Currently, industrial countries generate most of their electricity in large centralized facilities, such as coal, nuclear, hydropower or gas powered plants. These plants have excellent economies of scale, but usually transmit electricity long distances.
Most plants are built this way due to a number of economic, health & safety, logistical, environmental, geographical and geological factors. For example, coal power plants are built away from cities to prevent their heavy air pollution from affecting the populace, in addition such plants are often built near collieries to minimize the cost of transporting coal. Hydroelectric plants are by their nature limited to operating at sites with sufficient waterflow. Most power plants are often considered to be too far away for their waste heat to be used for heating buildings.
Distributed generation is another approach. It reduces the amount of energy lost in transmitting electricity because the electricity is generated very near where it is used, perhaps even in the same building. This also reduces the size and number of power lines that must be constructed.
Typical distributed power sources in a FIT scheme have low maintenance, low pollution and high efficiencies. In the past, these traits required dedicated operating engineers, and large, complex plants to pay their salaries and reduce pollution. However, modern embedded systems can provide these traits with automated operation and clean fuels, such as sunlight, wind and natural gas. This reduces the size of power plant that can show a profit.
The usual problem with distributed generators are their high costs.
One favored source is solar panels on the roofs of buildings. The production cost is $0.99 to 2.00/W (2007) plus installation and supporting equipment unless the installation is DIY bringing the cost to $6.50 to 7.50 (2007). This is comparable to coal power plant costs of $0.582 to 0.906/W (1979), adjusting for inflation. Nuclear power is higher at $2.2 to $6.00/W (2007). Most solar cells also have waste disposal issues, since solar cells often contain heavy-metal electronic wastes, (CdTe and CIGS), and need to be recycled. The plus side is that unlike coal and nuclear, there are no fuel costs, pollution, mining safety or operating safety issues. Solar also has a low duty cycle, producing peak power at local noon each day. Average duty cycle is typically 20%.
Another favored source is small wind turbines. These have low maintenance, and low pollution. Construction costs are higher ($0.80/W, 2007) per watt than large power plants, except in very windy areas. Wind towers and generators have substantial insurable liabilities caused by high winds, but good operating safety. Wind also tends to be complementary to solar; on days there is no sun there tends to be wind and vice versa. Many distributed generation sites combine wind power and solar power such as Slippery Rock University, which can be monitored online
Distributed cogeneration sources use natural gas-fired microturbines or reciprocating engines to turn generators. The hot exhaust is then used for space or water heating, or to drive an absorptive chiller for air-conditioning. The clean fuel has only low pollution. Designs currently have uneven reliability, with some makes having excellent maintenance costs, and others being unacceptable.
Cogenerators are also more expensive per watt than central generators. They find favor because most buildings already burn fuels, and the cogeneration can extract more value from the fuel.
Some larger installations utilize combined cycle generation. Usually this consists of a gas turbine whose exhaust boils water for a steam turbine in a Rankine cycle. The condenser of the steam cycle provides the heat for space heating or an absorptive chiller. Combined cycle plants with cogeneration have the highest known thermal efficiencies, often exceeding 85%.
In countries with high pressure gas distribution, small turbines can be used to bring the gas pressure to domestic levels whilst extracting useful energy. If the UK were to implement this countrywide an additional 2-4 GWe would become available. (Note that the energy is already being generated elsewhere to provide the high initial gas pressure - this method simply distributes the energy via a different route.)