Decentralized Energy:

Generating Energy Close to Point of Use

Energy Efficiency, Energy Security, Renewable Energy: Taking Forward
the Gleneagles Dialogue and the G8 St Petersburg Summit

July 25th 2006

Jeff Bell – Research Executive

World Alliance for Decentralized Energy (WADE)
What is Decentralized Energy (DE)?

Electricity production at the point of use, irrespective of

size, fuel or technology – on-grid or off-grid:

• High efficiency cogeneration (CHP)

• On-site renewable energy
• Industrial energy recycling and On-site power

• Otherwise known as:

• Distributed Generation, Captive Power, Embedded Generation,
Microgeneration, CHP, CCHP, Trigeneration, etc.

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Decentralized Energy – The Main Choices

Gas Turbines
Reciprocating Engines
Large & small
Rooftop PV

Fuel Cells Stirling Engines

Microturbines

On-site wind
3
About WADE

Non-profit research & promotion organisation

created June 2002

WADE is supported by:

National DE organisations

UK CHPA, USCHPA, Cogen Europe etc.

CHP/DE companies with international interests

Thermax, Capstone, Siemens, Caterpillar , Solar Turbines,
FuelCell Energy, MTU, Marubeni, Primary Energy, Wärtsilä, etc

4
WADE Network of DE Promotional Organisations

2nd (Amsterdam, 2001)

7th (Prague, 2006)
6th(NYC, 2005)
1st (Washington, 2000) 5th (Beijing, 2004)

3rd (Delhi, 2002)

WADE Network
4th (Rio, 2003)

Other Events:
In train
1. DE Conference, Toronto, September 2006
WADE Annual International Conferences
2. Sugar Bagasse Cogeneration, Bangkok, November 2006
3. C20 Event, Municipal Energy Self Sufficiency, NYC, April 2007?
4. DE and Energy Security, ? , 2007
5. 8th Annual DE Conference, ? , 2007

5
WADE Research

DE Market
data

Future Studies:

Onsite Power in the

Cement Industry,
August 2006

Cogeneration and
the CDM,
September 2006

Onsite Power and

Security, ?

Sector Specific Research on

DE Research Specific Challenges
facing DE
6
Energy Madness – worldwide energy waste
Prioritize opportunities:
Electricity Generation Worldwide (TWh) 1. Efficiency:
• End Use Efficiency
• DSM
• Supply Side
2. Renewables
3. CCS etc..

(Source: International energy Agency 2002)

7
WADE Mission

Source: Danish Energy Center

8
 Global DE Statistics
Source WADE Annual World Survey of DE 2006

DE share as % of total power generation

10.0

20.0

30.0

40.0

50.0

60.0
0.0
Denmark 53.0
Finland 38.0
Netherlands 38.0
Latvia 37.5
Czech 26.4
Hungary 21.5
Germany 20.5
Turkey 17.6
Slovakia 17.5
Poland 17.2
Japan 16.7
Portugal 15.0
Austria 13.6
India 12.1
Canada 11.4
SouthAfrica 11.1
Estonia 11.0
WORLD 10.4 Where does your country stand?
Chile 10.0
China 10.0
Korea 9.8
9

Lithuania 9.7
Mexico 8.4
Uruguay 8.0
Luxembourg 7.9
Greece 7.8
Spain 7.8
Belgium 7.5
Italy 7.4
UK 7.2
Sweden 6.8
Slovenia 5.9
Indonesia 5.6
Uganda 5.6
Australia 5.4
France 4.9
US 4.1
Thailand 3.4
Brazil 3.3
Ireland 2.5
Argentina 1.9
Different Areas Require Different Approaches

Off-grid

Micro-grids

Village scale renewables

Small scale industrial CHP

On-grid

Micro-grids

Community scale renewables

Industrial CHP, large and small

Building-integrated Cooling
Heat and Power

Small wind
Microturbines

Solar PV
Fuelcells

Micro hydro
BIPV

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Different Areas Require Different Priority Applications

Water pumping
Buildings:

Rural electrification
Universities

Hotels

Textile mills
Supermarkets

etc

Sugar mills

Community Heating and

Food products
Cooling

Forestry

Heavy Industry

Petrochemical plants

Steel plants

Cement

Etc

Individual homes

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World All-Energy Investment, 2001 - 2030
Network investment needs
exceed generation needs
by 17%
Gas
19%

Coal
46% Power generation
2%

Electricity
60% 54% Network T&D
Oil
19%

$5.2 trillion of investment

Source: International Energy Agency, 2003 Reference Scenario – Business-as-Usual

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IEA Analysis - DE Scenario is lower cost

OECD Investment in Reference (BAU) and Alternative Policy Scenarios, 2001-2030

4000 20% lower investment

need; CO2 emissions
remain at 2000 level Alternative scenario:
3000
More cogeneration

