Centralised electricity generation is what the developed world has today. A centralised system is made up of a series of large power plants of up to 2000 MW, fed by fossil fuel, nuclear or hydro and usually sited close to where these sources, or cooling water, are available. The power they generate is transmitted at high voltage to the major demand centres. This is the function of transmission systems. Distribution systems then diffuse the power at lower voltages to the final consumers. Large amounts of power can be wheeled long distances over the high voltage grid which, because of its size, has a strong stabilising influence on the whole system.
Distributed generation is the term used to describe the installation of small generation units in the distribution networks, remote from the large power plant, where they can provide power economically and possibly improve the reliability of the system. The more remote the location, the better the prospects for distributed generation. During the past decade, advances in technologies such as gas and wind power plant have speeded the development of the concept. Distributed generation is attractive to utilities competing with one another on the free markets of today because small units can be added to power systems in increments, avoiding the need for huge one-time investments. The concept of distributed generation provides an attractive market for the new renewables because of their small size. Central stations, however, still provide the majority of the energy needs of all consumers on such a system.
In the ultimate decentralised power system, much of the high voltage transmission and large power plants are done away with. Power is largely provided by a new generation of technologies, including gas turbines, wind turbines, fuel cells, and solar generators, which will create electricity locally, even within individual buildings. These thousands of individual generators and consumers will be integrated into a single "smart" system that balances supply and demand by automatically turning individual generating and consuming devices on and off. The concept has great potential in thinly populated countries where most people have no access to electricity and no money to invest in major power plant investment.
An important distinction to make is that between "renewables," which include large hydro plant, and the "new renewables." The term "new renewables" refers to waste burning technologies, landfill gas, energy crops (by mass burn or gasification), the solar technologies, wind energy and small hydro (including "run of river" schemes). The amount of large hydro already on a system, however, plays an important part in deciding how much of the new renewables can be assimilated without pushing up the need for fossil plant. The characteristics of small hydro are roughly akin to those of the steady, as opposed to intermittent, renewables.