in this type of technology based on NCRE [5,11,27].
2.2.1. Photovoltaic Solar Energy
Photovoltaic solar energy is an attractive option for DG, being a sustainable solution to the depletion of fossil fuels. It is the most widely used alternative source for DG in South America [8,38,39], including promotion and legal regulations specifically aimed at it (Regulation No. ARCERNNR-001/21, Ecuador; Law 25.019, Argentina; Law No. 18,585 and Decree No. 451/011, Uruguay). This technology can be used directly for electricity supply, stored in batteries, or integrated into the electrical grid [33,37]. This clean and environmentally friendly technology can be installed on various scales, from residential systems to large solar plants [3,12]. Its implementation provides a decentralized approach for consumers to produce their own electrical power, which helps to reduce demand on distribution grids and improves the efficiency and sustainability of the overall energy system [3,34,37].
2.2.2. Small Wind Turbines
Wind energy is another renewable energy source that has experienced rapid growth in recent years [2]. It can be exploited either onshore or offshore, the second option being more expensive but with a higher generation potential due to the higher wind speed and stability [32,33]. This is a viable option for DG, especially in rural and isolated areas with limited access to the electric grid [4].
2.2.3. Small-Scale Hydroelectric Power
Hydropower is one of the oldest and most widely used renewable energy sources worldwide [1,2]. It is a relatively reliable and constant energy source as it does not depend on external factors such as the sun or wind that tend to vary on shorter time scales [35].
Hydropower can be an option for DG, especially in regions with abundant water resources and limited public grid access. However, it is essential to consider the potential environmental and social impacts associated with the construction of dams and reservoirs, such as the alteration of aquatic and terrestrial ecosystems and the displacement of local communities [1,2].
2.2.4. Batteries and Energy Storage Systems
Energy storage systems, such as batteries, play a crucial role in integrating and managing intermittent renewable energy sources such as solar and wind [28]. These systems allow for storing the energy produced during periods of high generation and releasing it when needed, improving the stability and reliability of the power grid [4,12]. Among the types of batteries most commonly used in DG are lithium-ion, nickel-cadmium, and lead-acid [30]. Energy storage systems can be implemented at residential, industrial, and commercial levels, facilitating self-consumption and participation in energy markets [4,28].
2.2.5. Other Emerging Technologies
Other emerging technologies could significantly impact DG in the near future. Some of these technologies include:
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Biogas: a type of renewable energy obtained from the anaerobic decomposition of organic matter, such as agricultural, animal, or food industry waste [1]. It can be used to generate electricity and heat through cogeneration engines or gas turbines, or it can even be purified and converted into biomethane to be used as a substitute for natural gas [9]. Only one initiative in Brazil is relevant for implementing this technology.
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Cogeneration systems: technologies that allow the simultaneous generation of two forms of energy from a single fuel source, such as natural gas, biomass, or biogas. Cogeneration produces electricity and useful heat [9]. These systems are highly efficient and can significantly reduce fossil fuel consumption and greenhouse gas emissions compared to conventional generation. Their application is on a very small scale, in industries and buildings, as distributed micro-generation. Only one record of its application was obtained in Chile [9].
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Wave and tidal energy: technologies that take advantage of the movement of waves and tidal currents to generate electricity, with great potential in coastal and marine areas [2,4]. Despite this, it is contemplated in the legislation of Colombia (Law 1715 of 2014) and Peru (Legislative Resolution No. 30044) for possible regulation in the event of projects of this type in such countries.
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Low enthalpy geothermal energy: use of heat stored in the subsoil at accessible depths to generate electricity and heat through heat exchangers and geothermal heat pumps. In South American countries that have access to the Andes Mountains, the volcanic activity of these mountains provides large amounts of geothermal energy, being estimated, for example, at 950 MW in the specific case of Ecuador [1]. Other Andean countries would also have similar potential to be exploited in future projects.
3. Implementation and Adoption of Distributed Generation in the Residential Sector in South America
This section investigates the burgeoning landscape of distributed generation (DG) in South America’s residential sector. It explores adoption trends and successful projects, offering insights into the region’s progress toward sustainable and decentralized energy solutions.