More efficiency
$US billion

More renewables
2000
IEA comment:
“However, the reliance
1000 on more expensive
generating options in
the Alternative Policy
0 Scenario is likely to
Reference scenario Alternative scenario result in higher
electricity prices.”
Distribution
Transmission
Generation (new and refurbishment)
Source: International Energy Agency, 2003

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WADE Economic Model

Object

To compare cost of DE and of central power in providing
new electricity demand growth over next 20 years

Model ‘builds’ new capacity to meet demand

growth and replace old plant

Takes account of peak time network losses

Can be applied to any country / region / city in the

world

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 The DE Model – Inputs and Outputs

Existing capacity and generation by technology Capital

Costs
Pollutant emissions by technology

Heat rates, fuel consumption and load factor by technology Retail

Costs
WADE
Capital and investment costs by technology and for T&D
Economic Fossil Fuel
Operation and maintenance (O&M) and fuel expenses by technology Model Use

System growth properties

CO2 and
Existing yearly capacity retirement by technology other
Pollutant
Emissions
Future growth in capacity by technology

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Applications of the WADE Economic Model

WADE would like to see

model work replicated:

In major cities

In provinces/states

In more countries

Australia - Commonwealth Scientific and Industrial Research Organisation

Canada - Federal Government of Canada (Natural Resources Canada)

China - UK Government (Foreign Office), for China

EU - European Commission – DG-FER programme

Ireland - Government of Ireland (Sustainable Energy Ireland)

Sri Lanka - European Commission

Germany - IZES for the Ministry of Environment

UK - Greenpeace UK

USA - Primary Energy Inc.

City of Calgary- Federal Government of Canada

Province of Ontario- Federal Government of Canada
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An Example – UK Application – Scenarios

Delivered Costs

9.00
Retail Costs (p/kWh)

8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Centr Nucl

DE

DE

DE

DE

DE

DE
CG

CG

CG

CG

CG

CG
DE/Renew

Low Fuel High Fuel No Nuclear No New No Nucl & No Greenpeace

Price Price Centr Gas Dmnd Grw th

Scenario
O&M Fuel Capital T&D

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IEA Analysis – T&D Savings from Decentralized Energy

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Policy and DE

What policies affect DE investment?

Example Policy Drivers

1. Targets
2. Feed-in Tariffs
3. Renewable Portfolio Standards
4. Disclosure labeling on power bills
5. Public Benefits charges
6. Carbon taxes

Example Policy Obstacles

1. Interconnection standards/rules.
2. Settlement rules

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Financing and DE

Financial Drivers
1. Guaranteed financing for DE
2. Favorable loans for DE
3. Government buy-downs for residential, commercial scale
systems
4. Import-export duty exemptions
5. Grants

Financial Obstacles
1. High Transaction costs
2. Shortage of precedence
3. Lack of institutional capacity

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DE and the Gleneagles Dialogue?

Economic Development:
Overall reduced energy costs:

Lower capital costs

Lower delivered energy costs

Climate Change:
Reduced emissions, and other

air pollutants

Less Import Dependence

Energy Security:

Increased Grid Reliability

More democratic energy system

Poverty:

Better access to energy

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 Thanks!
www. localpower.org

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 PART 2.
Climate for Decentralized Energy

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What makes up the climate for DE?

Factors that make investment in DE attractive have to

in the context of factors which make it unattractive.

The climate is made up of ideals and realities.

Drivers + Obstacles = Climate.

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Drivers/ Obstacles

Grid Extent (geographic)

Grid Extent (constraints)

Fuel Access (natural gas, biomass etc..)

Generation Capacity (surplus or shortage?)

Heat Loads

Cooling Loads

Power Loads

Public perception (environmental concerns)

Policy (interconnection and settlement)

Financing/economics

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Grid Extent (geographic)

Is the demand for power near the T&D network?

If not then DE is an ideal solution.

Onsite power applications are a much cheaper
alternative to grid extension

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Grid Extent (capacity)

Transmission or distribution bottlenecks?

If so DE may be attractive alternative to T&D

upgrades.

Even non-dispatchable capacity can offer grid relief

when generation coincides with demand
e.g. solar powered air conditioning or refrigeration

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Fuel Access

Natural Gas:

Distribution network in place?

Sparkspread (i.e. differernce between price per unit
of electricity and natural gas – High electricity price
combined with low gas price makes CHP attractive)

Biomass:

Distribution network in place?

Fuel seasonal? (e.g. sugarcane)

Sufficient storage space for fuel? Biomass is a low
energy density fuel compared to fossil fuels.

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Generation Capacity

Generation Capacity (surplus or shortage?)

Power surplus due to lumpy nature of central
investment.Reduces incentive for conservation.

Centralized
capacity
spending
Demand (GWh)

Decentralized
capacity
50MW investment

Power shortage due to long

lead times for central plants

1 5 10
Year

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Heat Loads

Is there local demand for heat?

CHP investments are heat driven

Is there need for space heating?

Are there any factories that need process heat?

Food processing?

Mills?

Manufacturing facilities? etc.

