Distributed generation is a new trend in the generation of heat and electrical power. The Distributed Energy Resources (DER) concept permits "consumers" who are generating heat or electricity for their own needs (like in hydrogen stations and microgeneration) to send surplus electrical power back into the power grid - a process also known as net metering - or share excess heat via a distributed heating grid. Distributed generation systems with Combined Heat and Power (CHP) systems can be very efficient, using up to 90% of the potential energy in the fuel they consume. CHP can also save a lot of money and fuel. Estimates are that CHP has the potential to reduce the energy usage of the USA by up to 40%. A cluster of distributed generation installations is viewed as a Virtual power plant.

Even if the term "distributed generation" is quite well established, terms like distributed power, distributed energy, distributed energy resources, embedded generation, decentralized power, decentralized energy, dispersed generation, and onsite generation can also be found in the literature. Although some of those terms may be used with a different meaning, typically they de facto refer to distributed generation.

In many parts of the United States, a significant amount of new generation capacity is being installed through the
installation of Distributed Generation (DG) facilities. The 2003 Northeast Blackout will undoubtedly accelerate DG
installation in the US as more businesses awaken to the need for reliable on-site generation. Interconnect protection
allows DG to operate in parallel with the utility power system and is the single most important technical issue in
most DG projects. Typically, protection requirements to connect distributed generators to the utility grid had been
established by each utility. These guidelines generally cover smaller distributed generators (10 MW or less), which
are usually connected to the utility system at the subtransmission and distribution level. These utility circuits are
designed to supply radial loads. Thus, the introduction of generation provides a source for redistribution of the fault
current on the feeder circuit, which can cause the loss of relay coordination and potential overvoltages. Within the
past few years, there have been efforts by the IEEE, as well as individual states, to develop standards and guidelines
for the interconnection of DG. The stated goal of these standards/guidelines is to have a single document of standard
technical requirements for DG interconnection rather than having to conform to local utility practices and
guidelines. This paper examines how well this objective has been met.
The paper also updates the author's previous papers (Ref. 3, 9, 10) on DG. It outlines the specific protection
challenges to interconnect distributed generators into utility systems, as well as methods to reconnect these
generators after interconnect protection tripping. It also highlights the importance of choosing the proper
interconnection transformer-winding configuration and discusses potential overvoltage problems that can be caused
by DGs. It is the author's opinion that IEEE 1547, the recently completed IEEE standard for the interconnection of
DG with the utility system, does not adequately address these topics. Also, P1547 does not address protection
methods other than over/under voltage and frequency.
DGs need to be protected not only from short circuits, but also from abnormal operating conditions. Many of these
abnormal conditions can be imposed on the dispersed generator by the utility system. Examples of such abnormal
conditions are: overexcitation, overvoltage, unbalanced currents, abnormal frequency and shaft torque stress due to
utility automatic reclosing. When subjected to these conditions, damage or complete generator failure can occur
within seconds. Machine damage due to these causes is a major concern of DG owners. Utilities, on the other hand,
are generally concerned that the installation of a dispersed generator will result in damage to their equipment or to
the equipment of their customers.
Most DGs are typically connected to the utility system at the distribution and subtransmission level. These utility
circuits are designed to supply radial loads. Islanded operation of dispersed generation with utility loads external to
the DG site on these circuits is not allowed for two major reasons:
1. The utility needs to restore the outaged circuits and this effort is greatly complicated by having
islanded generators with utility loads. Automatic reclosing is universally the first method attempted to
restore power to customers. Having islanded generators complicates both automatic reclosing, as well as
manual switching which requires synchronizing the generator/load islanded to the utility system.
2. Power quality (voltage and frequency levels, as well as harmonics) generally cannot be maintained
by the islanded dispersed generators within acceptable level provided by the utility and could result in
damage to the customer equipment.
Properly-designed interconnection protection should address the concerns of both the dispersed generator owner, as
well as the utility, at the lowest possible cost. The major functions of interconnect protection is to prevent system
islanding by detecting asynchronous dispersed generator operation—in other words, determining when the generator is no
longer operating in parallel with the utility system. This detection and tripping must be rapid enough to allow automatic
reclosing by the utility.