Lecture 1 Introduction

ECONOMICS & MANAGEMENT OF SUSTAINABLE ENERGY

Introduction

Queen Mary University of London

DEN433, DENM0232013/14

LecturesWeek

1 Lecture 1 – Introduction Background; Energy chain; Overview of sustainable systems

2 Lecture 2 – Energy Technologies1 Schedulable energy sources; Tidal, wave & wind power

3 Lecture 3 – Energy Technologies 2 Solar power; CHP; Energy storage;

4 Lecture 4 – Energy Systems Variability & intermittency. Back-up & Security;

5 Lecture 5 – Energy Costs Generation costs; Capacity strategies

6 Lecture 6 – Demand and Supply Determinants of demand & supply; Monopolies & Oligopolies

7 Reading Week Phew!

8 Lecture 7 – Energy Policy Energy policy changes; New Energy Paradigm; De-regulation & investment

9 Lecture 8 – Energy Pricing Pricing/costing for multi-energy systems; Marginal analysis; Energy pricing theory

10 Lecture 9 – Design of Energy Markets

Peak load capacity; electricity markets; Emissions; Plant utilisation & pricing

11 Lecture 10 – Demand & Load Management

End-user demand management options; Metering; Smart Grid

12 Lecture 11 – Energy Trading Pre-privatisation; Pool; NETA; International trends; Impact on renewables

Reading list

• “Renewable Energy in Power Systems” Freris & Infield; Wiley 2008

• “Renewable Energy”; Boyle (ed); OUP 2012

• “Energy Systems and Sustainability”; Everett et al (ed); OUP 2012

• “Renewables for power generation, status & prospects” International Energy Agency; OECD 2003

• “Sustainable energy – without the hot air” David JC McKay; (http://www.withouthotair.com/about.html)

• “The New Energy Paradigm”; ed Dieter Helm; Oxford 2007

• “Alternative Energy Systems & Applications”; Hodge; Wiley 2009

Other sources will be given during the lectures

http://www.withouthotair.com/about.html

Coursework

Each of the two pieces of coursework represents 20% of the total marks for this module.

Coursework must be submitted to the Office before 15.00hrs on:

Part 1 Monday 2nd March 2015

Part 2 Monday 20th April 2015

A copy must also be emailed to me on [email protected] at the same time.

The coursework is intended to make you think about real life situations. Like real life there are uncertainties which you will have to handle. You will also have to research the properties and economics of sustainable energy systems. Some of the information required will have to be guessed and later refined as you learn more – just like real life.

mailto:[email protected]

Revising for Examination

Revision•Lectures include a number of case study examples

– You are expected to understand the underlying issues from each case study

– You are not expected to memorise the case studies!

•Past examination papers are on the Intranet

•Revision guidelines will be given in Week 11

Examination•Worth 60% of module

•Answer 4 out of 6 questions

•Each question worth 25 marks

•Each question has typically 3-5 sub-questions

Note change in format from pre-2013 examination papers - No Part A or Part B

Stuff you know already but . . .

Power• As in peak demand, plant

capacity, etc.

1 MW = 1000 kW

1 GW = 1000 MW

1 TW = 1000 GW

Energy

• As in consumption, tariffs, etc.

1 MWh = 1000 kWh

1 GWh = 1000 MWh

1 TWh = 1000 GWh

8760 hours in one year – except for leap years!

Electricity demand challenge

• ‘Conventional’ fuels will continue to dominate

• Economic environment will affect choice of fuel – eg China and coal

• Challenge is to:

– Improve economics of renewable energy sources

– Improve energy efficiency of sustainable sources

– Decrease greenhouse gas emissions

– Improve energy effectiveness of power loads

New Energy Sources

New energy forms will impact on:

•Relative cost differentials between fuels

•Global political strategies

Fuel prices volatile due to:

•Political uncertainties

•Demand growth

•Supply sources

Fuel prices – why bother?•Cover/back-up for variable/intermittent generation•Price volatility incentive for sustainable sources•Natural Gas is key fuel for chp systems

Electricity decouples from GDP

‘Developing’ economies

•Electricity demand correlated with GDP growth

•Growth of manufacturing

‘Developed’ economies

•Loss of energy intensive industries

•Power quality and the digital economy

•Climate change:

– EU “three times 20” by 2020• 20% energy consumption cut• 20% greenhouse gases cut• 20% share by renewables

Renewable electricity:

• ~ 25% gross power generation in 2018, with non-hydro accounting for 8%.• surpass output from natural gas and double generation from nuclear by 2016,

becoming the second-most important source of electricity behind coal.

