In the past, due to economies of scale, power generating stations were often large with capacities in the range 150-1000 MW. Clearly, this type of power station requires large facilities, including land and personnel needed to operate it, and incurs high capital costs. Moreover, since these big power stations cannot be constructed closer to load centres for obvious reasons, there is a need for long Extra High Voltage (EHV) or Ultra High Voltage (UHV) transmission lines, including transmission substations. Similar to power stations, these transmission lines and substations need ample amounts of money for their design, construction, operation and maintenance. Moreover, the lengthy structure of these transmission lines makes the lines vulnerable to natural hazards such as heavy wind, snowstorms and lightning strikes. These natural hazards, in some cases, become the major reason for partial or full blackout of the power system triggered by some line outages.

These conditions, in addition to economical and environmental pressures in the recent past, have been changing the way electric power utilities approach generation. Some of the economical and environmental factors associated with large power plants are listed below:

* High fuel cost

* Environmental pollution

* Transmission rights of way problems

* High initial investment and long-term planning

* Land required for power plant construction and resettlement

What are the alternatives? By considering the above factors, one of the best alternatives for a change in the traditional methods of generation and delivery arrangements is to introduce distributed and dispersed generation, which can be conveniently located closer to load centres.

Distributed generation is not a new concept. If one looks back at the evolution of the electric power industry, electricity was introduced as an attractive alternative for steam, hydraulics, direct heating and cooling which were produced near the point of consumption in small quantities. The main idea behind distributed generation is that of generation on a small scale, which can be easily placed closer to the point of consumption. Distributed and dispersed generators are, by definition, a smaller size of generators, which can come from traditional or from new 'revolutionary' technologies.

Given the current trend of the deregulated electricity market, where competition is introduced in generation, transmission and distribution, the prospects for distributed generation are good. People with an interest in having their own power plant can do so and the rest of the power after their consumption can be sold on for the benefit of all. This would release the government from the burden of investing huge amounts of money in the generation sector and could result in a reduction in electricity prices and a better quality of supply.

It is also interesting to note that there is a shrinking in the 'economy of scale' in electrical energy production. A recent study indicates that the cost per kWh ratio of large (traditional) to small (DG) generating units has dropped from 60 per cent in 1960 to 30 per cent in 2000.1 This is due to the fact that there is technological advancement in fuel conversion, insulation, automation and control. Some DGs can be operated and controlled as fully automated systems and need to be shut down only once a year for maintenance purposes.

A number of advantages and the 'climate' of the current electricity business strongly favour the application of DGs. However, many issues need to be considered before allowing distributed and dispersed generators to operate in power systems. For instance, given the choice, where should the DG be placed in the system to enjoy maximum technical benefits, such as low losses, higher reliability, increase in loadability and better voltage profile? Apart from these, other issues, such as various stability problems and protection of DGs have to be properly considered. Since stability and protection issues are outside the scope of this paper, only DG placement in the distribution system is studied here, in particular its potential to increase the loadability of the distribution system. This may be an interesting issue in the current deregulated electricity market, where different 'Discos' (Distribution Companies) combined with 'Gencos' (Generation Companies) would want maximize the utilization of their facilities for maximum profit.