3.1. Trends in the Adoption of DG in the Residential Sector
The adoption of DG in the residential sector in South America has experienced remarkable growth in recent years, driven by several trends and factors. Among these, favorable policies and regulations, the growth of PV, the incorporation of innovative business models, and the trend towards smart grids (SG) stand out.
Regarding policies and regulations, the net metering system has been instrumental in encouraging the adoption of DG in the residential sector [35,39]. This measure allows consumers to sell surplus energy produced by their PV installations to the grid, thus encouraging investment in renewable generation systems. Countries such as Brazil, Argentina, Chile, Colombia, and Peru have implemented, or are in the process of implementing, this type of policy, contributing to the growth of photovoltaic energy in the region.
It is well known that South America has abundant solar resources, mainly in its areas with suitable slopes and deserts in the dry southern Andes and the Pacific desert coast between Peru and Chile [44]. These characteristics have favored the adoption of photovoltaic systems in the residential sector. It should be noted that each location has specific climatic characteristics that increase the advantages of using this technology. Investment in solar technologies is on the rise, which has generated a trend of lower installation costs and has made solar energy more accessible to consumers [6,11,39].
In the specific case of Ecuador, it is observed that the participation in renewable sources prevails in the highlands (56.0%) and the Amazon region (37.7%), with practically negligible participation in the coastal (5.4%) and insular (0.9%) regions. In these last two areas, the most significant problems of energy quality and efficiency accumulate and, counterintuitively, it is where the best radiation levels exist to promote photovoltaic energy.
Likewise, there are local initiatives to implement DG technologies other than solar or photovoltaic. Wind projects are scarcely developed in South America. A particular case wherein this renewable energy source outperformed solar was in the 2019 call of the Colombian Ministry of Mines and Energy, where six wind and two solar projects were obtained to be developed until 2022, generating a total award of 1398 MW [11].
3.2. Successful DG Projects in the Residential Sector
In order to encourage the development of DG projects based on renewable energy sources in South America, several initiatives have been carried out. However, most of them are mainly linked to photovoltaic energy. For 2018, the percentage of installed DG power concerning the overall power of the evaluated countries fluctuated between 0.0% (Paraguay and Venezuela) and 3.5% (Peru), with the rest of the countries maintaining levels below 0.30% (Argentina with 0.03%; Uruguay and Bolivia with 0.05%; Chile with 0.07%; Ecuador with 0.08%; Brazil with 0.22%; Colombia with 0.26%) [46]. Some successful projects in the region are involved in these relatively low percentages.
In Ecuador, significant reserves of renewable energy sources are not adequately exploited [27]. In 2020, distribution systems were developed for various renewable sources, including biogas, wind, thermal, hydro, and solar energy. The effective installed capacity in Ecuador is 8080.39 MW, of which 64.9% corresponds to renewable energy sources [28]. Hydraulic sources represent 96.9% of the renewable sources, while only 3.1% corresponds to wind, solar and biomass combined. However, despite this high potential, the development of solar PV is still incipient, especially in micro DG [27]. The solar potential of some countries, such as Ecuador, may considerably exceed the exploitable hydroelectric potential [28].
In an effort to encourage the incorporation of alternative renewable energy sources, Colombia has held auctions. The Ministry of Mines and Energy (MME) auction in October 2019 awarded 1298 MW of installed capacity to five wind and three solar projects, equivalent to approximately 5% of the country’s total generation capacity. In addition, with the 1398 MW awarded to six wind and two solar projects in the reliability-charge firm energy auction held in March 2019, these projects constitute about 11% of the total generation capacity in Colombia for non-conventional renewable energy [11].
4. Economic, Social, and Environmental Impact of Residential DG in South America
Turning attention to the multifaceted impact of residential DG in South America, this section delves into its economic, social, and environmental dimensions. Examining factors influencing profitability and net metering adoption, as well as the pivotal role in curbing emissions, the following lines offer insights into DG’s contribution to sustainability and societal welfare.
