VPPs and embedded PV

Presentation at the

Global Renewable Energy Support Programme

Dr Tobias Bischof-NiemzCentre Manager: Energy at the CSIR in South Africa

New Delhi, 30 March 2015

Dr Tobias Bischof-Niemz

Chief Engineer

New Delhi, 30 March 2015

Cell: +27 83 403 1108

Email: TBischofNiemz@csir.co.za

Agenda

Virtual Power Plants

1

Embedded PV

What is embedded PV?

Tra

nsm

issi

on

ne

two

rk

Utility-scale

1 75…100 MW and more

2Sources: SMA; CSIR analysis

Distributed

Embedded

2

3

< 1…30 MW

1…1,000 kW

Renewables projects have inherently very different sizes – but

currently only large projects are incentivised through REIPPPP

Large:

Utility-scale

Large:

Utility-scale

Medium:

Distributed Generators

Medium:

Distributed Generators

Small:

Embedded Generators

Small:

Embedded Generators

Wind

PV

1 2 3

Farmers

75 MW

> 100 MW

1…30

MW

1…30

MW

1…1,000

kW

0.5…2

MW

3

Biogas

CSP

Biomass /

Landfill Gas

Small Hydro

Projects too small for technology

Possible, but technology generally

leads to larger projects

Embedded projects too

small for technology

Farmers

Embedded projects too

small for technology

Embedded projects too

small for technology

Sources: CSIR analysis

100 MW

>10

MW

0.5…2 MW

0.5…2 MW

0.5…2 MW

Municipalities

(@ waste water treatment)Feedstock logistics

prohibitive for large

projects

Projects typically not

utility-scale

In today’s power system, “cells” are simply consumers (load) –

generation and balancing of supply/demand happens centrally

Balancing of supply/demand

on central system level

4

Cell =CCLoad

One-directional power flow

Transmission

Distribution

On end-consumer level mostly

no generation, no storage/balancing

capabilities, no manageable loadSources: CSIR analysis

Where a “cell” today is simply a consumer (load), in future it will

consist of generation, storage and manageable loads

A cell can be:

• A residential complex

• A commercial complex

• Individual buildings on CSIR’s campus

• A whole village

• An industrial customer

• Etc.

Generation options can be:

• PV

• Wind

• micro CHP (mCHP), fuel cells

• Biogas

5

• Etc.

Generation

StorageCell =CCLoad

• Biogas

Storage options can be:

• Batteries

• Thermal storage for space heating

• Thermal storage for industrial process heat

• Power-to-gas / power-to-H2

Load options can be:

• Non-interruptable / non-manageable loads

• Manageable loads (e.g. fridges, space cooling, space

heating, pool pumps, water heating, etc.)

• Fuel switch (e.g. power-to-gas or power-to-fuel)

Sources: CSIR analysis

Future power-system architecture: multiple cells of generation, storage

and load are balanced by cell agents and form a Virtual Power Plant

“Super Grid”

Virtual Power Plant

C

C

C

C C

C

C

C

C

CCA

CC

CC

CC

CC CC

CC

CC

CC

CC

CCCACA

C

C

C

C C

C

C

C

C

CCA

CC

CC

CC

CC CC

CC

CC

CC

CC

CCCACAC C

C

CC CC

CC

GG

GG

“Smart Grid”

6

CA =CA =

C

C C

CC

CC CC

GG

C

C

C

C

C C

C

C

C

C

C

CCA

CC

CC

CC

CC

CC CC

CC

CC

CC

CC

CC

CCCACA

C

C

C

C

C C

C

C

C

C

C

CCA

CC

CC

CC

CC

CC CC

CC

CC

CC

CC

CC

CCCACA

C

C C

CC

CC CC

GG

GG

C

C

C

CC

C

C

C CCA

CC

CC

CC

CCCC

CC

CC

CC CCCACACA

Bulk Power AC/DC

Highway

GG

DCAC

Generation

StorageCell =CCLoad

Sources: Siemens

Cell Agent

Inter-temporal and inter-spatial

optimisation of energy demand

and supply between cells

Today: CSIR’s main campus in Pretoria is a large electricity consumer

CSIR Campus today

GPS coordinates

-25.75, 28.28

7Sources: CSIR analysis

CSIR Campus today

� 52 buildings

� 150 ha

� 30 GWh/yr electricity demand

� 3 MW base load

� 5-6 MW peak load

Vision:

The three primary energy sources sun, wind & biomass are at the core

CSIR’s campus load

of one week

Electrolyser

Power

Excess wind/PV

power

8Mixing valve

Hydrogen

Biogas

Gas engines

Biogas/hydrogen mix

HeatPower

?

Sources: Enertrag; modified and expanded by CSIR

In future: hydrogen

fuel station, fuel cells,

synfuels, etc.

The future power system is more distributed and more flexible

Today: Supply follows LoadToday: Supply follows Load Tomorrow: Load follows SupplyTomorrow: Load follows Supply

9

Agenda

Virtual Power Plants

10

Embedded PV

What is different with a high share of renewables?

