Renewable Energy Sources Explained

Renewable power generation harnesses solar PV, wind turbines, and hydroelectric resources, using inverters, MPPT, and energy storage for grid integration, power quality, reliability, and decarbonization across smart grids and distributed generation.

What Is Renewable Power Generation?

Electrical generation from wind, solar, and hydro via grid-tied systems, inverters, and storage to cut emissions.

✅ Includes solar PV, wind turbines, and hydroelectric plants

✅ Employs inverters, MPPT, and converters for power quality

✅ Integrates storage, microgrids, and smart grid control

Renewable power generation is one of the most important subjects in today's electricity production industy and in the future will dominate the agenda to remove power generation from the use of fossil fuels As priorities shift, a clearer understanding of renewable energy sources helps frame policy and investment decisions.

Of all the energy currently consumed in Canada, about 3,700 PJ (46%) is used to generate electricity. Canada has approximately 112 GW of installed electricity generation capacity, and produces approximately 561,805 GWh of electricity annually11 , resulting in a $27 B/yr business12 . Most electricity generation, transmission and distribution have traditionally been handled by vertically integrated provincial monopolies. This resulted in the construction of large-scale centralized power generation facilities and massive transmission systems owned by the same generator. The market is currently evolving under new deregulation guidelines. These shifts are framed by national discussions on renewable electricity policy and markets that influence provincial planning across Canada.

There are currently five main sources of power generation in Canada: natural gas, oil, coal, hydro (larger systems), and nuclear. The smallest component is from "other" sources (<2%), which includes renewable power generation. The National Energy Board estimates that "other" renewable power generation sources will reach 5.5 GW of installed capacity under the Business As Usual scenario, or 16.1 GW under the Techno-Vert scenario13, by the year 2025.Projection figures vary considerably throughout the industry and among government departments and jurisdictions,but are sufficient to provide a range from which to make some reasonable assessments. Contextualizing these categories against the spectrum of renewable power sources clarifies where incremental capacity is most likely to emerge.

Renewable Power Generation

Building on this theme, many jurisdictions measure progress by how much renewable power can reliably contribute during peak demand conditions.

Each sub-sector is examined for its potential to produce electricity and displace conventional fossil fuel electricity generation. Some of the fuels may have other - or even better - applications involving renewable power generation. Cross-sector comparisons with broader renewable alternative energy pathways can highlight complementary uses and integration strategies.

• Wind generated electricity
• Solar energy converted into electricity
• Stationary Fuel Cell technology that generates electric power
• Electric power generated from bio energy sources

• Wind Power: Wind power is becoming the leading non hydro-electric renewable energy source of North American electricity generation. The wind power industry, like the larger renewable power generation industry, has benefited from many years of public and private investment and technology improvements from countries around the world. As a result,some wind installations in Canada are now cost-competitive with (and even less expensive than) conventional electricity generation-even without the Wind Power Purchase Incentive (WPPI) program. Because there is lots of rural property in with suitable wind potential, it means there are many suitable locations which can support renewable power generation. The current focus of the wind power industry is to erect wind turbines and make them operational in time to meet future electricity demand.

• Solar PV Power: Solar energy is traditionally classified in three ways:Photovoltaics (solar electricity,or PV),Solar Thermal (heat) and Passive Solar (displacing the need for active heating or cooling). Most residential, commercial and industrial buildings require both electricity and heat (hot water,space heat,etc.). At this time,this report only focuses on Solar PV. If required,a full treatment of solar thermal (or the combined use of PV and solar thermal) may be conducted in a future analysis.
• Bio-electricity Power: Biofuels encompass all forms of renewable energy derived from bio-based matreials. Ttwo of the four types of renewable power generation from bioenergy sources are bio oil and bio gas. Bio oil can also be converted to electric power in means other than boiler combustion. Generally, bio-renewable power generation involves feedstock collection, fuel production and electricity generation.
• Stationary Fuel Cell Power (Hydrogen): Hydrogen as a possible renewable power generation source opens up a broad application area from alternative energy fuels in transportation to renewable power generation using special hydrogen fuel cells.While the application area for hydrogen is large,the specific focus of this report is on the use of hydrogen fuel cells for the delivery of renewable power generation to electricity grids.