4.1. Economic and Social Aspect of Residential DG
The profitability of distributed generation projects depends on several factors, including size, productive capacity, incentives, and the possibility of net metering. Net metering is the most widespread business model among DG projects in South America and is applied for PV generation [32]. Different scenarios of PV-powered microgrid projects were analyzed and it was found that, in the absence of net metering, projects with a production capacity greater than 10 kW generated economic losses, while smaller-scale projects were profitable. However, when net metering was included in the analysis, projects became more profitable.
From the user’s point of view, the scheme or business model under which the service of injecting surplus energy into the system is applied is relevant. Net metering generates the most significant economic benefit for the user since it is a compensation mechanism. The user’s surplus balance can be used during the following month and reduce energy use costs [5,39].
From the point of view of cost regulation, [44] argued that it is necessary to establish and promote new compensation mechanisms in the planning of DG processes. It is essential to decouple energy service compensation from the volume of energy distributed through the grid to ensure an environment that benefits both private investment and users.
4.2. Environmental Aspect of Residential DG
One of the advantages of implementing residential DG is its contribution to reducing greenhouse gas (GHG) emissions and other pollutants, and to decrease the use of fossil fuels generally used in industry, such as oil, coal, or natural gas, as well as in conventional thermal energy production. The penetration level, or injection percentage, of photovoltaic energy in a conventional thermal energy system has been proposed to reduce the use of conventional fuels and greenhouse gas emissions [6]. In any distribution system, there are energy losses in transformers and lines.
Small- and medium-sized projects, including other DG sources such as photovoltaic, can reduce the energy production demand in the primary power plants by up to 33.51% [6]. If the power plant in question works with a conventional system of burning fossil fuels, greenhouse gas emissions are reduced by up to 1493.19 tons of CO2 equivalent [6].
5. Challenges and Barriers to the Implementation of DG in the Residential Sector in South America
This section probes the intricate challenges hindering the integration of DG in South America’s residential sector. Addressing technical obstacles, factors influencing implementation, innovation potential, and the role of private sector involvement, the discussion sheds light on impediments and opportunities in the DG landscape.
5.1. Technical and Operational Barriers and Challenges
In South American countries, such as Peru, the grid integration of users using energy sources such as photovoltaic energy depends on the economic benefit it generates or fails to generate. It is currently known that distributed residential PV micro DG for self-consumption generates more significant benefits than being integrated into the interconnected power system [35].
In some cases, users inject photovoltaic energy and energy from other sources into the distribution system and are not economically rewarded nor compensated for reducing their monthly payment rate [35]. This barrier discourages new users from investing in residential DG systems.
At the economic level, an important constraint continues to be the initial cost of installing a residential DG system. Users should be able to access low-interest loans, state subsidies, or differentiated tax benefits to incentivize the adoption of these energy alternatives [35]. Another feature that can act as a barrier, at least in the short or medium term, is the implementation of smart technologies associated with smart grids, such as smart meters and control systems. While these can help to improve energy efficiency and reduce operating costs, installing and acquiring such equipment can be a significant constraint for developing regions.
The application process to connect a micro DG system is also a major barrier [35]. In this respect, it is important at the country level to reduce the bureaucracy behind these applications and to offer online application systems so that users feel comfortable with the administrative procedure required. This can be solved by private initiative or active collaboration between private entities and the state.
On a technical level, in specific PV systems, the maximum voltage at low voltage busbars has been observed as the percentage of PV power injected increases. Although there is no evidence that this increased voltage exceeds what is allowed by the standard, it must be considered that this regulation varies from country to country and that the voltage level will be mainly due to the system’s characteristics. This barrier should be simulated and evaluated before implementing a medium or large DG project [6].
Technical constraints can always be addressed at the local level. National policies should consider the mediated reality of their systems, protocols, and technologies to adopt the DG systems they wish to implement progressively. For example, at the level of a consumer in residential systems, the maximum power that can be installed is associated with the product of the local voltage, the current supported by the circuit breaker at the entrance of the house or property, the number of phases, and the power factor [36].
