Distributed generation

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Just as the distributed information technology and internet communication revolutions dramatically changed the social context as well as the economic parameters of doing business, a distributed renewable energy revolution will have a similar impact on the world.

Jeremy Rifkin et al., 2008.

The move to a "Third Industrial Revolution" incorporating a social vision with an economic vision is considered by some world leaders to be essential if the future challenges of energy security and climate change mitigation are to be met. Major changes to the energy supply sector tend to only occur when a new energy regime happens to converge with a new communication regime (Rifkin et al., 2008). For example, in the 18th century the deployment of the coal-powered steam engine was aided by the printing press to disseminate its benefits and hence enable the rapid pace of the "first industrial revolution" to occur. In the late 19th and early-to-mid 20th centuries, the "second industrial revolution" occurred when first-generation electrical forms of communication, including the telegraph, radio, and telephone, enabled the necessary infrastructure development, organisation and marketing of millions of small vehicles powered by internal combustion engines and fuelled by oil products. Today, the technologies that made possible distributed global communication networks, including personal computers and the internet, can be applied to "distributed energy systems", whereby millions of privately-owned heat and power generation systems can produce energy for meeting local demand as well as sharing, in a similar manner to how electronic information is shared.

The electricity grid in place today was designed and developed historically when energy was cheap, pollution was free, and information dissemination was constrained. Today energy is relatively expensive, pollution needs to be paid for and information is abundant. In addition, the expectations for security of supply in terms of reliability and power quality have also changed. It is therefore appropriate to review the role of the electricity grid supply system with which we have all become familiar and to consider a paradigm shift to a new model based on increasing contributions from distributed resources, including renewables and CHP systems.

To achieve a rapid growth in renewable energy supply in a region, one effective mechanism could be the greater deployment of more locally distributed power generation within an intelligent grid. Other objectives that could be simultaneously addressed by the deployment of distributed electricity generation include minimising the need for new, large-scale thermal generation linked with transmission and distribution infrastructure. In addition, end-use efficiency could be encouraged, including the incorporation of combined heat, power and cooling systems. Innovative electricity pricing and business structures will be needed in many cases, to ensure that any incentives such as cost reductions in bulk electricity sales can be countered. These could be replaced with incentives that encourage investments in distributed generation and achieve societal benefits and reduce carbon emissions.

A decentralised form of energy use will need a major reconfiguration of the electricity grid and an acceptance by the incumbent utilities that future commercial opportunities will result. Energy storage will be an essential component as will demand-side management by remote control, smart meters and intelligent grids. Earlier evaluations of distributed energy systems by the IEA include Distributed Generation in Liberalised Electricity Markets, 2002 and Grid Integration of Renewable Energy, 2008.24 The World Alliance for Decentralized Energy (WADE) also provides regular news and information on distributed energy technologies to members. The following section in part builds on these publications.

Most electricity used in the world today is generated by large central power plants. In simple terms, electrons flow in one direction and the user pays the retailer who reimburses the generation and transmission/line companies (Fig. 7).25 Distribution is through somewhat inefficient and costly networks, using long power lines at varying voltages and often with significant line losses up to around 10% of the total power actually generated. During peak periods, utilities tend to deploy their more costly and less efficient power plants. This system has evolved from the very early generation systems that consisted of small, widely distributed, individual power generation plants using local energy sources and usually located fairly close to the customer load so that only short lengths of distribution lines were needed. Over time, cheap coal, oil and gas fuels were able to be transported over longer distances. Moreover, the investment and operating costs of larger generation plants became more competitive; large power plants were designed for easier control to match fluctuating demand; and many governments were willing to invest in national transmission and distribution infrastructure for the social good.

Today, however, the power sector in some countries is experiencing a renaissance with the advent of distributed energy. There are as yet no universally accepted terms for electricity that comes elsewhere than from large generating units exporting electricity into a high voltage network. Those used in this report are as follows.

a) Distributed generation (DG) is electricity generated in small plants to serve a user on-site or to provide support to a local distribution network by connection to a grid operating at a low level distribution voltage.

b) Distributed heating and cooling is where local systems reduce the demand for importing electricity or fossil fuels into a district to provide these end-use services.

c) Distributed energy systems include distributed power generation plus distributed heat, demand-side measures and, where appropriate, storage.