Source: IEE 2013

Sustainable Energy Systems

Sustainable Energy Source

• An energy source that:

– Is not substantially depleted by continued use

– Does not entail significant pollution emissions or other environmental concerns

– Does not involve the perpetuation of substantial health hazards or social injustices

Source: Boyle 2004

Dream on, but we will do our best

Micropower

• Relatively small, modular, mass-producible, quick-to-deploy (hence rapidly scalable) sources of electricity . (Vijay Vaitheeswaran, The Economist, 2000)

• Combines two kinds of micropower:

– renewables other than big hydroelectric dams,

– cogeneration of electricity and useful heat (combined-heat-and-power, CHP).

• Releases little or no carbon.

• Enables individuals, communities, building owners, and factory operators to generate electricity, displacing dependence on centralized generators.

• Democratises energy choices, promotes competition, speeds learning and innovation, and can further accelerate deployment

• Since 2000 generation from low and no-carbon, rapidly scalable renewables (excluding large hydro) and co-generation has grown by nearly 150% and generates ~24% of global power

Source: Rocky Mountain Institute 2014

http://blog.rmi.org/blog_2014_10_20_micropowers_quiet_takeover

Source: Rocky Mountain Institute “Micropower database July 2014

Global Low or No-carbon Installed Electricity Generation Capacity

Global Low or No-carbon Electricity Generation

Renewable energy flows

Source: Freris & Infield 2008

Path Renewable Energy Technology

Thermal electric

Geothermal schemes

Tidal schemes

Biofuels

Wind/wave converters

Hydropower

Photovoltaics

Direct heating

Photosynthesis

Heating of atmosphere

Water evaporation

Direct radiation

120,000 TWAbsorbed by Earth

SUN

Earth’s core 10 TW

Gravitational force 3 TW

Conversion of energy forms to electricity

Thermal ElectricalMechanical

NuclearWind & wave

GravitationalHydro/tidal

SolarChemical• coal, gas, oil• biomass, waste• hydrogen

Conversion of energy forms to electricity

Note: this diagram can be made more complicated!• Freris & Infield

Thermal ElectricalMechanical

NuclearWind & wave

GravitationalHydro/tidal

SolarChemical• coal, gas, oil• biomass, waste• hydrogen

Fusion(Fission)

Heat enginesη < 60%

Electrical generatorη = 90+%

η = 90+%

Fuel cells

PVSolar thermal

Thermal

Rankine/Brayton

Renewable & Sustainable energy sources• MSW (municipal solid waste)

– incineration– pyrolysis/gasification

• Hydro– large– small– run-of-river– high level dam

• Biofuels– energy crops– forestry waste– agricultural waste– sewerage and other organic

• CHP (combined heat & power)– Power led– Heat led

• Wind– onshore– offshore

• Wave– shoreline– near shore– offshore

• Tidal– stream– barrage

• Solar– PV– thermal

• Geothermal

(Source: Tyndall Centre 2003 “Renewable Energy in UK” + additions)

Sustainable Energy Systems

Sustainable Energy Systems impact on:

Environment

Politics Economics

Includes Climate Change

Energy Systems

Energy System – all processes from the reception of raw inputs to delivery of benefit

‘Raw Fuel’ input

Conversion• electricity• heat/coolth• mechanical

Transport• long-distance• local• storage

Usage Benefit

There are options within the energy supply chain according to application

Energy Systems – Electricity supply

Source: Boyle 2004

22kV 400kV 132kV

33kV

11kV240V*

Large industrial

Small industrial

Domestic & commercial

Power station Power stationtransformer

Step-downtransformer



Transmissionsystem

Sub-transmissionsystem

Distributionsystem

* 415V 3 phase

[History of UK power system – see Addendum]

Quoted in “Energy Efficiency, Taxonomy Overview”, Lovins 2004

Energy Systems – system losses

Energy Chain - Conventional electricity supply

Fuel inputPower generation

HV transmission(+ storage)

MV/LV distribution(+ storage)

Energy retailer/ marketing

End-user

• Security of supply

• Flexible

• Minimises spare capacity

• Capital intensive

• Energy losses

• (Climate change)

BUT

Energy Chain – “Direct Drive” system

Examples:

•Gas pipeline compressors

•Static construction plant

•Oil production

Fuel inputConversion/ Power generation

Application End-user

Issues:

•Dedicated

•Modular

•Capital saving on cabling

•Efficiencies can be poorCSP tower producing 50 tons of steam per day for enhanced oil recovery in Oman. (GlassPoint Solar)

Energy Chain – “Device Drive” system for isolated sites

Small PV/ small wind Storage Application End-user

Note: also applicable to solar heating systems

• Examples:– Telecommunication, signalling, etc– Remote buildings

• Issues:– Capital saving on cabling– Low cost storage (e.g. automotive batteries)– Flexible, mobile– Low power LV applications generally

Energy Chain – “Island Generation” system

• Examples:– High security supply

– Remote communities; no Grid supply

– (Micro-grids)

– ‘bloody mindedness’

• Issues:– Capital saving on Grid

connection

– Operation savings on ‘use of system’

– Back-up capacity

– Potential for CHP


Private MV/LV distribution

End-user Note: no external connection

Energy Chain – Combined Heat & Power (CHP) systems


Heat/coolth generation

MV/LV distribution End-user

Heat/coolth storage

Heat/coolth distribution & conversion

End-user

But what about wind and wave based systems?

• Examples:– Process heat industries

– Community/district heating

– Large HEVAC

• Issues:– Potential for improved efficiency

– Operation savings on ‘use of system’

– Heat/load balance

– Interconnection

Reserve capacity/storage/load management

Power generation

HV transmission

MV/LV distribution


End-user

Energy Chain – Large variable/intermittent system

• Examples:– Onshore/offshore wind

– Large solar

• Issues:– Variability/intermittency

– Interconnection

– Dispatchability

– AC/DC

Energy Chain – Distributed generation

• Examples:– Small generators

– Non-schedulable generation

• Issues:– Variability/intermittency

– Interconnection

– Dispatchability

HV transmission

MV/LV distribution


End-user

Micro- grid

.

.

.SmallGen.

.

.

.Energy sources.

Distributed generation - definitions

• Distributed Generation (DG) –any dispersed generation less than 100 MW.

• Distributed Energy Resources (DERs)

– small-scale power generation technology that supplies less than 10 MW

– located throughout the distribution network; frequently renewable energy and energy storage.

• Demand Response (DR) – management of consumption, anywhere along a feeder, in response to supply conditions

• Microgrid

– local network of DERs that is a subset of the distribution network

– can operate in an isolated manner or be connected. – Microgrid management targets local energy supply and demand.

Energy Chain – Distributed generation

Power & communication

network

Energy Mgt. System Energy Exchange

Billing

Manageable loads

Meter reading

Distributed loads

Wind turbinesDistributed micro-

chp

Solar

CHP

Biomass

Grid-control

Source: RWE Deutschland

Communication only

Communication + power

The new systems nature of the power sector

Power is going from a linear supply-demand model towards a model where:

•Power consumers become producers (‘prosumers’),

•One-way electricity and information flows become bi-directional,

•Decentralisation challenges and complements the old centralised architecture,

•Closer real-time management becomes feasible as well as necessary to handle more variable generation

EURELECTRIC, May 2013

“Disruptive challenges”

“Recent technological and economic changes are expected to challenge and transform the [US] electric utility industry. These “disruptive challenges” arise due to a convergence of factors, including:

•Falling costs of distributed generation and other distributed energy resources (DER);

•Enhanced focus on development of new DER technologies;

•Increasing customer, regulatory, and political interest in demand-side management technologies (DSM);

•Government programs to incentivize selected technologies;

•Declining price of natural gas;

•Slowing economic growth trends;

•Rising electricity prices in certain areas of the country.”

“Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business” Edison Electric Institute; January 2013

Financial risks to Utilities from “Disruptive Challenges”

The financial risks created by disruptive challenges include:

•declining utility revenues, increasing costs, and lower long-term profitability

•Increased DER and DSM “market share,” reduced utility revenues

•Higher DER integration costs + increased subsidies for DSM and direct metering of DER profitability squeeze

•Regulators may allow recovery of lost revenues in future tariff cases, but non-DER customers will have to pay for (or absorb) lost revenues.

•Increased DER penetration political pressure to undo cross subsidies utility stranded cost exposure.