In the context of DG, demand-side management focuses on managing energy flows locally to reduce energy demand at times of high load and increase energy efficiency [1,53]. To this end, technologies such as smart meters are used, which can be programmed to automatically reduce energy consumption at times of high demand, which can help reduce the load on the power grid and avoid overloads on distribution transformers [33]. The current cost of equipment that allows the development of smart grids, and with it demand management, is high. The economic constraint could be a competitive disadvantage to conventional energy distribution. Although demand-side management can also help promote renewable energy use and reduce dependence on fossil fuels in the region, initiatives with significant private and state investment funds are required to reduce the installation prices that the end user regularly pays.
5.2. Factors Promoting and Constraining the Implementation of DG in the Residential Sector
The implementation of DG in the residential sector in South America is influenced by a combination of political, economic, social, and technical factors. In order to promote the adoption of DG in the region, these challenges need to be addressed by implementing appropriate policies and regulations, promoting public awareness and technical training, and strengthening grid infrastructure. The following are the factors driving DG implementation in the residential sector in South America:
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Favorable government policies and regulations: implementing policies and regulations that promote the adoption of DG technologies, such as tax incentives, subsidies, feed-in tariffs, and net metering systems, can significantly boost the adoption of these technologies in the residential sector. In each country, one regulation has led the way in promoting DG.
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Environmental awareness and social responsibility: growing concerns about climate change and environmental sustainability can motivate homeowners to adopt DG solutions to reduce their carbon footprint and contribute to the diversification of the energy matrix.
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Reduced costs and increased energy efficiency: the adoption of DG technologies can lead to savings in energy costs and improve the energy efficiency of homes. Lower equipment and component prices can also facilitate their adoption.
Along these lines, the main factors limiting the implementation of DG in the residential sector in South America have been identified:
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Economic and financial barriers: initial investment in DG systems can be high, making adoption difficult for households with limited resources. In addition, a lack of financing and accessible credit options can hinder the adoption of these technologies.
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Changes in policies and regulations: changing policies and regulations, such as lowering feed-in tariffs or removing incentives, can disincentivize the adoption of DG systems. A stable and predictable regulatory framework is essential to drive investment in this sector.
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Lack of knowledge and technical training: lack of information and awareness of the advantages and characteristics of DG technologies and lack of technical training for installation and maintenance can limit their adoption in the residential sector.
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Challenges in grid integration: the injection of energy generated by DG systems into the electricity grid may present technical and infrastructural challenges, such as upgrading and reinforcing distribution networks to support the increasing amount of distributed energy generated.
5.3. Innovations and Development Opportunities
Despite the benefits of DG, completely replacing other conventional power generation sources with sources such as photovoltaics is not plausible in our reality. Even if the number of solar panels was infinite, an external grid would still have to deliver power during non-sunlight hours [6]. However, innovation will come from the integration of various DG sources. Creating mixed systems, i.e., where there are storage structures integrated into the system, would reduce the hourly gaps in energy production by sources dependent on environmental conditions, such as wind, sun, or tides [33], and consumers could use this energy at times of low or no wind, photovoltaic, or ocean generation, as appropriate.
One of the innovations at the management level needed for DG to become widespread worldwide is the structure of consumption charges. To accelerate the penetration of this type of system, based on the experience of European countries, it is necessary to implement incentive mechanisms such as Feed-in Tariff (FiT), Net Billing (NBi) and Net Metering (NMe) [5]. The pioneering countries in this area are Germany, Spain, Italy, and Japan. The level of integration of DG in their national energy systems is remarkable. The economic management mechanism that these countries have adopted is the payment of a differential tariff, FiT, paying a different tariff depending on the size or typology of the systems, and with dynamic cost reduction using both probabilistic methods [55] and based on the annual reduction in the cost of the technologies [54].
5.4. The Role of the Private Sector and Foreign Investment in DG Promotion
The private sector and foreign investment are key in promoting DG in South America. Both local and international private companies can develop, finance, and manage DG projects, thus expanding the energy infrastructure and increasing the efficiency of energy supply in the residential sector. For example, Enel, a multinational energy company, has actively promoted DG projects in Argentina, Brazil, Colombia, and Peru, generating 16,116 MW and a supply reaching 23.3 million users [57]. In addition, foreign investment in renewable energy and DG projects can introduce more advanced technologies and innovative business models, increasing the sector’s competitiveness and quality of services.
This entry is adapted from the peer-reviewed paper 10.3390/en16176207
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