the development of distributed generation scheepers …...the development of distributed generation...

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The Development of Distributed GenerationMartin Scheepers

ECN Policy Studies

Int. Conf. ‘Energy in Changing Environment’, 13-14-15 December, 2007, Jacobs University Bremen

Contents

• What is distributed generation (DG)?• The policy drivers• Integration of DG in the network system• Effect of a large penetration of DG on the

regulated operators of electricity distribution networks

• Impact of a large penetration of DG and electricity from renewable energy sources (RES) on the total electricity system costs and costs for society

What is distributed generation (DG)?

• Medium and small hydro• Onshore wind• Tidal energy• Biomass and waste

incineration/gasification• Solar energy (PV)

• Medium district heating• Medium industrial CHP• Commercial CHP• Micro CHP

Distributed Generation (DG)

• Large hydro**• Offshore wind• Co-firing biomass in coal

power plants• Geothermal energy

• Large district heating*• Large industrial CHP*

Large-scale generation

Renewable Energy Sources (RES)

Combined Heat and Power (CHP)

* typical > 50 MWe** typical > 10 MWe

Market presence of DG in EuropeSource:DG-GRID / SOLID-DER

0

5

10

15

20

25

30

35

40

Austria

Belgium

Denmark

Finlan

dFran

ceGerm

any

Greece

Irelan

dIta

lyLu

xembu

rgNeth

erlan

dsPort

ugal

Spain

Sweden UK

Bulgari

a

Czech

Rep

ublic

Estonia

Hunga

ryLa

tvia

Lithu

ania

Poland

Roman

iaSlov

akia

Sloven

ia

DER

sha

re in

tota

l ele

ctric

ity c

apac

ity (%

)

RES CHP DG total

The policy drivers

• Climate Change- 20% or 30% lower GHG emissions in 2020 compared to

1990• Renewable energy sources (RES)

- 20% RES in final energy consumption in 2020- 40% to 60% RES in electricity mix in 2020

• Energy efficiency- 20% more energy efficient in 2020- More CHP

• Energy Security- Reduction of gas and oil import dependency- Secured reliable electricity supply

• Market liberalization- Electricity directive: integration of DG in network

system

Integration of DG in network system

• Electricity Directive Art. 14/7- When planning the development of the distribution

network, energy efficiency/demand-side management measures and/or distributed generation that might supplant the need to upgrade or replace electricity capacity shall be considered by the distribution system operator

DSO

Consumers

Equipment

TSO

Large power producers

• Connection charges• Use of System charges(Transport + system services)

DG-operators


• Equipment procurement• Operating & maintenance

• Transport services• Ancillary services

Energy loss compensation

profit

Regulator

Incentive regulation: • revenue cap • price cap

Distribution grid

Effect of a large DG penetration on operational and capital expenditures (I)• Problems to solve

- DG in rural networks causes voltage rise problems. - DG in urban networks causes fault level increase.

• Reinforcement costs- At low DG penetration levels reinforcement costs are zero, but

they will increase progressively with higher DG penetration. - Also “DG-density” causes cost increases.

• Energy losses- DG may initially reduce energy losses, but with higher DG

penetration losses will increase.• Distribution asset replacement value

- DG may reduce power flows through high voltage T&D network assets and possibly postpone network reinforcements. This benefit reduces in case of high DG penetration and high “DG-density”.

DSO

Consumers

Equipment

TSO

Large power producers


DG-operators




Energy loss compensation

profit

Regulator


Distribution grid

DSO

Consumers

Equipment

TSO


DG-operators




profit

Regulator


SmartDistribution grid

(Active Network Management)

• Energy loss compensation• Ancillary services

Effect of a large DG penetration on operational and capital expenditures (II)• Active network management

- Reinforcement costs can be reduced with “active network management”. However, in some high DG-penetration cases costs will be higher than passive network management.

- Operational costs (i.e. energy losses, curtailment compensation,labour costs) will increase. This results in higher total costs in some cases.

Neutralizing negative effect on the DSOs revenues (I)• Extra DSO expenditures

- DG may induce extra operational and capital expenditures• DSOs should not be compensated through DG

connection charges- to guarantee non-discriminatory network access DG connection

charges should be based on shallow costs (i.e. direct costs of the connection)

• DG-integration costs should be socialized - DG-integration costs socialized among consumers and DG

operators through Use of System charges- Use of System charges should be cost reflective- Preferably differentiated by location and time of use- Should be positive (if network costs are increased due to DG

operation) or might also be negative (if the network savings aregreater than the costs)

Neutralizing negative effect on the DSOs revenues (II)

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

R R U U R R U U R R R R U U U U R R R R U U U U R R U U R R U U

P A P A P A P A P A P A P A P A P A P A P A P A P A P A P A P A

Yes Yes Yes Yes Yes Yes Yes Yes No No Yes Yes No No Yes Yes No No Yes Yes No No Yes Yes No No No No No No No No

Low Low Low Low High High High High Low Low Low Low Low Low Low Low High High High High High High High High Low Low Low Low High High High High

11% 11% 11% 11% 23% 23% 23% 23% 23% 23% 23% 23% 23% 23% 23% 23% 46% 46% 46% 46% 46% 46% 46% 46% 46% 46% 46% 46% 91% 91% 91% 91%

50 50 50 50 100 100 100 100 50 50 100 100 50 50 100 100 100 100 200 200 100 100 200 200 100 100 100 100 200 200 200 200

Incr

emen

tal n

et p

rofit

/regu

late

d pr

ofit

Impact with compensation Impact without compensation

Network type

Network management

Intermittency

Concentration

DG penetration (%)

DG penetration (MW)

Impact DG on DSO revenuewithout regulatory improvements

with regulatory improvements

Impact of a large DG penetration on the total electricity system costs and society

• Power generation costs- Electricity from RES still more expensive- Intermittent RES (e.g. wind) causes higher balancing costs

• Network costs- Higher network costs

• Costs for society- Electricity prices (commodity prices + network tariffs)- Financing support schemes for RES/CHP

Support MechanismSupport

Mechanism Power MarketPower Market

TSOBalancing

TSOBalancing

GridGrid

DG/RES-EDG/RES-E

ConsumersConsumers

network tariffs

productionsubsidy or feed-in tariff

electricity market price

network tariffselectricity end-user price

Funding through TSO or tax system


TSOAncillary services


Support MechanismSupport

Mechanism Power MarketPower Market

TSOBalancing

TSOBalancing

GridGrid

DG/RES-EDG/RES-E

ConsumersConsumers

network tariffs

productionsubsidy or feed-in tariff

electricity market price

network tariffselectricity end-user price



Large budget increase

Impact on grid costs

Impact on market prices

Impact on balancing costs



Evolution of total system costs

RES-E/DG penetration over time (%)

Cos

ts

Generation costs

incl. external benefits

0

Generation costs, incl. balancing



Cos

ts

Generation costs


Network integration

costs

Innovative network

integration

0




Cos

ts

Generation costs


Network integration

costs

Overall costsincl.

externalities

Overall costsincl.

innovations

Innovative network

integration

0


Summary and conclusion

• In future a large share of power generation will come from DG and RES.

• The technical and economical impacts should be considered.• Besides a ‘smart’ technical integration also a ‘smart’ economical

integration of DG and RES is necessary.• This requires adaptation of the regulatory framework and market

design • The overall costs of a electricity supply system with a high share of

DG/RES may increase.

Acknowledgements and further information

http://www.solid-der.org/

http://www.dg-grid.org/

http://www.improgres.org/Thank you

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