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Distributed generation may be fossil fuel based (mainly natural gas), but also RES based (e.g. solar cells, small hydro installations, wind turbines).

The lower bound of generation is NOT zero, as implied by the graph, but is actually negative when the windmill is not generating. The core is excited from the HV side, just like in a distribution system. When there is no generation, the transformer actually pulls power from the grid. For renewables, you should be using transformers with amorphous metal cores which cut no load losses by 70 percent.

A widespread use of high efficiency transformers could save the world 100 TWh/year. Under normal conditions, purchasing high efficiency transformers is both economically and environmentally sound. In the liberalized European energy market however, the regulatory and financial framework obstructs utility companies from making long term investments like purchasing high efficient transformers. National regulators put pressure on utility companies to do cost cutting and do not compensate with sufficient incentives for energy efficiency. According to this paper, there is a heterogeneous treatment between generation on renewable energy and transformer efficiency. Yet the greenest kWh is still the one that is saved, even when it is compared to a kWh derived from a renewable source.