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W. Joerss, B. H. Joergensen, P. Loeffler, P.E. Morthorst, M.A. Uyterlinde, E.J.W. van Sam- beek, T. Wehnert, B. Groenendaal, M. Marin, H. Schwarzenbohler, M. Wagner

5 th Research Framework Programme of the European Union

Energy, Environment and Sustainable Development, Part B Energy

Decentralised Generation Technologies

Potentials, Success Factors and Impacts in the Liberalised EU Energy Markets

DECENT

Final Report

Contract NNE5-1999-593

IZT Institute for Futures Studies and Technology Assessment gGmbH

COGEN Europe – European Association for the Promotion of Cogeneration

RISØ National Laboratory

ECN Netherlands Energy Research Foundation

unit[e] unit energy europe ag

Jenbacher AG

October 2002

Project Co-Ordinator:

Wolfram Jörß IZT - Institute for Futures Studies and Technology Assessment Schopenhauerstr. 26; 14129 Berlin; Germany w.joerss@izt.de phone: +49 30 803088-17 fax: -88

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DECENT Final Report

Authors:

IZT:

Wolfram Jörß

Timon Wehnert

COGEN Europe:

Peter Löffler Mercedes Marín Nortes

RISØ:

Poul Erik Morthorst Birte Holst Jørgensen

ECN:

Martine Uyterlinde Emiel van Sambeek Bas Groenendaal

unit[e]:

Heinz Schwarzenbohler

Jenbacher:

Michael Wagner

DECENT Final Report

Summary

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Summary

In the coming 20 years, decentralised generation (DG) is expected to play an increasingly important role in the European electricity infrastructure and market. DG can be defined as small-scale generation connected to the distribution network or on the customer side of the meter. The application of DG is often highly location specific and depends on such diverse issues as the possibilities of technical implementation, resource availability, environmental aspects, social embedding of the project, regulation and market conditions. These factors vary considerably among technologies and among the EU Member States. The DECENT project has identified the main barriers and success factors to the implementa- tion of DG projects within the EU and has formulated a number of related recommendations to EU and Member State policy makers to enhance the feasibility of DG projects within the internal energy market. Most of the barriers identified are attributable to electricity regulatory regimes that hardly recognise the values of DG, in particular those related to environmental benefits, to electrical or grid services, and to security of supply in the EU. It is therefore essential that future energy policies for the electricity sector acknowledge and value the qualities of DG. Considering the ongoing trend of liberalisation and the increased use of market mechanisms as policy instru- ments it is recommended to take an approach to policy development that is market compati- ble. The ultimate goal should be to design markets that ensure a level playing field for central- ised and decentralised generation. Markets must be open and transparent, and should give fair chances to different types of actors. Finally, in the long run, the environmental values of DG should be acknowledged in a market compatible manner while energy prices reflect external costs.

Tackling DG connection and system integration barriers

DG connection and system integration can be improved by enhancing the transparency on the terms, conditions, and procedures for connection. Particularly important in this regard is the standardisation of the technical interface between DG and the grid, and the existence of clear non-discriminatory rules on the allocation and sharing of connection costs. These cost alloca- tion rules should take into account the benefits of DG to the network, such as avoided grid investments and grid losses. However, the application of these recommendations may be in- sufficient when network companies have incentives not to connect DG under the applicable regulatory regime. Economic regulation of network companies should therefore be neutral to the integration of DG into the network. Furthermore, stricter unbundling of network opera- tions and ownership from generation and supply of electricity is a prerequisite to prevent such incentives on the part of network companies.

Improving DG authorisation and permitting procedures

Acquiring authorisation and planning consents for the establishment of DG installations is a major barrier to many projects, due to non-transparent and time-consuming procedures, as well as local opposition. Furthermore, network planning and spatial planning and planning of the use of renewable energy sources (RES) currently take place in a non-co-ordinated manner, thus raising the cost of DG integration. The means to overcome this barrier are streamlining

IZT, COGEN Europe, RISØ, ECN, unit[e] and Jenbacher

October 2002

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DECENT Final Report

Summary

planning and authorisation procedures for small-scale RES and combined heat and power (CHP) production, involvement of local actors, pro- active designation of areas for DG deve l- opment in spatial plans for RES and heat planning for CHP, and finally co-ordination of spa- tial planning, network planning and integration of RES.

Enhancing the financing of DG

Due to the lack of a level playing field in present electricity markets, and because the external cost of electricity production are not reflected in the prices, many DG technologies need fi- nancial support to be viable under current market conditions. In the long run, internalising the environmental benefits of DG should diminish the need for support. However, in the mean- time, support mechanisms should be market compatible and in line with the trend of liberali- sation. To reduce the uncertainty to investors, support policies should take into account and anticipate the future harmonisation of support frameworks across the EU. With a view to pro- viding a more stable long-term policy framework, it is desirable that long-term targets for the integration of renewables and cogeneration are fixed at the EU level. As many DG projects are set up by small-scale players, it is important to reduce the transaction costs in using sup- port mechanisms and in operating on the electricity market.

Recommendations for further research

There are many subjects that are important to the integration of DG in EU electricity systems which could not be studied within the DECENT project, but which deserve further attention in future research projects. First, given the expected growth of the market share of intermittent renewables and heat-based CHP, the costs of imbalances will become increasingly important, and the application of priority dispatch mechanisms may become increasingly less feasible. Therefore, further research on technical and market solutions to balancing problems is crucial. Secondly, it is recommended that further research on the role of information and communica- tion technology (ICT) in co-ordinating market and network operations should be conducted.