“Vicious Cycle from Disruptive challenges”


Technology Innovation (DER)

Energy Efficiency(EE, DSM)

Lost Revenue

Tariff increase

Customer reaction

DERBehavioural

change

Grid DefectionEntrepreurial attack•Declining technology costs•Alternative business models•Demand for alternative supplies (green-ness, resilience, etc)

Traditional Model under siege•Must deliver supply which is

– Reliable– Cost-effective– Environmentally responsible

•Meet shareholders financial demands

Upward price pressures•Grid and resilience upgrades•Environmental controls, retirements•Smart Grid investment•Energy efficiency successes

Re-allocation effects encourages external competition

Defection spreads fixed costs over fewer consumers

“Economics of Grid Defection”; CohnReznick et al; Feb 2014

E.ON – the shape of things to come . . ?

E.ON proposes to split into two separate companies in 2015:

•A new (as-yet-unnamed) company:

– the coal, gas and nuclear assets, plus its trading business and hydropower plants.

•E.ON:

– renewable energy,

– energy efficiency,

– digitizing the distribution network

– customer-sited energy sources like storage paired with solar.

Distributed Generation – Technical Issues

Proliferation of distributed energy without proper grid integration negative, consequences for the price, quality and reliability of power.

•Most DERs not connected to supervisory control and data acquisition (SCADA) systems.

•Difficult to monitor and control their security and efficiency.

•Renewables impact grid with transient voltage variations and harmonic distortions

•Clustered DERs can function as a single virtual power plant (VPP) with centralized voltage control, storage, demand response, and distribution automation. RWE began a pilot VPP in 2012 with ~80 MW capacity

•DERs can complement utility plant rather than competing.

•Utilities have potential to postpone generation investments and improve grid stability.

Energy Outputs

Energy System

Conversion• electricity• heat/coolth• mechanical

Transport• long-distance• local• storage

Usage Benefit

Alternating Current vs. Direct CurrentHigh Voltage Direct Current

Alternating Current

• Historically the most important

• Ease of changing voltages through transformers

• AC voltages chosen for each stage from generation to consumer

• Transmission power loss = I2R [I = current and R = resistance]

• Increased Voltage decreased Current lower power losses

BUT Increased voltage increased radiation losses

• Reactive elements (inductance and capacitance) limit transmission capacity and distance;

–may require additional compensating equipment on the line

• Linking AC systems can system instability, increasing short-circuit levels and undesirable power-flows.

Direct Current

• Historically difficult to change voltages without heavy losses

• Limited number of DC networks

BUT

• Solar PV produces DC (also fuel cells)

• Other renewables capable of DC

• Most storage technology is DC

• Most IT and digital technology is (low voltage) DC

• AC high energy (heat) loss

• AC spikes, etc.

Take a data centre as an example. [More in Addendum]

Direct Current Example: data centre

• If mains AC to data centre DC and then distributed DC power:

– less power loss in multiple conversions (AC to DC; DC to AC) reduced energy consumption; > 5-10% of energy saved (more if DC feed from solar)

– less space required by the DC infrastructure (less equipment; direct connection by IT equipment to backup batteries)

– decrease in cooling requirements

• Lawrence Berkley Labs (LBL) study (quoted Sinopoli 2012) indicated:

– 7% reduction of energy consumption

– 28% efficiency gain,

– “more reliable, and potentially cost less in the long run.”

• Facebook and SAP have piloted DC power in their data centers.

[Note DCC+G consortium, led by Siemens, studying an optimized 380-volt DC network in an office building and a superstore. Reporting 2015]

High Voltage Direct Current (HVDC) 1

High Voltage DC

•Commercial HVDC started in the 1950s based on mercury arc valves , (20-MW Gotland submarine-land project)

•Introduction of silicon-controlled rectifiers (thyristors) in the 1960s

Issues with high voltage, long distance AC transmission:

•Reactive elements (inductance and capacitance) limit transmission capacity and distance;

– may require additional compensating equipment on the line

•Linking AC systems can system instability, increasing short-circuit levels and undesirable power-flows.

High Voltage Direct Current (HVDC) - applications

Key applications:

•Developing countries with fast growth in electric energy demand (e.g. China, India and Brazil)

– long overhead transmission lines from hydro and fossil energy sources

– expanding their systems with ultra-high-voltage (UHV) grids including HVDC. Projects ±800 kV, 6,000-MW and higher under construction

•European utilities connecting hydro, wind, storage and other sources of energy

– Wayleave difficulties underground and underwater transmission.