Solid Biomass combustion is the most prominent form of biomass use in Canada. Biomass co-generation is already used widely in the pulp and paper industry for power, space and process heating. It is an established technology which needs improvement, but has not been a strong focus of biotechnology research and development. Advances in controls and co-firing are improving the competitiveness of biomass within the wider alternative energy power landscape for industrial sites.

The top five near-term investment opportunities for renewable power generation include:

Targeted pilots and standards can accelerate alternative energy development while de-risking capital for utilities and independent producers.

• Expanded Feedstock for Bio-electricity - To be successful, electrical generation (fuel conversion) equipment must be able to use a wider range of biomass feedstocks beyond the high quality sources that are currently used. Further, new logistics (collection, harvesting, refining) and conversion processes must be developed to supply a steady and reliable source of these additional raw materials for the emerging biofuel processes and bio-electricity facilities. Examples include technologies that go beyond corn-based ethanol8 and white-wood based pyrolysis.
• Wind Power Grid Integration Hardware - Connecting wind farms to the grid in a standardized,cost effective, and reliable way involves both new technology solutions and policy development. While grid connection is largely a policy issue, there are emerging technologies that can increase wind system power quality and reliability, which will help them gain acceptance among utilities.
• Liquid Biomass ( "Bio Oil") Plant Scale-Up - Demonstrations are required to validate the technical and economic viability of bio-processing plants as they scale from prototype to commercial sizes: ie: wood pyrolysis has progressed to the point of full production and needs to prove its value based on the many products that are derived.
• Large Wind Turbine Component - The wind power industry requires larger wind turbines to achieve energy economies of scale. However, to remain competitive in the renewable power generation business, certain ways must be explored to decrease the weight/power output ratio of wind turbines while at the same time increasing equipment life. It is being learned that new investments are required in the research and development of lighter, stronger and more cost-effective wind turbine components and tower designs.
• Solar PV Building Integration - Similar to wind, solar PV systems in Canada require greater access to the power grid.In the residential, commercial and industrial building markets there is the technical potential to fully integrate solar components within the structure and have it replace and reduce power demand from current sources. The cost of the solar power systems and their integration into renewable power development needs to be addressed. Many technological solutions and new energy policies may be required.

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• Renewable Energy Channel

Renewable energy credits certify MWh-scale green generation, enabling GHG accounting, Scope 2 reductions, RPS compliance, and PPA hedging via registries like WREGIS, GATS, and M-RETS for grid decarbonization and utility procurement strategies.

What Are Renewable Energy Credits?

Tradable 1 MWh certificates for renewable generation, used in Scope 2 accounting, RPS compliance, and decarbonization.

✅ Verifies MWh via meter data and ISO/RTO registry tracking

✅ Enables Scope 2 reductions for facilities and microgrids

✅ Supports RPS compliance and PPA procurement strategies

Renewable Energy Credits, otherwise known as Renewable Electricity Certificates, or Tradable Renewable Certificates (TRCs), are tradable, non-tangible energy commodities that represent proof that 1 megawatt-hour (MWh) of electricity was generated from an eligible renewable energy resource (renewable electricity). For context on how clean generation is delivered and tracked, see renewable electricity fundamentals and related attributes.

Renewable Energy Credits can be sold and traded or bartered, and the owner of the REC can claim to have purchased renewable energy. While traditional carbon emissions trading programs promote low-carbon technologies by increasing the cost of emitting carbon, RECs can incentivize carbon-neutral renewable energy by providing a production subsidy to electricity generated from renewable sources. It is important to understand that the energy associated with a REC is sold separately and is used by another party. The consumer of a REC receives only a certificate. These market incentives often complement policies such as renewable energy tax credits that influence project financing.

In states and provinces that have a REC programs, a green energy provider (such as a wind farm) is credited with one REC for every 1,000 kWh or 1 MWh of electricity it produces (for reference, an average residential customer consumes about 800 kWh in a month). A certifying agency gives each REC a unique identification number to make sure it doesn't get double-counted. The green energy is then fed into the electrical grid (by mandate), and the accompanying REC can then be sold on the open market. Understanding the range of renewable energy systems that can issue RECs helps stakeholders assess performance and eligibility.

Renewable energy power companies benefit from RECs because they serve as an incentive. Many non-renewable energy sources are subsidized, making it difficult for green energy companies to survive. By being able to sell the power and RECs, the company can afford to thrive in the market. Prices for RECs vary widely, just like other commodities, and they are available for sale in numerous locations. Price signals can also vary with the mix of local renewable energy sources and transmission constraints.