DECENT Final Report

Contents Overview

v

Contents Overview

Summary

iii

Contents Overview

v

Table of Contents

vi

List of Annexes

ix

List of Tables

x

List of Figures

xi

Acknowledgements

xii

1 Introduction

1

2 What is Decentralised Generation?

3

3 Outline of Research Methodology

5

4 Status Quo and Developments of DG Technology

17

5 Liberalisation and Decentralised Generation in the EU Member States

79

6 Scenarios: Europe’s DG Power Generation in the Year 2020

95

7 Case Study Analysis

107

8 Barriers and Success Factors for DG

129

9 Policy Implications

140

10 Security of Supply in Relation to the Deployment of Decentralised Energy Technologies

193

11 EU Energy Technology R&D Policy

203

12 Conclusions and recommendations

211

References

217

Annexes

see

List of Annexes, page ix

vi

DECENT Final Report

Table of Contents

Table of Contents

Summary

iii

Contents Overview

v

Table of Contents

vi

List of Annexes

ix

List of Tables

x

List of Figures

xi

Acknowledgements

xii

1 Introduction

1

2 What is Decentralised Generation?

3

3 Outline of Research Methodology

5

3.1 The 4-Dimensional Analytical Approach in DECENT

5

3.2 DG Project Stages

7

3.2.1

Detailed Characterisation of the Implementation of a DG project

7

3.3 Conceptual Framework

13

4 Status Quo and Developments of DG Technology

17

4.1 Renewable Energy Sources

17

4.1.1 Photovoltaics

17

4.1.2 Wind Turbines

20

4.1.3 Hydro power

30

4.1.4 Biomass

35

4.2 Combined Heat and Power (CHP)

44

4.2.1 Steam Turbines

44

4.2.2 Reciprocating Engines

45

4.2.3 Gas Turbines

46

4.2.4 Combined Cycle Gas Turbines

47

4.2.5 New Small-Scale CHP Technologies

47

4.2.6 Fuel Cell Technology

49

4.3 Future Decentralised Energy Systems 2020

59

4.3.1 Introduction

59

4.3.2 General Remarks

59

4.3.3 General Framework Topics Important for Decentralised Energy Generation in the EU up to 2020

61

4.3.4 Ranking of Topics

62

4.3.5 Environment and Cost of Energy

65

4.3.6 Period of Occurrence

69

4.3.7 Constraints for Realising the Topic

73

4.3.8 Other Comments of Survey Respondents

78

5 Liberalisation and Decentralised Generation in the EU Member States

79

5.1 Status of Electricity Market Liberalisation in the EU Member States

79

5.1.1 The Directive on Liberalisation of the Electricity Market

79

5.1.2 Overview on Member States

83

5.2 Use of Renewables

85

5.2.1 Motivations for RES-support

86

5.2.2 Type of Support

86

5.3 Use of CHP

90

5.3.1 CHP Policies

90

5.3.2 CHP Support Schemes in the EU Member States

91

DECENT Final Report

Table of Contents

vii

6 Scenarios: Europe’s DG Power Generation in the Year 2020

95

6.1 Scenario I – Green Power and Nuclear Ecology

98

6.2 Scenario II – Huge Fossils

101

6.3 Scenario III – Widespread Economic Niches

103

6.4 Scenario IV – Hip Ecology

105

7 Case Study Analysis

107

7.1 Expert Interviews

107

7.2 Choice of Case Studies

122

7.3 Short Presentation of Case Studies

123

8 Barriers and Success Factors for DG

129

8.1 Characterisation of Actors

129

8.2 Identified Barriers and Success Factors

130

8.2.1 Policy/ Institutional Dimension

132

8.2.2 Market/ Financial Dimension

135

8.2.3 Technological Dimension

137

8.2.4 Social and Environmental Dimension

138

9 Policy Implications

140

9.1 Introduction

140

9.2 Authorisations and Permitting

144

9.2.1 Construction Permits and Spatial Planning

144

9.2.2 Local Resistance

148

9.2.3 Permitting Problems for Biomass Plants based on wood or waste

150

9.3 Grid Connection

152

9.4 Market Access and Contracting

162

9.4.1 Balancing and Settlement Systems

162

9.4.2 Transaction Costs

166

9.4.3 Gas Liberalisation

166

9.5 Financing

168

9.5.1 Financing Issues, Barriers and Solutions

168

9.5.2 Support Mechanisms

171

9.6 Operation

174

9.6.1 Grid Use Fees

174

9.6.2 Ratio of Gas and Electricity Prices for CHP

180

9.6.3 Biomass Fuel Supply

182

9.7 Barriers and Success Factors not Specific to a Particular Stage

183

9.7.1 Other Benefits of Decentralised Generation

183

9.7.2 Uncertainty on Policy Development

184

9.7.3 Market Power of Utilities

187

9.7.4 Specific Difficulties of Small Independent Power Producers (IPPs)

188

9.7.5 Lack of the Skills Required to Plan and Install a CHP Plant

188

9.8 Policy Implications of the Outlook to 2020

190

9.8.1 Scenario I – Green Power and Nuclear Ecology

191

9.8.2 Scenario II – Huge Fossils

191

9.8.3 Scenario III – Widespread Economic Niches

191

9.8.4 Scenario IV – Hip Ecology

192

10 Security of Supply in Relation to the Deployment of Decentralised Energy

Technologies

193

10.1 Introduction

193

10.2 The Dependence of the Energy Supply on Imported Fuels

193

10.3 The Availability of the Required Energy Production Capacity

195

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Table of Contents

10.4 Evaluation of Decentralised Plants in Relation to Security of Supply

196

10.4.1 Criteria for Evaluating decentralised plants

196

10.4.2 Substitution of Imported Fuels

196

10.4.3 Reliability

197

10.4.4 Flexibility

197

10.4.5 Economic Attractiveness

198

10.4.6 Financial Risk

199

10.4.7 Vulnerability

200

10.5 Conclusions and Recommendations

200

11 EU Energy Technology R&D Policy

203

11.1 Introduction

203

11.2 EU Research and Development Policy

203

11.3 Assessment of Non-Nuclear Energy Proposals

205

11.4 Results From the DECENT Futures study

206

11.5 The Future of European Energy Research

208

11.6 Conclusion

209

12 Conclusions and recommendations

211

12.1 DG interconnection and system integration

211

12.2 DG authorisations and permitting

213

12.3 Financing DG

213

12.4 The impact of DG on the security of supply

214

12.5 EU energy technology R&D

215

12.6 Recommendations for further research

216

References

217

Annexes

see

List of Annexes, page ix

DECENT Final Report

List of Annexes

ix

List of Annexes

Annex A: EU energy legislation applicable to DG Annex B: Survey Questionnaire of the DECENT Futures Study Annex C: Expert Interview Reports Annex D: Hypotheses on Barriers and Success Factors for DG Annex E: Case Study Reports

