Chairman Reasor and Members of the Joint Subcommittee:

My name is Sarah McKinley and I am Executive Director of The Distributed Power Coalition of America (DPCA).

The recent power outages across the Midwest and other sections of the country may have been caused by a variety of factors, including increased demand for electricity, the permanent or temporary shutdown of nuclear facilities, and unusually warm weather. Fortunately, the electric industry has within its grasp an obvious solution to the specter of rolling brownouts: natural gas-fired distributed generation.

Easy to install and varying in size from 30 kW to 40 MW, these units can be planted easily behind electric transmission bottlenecks to provide peaking services, especially where power lines cross natural gas facilities. Turbines also fit in well with peaking needs because they require very short lead times to reach full production. A large turbine can produce electricity at near maximum rates within 15 minutes of a cold start, and within seconds if the unit is in "spinning" mode. In smaller turbines the cold start time is even faster.

The cost of installing turbines is also remarkably reasonable. Dr. Henry Linden of the Illinois Institute of Technology estimates that a peaking unit of 40-50 MW can be installed for about $450/kW. Assuming that it operates only 1000 hours per year and natural gas costs $3.00/MMBtu, it can produce electricity at 10 cents/kWh.

There is also an obvious fit with the natural gas industry, whose winter peaking loads complement summer air conditioning. Trade publications report that delivered prices for natural gas this summer fell below the costs used by Dr. Linden in his study. Considering that these units operate for a relatively short period of time, they are a cost-effective complement to other sources of generation.

Any doubts about the economics of gas-fired distributed generation, however, should have been dispelled this summer when spot prices approached the $10,000/MWh range. These prices signal that the free market for electricity is alive and well. It also demonstrates the economic viability of distributed generation.

Distributed generation is a relatively new but proven technology, and one that can facilitate restructuring in states like Virginia that suffer from transmission constraints. DPCA recommends that the Joint Subcommittee and the General Assembly consider distributed generation as a practical means of countering the effects of transmission constraints and peak demand periods.

Thank you for the opportunity to present these remarks.

Sarah McKinley
Executive Director
Distributed Power Coalition of America
10 G Street N.E.
Suite 700
Washington, DC 20002
(202) 216-5944