By purchasing Renewable Energy Credits, consumers can claim that they are supporting green energy. While a consumer would ideally also purchase renewable energy for his or her home, this is not always possible. RECs allow companies and individuals to support power in areas which do not offer it directly. Consumers should also, of course, practice conservation and work to get green power in their area, but RECs are a good place to start. For companies, they are an important part of doing business responsibly, while thinking about future generations. For households unable to procure green tariffs, RECs align with broader clean renewable energy practices and ongoing efficiency efforts.

Along with carbon offsets and other incentive programs, Renewable Energy Credits are part of a growing movement which acknowledges that even small changes make a big difference. By supporting green energy, consumers show that there is a demand for it, and companies can build more plants or accelerate production with the funds raised through the sale of RECs. Organizations which promote programs like this hope to eventually see everyone's ecological footprint, meaning the amount of resources and space needed to support a particular lifestyle, greatly reduced. Clear explanations of what is renewable energy empower buyers to request credible products and disclosures.

What's the difference between a REC and a Carbon Offset?

All RECs from qualifying new generators represent the environmental attributes of renewable power, principally the fact that producing that power causes less, or no, pollution. When you buy an amount of wind-generated Renewable Energy Credits equal to your electricity consumption, you are legally entitled to claim that you are wind powered, and that your electricity use does not contribute to global warming. In other words, all wind Renewable Energy Credits can convert your electricity to wind power. However, for a REC to be used to offset emissions from driving, flying or heating your home, it must be from a project that would not have been implemented without the opportunity to realize revenues for the carbon reductions (in other words, it must be "additional" to business-as-usual - see "what's the importance of additionality, below"), and not all renewable energy projects can say that. To evaluate such claims confidently, consult resources that present renewable energy facts and common verification methods.

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Tidal energy is a renewable power source that harnesses ocean tides through the use of turbines and barrages. Utilizing predictable tidal cycles, it supports clean electricity generation, reduces dependence on fossil fuels, and strengthens sustainable energy systems.

What is tidal energy?

Tidal energy is the conversion of ocean tides into electricity using turbines, barrages, or tidal stream systems, offering a predictable and sustainable renewable resource.

✅ Harnesses predictable tidal cycles for renewable power

✅ Reduces reliance on fossil fuels and lowers emissions

✅ Supports clean, sustainable electricity generation

It is a renewable power harnessed from the rise and fall of the ocean's tides. The ocean's vast power is one of the most promising resources, capable of generating electricity to meet the needs of communities worldwide. With the growing demand for clean, sustainable sources, tide-generated power has been thrust into the spotlight as an effective and environmentally friendly option. Understanding tidal power highlights how Renewable Power Generation technologies are diversifying to create a more sustainable grid.

What is Tidal Energy? It is an ocean energy resource; tide-generated power is extracted from the natural ebb and flow of coastal tides. The key difference between tidal energy and other renewable sources, such as wind and solar power, lies in the predictability and reliability of the high tides. Additionally, the water in the ocean is approximately 800 times denser than air, making it a more concentrated and efficient power source compared to wind turbines. Governments worldwide are encouraging clean projects like tidal power through Renewable Energy Tax Credits, which lower the cost of adoption.

Tidal Barrage Systems for Renewable Power

Two primary methods of capturing tidal energy are tidal barrage and tidal stream generators. A tidal barrage is a large-scale engineering project that involves constructing a dam across a tidal estuary or bay. Then, as the water level changes during the high and low tidal barrage, water flows through turbines, generating electricity. The most notable tidal barrage projects include La Rance in France and the Sihwa Lake tide-generated Power Station in South Korea. 

Tidal Stream Generators and Ocean Turbines

Tidal stream generators, on the other hand, utilize underwater turbines positioned in tidal streams to harness the kinetic energy of the moving water. Like wind turbines, tide-generated turbines rotate as water flows over their blades, converting it into electricity. This technology is less intrusive to the environment and marine life than tidal barrage systems.

Advantages of Tidal Energy for Clean Electricity

There are numerous advantages to utilizing it as a renewable source. First, tidal energy is predictable, making planning for power generation and grid integration easier. Additionally, tide-generated power is environmentally friendly, as it produces no greenhouse gas emissions or air pollution during operation. This makes it a desirable option for reducing dependence on fossil fuels and combating climate change.