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DECENT Final Report

List of Tables

List of Tables

Table 3-1: DG project implementation stages

9

Table 4-1: Average PV costs in Germany

19

Table 4-2: Cost structure for a 1MW wind turbine

22

Table 4-3: Investment costs related to the Tunø Knob wind farm

27

Table 4-4: Unit costs for hydropower in the EU

32

Table 4-5: Investment and Unit Costs for Small Hydro Plants

33

Table 4-6: Cost of biomass technologies

40

Table 4-7: Emissions from biomass fired processes

41

Table 4-8: Steam turbine characteristics

45

Table 4-9: Reciprocating engine characteristics

46

Table 4-10: Gas turbine characteristics

47

Table 4-11: Combined cycle gas turbine characteristics

47

Table 4-12: Micro Turbine characteristics

48

Table 4-13: Stirling engine characteristics

49

Table 4-14: Key properties of a PEM fuel cell

50

Table 4-15: Key proportion of a DMFC fuel cell

51

Table 4-16: Key properties of a SOFC fuel cell

53

Table 4-17: Key properties of a PAFC fuel cell

54

Table 4-18: Key properties of a MCFC fuel cell

56

Table 4-19: Key properties of an Alkaline fuel cell

57

Table 4-20: Impact of topics on decentralised energy generation in the

61

Table 4-21: Characteristics of top ten topics

63

Table 4-22: Barriers to the Top Ten Topics

64

Table 4-23: Higher middle list

64

Table 4-24: Lower middle list

65

Table 4-25: Bottom list

65

Table 4-26: Top ten of beneficial impact on global environment

66

Table 4-27: Bottom list of beneficial impact on global environment

67

Table 4-28: Top ten [nine] list of beneficial impact on cost of energy

68

Table 4-29: Bottom list of beneficial impact on cost of energy

68

Table 4-30: ”Never” responses

69

Table 5-1: Overview on Liberalisation Status of EU Member States (I)

83

Table 5-2: Overview on Liberalisation Status of EU Member States (II)

84

Table 5-3: Support systems for electricity from renewable energy sources in the EU

88

Table 5-4: Share of Renewable Energy Sources in Gross Inland Energy Consumption

89

Table 5-5: CHP Support Systems in the EU Member States

92

Table 7-1: Expert Interview Partners in DECENT

108

Table 7-2: Leading questions of expert interviews

109

Table 7-3: Key results from expert interviews

110

Table 7-4: Overview on Case Studies

122

Table 8-1: Overview on barriers and success factors for DG

131

Table 9-1: Examples of schemes to involve local actors in the development of a DG project

149

Table 10-1: Overview of the evaluation results for decentralised technologies

201

Table 11-1: Ratings for selected groupings of energy proposals

205

Table 11-2: Top ten of beneficial impact on global environment

207

Table 11-3: Top list of beneficial impact on cost of energy

208

Table 11-4: Financial overview of 5 th and 6 th Framework Programmes

208

DECENT Final Report

List of Figures

xi

List of Figures

Figure 3-1: The four analytical dimensions in DECENT

5

Figure 3-2: Conceptual framework of DECENT analytical

13

Figure 3-3: Links between working steps in DECENT

15

Figure 4-1: Wind turbine sizes and

21

Figure 4-2: Wind turbine costs

23

Figure 4-3: Wind Energy Unit Costs

24

Figure 4-4: Off-shore wind energy unit costs I

28

Figure 4-5: Off-shore wind energy unit costs II

29

Figure 4-6: Hydropower Principle

30

Figure 4-7: Cost structure for a new hydropower plant

32

Figure 4-8: Level of expertise of survey participants

60

Figure 4-9: Expertise of survey participants according to energy type

60

Figure 4-10: Combined index of global environmental impact and cost production impact

62

Figure 4-11: Index of beneficial impact on global environment

66

Figure 4-12: Index of beneficial impact on cost of energy production

67

Figure 4-13: Time of occurrence for all decentralised energy topics

69

Figure 4-14: Time of occurrence by energy types

70

Figure 4-15: Time of occurrence for wind power topics

70

Figure 4-16: Time of occurrence for PV topics

71

Figure 4-17: Time of occurrence for biomass topics

71

Figure 4-18: Time of occurrence for small hydro topics

72

Figure 4-19: Time of occurrence for CHP topics

72

Figure 4-20: Time of occurrence for fuel cell topics

73

Figure 4-21: Barriers for realising the topics

73

Figure 4-22: Barriers for realising the topic by energy type

74

Figure 4-23: Barrier for wind power topics

75

Figure 4-24: Barriers for PV topics

75

Figure 4-25: Barriers for biomass topics

76

Figure 4-26: Barriers to small hydro power topics

76

Figure 4-27: Barriers to CHP topics

77

Figure 4-28: Barriers to Fuel Cell topics

77

Figure 5-1: Renewables' share of electricity generation in EU Member States, 1996

89

Figure 5-2: Approximate CHP share of total electricity production in EU Member States in 1998

91

Figure 6-1 : Four scenarios characterised by 2 drivers

96

Figure 7-1: Expert Interviews per EU Member State

107

Figure 7-2: Expert Interviews per Technology Focus

107

Figure 7-3: Distribution of Case Studies Generation Technologies

123

Figure 7-4: Distribution of Case Studies on EU Member States

123

Figure 9-1: DG and the legal and regulatory environment

141

Figure 9-2: Actor-phase diagram for DG in a liberalised market

143

Figure 9-3: Classifying renewables support mechanisms

172

Figure 9-4: Drivers for scenarios for DG futures in 2020

190

Figure 10-1: Business as usual scenario for final energy consumption in the European Union until 2030

193

Figure 10-2: Business as usual scenario for energy supply originating from within the European Union until

194

Figure 10-3: The EU dependence on imported energy

194

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DECENT Final Report

Acknowledgements

Acknowledgements

The authors would like to thank the following persons that facilitated the successful execution of the DECENT project through their valuable contributions as interview partners, case study contact persons, reviewers and/or linguistic advisors.