Demand for heat is the single biggest driver for CHP

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Cooling Loads

Cooling Loads

More demand in Equatorial Regions/Developing
Nations

Can be combined in CCHP applications

Space cooling (air conditioning) and process cooling

applications

If there is a predictable need for cooling/heating then

CCHP will likely be economic and power will
become a valuable biproduct.

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Power Loads

Is there demand for Power?

Demand for power secondary to heat as driver for
CHP

Demand for reliability/independence from grid key
driver

Power driver most relevant to building sector especially

e.g hospitals, colleges, schools, condos

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Public Perception (opinion of DE)

Do people want DE or care about it?

Public support for/demand for DE is the single

biggest driver for DE investment because it
influences so many other factors

That people don’t or care about the benefits of DE

is the most important obstacle.

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Public Perception (environment and DE)

Is there demand for DE because of its environmental

benefits compared to central generation?

DE results in fewer GHG

DE reduces other air pollutants associated with
central power

DE results in fewer overhead power lines

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 PART 3.
Experience from Abroad

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Policy Drivers

EU Level

European Cogeneration Directive

European Energy Efficiency for Buildings Directive

European Emissions Trading Scheme

Case Studies

Portugal

Belgium

United Kingdom

USA

Japan

36
European Cogeneration Directive

Directive number 2004/8/EC

Builds on Common Rules for the Internal Market for Electricity

Directive

Came into effect in 2004

Legally binding

Member states must address key barriers to CHP

Member states are encouraged to develop their own, more
specific and ambitious rules for promoting CHP

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European Cogeneration Directive

5 main drivers

Obliges the Commission to establish criteria for high-efficiency

CHP (Article 4)

Obliges members to implement certification system to
guarantee that CHP power is from plants that meet
established criteria (Article 5)

Obliges members to evaluate the national potential for CHP
and report progress in realizing it (Article 6, Article 10).

Obliges members to address grid connection barriers
(Article 8)

Obliges regulatory authorities of member states to make
transparent back-up and top-up tariffs (Article 8)

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European Energy Efficiency for Buildings Directive

Directive number 2002/91/EC

Came into effect January 2003

Applies to buildings over 10002 feet

Obliges each Member State to define minimum energy
standards for buildings

Calculation process “ must account for the positive influence
of electricity produced by CHP”

Ultimate aim to harmonize standards for all Member States.

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European Energy Efficiency for Buildings Directive

3 possible drivers for DE

Members could require developers to integrate possible

benefits of DE into building energy performance calculations

Members could require mandatory DE feasibility studies for
new buildings and major renovations

Members could simply require DE to be installed to obtain the
energy performance certificate

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European Emissions Trading Directive

Directive number 2003/87/EC

Driven by Kyoto commitments

Came into effect January 2005

Legally binding

National Allocation Plans have now been submitted by all
Member States

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European Emissions Trading Directive

Scheme will promote DE directly

Member States in their national allocation plans can provide
incentives for further DE development

e.g. In the UK a number of permits have been set aside for
new entrant CHP projects.

Scheme will promote DE indirectly

General increase power prices expected from the scheme
will make onsite generation comparatively attractive.

Because DE results in lower carbon emissions projects will be
better suited for carbon constrained market.

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Portugal

Feed-in Tariffs

Renewables and CHP of any scale are guaranteed generous feed-in
tariffs

Eff

carbon savings

reduced network use

PRIME Program

Many costs incurred by investors in renewables, efficiency and CHP,
are eligible for up to 50% capital cost reduction

Eligible costs include materials, feasibility studies, land, field trials,
transport etc…

Tax deductions

The government is currently considering a new tax
regime which may favor DE applications
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Belgium

CHP certificate Scheme

Cap and trade type scheme to promote CHP

Must be “high quality”, commissioned after January 2002 and
generate energy savings in the region

All electricity supply companies not submitting sufficient
certificates are subject to a fine

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United States

National CHP Roadmap (Strategy Document)

Has put CHP on political agenda

Set target of 92GW by 2010

Identified main barriers

State Initiatives

California: air pollution regulations are based on useful energy
output rather than pollution in exhaust per fuel input.

New York: “systems benefits charge” charges small surplus on
every kWh used and funds collected used to finance up to
50% of DE projects

Pennsylvania: RPS requires renewables and CHP

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Japan

Rational Use of Energy Law (1993)

All factories must hire energy manager and prove energy
efficiency measures including CHP are being taken whenever
possible

Energy Master Plan

Targets for biomass, MSW, and fuel cells as well as
reciprocating engines

Feed-in Tariffs

Net metering for PV

Financing

Low interest loans for CHP and renewables

Rebates for renewables

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Remaining Obstacles

Similar obstacles remain in place in many places all

over the world

1. Lack of clear interconnection rules/step-by-step

procedures because of concerns over:

safety,

power quality,

dispatch.
2. Lack of clear settlement rules.
3. Lack of financing for those who do decide to invest in
DE

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