– Mainly HVDC; 64 - 80 km claimed break-even point [?]

Sources: http://tdworld.com/overhead_transmission/power_war_currents_update/#ixzz24MhjS16Rhttp://tdworld.com/overhead_transmission/hvdc-transmission-evolution-040112/#ixzz24Mnbzj7p

http://tdworld.com/overhead_transmission/hvdc-transmission-evolution-040112/

High Voltage Direct Current (HVDC)

• For 6,000-MW transmission:

7x 500-kV AC power lines = 2x 600-kV DC lines = one 800-kV DC line

• Ideal for underwater cables – Iceland geothermal?

• HVDC power transfers controllable and precisely measured directing exactly where the power is injected into the AC grid no transmission congestion.

Note: DESERTEC and others!

Sources: http://tdworld.com/overhead_transmission/power_war_currents_update/#ixzz24MhjS16R

http://tdworld.com/overhead_transmission/hvdc-transmission-evolution-040112/#ixzz24Mnbzj7p




Addendum

• Development of UK transmission and distribution system

• Power usage in Data Centres and Servers

1880 - 1920: Electrification beginsElectricity Demand and

Generation Capacity

0

50

100

150

200

250

300

1890 1891 1892 1893 1894 1895 1896 1897 1898 1899 1900

Year

Gen

Cap

acit

y (M

W)

0

20

40

60

80

100

120

140

160

Ele

c D

eman

d (

GW

h)

Generation Capacity Electricity Demand

Typical UK power station:8 x100 kW

First electrified tramway commissioned

Load factor still only 10%

World’s first 3 turbo-alternator commissioned(150kW, 40Hz)

Electricity Demand and Generation Capacity

0

0.5

1

1.5

2

2.5

3

1900 1902 1904 1906 1908 1910 1912 1914 1916 1918 1920

Year

Gen

Cap

acit

y (

GW

)

0

0.5

1

1.5

2

2.5

3

3.5

4

Ele

c D

eman

d (

TW

h)


3transmission system6.6kV, 40Hz

Voltage raised to 20kV

1920-1947: High Voltage Transmission eraElectricity Demand and Generation Capacity

0

2

4

6

8

10

12

14

16

1920 1924 1928 1932 1936 1940 1944 1948Year

Gen

Cap

acit

y (

GW

)

0510

1520253035

404550

Ele

c D

em

an

d (

TW

h)


Central Electricity Board (CEB) created

CEB complete most of 132kV, 50 Hz grid

CEB despatch 140 power stations (public/private)

1947-1990: Nationalised Industry era Demand and Generation

1947Nationalisation of 200 electricity companies and 370 municipality supply obligationsCapacity shortages lead to disconnection at peak loadGovernment intervention to limit choice of turbo-alternators to 30MW or 60MW

1948: British Electricity Association created:- 14 area boards- 14 generating divisions

1951: Capacity shortage persists (17% load-shed)

1955: Nuclear power programme announced

Grow th in Electricity Demand and Generation Capacity

0

50

100

150

200

250

300

350

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995

Year

0

10

20

30

40

50

60

70

80

Electicity Demand Generation CapacityMaximum Demand

Max

Dem

and/

Gen

Cap

acity

(GW

)

Ele

c D

eman

d (T

Wh)

Priv

atis

atio

n

1950: Need to build 275kV grid recognised

1947-1990: Nationalised Industry era Demand and Generation

Privatisation

Grow th in Electricity Demand and Generation Capacity

0

50

100

150

200

250

300

350

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995

Year

0

10

20

30

40

50

60

70

80

Electicity Demand Generation CapacityMaximum Demand

Max

Dem

and/

Gen

Cap

acity

(GW

)

Ele

c D

eman

d (T

Wh)

Priv

atis

atio

n

1955: South of Scotland Electricity Board created

1958: CEGB created with responsibility for:-Generation (262 power stations, 24 GW)- Transmission (15,000 km Over Head Lines)- Wholesale reselling

1958: 12 area boards created with responsibility for:-Distribution-Retailing

AC-DC conversions within data centers

Numerous AC-DC conversions within data centers, each resulting in energy losses

Electricity Use In A Server (Watts)

Based on a typical dual processor 450W 2U Server; Approximately 160W out of 450W (35%) are losses in the power conversion process.

Source: Brian Griffith: INTEL

Documents

Lecture 1 Introduction