Thomas Ackermann, José Luis García Angulo, André Bandilla, Femke Bartels, S.I. Bestebroer, Carlos Itoiz Beunza, Hilmar Bieder, John Bird, Martin Bogaard, Mads Borup, Rien Bot, Gilles Boving, Martin Bucher, Marcello Capra, Eugene Cross, Gabriela Prata Dias, Pamela Finzer, Anna Fraccalvieri, Amparo Fresneda Garcia, Reinhard Göttlicher, Walter Graf, Reinhard Grünwald,

J.H.P. Haagen, Hans Häge, Jan Erik Hanssen, Jeremy Harrison, Mark Hinnells, Andreas Höllinger, Cynthia Horn, Jari Ihonen, Boris Jovkov, Helma Kip, Corinna Kleßmann, Michael Knoll, Søren Krohn, Stefan Lang,

Royal Institute of Technology (KTH), Sweden IDAE, Spain Plambeck Neue Energien, Germany Greenpeace Netherlands, Netherlands Agency for Research in Sustainable Energy, Netherlands EHN, Spain Tzschelln Hydropower, Germany St. Pancras & Humanist Housing Association, UK Nuon International/ Renewable Energy, Netherlands RISØ, Denmark Nuon, Netherlands Ministry of the Flemish Community, Belgium Voltwerk, Germany ENEA, Italy ECN, Netherlands CEEETA, Portugal unit[e] Germany Ancinale Idroelettrica, Italy IDAE, Spain unit[e], Germany ARGE Biogas, Austria Office for Technology Assessment at the German Parliament (TAB), Germany Medisch Centrum Alkmaar, Netherlands unit[e], Germany DG TREN, European Commission EA Technology, UK ETSU, UK unit[e], Germany RISØ, Denmark Lumituuli Oy, Finland unit[e], Germany EnergieNed, Netherlands IZT, Germany IZT, Germany Wind Turbine Manufacturers’ Association, Denmark SenerTec, Germany

DECENT Final Report

Acknowledgements

xiii

Cerstin A. Lange, Theo de Lange, Gilles Laroche, Jens Larsen, Jesper Lorentzen, Lars Malmrup, Lutz Mez, Catherine Mitchell, Gerard Moerman, João Montez, Armin Müller, Carl Henrik Neland, Lars Nielsen, Flemming Nissen, Bruno Oberhuber, Walt Patterson, Inneke Peersman, Uli Prochaska, Josef Raab, Elmar Reitter, Siegfried Rettich, Fieke Rijkers, Ulrich Sawetzki, Werner Schnurnberger, Wolfgang Schönharting, Alwin Schoonwater, Bernard Schuijt,

Knut Stahl, P. Steijn, Christoph Strobl, Søren Tafdrup, Bjørn Teislev, Klaus Thiessen, Daniela Velte, Mark van Wees, Jens Windelev, A.W.M. van Wunnik,

Energiekontor, Germany ECN, Netherlands Club Cogénération, France KMEK, Denmark DG TREN, European Commission Turbec, Sweden Freie Universität Berlin, Germany Warwick Business School, UK Public Hospital of Ronse, Belgium ECOGEN, Portugal SenerTec, Germany Vindinge Wind Turbine, Denmark DG TREN, European Commission ELSAM, Denmark Energie Tirol, Austria Royal Institute of International Affairs, UK Cogen Vlaanderen, Belgium MENAG Energie, Germany Brennpunkt, Germany Association of Small Hydro-Plants (DGW), Germany Energieagentur Lippe, Germany ECN, Netherlands Jenbacher, Austria German Aerospace Centre DLR/TT, Germany Unit Energy Portugal, Portugal Nuon International/ Renewable Energy, Netherlands Association for Wind turbine owners in North-Holland, Nether- lands T.B.E., Germany Windpark Zwaagdijk, Netherlands Thöni Industriebetriebe, Austria Danish Energy Agency, Denmark Babcock & Wilcox Vølund, Denmark WISTAsolar, Germany Prospektiker, Spain ECN Netherlands Danish Energy Agency, Denmark Project Agency for Renewable Energy – PDE, Netherlands

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DECENT Final Report

Acknowledgements

DECENT Final Report

Introduction

1

1

Introduction

Decentralised generation (DG) technologies have the potential to significantly contribute to savings in CO 2 -emissions and energy consumption. This applies both for renewable energies and decentralised CHP (combined heat and power) applications. Many studies in the field suggest, that there could be as much as 30 % reduction in final energy consumption if the po- tential could be exploited. To allow for the integration of long-term oriented goals, e.g. environmental concerns, an ap- propriate framework for renewables and decentralised CHP has to be installed. This is needed

in order to meet the EU Kyoto-target for CO2-reduction and the 12 % goal for the share of

renewable energy in 2010 . A thorough understanding of the relation of the ongoing liberalisa-

tion in the Internal energy markets to decentralised generation is of great importance for set- ting an appropriate framework for the markets to develop. As the European energy markets change from a monopoly situation to a more and more liber- alised environment, the potentials for the absorption of decentralised generation technologies also change: The recent liberalisation of the European energy markets has completely changed the way the Energy sector is functioning. New actors have appeared in the energy markets (Independent Power Producers (IPPs), Energy Service Companies (ESCOs), traders

of electricity) and decision-makers tend to be much more oriented on short-term benefits to

put up with the competition.

A key factor for the efficient mobilisation of the existing potential is a thorough understand-

ing of success factors on the project level. To overcome the barriers and constraints imposed by the liberalised market framework an efficient strategy is needed. Thus, the objectives of the present study were to identify success factors and impeding factors for decentralised generation in the liberalised European energy markets and to analyse policy implications for the setting of the appropriate frameworks. Taking that decentralised power production based on renewable energy sources and on CHP can significantly contribute to CO 2 and energy savings, the guiding research questions can be narrowed down to “How do Decentralised Generators “survive” in the liberalised markets?” and “How can the framework be influenced in order to create a level playing field and thus facilitate the development and operation of decentralised, environmentally friendly genera- tors?”. To that end the study employs a bottom-up approach which directly accesses the experience gained with decentralised generation technologies on project and regional level via a number

of case-studies. The results were then linked to an analysis of policy instruments. Supported

by the results of a futures study for DG, DECENT thus provides orienting knowledge and technical input to the Commission’s considerations with respect to installing an appropriate framework.

