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Electricity distribution and embedded renewable energy generators

Martin Scheepers

ECN Policy Studies

Florence School of Regulation, Workshop, November 24, 2006

2

Contents

1. Distributed generation: RES & CHP2. Impact DG on the DSO business

2.1 Integration of DG in electricity distribution networks

2.2 Reinforcement costs, energy losses and replacement of distribution assets

2.3 Remuneration of DSO costs2.4 DSO revenues and incentives2.5 DG providing ancillary services

3. What is the optimal amount of DG?

3

RES & CHP in EU-25 scenarios

Source: PRIMES

0%

10%

20%

30%

40%

50%

60%

Sha

re in

tota

l ele

ctric

ity

supp

ly

2000 2010 2020 2030

%-CHP %-RES %CHP %-RES

Base line scenario Policy scenariohigh RES & efficiency

1. Distributed generation: RES & CHP

4

Distributed Generation (DG)

Combined Heat and Power (CHP)

Renewable Energy Sources (RES)

Large-scale generation

• Large district heating*

• Large industrial CHP*

• Large hydro**

• Offshore wind

• Co-firing biomass in coal power plants

• Geothermal energy

Distributed Generation (DG)

• Medium district heating

• Medium industrial CHP

• Commercial CHP

• Micro CHP

• Medium and small hydro

• Onshore wind

• Tidal energy

• Biomass and waste incineration/gasification

• Solar energy (PV)

* typical > 50 MWe

** typical > 10 MWe


5

Current DG share in total generation capacity

Source: DG-GRID/Risoe


6

Integration of DG in electricity distribution networks

Planning DG should be considered by DSOs when planning

the development of the distribution network (Article 14/7 of the EU Electricity Directive)

Operation DG could also be involved in the economic

efficient operation of the network by using active network management* resulting in lower costs* Also including demand side management

DG could provide ancillary services to DSOs

2. Impact of DG on the DSO business

7

Impact DG on Business Model DSO

Extensions/reinforce-

ments


ments

Ancillaryservices

Ancillaryservices

Energy losses

Energy losses

O&M CostsO&M Costs

DSO(Distribution

System Operator)

DSO(Distribution

System Operator)

Connectioncharges

Connectioncharges

UoS charges

UoS charges

Capital expenditures

Operational expenditures

Revenues

Consumer/DG Operator

Equipmentsupplier

TSO/DG Operator

UoScharges

(cascade)

UoScharges

(cascade)TSO

DG Operator/Large power producer


Money flow


ments


ments

Ancillaryservices

Ancillaryservices

Energy losses

Energy losses

O&M CostsO&M Costs

DSO(Distribution

System Operator)

DSO(Distribution

System Operator)

Connectioncharges

Connectioncharges

UoS charges

UoS charges



Revenues


Equipmentsupplier

TSO/DG Operator

UoScharges

(cascade)

UoScharges

(cascade)TSO



Money flow

DG

DG

reinforcements

replacing

distribution assets

DG

DG

ancillary services

energy losses

DGconnection costs

Source: Dispower/ECN


8

Reinforcement costs related to DG

Rural network Type of DG:

‑ Intermittent: wind, small-hydro‑ Non-intermittent: CHP

Problems to solve: voltage rise

Urban network Type of DG:

‑ Intermittent: PV‑ Non-intermittent: CHP, micro-CHP

Problems to solve: fault level increase


9

Analyses of effect of large DG penetration on reinforcement costs

Approach Quantitative analyses of impact of high DG/RES penetration

on electricity networks in UK and Finland

Parameters varied: Rural and urban networks Different DG penetration levels DG concentration, i.e. the amount of DG connected to

specific network areas and levels Non-intermittent production and intermittent production

Alternatives considered: Status quo, i.e. “passive” network management Innovative, i.e. “active” network management


10

Ranges of incremental reinforcement costs rural network (UK case)Top → DG high concentrated; bottom → DG low concentrated

0

200

400

600

800

1000

1200

1400

2.5 5 7.5 10 Installed capacity (GW)

Cos

t (M

£)

Passive rural network Active rural network Source: DG-GRID/Imperial College


11

Ranges of incremental reinforcement costs urban network (UK case)Top → DG high concentrated; bottom → DG low concentrated

0

200

400

600

800

1000

1200

1400

2.5 5 7.5 10

Installed capacity (GW)

Cos

t (M

£)