Disadvantages and Challenges of Tidal Power

However, it also has its disadvantages. The initial cost of constructing large-scale tidal power plants, particularly large-scale tidal barrage projects, can be substantial. This kind of generation is also limited to specific coastal locations with sufficient range and appropriate topography. Furthermore, concerns exist about the potential impact on marine life and coastal ecosystems, although research is ongoing to develop more sustainable and less disruptive technologies.

Tidal Energy vs Wind and Solar Power

Regarding efficiency, it is competitive with other renewable power sources, such as wind and solar power. In addition, the density of water makes tidal power generation more efficient in terms of power output per unit of installed capacity. However, the technology's scalability and geographic limitations make it challenging to deploy tidal energy globally. Tide-generated systems complement other clean technologies featured in our articles on Biomass Renewable Energy and Clean Renewable Energy.

Environmental Impact of Tidal Power Plants

The environmental impact is generally considered to be low, with minimal greenhouse gas emissions, air pollution, or waste production. However, localized effects on marine ecosystems and sediment transport may occur, depending on the type and scale of the project. Therefore, it is crucial to perform thorough environmental assessments and monitoring to minimize the potential negative effects of tide-generated power installations. To see how tidal power contributes to decarbonization efforts, visit our Renewable Electricity and Renewable Power Sources guides.

Global Examples of Tidal Power Stations

The best locations for generating tidal energy are areas with a high tidal range, strong tidal currents, and suitable coastal topography. Some of the world's most promising sites include the Bay of Fundy in Canada, the Bristol Channel in the United Kingdom, and the northwest coast of Australia. In addition, countries such as France, South Korea, and the UK are already home to some of the largest tide-generated power stations and continue to invest in this renewable power technology. As part of global Renewable Energy Projects, tide-generated power installations provide reliable baseload power alongside solar and wind.

Future of Tidal Energy in Renewable Systems

What is Tidal Energy? Tidal energy is a promising renewable resource with significant potential for generating clean, sustainable electricity. While there are challenges to overcome, such as high initial costs and site-specific limitations, ongoing research and technological advancements aim to make tide-generated electricity a more accessible and environmentally friendly option for the future. For a deeper comparison beyond 'What is Tidal Energy,' explore our article on 'What is Distributed Generation?' which shows how local systems, such as tidal plants, strengthen energy resilience.

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What is renewable energy? Electricity from solar, wind, hydro, and geothermal converted via generators and power electronics, integrated with grid infrastructure, energy storage, and smart controls to deliver sustainable, low-carbon power with reliability and efficiency.

What Is Renewable Energy?

Renewable energy is electricity from renewable sources using electronics, storage and controls for low-carbon power.

✅ Sources: solar PV, wind turbines, hydro, geothermal generation

✅ Integration: grid codes, inverter control, frequency and voltage support

✅ Enablers: power electronics, energy storage, microgrids, SCADA

What Is Renewable Energy? Renewable Energy is popularly considered as any source of sustainable energy that has as its source the renewable, natural environment. Most souces of renewable energy include wind energy, solar energy, water energy and biomass energy, as well as geothermal energy. In most cases, renewable energies are replenished by the natural environment. Non renewable energy resources, such as fossil fuels, cannot be replenished. After all, it took eons of time to create deposits of fossil fuels sources and these deposits are in very limited supply and cannot be replaced. For a deeper overview of definitions and key concepts, see this guide on what renewable energy is and why it matters today.

Wind energy, solar energy, water energy and biomass and geothermal energies comprise most of the plantet's renewable energy sources. Solar energy can be turned into electric power through the use of photovoltaic panels. This electric power can be consumed by many electrical appliances. To explore the main types and how they work, review these detailed summaries of renewable energy sources across different technologies.

What Is Renewable Energy? These are systems that are a key part of the portfolio of electricity solutions. For example, today, traditional biomass represents the most important source of power in the developing world, with a 36 per cent share of total electricity consumption. Used in a sustainable way, biomass and other RE sources do not generate additional greenhouse gas emissions. For context on how clean generation is integrated into modern grids, learn more about renewable electricity and its role in power systems.