The present DECENT final report presents:

the basic analysis of the status and possible developments of DG technologies and mar-

kets, the critical barriers and success factors that were identified for DG in Europe and

IZT, COGEN Europe, RISØ, ECN, unit[e] and Jenbacher

October 2002

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DECENT Final Report

Introduction

and recommendations for DG-related European policies. In particular, the final report presents the working definition of “Decentralised Generation” (DG) within DECENT in order to create a clear idea of the subject of the research project and set the basis for comparison with other work done in this field (chapter 2). In the following, an insight into the methodologies used in the project is given (chapter 3). Further on, an update of the status quo of DG technologies and costs is given (chapter 4); this overview is complemented with the results of a survey on expected technology developments among European energy experts (chapter 4.3). In parallel, an overview is given on DG related policies and the use of renewables and CHP in the EU Member States (chapter 5). This is aug- mented by scenarios for Europe’s DG power generation in the year 2020 (chapter 6). Furthermore, the main elements of the empirical analysis of DECENT are given, featuring expert interviews and case study analysis (chapter 7) and critical barriers and success factors for DG in Europe (chapter 8). In the subsequent analysis of policy implications (chapter 9) barriers and success factors are discussed policy recommendations both on EU and Member State Level are being developed. The policy analysis is completed with chapters on the relation of Security of Supply and Re- search policies to DG (chapters 10 and 11). Finally, the conclusions and recommendations of the DECENT project are summarised (chapter 12).

the policy oriented analysis of policy implication in order to come up with conclusions

DECENT Final Report

What is Decentralised Generation?

3

2 What is Decentralised Generation?

A definition for the purpose of the DECENT research project.

In the scientific and energy community many views and names of decentralised generation

(DG) exist: Other often used terms are “distributed generation” and “embedded generation” 1 . Further terms often used are “distributed energy resources” or “embedded resources”. Differ-

ent aspects play roles in the perspective on the topic. The “resources” access widens the scope

to energy management techniques like energy storage and demand side management, com-

pared to the more restricted view on generation. Within the “generation” access some see an important distinction that the DG unit can be placed close to the actual power (or heat) de- mand, while others have rather the widespread use of (renewable) energy sources in mind, at the sites where they are usable which are not necessarily where the actual demand is. Other discussed factors are ownership, module size, interconnection to the power grid, grid inter- connection voltage, grid interconnection level (transmission, distribution, customer side of the meter). However there is no generally accepted definition of DG, since the objective of the stakeholders are very different. While some focus on an academical definition for electrical systems, others focus on economical aspects of grid structures, others focus on development perspectives for non-electrified regions and again others focus on environmental benefits. When defining decentralised Generation (DG) for DECENT we take into account the objec- tives of DECENT. The political background of DECENT is to research possibilities to sup- port the Kyoto targets of the EU. The idea is basically to study aspects of typically environ- mentally friendly generation technologies that bring along a new, decentralised structure to the generation network. This exercise is carried out in the framework of national energy mar- kets which are being transformed to competitive structures and a single European internal market. Thus the first restriction of a DECENT DG definition is that we look at generation technolo- gies which have no or a low environmental impact in terms of CO 2 emissions. For renewables we study PV, hydropower, wind power and biomass (single power production and CHP ap- plications). Additionally natural-gas-fired combined heat and power (CHP) installations and fuel cells which are operated in CHP mode are covered. For CHP installations an annual en- ergy efficiency of 70 % should be a benchmark.

A relatively well established academic definition 2 of DG focuses only on the connected grid

level and declares “all generators that are interconnected to the distribution grid, or on the customer side of the meter” to be DG. This should be accomplished for DECENT with an

indicative size threshold, since for political and economical analysis of DG the size of the generating unit (as well as the size of the developing and/or operating company) are of rele- vance, especially when transaction costs and market entry procedures are discussed. Since

1 Cf. i.a. the discussion that took place in the newsgroup “Distributed-Generation” in 2000 (http://groups.yahoo.com/group/distributed-generation).

2 Thomas Ackermann: “What is distributed generation?” in: Conference Proceedings “International Symp osium on Distributed Generation: Power System and Market Aspects, June 11-13, 2001, Stockholm, Sweden”

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DECENT Final Report

What is Decentralised Generation?

many of the structural conditions that DG projects face are thus linked to the installation size, and indicative upper size threshold of 10 MW e is chosen. However, as DECENT does not come forward with a legal definition of DG installation, the limit value or threshold should not be seen too strict. DECENT is thus not restricted to exa m- ine generation projects that might not be part of the formal definition, if they are interesting as a comparison object (e.g. off- shore wind park connected to the trans mission network). A formal lower size threshold for DG to be analysed is not necessary: The evaluation of DG projects (especially CHP) in the case studies, however, is restricted to sizes that are already commercialised or are close to commercialisation. On the other hand, one focus of the evalua- tion of future developments are the perspectives of small-scale CHP applications. Based on these considerations a short working definition :

Decentralised Generation in DECENT comprises all generation installations that are connected to the distribution network or on the customer side of the meter, and that are based on the use of renewable energy sources or technologies for combined heat and power (CHP) generation not exceeding a size of approx. 10 MW e .

