The Energy Information Administration's (EIA) 2002 Annual Energy Outlook (AEO) forecast anticipates the need for 375 MW of new generating capacity (or about one new power plant) per week for the next 20 years, most of which is forecast to be fueled by natural gas. The Distributed Energy and Electric Reliability Program (DEER) of the Department of Energy (DOE), has set a national go al for DER to capture 20 percent of new electric generation capacity additions by 2020 (Office of Energy Efficiency and Renewable Energy 2000). Cumulatively, this amounts to about 40 GW of DER capacity additions from 2000-2020. Figure ES-1 below compares the EIA forecast and DEER's assumed goal for new DER by 2020 while applying the same definition of DER to both. For the purposes of this study, Berkeley Lab needed a target level of small-scale DER penetration upon which to hinge consideration of benefits and costs. Because the AEO2002 forecasted only 3.1 GW of cumulative additions from small-scale DER in the residential and commercial sectors, another approach was needed to estimate the smallscale DER target. The focus here is on small-scale DER technologies under 500 kW. The technology size limit is somewhat arbitrary, but the key results of interest are marginal additional costs and benefits around an assumed level of penetration that existing programs might achieve. Berkeley Lab assumes that small-scale DER has the same growth potential as large scale DER in AEO2002, about 38 GW. This assumption makes the small-scale goal equivalent to 380,000 DER units of average size 100 kW. This report lays out a framework whereby the consequences of meeting this goal might be estimated and tallied up. The framework is built around a list of major benefits and a set of tools that might be applied to estimate them.