The electricity supply system is undergoing major regulatory and technological change with significant implications for the way in which the sector will operate (including its patterns of carbon emissions) and for the policies required to ensure socially and environmentally desirable outcomes. One such change stems from the rapid emergence of viable small-scale (i.e., smaller than 500 kW) generators that are potentially competitive with grid delivered electricity, especially in combined heat and power configurations. Such distributed energy resources (DER) may be grouped together with loads in microgrids. These clusters could operate semi-autonomously from the established power system, or macrogrid, matching power quality and reliability more closely to local end-use requirements. In order to establish a capability for analysing the effect that microgrids may have on typical commercial customers, such as office buildings, restaurants, shopping malls, and grocery stores, an economic model of DER adoption is being developed at Berkeley Lab. This model endeavours to indicate the optimal quantity and type of small on-site generation technologies that customers could employ given their electricity requirements. For various regulatory schemes and general economic conditions, this analysis produces a simple operating schedule for any installed generators. Early results suggest that many commercial customers can benefit economically from on-site generation, even without considering potential combined heat and power and reliability benefits, even though they are unlikely to disconnect from the established power system.