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Outline of Research Methodology

3.1

The 4-Dimensional Analytical Approach in DECENT

The aim of the DECENT research project is to investigate the regulatory, economic, market,

social and environmental aspects that influence the development of decentralised power ge n- eration and the way they can be influenced by EU and national policies. To that end, within DECENT a four-dimensional analytical model was developed to structure the influences on the development and operation of a decentralised generation (DG) project. These four dimensions are:

I. Technology dimension

II. Market and Financial dimension

III. Policy and Institutional dimension

IV. Social and Environmental dimension

The model is depicted in Figure 3-1 and further described below:

Market/technological/ Political/Institutional social interface interface Social and environmental framework Market
Market/technological/
Political/Institutional
social interface
interface
Social and environmental framework
Market structure
Policy
DG - Project
Technology structure
Identification of
success and failure factors
Project evaluation
in 4 dimensions
Policy recommendations distinguished between EU and MS
Policy
recommendations
distinguished
between
EU and MS

Filter:

Policies on liberalisation Policies on RES / CHP Other DG TREN policies

Analysis Model
Analysis
Model

Figure 3-1: The four analytical dimensions in DECENT

Technology Dimension

The technology dimension comprises all technological aspects related to the DG project itself and the market in which it is implemented. More specifically it concerns the technical con- figuration of the DG device, the transmission and distribution (T&D) network including gen- erators, interconnection facilities, as well as technical operation, operational standards relating to safety, reliability and stability of the network, etc. Moreover, aspects that are an immediate consequence of the above technological aspects are included in the technology dimension.

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Particularly important in this respect is the environmental profile of DG technologies and the existing electricity infrastructure.

Market and Financial Dimension

The market and financial dimension covers all economic aspects of the DG project itself and the market structure in general. The market structure refers to the number and size distribution of the players, the pricing and trading mechanisms, the level of competition, the faculty of entry to and exit from the market and the form of economic regulation. Economic aspects related to the DG project include the cost of equipment, operating cost, financing, output con- tracting, fuel contracting, etc.

Policy and Institutional Dimension

The policy and institutional dimension relates to all the policy mechanisms that directly and indirectly impact on DG projects, as well as the institutional structure and mechanisms through which these policies are formed, implemented and administered. There is some over- lap with the market structure where it concerns economic regulation of the electricity market.

Environmental and Social Dimension

The environmental and social dimension comprises all environmental and social aspects re- lated to a DG project itself, the current electricity infrastructure, and the potential future elec- tricity infrastructure with an increased penetration of DG. The environmental profile of DG projects and conventional electricity supply are considered from a life cycle perspective. Spe- cific social aspects include the motivation of the project developers and project operators, job effects, regional development, and effects on communities.

Relationship between The Four Dimensions

The four dimensions help to put in perspective all the factors that are identified under the im- plementation characterisation. Moreover it helps to identify flaws, inconsistencies and voids in the analytical framework. Figure 3-1 explains the relationship between the three dimensions of the research project and the distributed generation project. The effects of policy on distributed generation projects can be both direct and indirect. The indirect effects occur through its effects on the market struc- ture in which DG is to develop, e.g. by tariff regulations, and through its effects on the tech- nological structure, e.g. by stimulating DG technology R&D, or through network expansion and upgrade regulations. The technological structure in the above diagram refers to all techno- logical aspects as described above under the technological dimension. Technology and Mar- ket also strongly influence each other. A market structure that provides few opportunities for DG will provide poor incentives for further DG technology development. On the other hand, targeted R&D policies can enhance the maturing of DG technologies, and facilitate an alterna- tive electricity infrastructure and market structure. The direct effects of policy on DG projects occur through policy measures such as direct subsidy schemes, environmental permitting, tax regulations, etc. By entering into the market DG projects of course also affect the technologi- cal and market structure.

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It should be noted that most aspects in the above dimensions are dynamic rather than static. They therefore change over the course of time. Scenarios can be developed to account for this change.

Interfaces

Two interfaces are of critical importance to the potential for DG projects and the effectiveness and efficiency of policy. These interfaces are the policy/institutional interface and the mar- ket/technological/social interface. The policy/institutional interface determines the effective- ness of the implementation of various policies, while the market/technological/social interface determines the effects of these policies on DG projects.

3.2 DG Project Stages

In addition to the above mentioned 4-dimensional structure, the DG implementation process was differentiated into project stages. Major project stages, which will i.a. be used in the analysis of policy implications in chapter 9, are:

Interconnection Contracting Financing Operation

Authorisation and Permitting

However, in the following sub chapter, a more detailed structure is presented which consti- tuted the starting point for the project stage-related analysis.

3.2.1 Detailed Characterisation of the Implementation of a DG project

The characterisation of the DG implementation traject starts with the identification of the need or opportunity for DG, and ends with decommissioning of the DG device. For illustrative pur- poses the implementation of a DG project is divided into 16 stages (see Table 3-1). These stages are not discrete consecutive steps, but are overlapping and interrelated subprocesses. Table 3-1 lists the most important project determining policy, technology and market aspects, as well as the main actors involved with each specific aspect, in each conceptual stage of DG project implementation. The table is not an exhaustive list of aspects and actors that need to be covered in the research project. Rather it provides a starting point for finding relevant is- sues for DG development and operation that are to be analysed within DECENT. Since in many policies “the devil is in the details”, it is paramount to have a more ore less complete list of potentially important issues. Detailed case studies are consequently important to support sound policy recommendations. The issues listed in the following table should be considered under the aspects e.g. of the connected risk, its development over time, its quantifiability and its importance to each of the actors involved.

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It would appear that DG project implementation is most sensitive to external factors over

which the project developer has little or no control. In this respect the following stages are particularly important:

Identification of DG need or opportunity

A

project developer must be able to identify the opportunity or need for DG of a certain kind

at

a specific location. This means that the project developer should receive clear economic

signals to guide DG project development. These economic signals may derive from the pro- ject developer, customer demand and/or from the network configuration. In the latter case network costs and constraints would ideally be clearly reflected in the electricity and T&D tariff structure. Tariff structures in turn are subject to regulation. Other factors that play an important role are the possibility of participating in green electricity markets, resource avail- ability, opportunities/need for cogeneration and process integration.

Interconnection request and contracting

Interconnection is crucial to the proposed operation and market participation. The intercon- nection procedure, technical (safety) standards and the contents of the interconnection con- tract emanating from this procedure are typically determined by transmission system opera- tors, distribution utilities and regulators. Important aspects of the interconnection procedure are the rules, timing, possibilities for appeal against decisions and mechanisms of dispute resolution.