Passive urban network Active urban network Source: DG-GRID/Imperial College


12

Average annual energy losses (UK case)Losses LV-network not included

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0 2,5 5 7,5 10

DG capacity connected (MW)

En

erg

y lo

sses

Low/ Passive Low/ Active Low-medium/ Passive Low-medium/ ActiveMedium-high/ Passive Medium-high/ Active High/ Passive High/ Active

DG concentration / network management type

Source: DG-GRID/Imperial College


13

Replacement of distribution network assets

DG penetration

Replacement value of DG

(for the UK)

DG with low density in the network

DG with high density in the

network

2.5 GW 108 €/kW 110 €/kW

5 GW 110 €/kW 112 €/kW

7.5 GW 113 €/kW 97 €/kW

10 GW 113 €/kW 44 €/kW

Source: DG-GRID/Imperial College


14

Impact on OPEX and CAPEXReinforcement 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.

Replacement value of DG DG can replace distribution assets because the net (peak) load of the network will

decrease with increasing DG penetration. The replacement value decreases in case of high DG penetration in combination with high “DG-density”

Active network management Reinforcement costs can be reduced with “active network management” (incl.

implementation costs like ICT). 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.

Type of DG The type of DG (non-intermittent and intermittent) influences network capacity and

losses. Effects are different for rural and urban networks, also because of the different types of

DG connected.


15

Remuneration of DSO costsExtensions/reinforce-

ments


ments

Ancillaryservices

Ancillaryservices

Energy losses

Energy losses

O&M CostsO&M Costs

DSO(Distribution

System Operator)

DSO(Distribution

System Operator)

Connectioncharges

Connectioncharges

UoS charges

UoS charges



Revenues


Equipmentsupplier

TSO/DG Operator

UoScharges

(cascade)

UoScharges

(cascade)TSO



Money flow


ments


ments

Ancillaryservices

Ancillaryservices

Energy losses

Energy losses

O&M CostsO&M Costs

DSO(Distribution

System Operator)

DSO(Distribution

System Operator)

Connectioncharges

Connectioncharges

UoS charges

UoS charges



Revenues


Equipmentsupplier

TSO/DG Operator

UoScharges

(cascade)

UoScharges

(cascade)TSO



Money flow

Source: Dispower/ECN


To guarantee non-discriminatory network access DG connection charges should be based shallow costs (direct costs of the connection).

DG UoS charges‑ should be cost reflective‑ preferably differentiated by

location and time of use‑ Might be positive (if network

costs are increased due to DG operation) or negative (if the savings are greater than the costs

16

DSO revenues and incentives

Revenues DSOs revenues are determined by incentive regulation DG can have a negative effect on the DSOs revenues DSOs revenues should be calculated taking into account the

incremental effect on CAPEX and OPEX of different DG penetration levels, e.g. ‑ Allowance for DG in regulated asset base (RAB)‑ DSO benchmarking considering DG as cost driver‑ Tariff adjustment factor (ex post)‑ Allowance for a direct revenue driver

- e.g. TARt = TARt-1(1 + CPI – X) + € A/ kWDG + € B/ MWhDG

Incentives Negative effects on revenues should at least be neutralised (Temporarily) positive incentives could be used to promote DG

integration


17

DG providing ancillary services

Ancillary services DSOs should be able to purchase ancillary services from DG

operators‑ e.g. voltage and reactive power support, energy losses,

congestion management, etc.

Islanded operation DG reducing the impact of network outages on customer

supply interruptions (i.e. improving quality of service) Requires active network management, local balancing, etc.

DG-DSO arrangements DG-DSO service contracts DG regulated payments


18

Costs reductions expected with increasing RES

0.01

0.1

1

10

0.01 0.1 1 10 100 1000

Cumulative Electricity Production (TWh)

Co

st

of

Ele

ctr

icit

y (E

CU

(19

90)/

kW

h)

Photovoltaics (~65%)

Electricity fromBiomass (~85%)

Supercritical Coal (97%)

NGCC (96%)

Wind Power - Average (82%)

Wind Power - Best Performance (82%)

1985

1995

1980

1995

© OECD/IEA, 2001


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What is the optimal amount of DG?

Time /DG/RES share in load flow distribution grid

Dir

ec

t s

ys

tem

co

sts

0

Generation costs

Market & network integration costs, incl. innovations

Overall costs

Overall costs,incl. innvoations

Market & network integration costs


Source: ECN

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More information:

http://www.dg-grid.org

http://www.electricitymarkets.info/distributedgeneration/index.html

Thank you

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