RE solutions offer many advantages. Since they use indigenous energy sources like wind, the sun, and rivers of water, they contribute to supply security by reducing reliance on electricity imports. There are a variety of national situations in terms of needs and resources, but renewable ernergy resources are largely available in most developing and developed countries. Creating an enabling environment which contributes directly to local economic development. Renewable energy installations bring jobs, capital, and sources of revenue to local communities, often to rural areas where these benefits are needed most. If you are comparing options beyond conventional fuels, this overview of renewable alternative energy explains pathways for communities and planners.

In certain remote locations, where electricity and/or fossil fuel infrastructure does not reach, RE systems can be the only cost effective option. In addition, modern renewable energy systems generate far less air pollution and greenhouse gas emissions than fossil energy systems thus reducing the threat of climate change and health risks. Depending on the installation, renewable ener gy projects may be smaller in scale and not as technically complex to operate and maintain as conventional energy projects. For all of these reasons, renewable energy is a valuable resource in addressing the world’s growing electricity needs. These benefits are central to the case for clean renewable energy as a public health and climate solution.

RE form a relatively small part of the commercial energy portfolio today, but the costs of developing, installing, and delivering renewable energy to consumers have been falling, due largely to improvements in system designs and manufacturing techniques. In many applications, particularly in those instances where gaining access to conventional energy systems is difficult or costly, the market share of RE has been growing steadily in recent years. As deployment scales, modern renewable energy systems are becoming more efficient and accessible for diverse users.

What Is Renewable Energy? Characterising the impact of cost reductions and market share increases is the “learning curve.” Simply speaking, RE manufacturers and developers gain valuable experience with each new installation. The level of industrial experience with conventional energy systems is many decades longer than that for renewable energy systems. With modern research, development, and technology transfer techniques at their disposal, the RE industries have achieved progress. But because of this relative immaturity of some ernergy sources, many industry analysts expect cost reductions and performance improvements to continue at a faster pace in the RE sector, thus gaining greater competitiveness and increasing the likelihood that RE uptake will expand in the future. This accelerating experience base is steadily improving renewable power performance, reliability, and competitiveness.

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Renewable Energy Tax Credits reduce project CAPEX via ITC/PTC incentives for solar, wind, battery storage, and EV charging, supporting grid modernization, power electronics, and IEEE-compliant interconnections while accelerating decarbonization and load flexibility.

What Are Renewable Energy Tax Credits?

ITC/PTC credits cut capex for electrical systems—solar PV, wind, storage, EV chargers—boosting ROI and grid reliability.

✅ Offsets inverter, transformer, and protection system costs

✅ Applies to solar, wind, storage, microgrids, and EVSE

✅ Encourages IEEE 1547 interconnects and smart inverters

The Government of Canada wants Canadians to invest in a healthier environment, a more stable energy future and a more competitive economy, so it offers innovative Renewable Energy Tax Credits. For an overview of complementary programs, the resource at alternative energy incentives outlines how federal and provincial measures align with investment goals today.

In order to achieve these goals, two specific Renewable Energy Tax Credit measures are available to encourage investments in energy efficiency and renewable energy projects:

• Class 43.1 in Schedule II of the Income Tax Act allows taxpayers an accelerated Renewable Energy Tax Credit write-off of certain equipment that is designed to produce energy in a more efficient way or to produce energy from alternative renewable energy sources.

• Canadian Renewable and Conservation Expenses (CRCE) is a category of fully deductible expenditures associated with the start-up of renewable energy and energy conservation projects for which at least 50 per cent of the capital costs of the property would be described in Class 43.1.

Investors can also consult alternative energy tax credits to understand how project structures interact with other deductions and incentives available in Canada.

Investments in energy efficiency and renewable energy are helping to reduce Canada’s consumption of fossil fuels and minimize the production of greenhouse gases that contribute to climate change and other environmental problems. These investments also contribute to the development of new technologies1 and lead to export opportunities. It’s all part of the government’s ongoing efforts to promote sustainable development by integrating economic and environmental goals. Further context on market benefits is provided in clean renewable energy discussions that track growth trends and policy impacts across sectors worldwide.

Sustainable development will ensure the continued prosperity of Canadians while safeguarding our natural heritage for future generations. As deployment expands, insights into renewable power generation can help stakeholders benchmark performance and grid integration approaches in comparable jurisdictions.

