distributed generation spiral of growth
TRANSCRIPT
Distributed generation spiral of growth
Isaac Dyner, Sebastián Zapata, Maritza Jiménez, Mónica Castañeda Nivalde de Castro and GESEL group
Content
1
Energy trend
Rethinking traditional UBM
We already know that …
We would like to know
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Introduction
Case studies 4
Conclusions 7
Introduction Traditional supply chain
Figure 1. Today’s Power System Characterized by Central Generation of Electricity, Transmission, and Distribution to End-Use Consumers [1]
Figure 2. Creating an Architecture with Multi-Level Controller [1]
Introduction Wind of change
Energy trend Renewable impacts on utilities
European thermal utilities
European non conventional utilities
Fig 1. Share price in the last 5 years (Bloomberg, 2015)
A utility as EON is changing its energy strategy!!
• 13 GW of thermal generation • Renewable energies • Distributed generation • Customer support solutions
Distributed Energy Resources (DERs): energy supplied to medium voltage (MV) or low voltage (LV) distribution systems (Akorede et al., 2010).
Distributed Energy Resources (DER) include (Ruester et al, 2014):
• Distributed generation
• Local storage
• Electric vehicles
• Demand response
Energy trend Development of Distributed Energy Resources (DERs)
Energy trend Here comes the sun…
• Solar PV cost has reached grid parity in many locations (Irena, 2015; Bayod-Rújula, 2009).
• Solar PV is growing fast: between 2000 to 2014 the annual growth was 44% (Fraunhofer, 2015).
• There is an energy trend from centralized to decentralized system of power generation, which poses technical challenges (EPRI, 2014).
New market players….
• If the new technologies are truly disruptive, utilities should take an aggressive attitude. A purely defensive posture of protecting the current business model and profits may temporarily avert short-term financial distress but not long-term challenges [4]
• An organizations is ambidextrous if it is capable of both exploit their existing capabilities and develop new competencies that are required in the long-term [14].
Source: [15]
Rethinking traditional UBM The future is not what it used to be…
Elec. Tariff/PV cost
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Retailcharge
++
+
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Elec. Tariff/PV cost
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Retailcharge
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+
Othercharges
+
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Retailcharge
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Othercharges
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Adopterhouseholds
+ -
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Solar PVcost
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R2
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Adopterhouseholds
Elec. Tariff/PV cost
-
++
+
+
R1
+ -
-Adopterhouseholds
Solar PVcost
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+ -
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Solar PVcost
Elec. Tariff/PV cost
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Distributioncharge
++
+
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R2
+ -
ElectricitydemandAdopter
households
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+ -
-Electricitydemand
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-Electricitydemand
Solar PVcost
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Distributioncharge
+
-R2
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Distributioncharge
+
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Elec. Tariff/PV cost
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Distributioncharge
++
+
-
+ R3
+
R1R2
R3
Electricitydemand
Transmissioncharge
Distributioncharge
+
+
-R2
R3-
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Transmissioncharge
Elec. Tariff/PV cost
-
++
+
+
+
Generationcharge
+
Elec. Tariff/PV cost
-
Retail
charge+
++
Other
charges+
+
Distributed generation spiral of growth
This is what matters now!!
Types of new business models There are plenty of opportunities
I. Distributed Power Generation business models
1. Supply of Distributed Generation Systems
2. Leasing
3. PPA
4. Rent the space model
II. Demand management business models
1. ESCOS
2. Supply of smart home solutions
3. Demand response
III. Regional aggregation business models
1. Community solar
2. Microgrid
3. Virtual power plant
[16],[17],[18],[19]
Case Studies
• Brazil
• Colombia
Both countries have lots in common. For instance: high hydroelectricity, high solar irradiance and high electricity price volatility.
We already know that in Colombia….
What are the market conditions that may lead to the utility death spiral?
• PV grid parity, net metering, volumetric charge and oversized PV systems
• Free-riders
Figure 1. Solar PV cumulative installed capacity
Figure 2. Final tariff for residential sector
The system collapses in 2035, since the total solar PV production minus the total energy consumption falls dramatically in the residential sector for hypothetical case.
62%
6%
35%
(Percent of cumulative installed capacity).
What are the long-term effects on customers and utilities?
Figure 3. Energy bill for customers under oversized PV systems (3kW)
Figure 4. Residential tariff for 1.7kW PV panel size and a longer timeframe
Revenue losses of utilities coincide with the high expenses of non-PV adopters and high revenues of PV adopters
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[USD
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[Year]
3kW PV adopters 3kW non PV adopters
Can the regulator and utilities avert a death spiral achieving social welfare? Some alternative actions could be adopted…
1. Implementing a back-up fee
2. Shifting from Net Metering to Net Billing
3. Changing tariff design
4. Rethinking business models
Some of these actions may only delay slightly solar PV attractiveness and its
adoption.
We already know that in Brazil (Minais Gerais)….
What is the evolution of cumulative PV installed capacity?
462 MW
277 MW
185 MW
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MW
Total installed capacity of PV
Industrial and commercial solar PV capacity
Residential solar PV capacity
Percentage of adoption respect to the total number customers
30%
60%
By 2036, residential solar PV capacity may account for around 59% of total installed capacity
What are the effects of PV development on energy consumption?
From 2016 to 2036, residential energy consumption may decrease at rate of about 0.5% per year, while industrial and commercial energy consumption declines at a rate of about 4% per year
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GW
h-m
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Total energy consumption from gridIndustrial and commercial energy consumption from gridResidential energy consumption
What are the effects of PV development on tariffs?
Between 2016 to 2036, distribution tariff for industrial and commercial customers may grow by about 56%
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R$
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Electricity tariff for industrial and commercial customers
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R$
/MW
h
Distribution tariff for industrial and commercial customers
From 2016 to 2036, electricity tariff for industrial and commercial customers may grow by about 13%
What are the effects of PV development on tariffs?
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R$
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Electricity tariff for urban residential customers
Electricity tariff for rural residential customers
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/MW
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Distribution tariff for urban residential customers
Distribution tariff for rural residential customers
Similar behaviour, energy cost remains almost constant. Between 2016 to 2036, distribution tariff for residential customers may rise by about 55%
What are the effects of PV development on utility incomes?
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Mill
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$
Total incomes of utility
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Mill
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Income from distribution activity
Growing trend of income from distribution activity due to tariff revision each 4 years, losses of income due to PV penetration
Slightly downward trend due to energy cost reduction
We would like to know…
• How utilities may adapt their business strategies to become competitive in a decentralized power market?
• Alternative solar business models and strategies that may be appropriate in the future?
• How alternative business models may create value to society?
Conclusions
• Solar PV adoption leads to lower energy prices
• The short-term view to the utility death spiral: Implementing a back-up fee, Shifting from Net Metering to Net Billing and, in general, different tariff designs. All these may only slightly delay PV adoption.
• The diffusion of PVs offers opportunities for successful business models and strategies.