A distributed energy system is decentralised and, if well-designed, should, where necessary, be able to meet increasing local energy demands, incorporate demand side management as a critical first step, provide security of supply, reduce greenhouse gas emissions compared with thermal power plants, and provide many social benefits, including local employment, sustainable development, pride, independence, and social cohesion of communities. Although the emphasis can be on renewable energy sources for local production of heat and power, this does not have to be exclusive of other forms of primary energy, particularly natural gas (for direct combustion for heat, CHP, or as a fuel for gas engines or, after reforming, for fuel cells), and also gasoline or diesel (used in generating sets operated to meet peak load demand or as back-up systems).

The demand for distributed generation technologies that can give back-up to grid power outages and hence higher reliability has grown in recent years, particularly for safety reasons in hospitals, as well as

24. http://www.iea.org/Textbase/publications/free_new_Desc.asp?PUBS_ID=2040

25. In fact, a typical wholesale electricity market usually has several generators bidding into a merit order every 30 minutes at varying prices and is very complex. In addition the system operator, transmission, distribution, metering, and customer relationship management are part of the system for which separate charges are embedded in the various tariffs paid by the customers.

security for credit card, trading, finance, defence, computing and information technology companies etc. Worldwide DG capacity orders for internal combustion engines and gas turbines below 30 MW for stand-by, peaking as well as continuous applications, have been around 10% of annual global electricity generation orders (over 20 000 MW in 2000; IEA, 2002) and somewhat greater when renewable energy generation is included.

Renewable energy projects such as hydro dams, geothermal field developments, or off-shore wind farms usually require large capital investments. Hence future developments could be constrained if credit is not widely available. Private or public investors with access to limited credit will therefore need to have confidence in the technologies and their ability to provide enhanced energy security if they are to choose renewable energy over other potential investments.

Key economic advantages possible from distributed generation, especially for on-site power production, include avoidance of transmission and distribution costs which can amount to around 30% of the delivered electricity costs; waste heat available for use on site as combined heat and power; delaying the need to upgrade a congested transmission system; and the opportunity to use relatively cheap local fuels such as landfill gas and crop or wood processing residues. Conversely smaller plants tend to be less efficient with a lower fuel economy (unless used in CHP mode) and have higher capital costs per kW.

Another key barrier to the deployment of distributed generation systems is a lack of incentive for the system operator. DG is often seen as a complexity that carries additional costs. Grid operators also often maintain a passive system rather than treat the DG as an active control element in the operation and planning of the network (Krewitt, 2008). Market access can also be a hindrance to deployment where entry barriers have not been removed by regulations (Scheepers, 2007).

Many new small-scale heat and power generating technologies are commercially available, often using renewable energy sources (as well as natural gas). Technologies include bioenergy or natural gas CHP systems; wind, solar, small-hydro and micro-hydro generators; geothermal heat pumps; solar thermal systems; Stirling engines (see Box A); steam turbines and fuel cells. As generation becomes more widely distributed and the number of generating plants increases, the direction of flow of electrons along a power line must then be in both directions. The owners of the local distribution lines then become service providers.

Large central power stations will continue to exist to provide base loads for industry and cities, but large numbers of smaller systems will be added to the system. System operation will then need to be co-ordinated and facilitated by information and communication technologies (DISPOWER, 2006). Renewable energy heating and cooling applications can become part of the overall energy system in order to reduce the demand for electricity otherwise used for this purpose.

The costs of small generation technologies continue to decline through greater mass production. Taking into account the reduced investments needed for new transmission infrastructure and for network upgrading to meet higher load capacities, an economically viable solution for small CHP plants can often be found. In the many regions of the world currently without access to electricity, this could be in the form of a small local-grid. This is analogous to a similar "leapfrog" technology - the mobile cell phone that has given millions of people hi-tech communication without having to wait decades for investment in the alternative conventional development of costly infrastructure. The mobile phone enables a person to easily communicate with another person directly wherever he or she may be, rather than the old process of telephoning a building with the hope that there might be someone there to respond.

