distributive generation reducing greenhouse gas emissions
TRANSCRIPT
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DISTRIBUTIVE GENERATION
REDUCING GREENHOUSE GAS EMISSIONS
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AuthorPrepared for Energy Law with Professor Fred
Bosselman at Chicago-Kent College of Law, Spring 2005, by Adam Nodzenski
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WHAT IS DG?Varying DefinitionsGenerally Characterized by:
Generation located at or near point of consumption
Production range from 5kW to 30+MW From any variety of sources
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ELECTRICITY DEMANDS OF TOMORROWEIA (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.
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US DEMAND
Source: EIA Annual Energy Outlook 2005
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FUTURE GHG EMISSIONSOnly measuring Carbon Dioxide…
IEA estimates between 50% and 91% growth in CO2 emissions until 2030.
These numbers all suppose central generation (“CG”) as a primary source of electricity.
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PROBLEMS WITH CENTRAL GENERATION
InefficientTransmission and Distribution Costs
(“T&D”)Regulatory HurdlesVulnerableDirty
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INEFFICIENTThe best CG plants today achieve 50%
efficiency. This is before line losses 9% in 2002 Average efficiency between 30% and 40%
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T&D COSTSEvery new CG plant built will require
new T&DNew T&D estimated at $1260 per kW1
Old T&D requires maintenance, repair, upgrade.
1. Optimising Power, Thomas R. Casten and Brennan Downes, Cogeneration and Onsite Power Production, March 12, 2004.
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REGULATORY HURDLESPermitting a CG plant is:
A) Time consuming B) Expensive C) Unpredictable D) All of the above
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VULNERABILITYFailure of base load plant or its
supporting T&D system can cause brownouts and blackouts.
Domino EffectTempting Targets for Terrorists?
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DIRTYCG is responsible for at least half of
GHG emissions in the USPlants are poorly managedBecause CG design is so varied, it is
hard to find the perfect pollution control solution
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DG: BENEFITS AND SOLUTIONSCan be more efficientLower T&D costsFewer regulatory hurdlesLess vulnerableCan be less polluting InterconnectionReliability
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MORE EFFICIENT?Efficiency will depend on the type of DG
employedThe 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.
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Advantages of CHP Well suited to commercial and industrial
applications Already 72GW online Market forecasts 20GW to 40GW of added
CHP capacity over next 10 years2
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.
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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
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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
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LOWER T&D COSTS10% 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 costs3
Savings to the rest of the world could be in the trillions
3. Optimising Power
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A Note on Cost to Generate Costs to generate are still high for solar and
fuel cells (around 20 cents/kWh) Projected 5 cents/kWh in 2035)
Micro-turbines utilizing CHP are nearing competitive costs but still have a little way to go (10-15 cents/kWh)
Wind is very competitive (3-6 cents/kWh), but not a source of continuous power
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Other Cost Savings
Option value (option of rapidly building capacity)
Deferral value (not having to make T&D investment)
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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
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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.
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LESS VULNERABLEDG is grid independentThe 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
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POLLUTION SAVINGSCHP DG that is fueled by natural gas
offers low pollution with high efficiencyCHP 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
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Pollution Costs for CGMeasured as externalitiesBetween 2 and 4 cents/kWh for fossil
fuelsLess for renewables If DG promotes use of CHP and
renewables, we will realize significant savings
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DG Specific Pollution ProblemsShorter/no stacksLittle/no dispersionMay get resultant hotspots
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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
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RELIABILITYDG provides high quality, mission
critical electricity.The grid can’t get it done.DG has a reliability value measured in $
$$ to consumers
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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/kWh Existing T&D capacity shortages may mean
its cheaper to add capacity at end user
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Cont.Even with NG price spikes we may not
be driven into the waiting arms of coal/nuclear
Coal mining can be terribly destructiveDifficult to get nuclear up and
running/sitedDifficulty siting new T&D
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HOW DO WE GET THE RIGHT SORT OF DG?
The point is to reduce GHG emissionsDG that doesn’t meet this goal should
not be encouragedTo that end we can employ a carrot (tax
incentive) and stick (permitting) policyFacilitate interconnection
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Power of Favorable RegulationsRegulations 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
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TAX INCENTIVESA 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
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PERMITTINGTechnology forcing permitting for DG is
clearly the way to goUnder 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
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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 systemsReadjust limits as technology matures
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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
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CA Cont.
Sets two standardsThe first is for DG not integrated with
CHPThe second is for DG integrated with
CHP
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CA Cont.
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CA Cont. Limits Tighten in 2007
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CA Cont.How CA Certifies
Manufacturer submits: Description 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
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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
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FACILITATING INTERCONNECTIONSolving interconnection issues may
ease investor worries Common standards mean getting your
money back is more of a sure thingCA has set standards through
legislation and rulings by CA Public Utility Commission
Streamlines contractual issues
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A CALIFORNIA SUCCESS STORY
Occurred before the certificate programCA decided to shut down Rancho Seco
Nuclear PlantUtility lost half of its capacity Instead of building new CG, pursued
energy efficiency and DG
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Eureka! Cont.
Invested in all kinds of renewable DG as well as CHP systems
Whatever fit client needs bestEconometric studies show savings of
$180 million to region versus the nuclear plant4
4. Natural Capitalism: Path to Sustainability?, L. Hunter Lovins, Natural Resources and Environment, Fall, 2004.
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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