Technologies appropriate for distributed generation include modular renewables (such as photovoltaics and small-scale wind turbines) and modular nonrenewable generation (such as fuel cells and gas micro-turbines).

Although the distributed utility model has been pioneered in the United States, its characteristics appear particularly well suited to conditions prevailing in many developing countries:

* separating uncertain demand for power in rural areas, suggesting an incremental approach to investment;
* separating high transmission and distribution costs;
* separating relatively low electrical demand per unit area;
* separating high energy losses in getting power to the user (for example, more than 20% loss in India); and
* separating unreliable interconnections and poor local power quality.

The distributed approach can help meet these challenges. Local demand peaks, which are often costly to serve, are reduced. Excess power can be sent to customers outside the immediate grid. Power quality can be improved. Finally, capital-strapped utilities can phase in needed investments. That is, local grids can be developed first and, when demand rises sufficiently, they can be connected to the transmission system.

Because the level of investment in power sector infrastructure is still small relative to the level needed to meet projected demand, developing countries could potentially leapfrog to a distributed utility model. The potential for this can be seen in countries where telecommunications systems have bypassed wires and leaped to cellular phones, and where information processing has skipped the mainframe stage and moved directly to personal computers.