Mobile phones were rapidly embraced by the general public, giving a rate of market growth in OECD countries somewhere around 40% to 50% per year. In many developing regions such as Africa, the technology has leap-frogged the need to build costly poles and wires to bring telephone connections to the more remote communities. The rapid rate of deployment of mobile phones over the past decade, now coupled

Box A * Whispergen domestic CHP technology

This novel device can serve as a substitute for a hot water boiler and also generate power. It is described here to illustrate how new and unexpected technologies can enter a market and develop rapid change in a system, as was the case with mobile phones and laptop computers. The Whispergen domestic scale, combined heat and power system, developed in New Zealand, is based on the Stirling engine and a novel yoke coupling. In essence four cylinder nodes (Fig. 10), housed within a sealed hood (not shown), are heated by any source of fuel (biogas, natural gas, LPG or even concentrating solar heat). This starts a process of gas expansion and contraction inside the cylinders that gives linear motion. The wobble yoke mechanism converts this into rotary motion of the alternator to generate electricity. The operation is clean, quiet and needs only low maintenance, thereby making it suitable for applications in small boats and domestic situations.

The on-grid, heat demand-led domestic model produces 1kWe and 13 kWth and substitutes for a hot water boiler, with AC electricity being generated as the co-product to supplement the grid supply or to export when in surplus to demand. It can be mass produced and installed and maintained like any other domestic appliance.

Figure 10 * Cutaway diagram of the Whispergen micro-CHP generation technology showing yoke coupling between the Stirling engine and alternator and example of the domestic installation of the appliance

Figure 10 * Cutaway diagram of the Whispergen micro-CHP generation technology showing yoke coupling between the Stirling engine and alternator and example of the domestic installation of the appliance

Distributed Generation Chp

A typical product development cycle has been undertaken and the device is now finally reaching the fully commercial stage after eight years of field trialling and seven years of iterations. Low volumes of the product were manufactured for undertaking technology trials and detailed testing in around 30 homes in the United Kingdom. Demonstrations of its potential in the northern European market resulted in modifications and further testing before market testing began in around 400 homes. Mass manufacturing by selected partner Mondragon (of the Spanish MCC industrial group of whiteware and gas boiler manufacturers) began with prototypes being produced in 2007. A joint venture company (EHE: Efficient Home Energy) was incorporated in early 2008 and a factory then established with the capacity to produce 30 000 units per year on a single shift. Wider marketing and deployment are now being pursued in Germany, Belgium and the Netherlands, with Italy, Spain, United Kingdom and France under evaluation.

with the added convenient E-mail and internet access from almost anywhere in the world, illustrates what is possible when a new technology enters the market. The costs involved to access these communication services do not seem to be a deterrent for many people whose monthly phone bills greatly exceed their electricity accounts. Whether a similar acceptance of decentralised energy systems by society, with all their potential benefits, will occur in the future in a similar manner remains to be seen.

Where existing power is provided by large nuclear, thermal or hydro plants to provide base-load, these would remain the heart of the system. New decentralised plants would be added and managed, possibly under the control of the line companies.26 Policy-makers, as well as the more conservative members of the power industry, need to be aware of the growing transition towards distributed energy systems.

■ Decentralised systems and their integral technologies, including smart meters, intelligent control systems, and small-scale generation technologies, are reaching the commercial stage of development.

■ T he overall costs of a DG system, compared with traditional power generation, are declining and include costs saved from avoiding new infrastructure and deferred line upgrades.

■ Txisting demonstration and early commercial-stage projects illustrate the reliability, quality and benefits of an integrated system.

■ Decentralised systems in both OECD and non-OECD countries could be designed as either standalone systems, local mini- or micro-grids, or linked with major power supply systems via low-voltage distribution networks.

■ Tince the potential for distributed energy deployment has not always been adequately included in the past due to lack of data, evaluations of future trends, barriers, benefits and implications for decentralised systems are being developed for use by scenario modellers.

■ Tecommendations for policy-makers and utility companies are already being developed by some national and state governments in order to advance the transition to distributed energy systems with a high share of clean energy technologies.

Social issues of DG and demand side management (DSM) that relate to consumer behaviour and change are yet to be fully evaluated. Careful tariff price setting will be needed to ensure that consumers maximise the benefits that the technology offers. Innovative business models for the utility and line companies need to be developed which could include such factors as ownership and leasing of the small-scale generation technologies or enabling third parties to invest in the equipment.

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