Distributed Power

Generation

Renewables are inherently smaller in size

than conventionals and they are modular

Grid-technology

Implications

11

System Planner’s /

Operator’s

Paradigm Shift

Democratisation of

Power Generation

Paradigm shift from: “supply follows load”

to “dispatchable load and dispatchable

supply follow fluctuating supply”

Energy Planning and

Operational Implications

Renewables attract new funders due to

granularity and fixed-deposit type of

investment � ownership base very

different as compared to conventionals

Socio-economic

Implications

Sources: CSIR analysis

Background: PV and wind are

intermittent (not “schedulable” /

dispatchable) and have zero

marginal costs � therefore “must

run” in any market setting

Advantages of incentivising embedded PV

Job creation & local content

• Potential for rural enterprises to run a “micro-utility business” with small-scale PV generators � wherever there is a grid, there is a PV business opportunity!

• Huge potential for SMMEs in PV design, installation & verification for residential & commercial customers

Reduced grid losses and system costs

• Embedded PV is close to the load, i.e. grid losses are low (saves add. up to 5% of costs)

+

+

12

• Embedded PV is close to the load, i.e. grid losses are low (saves add. up to 5% of costs)

• Generally only very little grid strengthening and no grid extension required (PV follows the grid)

• Aggregated supply profile of spatially distributed embedded PV generators is very smooth and highly predictable

Reduced transaction costs

• Project development costs, legal fees, environmental assessment, etc. are all reduced or non existent for embedded PV as compared to large PV installations

Funding easier due to granularity (small project size, R 100,000 to few millions)

• With a proper standard offer defined, rooftop PV installation would become bankable

• Banks could put the asset into the home loan for easy financing

12Source: Eskom EPMD analysis

+

+

PV and wind are cost-efficient fuel-savers for gas power plants today

1.03.5

4.0

4.5

R/kWh

4.2

0.1

Capital

Fuel

Fixed O&MRenewables Conventional new-build options

13

0.91.2

3.1

0.9 0.5

0.9

0.9

0.40.6

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Diesel (OCGT)

0.1

Gas (OCGT)

2.2

0.1

Gas (CCGT)

1.2

0.3

Mid-merit Coal

1.3

0.1

Baseload Coal

0.8

0.20.1

Wind

0.7

0.1

PV

1.0

0.1

Assumption: Typical full-load hours per generator assumed (92% for nuclear, 85% for coal, 50% for CCGT, 10% for OCGT). Changing full-load hours for conventionals drastically changes the fixed

cost components per kWh (lower full-load hours � higher capital costs and fixed O&M costs per MWh); average efficiency for CCGT = 50%, average efficiency for OCGT = 35%; gas @ R120/GJ

Source: IRP Update; REIPPPP outcomes; CSIR analysis

50%85% 50% 10%Assumed load factor � 10%

PV has three main cost drivers – LCOE locked in over lifetime of asset

CAPEX

R/kWp

WACC

%

+

Annualised CAPEX

R/kWp/yrf

Annual Costs

R/kWp/yr

1

2

14

R/kWp

OPEX

R/kWp/yr

Annual Energy Yield

kWh/kWp/yr

LCOE

R/kWh./.

R/kWp/yr

Note: Without inflation, i.e. In real terms; LCOE = Levelised Cost of Energy = discounted total lifetime cost of the PV installation divided by discounted total lifetime energy yield of PV installation

Sources: CSIR analysis

3

Uncertainty about future tariff makes investor require higher initial

tariff – with potential subsequent windfall profits

0.6

0.7

0.8

0.9

1.0

R/kWh

?

Effective Tariff

LCOE

15

0.0

0.1

0.2

0.3

0.4

0.5

0.6

2015 2020 2025 2030 2035 2040

PV investment similar to fixed-deposit savings account, thus

requires the same investment certainty, to bring costs down

Note: Without inflation, i.e. In real terms; LCOE = Levelised Cost of Energy = discounted total lifetime cost of the PV installation divided by discounted total lifetime energy yield of PV installation

Sources: CSIR analysis

Uncertainty about future offtake increases LCOE, which pushes

required initial tariff additionally up – with subsequent windfall profits

0.6

0.7

0.8

0.9

1.0

R/kWh

LCOE

Effective Tariff

?

16

0.0

0.1

0.2

0.3

0.4

0.5

0.6

2015 2020 2025 2030 2035 2040

PV investment requires security about tariff and about

offtake in order to bring total cost to the power system down

Note: Without inflation, i.e. In real terms; LCOE = Levelised Cost of Energy = discounted total lifetime cost of the PV installation divided by discounted total lifetime energy yield of PV installation

Sources: CSIR analysis

Higher CAPEX of residential or commercial PV can be compensated by

lower cost of capital

20

25

30

35

CAPEX in R/Wp

Utility-scale

17

0

5

10

15

20

4% 6% 8% 10% 12% 14% 16% 18%

LCOE = 0.6 R/kWh

LCOE = 0.8 R/kWh

LCOE = 1.0 R/kWh

LCOE = 1.2 R/kWh

WACC (nominal)

Assumptions: 20 years lifetime, 1,700 kWh/kWp/yr specific energy yield in year 1, 0.8% annual degradation, 200 R/kWp/yr OPEX, 6% inflation

Source: CSIR analysis

Residential

Commercial

Utility-scale

18

Thank you!