DISTRIBUTIVE GENERATION REDUCING GREENHOUSE GAS EMISSIONS Author Prepared
DISTRIBUTIVE GENERATION REDUCING GREENHOUSE GAS EMISSIONS
Author Prepared for Energy Law with Professor Fred Bosselman at Chicago-Kent College of Law, Spring 2005, by Adam Nodzenski anodzens@iit. edu
WHAT IS DG? ® Varying Definitions ® Generally Characterized by: ® Generation located at or near point of consumption ® Production range from 5 k. W to 30+MW ® From any variety of sources
ELECTRICITY DEMANDS OF TOMORROW ® EIA (US) predicts 1. 8% per year growth in US demand until 2025. ® Capacity will need to increase by 281 GW. ® IEA (OECD) predicts 2. 2% per year growth in world demand until 2030. ® Global capacity will need to increase by 4, 800 GW.
US DEMAND Source: EIA Annual Energy Outlook 2005
FUTURE GHG EMISSIONS ® Only measuring Carbon Dioxide… ® IEA estimates between 50% and 91% growth in CO 2 emissions until 2030. ® These numbers all suppose central generation (“CG”) as a primary source of electricity.
PROBLEMS WITH CENTRAL GENERATION ® Inefficient ® Transmission and Distribution Costs (“T&D”) ® Regulatory Hurdles ® Vulnerable ® Dirty
INEFFICIENT ® The best CG plants today achieve 50% efficiency. ® This is before line losses ® 9% in 2002 ® Average efficiency between 30% and 40%
T&D COSTS ® Every new CG plant built will require new T&D ® New T&D estimated at $1260 per k. W 1 ® Old T&D requires maintenance, repair, upgrade. 1. Optimising Power, Thomas R. Casten and Brennan Downes, Cogeneration and Onsite Power Production, March 12, 2004.
REGULATORY HURDLES ® Permitting ® A) a CG plant is: Time consuming ® B) Expensive ® C) Unpredictable ® D) All of the above
VULNERABILITY ® Failure of base load plant or its supporting T&D system can cause brownouts and blackouts. ® Domino Effect ® Tempting Targets for Terrorists?
DIRTY ® CG is responsible for at least half of GHG emissions in the US ® Plants are poorly managed ® Because CG design is so varied, it is hard to find the perfect pollution control solution
DG: BENEFITS AND SOLUTIONS ® Can be more efficient ® Lower T&D costs ® Fewer regulatory hurdles ® Less vulnerable ® Can be less polluting ® Interconnection ® Reliability
MORE EFFICIENT? ® Efficiency will depend on the type of DG employed ® The most efficient DG type is Combined Heat and Power (“CHP”) ® More than 65% efficient ® This is more than twice as efficient as the average CG plant today.
Advantages of CHP ® Well suited to commercial and industrial applications ® Already 72 GW online ® Market forecasts 20 GW to 40 GW of added CHP capacity over next 10 years 2 ® Eliminates the inefficiency of a separate boiler system. ® Ideal for high-rises 2. . High Natural Gas Prices and the Updated Market for CHP, Resource Dynamics Corporation, September 23, 2004.
Efficiency of Zero or Low Emission Sources ® Fuel cells are more efficient than the average (36% to 40%) ® Solar technologies are still very inefficient (15% to 25%), but the fuel is free ® Wind generators can be very efficient, but this depends on the wind
Efficiency of Other Sources ® Micro-turbines (27%) ® Advanced Turbine System (36%) ® Gas ICE (35%) ® Diesel ICE (44%) ® In general these technologies are either dirtier and/or less efficient than a CG natural gas plant
LOWER T&D COSTS ® 10% of traditional T&D costs (backup power from grid in the case of unplanned outages) ® If all 281 GW of new capacity in US were to come from DG, that would be over $300 billion in avoided T&D costs 3 ® Savings to the rest of the world could be in the trillions 3. Optimising Power
A Note on Cost to Generate ® Costs to generate are still high for solar and fuel cells (around 20 cents/k. Wh) ® Projected 5 cents/k. Wh in 2035) ® Micro-turbines utilizing CHP are nearing competitive costs but still have a little way to go (10 -15 cents/k. Wh) ® Wind is very competitive (3 -6 cents/k. Wh), but not a source of continuous power
Other Cost Savings ® Option value (option of rapidly building capacity) ® Deferral value (not having to make T&D investment)
FEWER REGULATORY HURDLES ® For many smaller DG applications there is no permit system in place ® This is not necessarily good ® However, capacity can be brought online as it is needed
Hurdling Cont. ® Regulations aren’t so necessary when we are talking about low or no emission sources. ® For all other DG technology forcing permits should be required. ® We’ll get into this later.