Canadian Renewable Energy Tax Credits and Conservation Expenses

The early development phase of renewable energy and energy conservation projects typically involves certain intangible costs, such as feasibility and resource assessment studies. The CRCE category of expenditures was introduced in the 1996 Budget to allow investors Renewable Energy Tax Credits to fully write-off certain intangible costs associated with investments in renewable energy and energy conservation projects. CRCE is intended to promote the development of conservation and renewable energy projects in the same way that is currently done for investments in other types of resource activities.

Under CRCE, Renewable Energy Tax Credits allow eligible expenditures are 100 per cent deductible in the year they are incurred or can be carried forward indefinitely for deduction in later years. These expenditures can also be renounced to shareholders through a flow-through share agreement, providing the agreement was entered into before the expense was incurred. To be eligible, costs must be incurred after December 5, 1996. For the legislative basis of flow-through shares and CRCE expenditures, please refer to Sections 66 and 66.1 of the Income Tax Act and to Section 1219 of the Income Tax Regulations.

In parallel, understanding how markets value renewable energy credits can enhance financial models where environmental attributes are monetized alongside tax deductions.

Class 43.1 Accelerated Capital Cost Allowance

Class 43.1 provides an accelerated rate of write-off for certain capital expenditures on equipment that is designed to produce energy in a more efficient way or to produce energy from alternative renewable sources.

Class 43.1 allows taxpayers to deduct the cost of eligible equipment at up to 30 per cent per year, on a declining balance basis. Without this accelerated Renewable Energy Tax Credit write-off, many of these assets would be depreciated at annual rates of 4, or 20 percent (with the exception of expenses eligible for the pre-existing Class 34, which were deductible at an annual rate of up to 50 percent). In planning capital acquisitions, awareness of broader trends in alternative energy development can inform equipment selection and timing for making claims under this class.

What Types of Systems Qualify?

In general, the following types of systems qualify for CRCE Renewable Energy Tax Credit or Class 43.1 write-off:

Electricity Generation Systems

• certain cogeneration and specified-waste fuelled2 electrical generation systems
• small-scale hydro-electric installations (not exceeding 15 megawatts of average annual capacity)
• wind energy electrical generation systems
• enhanced combined cycle systems
• expansion engines
• photovoltaic electrical generation systems (three kilowatts capacity or larger)

Specified-waste fuels, both for electricity generation and heat production, are defined as municipal waste, wood waste, landfill gas or digester gas.

• geo-thermal electrical generation systems
• electrical generating systems using solution gas that would otherwise be flared during the production of crude oil

Thermal Energy Systems

• active solar systems (including groundsource heat pumps)
• heat recovery systems
• specified-waste fuelled heat production equipment

Note: Thermal energy systems qualify only if their primary purpose is to produce thermal energy for use directly in an industrial process.

Eligible Expenses
Intangible expenses eligible under CRCE Renewable Energy Tax Credits include:

• the cost of pre-feasibility and feasibility studies of suitable sites and potential markets for projects that will have equipment included in Class 43.1
• costs related to determining the extent, location and quality of energy resources
• negotiation and site approval costs
• certain site preparation costs that are not directly related to the installation of equipment
• service connection costs incurred to transmit power from the project to the electric utility

Test Wind Turbines

Costs related to the acquisition and installation of a test wind turbine – defined as “the first wind turbine installed at the site of a proposed wind farm, whose primary purpose is to test the energy production at the site” – are included in the CRCE category of expenses. In order to be eligible, a favourable prior opinion must be issued by the Minister of Natural Resources Canada for each installation.

Tax Incentives
The following types of costs are eligible for an accelerated rate under Class 43.1:

• machinery and equipment
• related soft costs for design, engineering and commissioning
• other services required to make the system operational

Many proponents also leverage alternative energy grants to complement accelerated allowances and reduce upfront cash requirements for project execution.

Depending on all the facts of a particular situation, the cost of modifications and improvements to existing qualifying equipment may also be eligible, provided that:

• the costs increase the capacity or performance of the equipment
• the resulting system continues to meet the conditions for qualification

The following are generally ineligible under Class 43.1:

• operating costs
• spare parts inventories
• foundations and structures, except those associated with qualifying small-scale hydro-electric, photovoltaic and wind energy conversion systems
• electrical distribution systems
• electrical transmission systems, except those associated with qualifying small-scale hydro-electric, photovoltaic and wind energy conversion systems
• used equipment, except if the equipment was included in Class 34 or 43.1 of the vendor, remains at the same site in Canada and is not more than five years old Generally, to be eligible for Class 43.1, an asset must be acquired after February 21, 1994, by a Canadian taxpayer for use in a business in Canada.