Regulatory approval

Within liberalising electricity markets DG project developer may have to demonstrate that the project complies with electricity sector regulations and ask for regulatory approval of the pro- posed operations and market participation.

Permitting and siting

The main potential problem with permitting and siting is the time the procedures may take to acquire all the necessary permits to site a DG device. Moreover, depending on protest and appeal procedures local resistance to DG siting may play an important role.

Financing

Financing can be a sensitive issue as DG technologies are often relatively new and unknown

to the financial market. This can drive up financing cost. Furthermore, the potential financing

structure is dependent on the owner/project developer of the DG project. Market regulations and utility and TSO practices may restrict a DG’s market participation. They thereby limit the potential revenues and complicate financing. Financing also depends on the contracts for both fuel and electricity and heat output.

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Table 3-1: DG project implementation stages

DG project im- plementation stages

project determining aspects

actors 3

 

Technology:

 

planned T&D upgrades/expansions congestion relief load growth voltage drops/reactive power requirements energy losses alternative options (capacitators, etc)

Ut, PD

Ut

Ut

Identification of DG opportunity/need

Ut

Ut

TM

Market & Commercial:

fixed capital cost variable cost tariff structure T&D costs costs of lost load green electricity market resource availability (gas, wind, bio residues) cogeneration/process integration

TM TM, PD, FP Ut, TSO, PD Ut, TSO, Reg PD PD, ? PD, FP PD

Policy & Institutional:

tariff structure

Reg, Ut, TSO Gov

financial incentives

Social & Environmental developer’s motivation local wish for environmentally friendly generation regional/agricultural development plans

PD

 

Com

Com, Gov

 

Technology:

 

Technical and economic proposition/ “scoping”

Technology choice (~ operating and capacity cost, and application) generator type: synchronous/induction/inverter capacity application: base load, peak shaving, cost-optimisation, heat fuel supply to local area/grid or self-generation

PD PD, Ut PD, Ut PD, Ut PD, Ut PD, Ut, TSO

Market & Commercial:

self-generation power market participation (spot energy, capacity, ancillary services, bilateral contracts, green power, CO2 markets) financing

PD PD, Ut, Reg, TSO

PD, FI

Policy & Institutional:

 

sector regulation

Gov, Reg

spatial planning

Gov

 

Technology:

 

Preliminary project feasibility assessment

fuel infrastructure T&D infrastructure generator configuration and operation operation and maintenance

FS Ut, TSO, PD TM, PD TM, PD

Market & Commercial:

financial scoping: financing possibilities tariff structure expected project cost

FI, TM, PD TSO, Ut, Reg, MO PD

Social & Environmental support schemes for regional/agricultural development

Com, Gov

3 The abbreviations are explained at the end of the last page of the table.

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Table 3-1continued

DG project im- plementation stages

project determining aspects

Actors

 

Technology:

 

Interconnection request and contracting

 

capacity generator type: synchronous/induction/inverter location and T&D infrastructure (loop/radial) dispatch reliability system protection safety aspects: islanding/de-energised lines/isolation voltage level interconnection standards (technical and operational) interconnection facilities metering

PD

PD, Ut, TSO PD, Ut, TSO PD, TM

PD, Ut

Ut, TSO Ut, TSO C, PD, TSO, Ut, MO, Reg

Market & Commercial:

interconnection procedure interconnection cost determination and allocation power market participation stranded assets liability insurance

Ut, TSO, Reg Ut, TSO, Reg, PD TSO, Reg, Ut, PD Ut, TSO, Reg Ut, TSO, PD

Policy & Institutional:

 

regulatory approval

Reg, PD

 

Technology:

 

Permitting/siting

 

emissions profile (abatement options) noise pollution visibility issues fuel infrastructure adjustments (environmental risks?) T&D infrastructure adjustments Waste

PD, TM PD, Com, Gov PD, Com, Gov Reg, FS, Gov, PD Ut, TSO, Gov PD, TM, Gov

Policy & Institutional:

environmental regulation public consultation and appeal procedures

Gov

 

Gov, Com

 

Technology:

 

Financial feasibility assessment

 

Reliability Detailed technical design:

TM

Technology and fuel choice capacity/efficiency emission control technology fuel delivery, storage, preparation, administration interconnection facilities heat transport

PD PD, TM Reg, TM, PD FS, PD, TM Ut, TSO PD, TM

Market & Commercial:

tariff structure: backup/standby charges, exit fees, sharing in network benefits market pricing mechanisms interconnection cost allocation fixed capital cost variable cost insurance

Ut, TSO, Reg, Ut, TSO, Reg, MO Ut, TSO, Reg TM TM PD

 

Policy & Institutional:

tax and fiscal policies

Gov

Imple-

mentation

decision

All previous and expected following

PD

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Table 3-1continued

DG project im- plementation stages

project determining aspects

actors

 

Technology:

 

Novelty/experience Reliability Market & Commercial:

FI, TM

Financing

 

TM, FI

tariff structure power purchase agreements market pricing mechanisms competition

Ut, TSO, Reg PD, C Ut, TSO, Reg, MO

 

Policy & Institutional:

tax regulations

Gov

Power/heat

 

Technology:

 
 

contracting

reliability

PD, TM PD, TM TSO, Ut, PD

output

capacity

dispatch

 

Technology:

 

Procurement

of equipment

 

TM

manufacturing, economies of scale shipping

TM

 

Technology:

 

fuel infrastructure fuel capacity fuel supply reliability dual fuelling capability gas pressure fuel quality (heating value, chemical composition) safety aspects

FS

Fuel procurement and contracting

 

FS

FS

PD, TM

FS

FS

PD, TM

Market & Commercial:

fuel prices

FS

Policy & Institutional:

 

tax regulations

Gov

 

struction

 

Technology:

 

Con-

construction lead time

CC

 

Technology:

 

Implementation of metering, accoun- ting and data ma n- agement systems

metering equipment

Ut, TSO, Reg, PD, TM, C SE, PD

accounting software

Physical

intercon-

 

Technology:

 

nection

interconnection facilities Market:

