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Capital markets have come to realize that right-sized resources, for individual customers, distribution substations, or microgrids, are able to offer important but little-known economic advantages over central plants. Smaller units achieved greater economic benefits through mass-production than larger units gained from their size alone. The increased value of these resources—resulting from improvements in financial risk, engineering flexibility, security, and environmental quality—often outweighs their apparent cost disadvantages.<ref>Lovins; Small Is Profitable: The Hidden Economic Benefits of Making Electrical Resources the Right Size; Rocky Mountain Institute; 2002</ref> Distributed generation (DG), vis-à-vis central plants, must be justified on a life-cycle basis.<ref>Michigan (Citation pending)</ref> Unfortunately, many of the direct, and virtually all of the indirect, benefits of DG are not captured within traditional utility [[Cash flow|cash-flow]] accounting.<ref name="DOE 2007"/>
While the [[levelized cost of electricity|levelized cost]] of DG is typically more expensive than conventional, centralized sources on a kilowatt-hour basis, this does not consider negative aspects of conventional fuels. The additional premium for DG is rapidly declining as demand increases and technology progresses,
DG reduces the amount of energy lost in transmitting electricity because the electricity is generated very near where it is used, perhaps even in the same building. This also reduces the size and number of power lines that must be constructed.
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