Reliable power is often taken for granted, quietly enabling everything we do until an interruption reminds us how important it is. A brief outage or even rising energy costs can shift that perspective, prompting a closer look.
That shift is often what leads industrial and commercial facilities to explore distributed generation. This means of power production offers a response to a growing need to better understand, manage, or control how energy supports facility operations. In those conversations, decisions typically come down to three primary drivers:
- Economics
- Resiliency
- Environmental Impact
Most projects involve a mix of these objectives, but identifying the main driver is essential. That priority defines success criteria and guides decision-making when trade-offs inevitably occur, whether in system application, technology choice, or cost. Without that clarity, it becomes hard to determine how to balance competing priorities effectively. Because of this, not all distributed generation strategies look the same.
In this blog, we’ll explore how priorities like economics, resiliency, and emissions influence decision-making, and how identifying a clear driver can help facilities evaluate options and move forward with confidence.
Establishing the Baseline
Once the primary driver is defined, the next step is to establish a baseline. This creates a clear starting point and a consistent framework for evaluating performance and trade-offs as decisions evolve.
What that baseline includes depends on your primary objective:
- Economics focuses on current energy costs, including baseload consumption, peak demand, and utility rate structures. Understanding how costs fluctuate, both long-term and short-term, helps identify where exposure exists and where onsite generation could provide value.
- Resiliency centers on evaluating operational risk, including identifying critical loads that would result in significant revenue loss or impact life safety if lost.
- Environmental impact establishes current emission levels, including:
- Scope 1: Onsite emissions
- Scope 2: Emissions from purchased electricity
This provides a clear foundation for measuring how onsite generation can reduce total emissions over time.
A well-defined baseline means your future decisions are measurable and directly tied to your facility’s goals.
Economic Considerations
For many facilities, economics is the primary driver—whether through cost reduction or revenue generation. This value of distributed generation is typically realized through a combination of:
- Energy offset
- Demand charge reduction
- Grid export offtake
Dispatchable generation systems often deliver strong economic value, particularly when applied as a combined heat and power (CHP) unit. CHP systems use a single fuel source to generate both electricity and usable thermal energy, allowing facilities to efficiently offset both electricity purchases and onsite fuel consumption.
A key metric for evaluating the viability of onsite CHP systems is the spark spread, which compares the cost of generating power onsite using natural gas to the cost of purchasing electricity from the grid. A positive spark spread indicates the potential for cost savings. In practice, CHP systems tend to be most viable as electricity costs are often significantly higher than natural gas costs.
These systems can also reduce demand charges, which are often driven by a facility’s highest level of power use during short peak intervals (such as 15-minute windows, typically during the afternoon through early evening). Because demand charges are driven by a facility’s grid usage during peak demand hours, onsite generation can reduce costs by offsetting your loads during these periods. However, reliable and consistent operation is critical, as even a brief interruption during peak hours can eliminate savings.
Renewable systems, on the other hand, typically capture value through energy offset and net metering, rather than controllable demand charge reduction (unless paired with battery storage). Because these systems are often variable, the energy generated may not align with real-time facility demand. As such, it is important to have a way to still capture the value during these periods of excess generation.
This makes export compensation mechanisms—such as net metering—an important aspect of project economics. When utilities compensate for excess generation at the retail rate, renewable systems become much more economically attractive for your facility.
Resiliency
Resiliency ultimately comes down to the consequences of losing power, whether that’s lost revenue or life safety.
If your facility has a high business continuity risk, it needs systems that can operate independently of the grid (in island mode) and support critical loads during an outage. Achieving this requires careful alignment between the generator system’s capabilities and the facility’s actual load profile.
Key generator considerations include:
- Black start capability (i.e., the ability to start the generator without relying on grid support)
- Ability to handle critical load variability
These factors determine whether a system can deliver true resilience for your facility during an outage.
Environmental Factors
When environmental impact is the primary driver, the focus shifts to how onsite generation impacts overall facility emissions.
- Combustion-based systems often produce onsite emissions (Scope 1), but still reduce overall emissions by improving efficiency when paired with heat recovery. These systems will also reduce marginal grid emissions by displacing grid usage (Scope 2).
- Renewable systems provide a combustion-free approach, reducing reliance on grid-supplied electricity without introducing additional onsite emissions. This allows facilities to lower Scope 2 emissions without increasing Scope 1 emissions.
The appropriate technology approach depends on the project’s overall objectives and the relative importance placed on emissions reduction versus economics and resilience.
Bringing It All Together
A successful distributed generation strategy requires a holistic evaluation that balances technical feasibility, economics, regulatory requirements, and operational needs.
Starting with a clear objective and a well-defined baseline allows facility owners to make informed decisions and navigate tradeoffs with confidence. Early-stage feasibility analysis is a critical first step in aligning energy investments with long-term business goals.
Ultimately, the best distributed generation solution is not the one with the most features, but the one that best aligns with your facility’s primary objective. Afterall, there is no universally best technology. The best solution depends on what you’re trying to accomplish.