LESS VULNERABLE ® DG is grid independent ® The grid, because it is set up around base load CG, is not terribly dependent on interconnected DG. ® Decentralized nature of DG makes it terror proof
POLLUTION SAVINGS ® CHP DG that is fueled by natural gas offers low pollution with high efficiency ® CHP fueled by diesel or gas may still cause less pollution if high-efficiencies are realized ® Renewable and fuel cell sources are frequently best implemented as DG
Pollution Costs for CG ® Measured as externalities ® Between 2 and 4 cents/k. Wh for fossil fuels ® Less for renewables ® If DG promotes use of CHP and renewables, we will realize significant savings
DG Specific Pollution Problems ® Shorter/no stacks ® Little/no dispersion ® May get resultant hotspots
INTERCONNECTION ® Interconnection offers prospect of cheaper, more reliable electricity ® If managed properly, electricity will only be produced where it is cheapest to do so. ® Electricity can be moved around easily as demand increases/decreases ® THE VIRTUAL POWERPLANT
RELIABILITY ® DG provides high quality, mission critical electricity. ® The grid can’t get it done. ® DG has a reliability value measured in $$$ to consumers
Some Other Thoughts on DG ® Price spikes for Natural Gas may drive market to CHP ® Price drops for NG would make DG very competitive ® Renewable fuel costs are stable at 0 cents/k. Wh ® Existing T&D capacity shortages may mean its cheaper to add capacity at end user
Cont. ® Even with NG price spikes we may not be driven into the waiting arms of coal/nuclear ® Coal mining can be terribly destructive ® Difficult to get nuclear up and running/sited ® Difficulty siting new T&D
HOW DO WE GET THE RIGHT SORT OF DG? ® The point is to reduce GHG emissions ® DG that doesn’t meet this goal should not be encouraged ® To that end we can employ a carrot (tax incentive) and stick (permitting) policy ® Facilitate interconnection
Power of Favorable Regulations ® Regulations and protections resulted in CG ® In the beginning electricity was generated close to end use and recycled waste heat ® Result: Even with some gains in efficiency, plants today are hardly more efficient than they were 60 years ago
TAX INCENTIVES ®A tax structure that encourages clean DG might include: ® No tax on zero/low emission generation equipment sales ® No tax on electricity generated from zero/low emission sources ® Tax breaks on CHP equipment and electricity sales
PERMITTING ® Technology forcing permitting for DG is clearly the way to go ® Under such a regime, DG equipment would be treated like cars ® An emission standard is set ® Before the generator can leave the factory, it must comply
Elements of a Permit Program ® Set emission limits at or below those for the cleanest CG ® Implement a certification program to ensure the equipment will meet standards ® Randomly test in-use systems ® Readjust limits as technology matures
California’s DG Permit Regime ® Distributed Generation Certification Program (eff. 1/1/2003) ® DG units manufactured, sold or leased in CA must comply ® Covers only DG that isn’t otherwise permitted ® Does not cover zero emission DG ® Does not cover DG used for emergency
CA Cont. ® Sets two standards ® The first is for DG not integrated with CHP ® The second is for DG integrated with CHP
CA Cont.
CA Cont. Limits Tighten in 2007
CA Cont. How CA Certifies ® Manufacturer ® Description submits: of DG unit ® Maximum output rating ® Fuel type ® Description of emission control equipment ® Emissions test data, supporting calculations, qualitycontrol/assurance information, and all other information needed to demonstrate compliance
CA Cont. How CA Certifies ® Lays out testing procedures ® Certification valid for four years ® Fee of $2, 500 per certificate ® Doesn’t provide for random in-use testing, but allows inspections of manufacturers and retailers and resellers to ensure compliance
FACILITATING INTERCONNECTION ® Solving interconnection issues may ease investor worries ® Common standards mean getting your money back is more of a sure thing ® CA has set standards through legislation and rulings by CA Public Utility Commission ® Streamlines contractual issues
A CALIFORNIA SUCCESS STORY ® Occurred before the certificate program ® CA decided to shut down Rancho Seco Nuclear Plant ® Utility lost half of its capacity ® Instead of building new CG, pursued energy efficiency and DG
Eureka! Cont. ® Invested in all kinds of renewable DG as well as CHP systems ® Whatever fit client needs best ® Econometric studies show savings of $180 million to region versus the nuclear plant 4 4. Natural Capitalism: Path to Sustainability? , L. Hunter Lovins, Natural Resources and Environment, Fall, 2004.
CONCLUSIONS ® DG can: Reduce GHGs ® Improve efficiency ® Enhance reliability ® Save money ® ® But ® only if we: Promote the right kind of DG with tax incentives, technology forcing and regulatory ease
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