For more information on CRCE or Class 43.1, please order the guide entitled Class 43.1 Technical Guide and Technical Guide to Canadian Renewable and Conservation Expenses (CRCE) at a cost of $100 plus applicable taxes, available from the following address. A written prior opinion can be obtained by writing to:

Class 34/43.1 Secretariat
CANMET Energy Technology Centre
Natural Resources Canada
1 Haanel Drive, Bldg. 3
Nepean, ON K1A 1M1
Tel.: (613) 996-0890
Fax: (613) 995-7868

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Distributed generation refers to the local production of electricity using renewable energy, microgrids, and small-scale systems. It enhances efficiency, minimizes transmission losses, and facilitates reliable and sustainable power distribution in modern electrical networks.

What is Distributed Generation? 

It involves the decentralized production of electricity near consumers, utilizing renewable energy sources, combined heat and power systems, and microgrid technologies.

✅ Provides local electricity generation near demand points

✅ Improves grid reliability, energy efficiency, and sustainability

✅ Reduces transmission losses and supports renewable integration

What is distributed generation? Distributed generation systems are transforming how communities generate electricity by shifting away from exclusive reliance on traditional centralized power plants. These systems often combine renewable sources with local energy solutions, and in some cases use natural gas for backup or combined heat and power applications. By operating closer to the point of use, distributed generation reduces transmission losses, supports energy efficiency, and decreases dependence on fossil fuels, helping to build a more sustainable and resilient power network.

Distributed Generation Training

How Distributed Generation Works

Distributed generation functions through on-site or near-site production of power. While centralized generation transmits electricity across hundreds of miles, DG creates it close to consumption, reducing energy losses and infrastructure needs. The process begins with various small-scale technologies, each designed to serve specific needs. Some systems connect directly to the larger utility grid, while others operate independently within microgrids. Energy storage plays a vital role, allowing surplus power to be stored and released during periods of peak demand, thereby improving energy resilience and grid balance.

Key technologies include:

• Solar photovoltaic (PV) panels, widely deployed in residential rooftops and utility microgrids, convert sunlight into electricity.

• Wind turbines, both small-scale and community-based, deliver renewable power directly to local users.

• Fuel cells generate clean, reliable electricity through chemical reactions, making them ideal for critical infrastructure.

• Combined heat and power (CHP) systems capture waste heat during electricity generation to improve total efficiency.

• Microgrids integrate multiple DERs and can disconnect (“island”) from the main grid during outages to supply continuous power.

• Energy storage systems, such as batteries, provide flexibility, backup supply, and peak demand management capabilities.

Benefits of Distributed Generation

The benefits of DG extend well beyond simple power supply. At its core, DG enhances the overall performance of electrical systems by placing power sources closer to demand, thereby reducing reliance on long-distance transmission and minimizing losses. It supports the transition to cleaner energy by enabling the integration of renewable sources, strengthens resilience by diversifying power sources, and reduces stress on centralized grids during peak demand. Communities, businesses, and utilities alike benefit from increased security, sustainability, and cost savings when they adopt DG.

DG delivers multiple advantages:

• Higher energy efficiency, as CHP systems and other technologies recover waste heat for practical use.

• Reduced transmission losses, since electricity does not need to travel across extensive networks.

• Grid reliability and resilience, with local systems ensuring power supply even when centralized networks fail.

• Renewable integration provides a pathway for solar, wind, and other sustainable technologies.

• Peak demand management helps balance the electricity supply during periods of high consumption.

• Energy independence is particularly important for remote or underserved communities that cannot rely on centralized grids.

Regulatory Standards and Policies

The adoption of DG depends heavily on regulatory frameworks that govern safety, interconnection, and compensation. Technical standards, such as IEEE 1547, define the rules for how distributed energy resources connect to the grid, addressing voltage regulation, protection coordination, and power quality. Without clear standards, widespread deployment would risk instability and safety issues.

