The distributed resource energy has been widely used to cope with the higher demand for power quality. The association of different Distributed Generation System (DGS) could cause as many problems as it may solve. The generation and loads could be considered as a micro-grid and separate from the distribution system to isolate the micro-grid's load from the disturbance without harming the distributed network's integrity. This paper discusses the operation principle of the distributed generation system and the influence it introduced into the distributed network. The location and penetration of the distributed generation system would influence the power loss of the grid. Simulation and analysis has been done to verify the results. The methods are proposed to properly design the location and penetration of distributed generation system and improve the power quality.