In October 1999, the Legislature passed Wisconsin Act 9, which included a provision (Wis. Stat. § 196.025(4)) requiring the Public Service Commission (PSC or Commission) to “study the establishment of a program for providing incentives for the development of high-efficiency, small-scale electric generating facilities….”  The legislative interest in what is generally referred to as Distributed Generation (DG) reflects a growing interest in decentralized electrical generation on the part electric consumers, utilities, and independent power producers. The United States Department of Energy (DOE) forecasts that DG could provide as much as 20 percent of all new US power generation capacity additions by 2010.

The small-scale, high-efficiency distributed generation technologies studied for this report include photovoltaics (solar), wind power, fuel cells, microturbines, internal combustion powered generators, and combined heat and power (CHP).  The report and its findings and recommendations are based on a survey of stakeholders, comments from other states, extensive literature research, seminars, and input from the State of Wisconsin’s Departments of Administration (DOA), Natural Resources (DNR), and Revenue (DOR). 

The renewable energy technologies of wind and photovoltaics are considered high efficiency by definition.  The study finds, for fossil fuel technologies, that it is reasonable to define “high efficiency” as a combined heat and power efficiency greater than 50 percent and that “small-scale” refers to a generator that has an average annual capacity of 1 megawatt (MW) or less.

The study compares air emissions for different technologies.  It identifies a concern with the cumulative effects of numerous diesel or gas-powered distributed generators that individually would be exempt from the air permit requirements of the federal Clean Air Act (CAA).

Disincentives may exist for the growth of DG in Wisconsin in the form of complex rules and practices imposed on small, non-utility owned DG.  Establishment of a stakeholder collaborative group to develop a set of streamlined rules and contract provisions would provide an incentive for properly sited, small-scale DG.  The report further recommends that a statewide interconnection standard be created consistent with national standards developed by the Institute of Electrical and Electronics Engineers (IEEE), Underwriters Laboratories (UL), and the National Fire Protection Association (NFPA).

Financial incentives examined in the report include expansion of the net energy-billing tariffs; buy-back rates that are based on the environmental benefits, and a production tax credit for technologies with reduced environmental impacts.  A recommendation is also made that state agencies provide assistance to local units of government in siting of small-scale, high-efficiency distributed generation.