Government policies also provide critical support. Net metering programs enable households and businesses to sell excess electricity back to the grid, making the adoption of renewable energy more affordable. Feed-in tariffs create financial incentives for producers by guaranteeing payment for electricity generated from renewable sources. Grid interconnection standards ensure that systems connect seamlessly without harming existing infrastructure. Together, these regulations provide structure, encourage investment, and shape the growth of distributed generation worldwide.

Challenges of Distributed Generation

While DG offers many advantages, it also introduces challenges that must be addressed for long-term success. The most obvious barrier is financial: new systems require significant investment in generation capacity, storage, and interconnection. Technical issues, such as managing voltage fluctuations, maintaining power quality, and integrating many small systems into a stable grid, also create complexity. As adoption grows, utilities must develop smarter monitoring and control systems to coordinate multiple inputs. Ultimately, regulatory uncertainty in certain regions can deter investment.

Key challenges include:

• High initial investment costs limit adoption, despite the potential for long-term savings.

• Grid management issues arise with the increasing number of decentralized resources, complicating system operations.

• Power quality and control concerns require advanced technologies to maintain stability.

• Regulatory hurdles, as inconsistent policies, can slow or prevent project development.

Real-World Examples

Distributed generation is already reshaping global energy systems:

• United States: California leads the way with extensive rooftop solar adoption, supported by net metering policies and community microgrids that supply critical facilities during power outages.

• Germany: Its feed-in tariff system has transformed the energy landscape by encouraging the integration of distributed solar PV and wind, making it a world leader in renewable energy adoption.

• Canada: Remote northern and Indigenous communities are turning to DG solutions, which combine solar panels, battery storage, and backup generators, to reduce their reliance on diesel and improve reliability.

• India: Solar microgrids are expanding electricity access to rural villages, providing sustainable power where centralized infrastructure is impractical.

These examples illustrate how DG provides environmental benefits, cost savings, and enhanced energy resilience across diverse regions.

Future Trends in Distributed Generation

The future of Distributed Generation lies in smarter, more integrated energy systems. As renewable energy continues to grow, distributed generation will play a central role in balancing demand and supply at the local level. New technologies, such as battery storage systems and smart inverters, are making grids more adaptable. Peer-to-peer energy trading platforms are emerging, allowing consumers to buy and sell electricity within communities. Virtual power plants (VPPs), which aggregate thousands of small resources into coordinated grid assets, will enhance efficiency and resilience. Looking further ahead, hydrogen fuel cells and hybrid renewable systems will expand the reach of DG into industrial and transportation sectors.

Emerging trends include:

• Battery storage for greater flexibility and backup.

• Smart inverters that maintain stability during variable renewable generation.

• Peer-to-peer trading, enabling community-level energy exchange.

• Virtual power plants (VPPs) that combine DERs into large, coordinated resources.

• Hydrogen technologies offer clean and scalable options for generating energy.

Frequently Asked Questions

What is the difference between distributed generation and dispersed generation?

Although often used interchangeably, dispersed generation usually refers to small-scale power produced in isolated locations away from the grid, while distributed generation emphasizes systems located close to consumers, often integrated with microgrids.

What is distributed generation, and what are the pros and cons?

Pros include increased efficiency, renewable energy integration, improved grid resilience, and reduced transmission losses. Cons involve high infrastructure costs, regulatory complexity, and grid management challenges.

What is the difference between distributed generation and a microgrid?

A microgrid is a self-contained energy network that can operate independently. Distributed generation refers to the small-scale power sources—such as solar panels or CHP systems—that may be part of a microgrid.

What are examples of distributed generation technologies?

Examples include solar PV, wind turbines, CHP systems, fuel cells, energy storage, and integrated microgrids.

What role do regulations play in distributed generation?

Standards like IEEE 1547, along with policies such as net metering and feed-in tariffs, govern the safe interconnection of Distributed Generation and provide financial incentives that support its wider adoption.

How can distributed generation improve grid resiliency?

By diversifying energy sources and enabling localized supply, DG ensures backup power for critical facilities during outages and reduces the impact of large-scale disruptions.

What is Distributed Generation? Distributed generation represents a shift from traditional centralized power plants to localized, flexible energy solutions. By integrating renewable resources, natural gas, and advanced technologies like microgrids and storage, DG improves efficiency, reduces reliance on fossil fuels, and enhances grid resilience. As policies, standards, and innovations continue to evolve, distributed generation will play an increasingly vital role in building a sustainable, reliable, and future-ready energy system.

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