Ut, TSO, Reg Ut, TSO, Reg, PD,

market participation (interface)

MO

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Table 3-1continued

DG project im- plementation stages

 

project determining aspects

 

actors

 

Technology:

 

Commercial operation

 

reliability

TM, PD

capacity

PD

maintenance

PD

Market:

market participation

PD

contracting

PD, C PD, MO, TSO, Ut PD, MO, TSO, Ut

accounting

settling

PD

Environmental:

 

operational environmental performance

 
 

Technology:

 

Decom-

mission-

 

safety

DC

ing

Market:

salvage value decommissioning reserve

 

C

 

PD

List of abbreviations of actors:

 

C

customer

FS

fuel supplier

SE

Software Engineers technology manufacturer

CC

constructio n contractor

Gov

government

TM

Com

local community

MO

market operator

TSO

transmission system operator utility

DC

decommissioning contractor

PD

project

developer 4

FI

financial institutions

Reg

regulator

Ut

4 The PD does not have to be a small independent power producer. It can for example also be an industrial con- sumer, a municipality, an office bloc, a shopping mall, a utility, or even a system operator.

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3.3 Conceptual Framework

Literature Review & Expert Interviews

Framework Literature Review & Expert Interviews Overview Policy & Institutional Market &

Overview

Policy & Institutional

Market & Financial

Technology

Social & Environmental

EU liberalisation policy Other EU policies Member States:

Member States:

- Externalities

- Motivation of DG

- Progress of

- T&D infrastructure

developer

liberalisation

aspects

- Regional econonmic

- Progress of

- Market structure

- technology options

structure

liberalisation

- Economic valuation

- technological

- Ecological impacts

- Relevant policies

- Market interfaces

interfaces

- Institutional setting

Market interfaces interfaces - Institutional setting Further identification, specification, actualisation and

Further identification, specification, actualisation and prioritisation of policy, market technological aspects that need to be considered, plus working definition of DG

that need to be considered, plus working definition of DG Overview on relevant issues for the
that need to be considered, plus working definition of DG Overview on relevant issues for the

Overview on relevant issues for the development and operation of DG installation

issues for the development and operation of DG installation Identification and categorisation of case studies

Identification and categorisation of case studies Identification of uncovered aspects - focusing of case studies

of uncovered aspects - focusing of case studies Case Studies Empirical complementation, illustration and

Case Studies

Empirical complementation, illustration and validation of the outcome of literature review and expert interviews. Analysis of specific priority issues.

Discounted Cash Flow Analysis

Identification of main policy and economic sensitivities of DG

Future Analyses

Future study survey - working with results to explore future scenarios for the role of DG

Policy Implications

Analysis of possible impacts of EU / national policy fields on identified issues

impacts of EU / national policy fields on identified issues Peer Review Results: key barriers and

Peer Review

Results:

key barriers and success factors (sensitivities, technical factors and policy levers Policy Recommendations

Figure 3-2: Conceptual framework of DECENT analytical methods.

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The conceptual framework is illustrated in Figure 3-2 on the previous page:

The project started with an extensive literature review and expert interviews to get an over- view of technology, policy, market and social/environmental aspects that affects DG project implementation. As a starting point for this inventarisation a matrix featuring DG project im- plementation stages, determining aspects, and relevant actors was developed. An overview on the relevant issues then gives a clear picture of the entire subject field. This overview guided the process of identifying and selecting case studies, and helped to ensure that all priority as- pects are covered by one or more case studies. The result of all previous steps was a descrip- tion of barriers and potentials for the implementation of DG projects. Within the case studies different analysis steps are carried out:

Where the economical data was available in sufficient detail, an economical evaluation of the DG development was performed with the help of a discounted cash flow (DCF) model, which also allowed to vary relevant input parameters in order to model the influence of different policies/ framework conditions. In addition social and environmental effects, as well as the influence of energy, tax, environ- mental, permitting/siting and spatial planning policies and frameworks are analysed. This was used to further clarify the critical issues for DG developments within the given na- tional settings. As the direct result of the case study analysis (in combination with the previous working steps) a number of barriers and success factors for DG project were identified which were used to focus the analysis of policy implications.

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The link between the case studies, the futures study, and policy recommendations are further explained in Figure 3-3:

literature review /

literature review /

interviews

interviews

case studies

case studies

/ interviews interviews case studies case studies Issues Issues barriers and barriers and success factors
Issues Issues barriers and barriers and success factors success factors
Issues
Issues
barriers and
barriers and
success factors
success factors
barriers and barriers and success factors success factors Future study - Future study - visions visions

Future study -

Future study -

visions

visions

Policy instruments / Policy instruments / Current policy Current policy best practices best practices evaluation
Policy instruments /
Policy instruments /
Current policy
Current policy
best practices
best practices
evaluation
evaluation
Policy packages
Policy packages
Policy analysis
Policy analysis
Peer review
Peer review

Policy recommendations

Policy recommendations

Figure 3-3: Links between working steps in DECENT

The outcome of the literature review and the expert interviews were condensed to a number of approximately 20 relevant issues/hypotheses. These issues were especially checked in the case studies. The issues thus finally identified as barriers and success factors, were input to both futures studies and policy implications analysis:

In the futures study these issues are integrated in a Delphi- style survey (featuring addi- tional technological items, e.g. development of PV, fuel cells, micro-CHP) in order to submit them to the evaluation of experts, identify key drivers, and elaborate visions of DG development. These visions were then used in the policy analysis for validation purposes in a robustness check.

In the policy implications analysis these issues serve as a basis for the identification of best practices and barriers (“worst practices”) and, based on that, for the elaboration of policy options. For all issues it is checked, whether they can be approached within the framework of current EU level policies (DG TREN), or whether they could be ap- proached through future commission’s initiatives or through policies on Member State level.

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Policy recommendations are thus based on evaluation of policy instruments, best practices, current policies, and future visions. The recommendations were finally subject to a peer re- view before final results are were presented in a workshop 5 .

5 “The European Energy Market – Liberalisation, Decentralisation, Cogeneration” Joint workshop with the CHP STAGAS project (funded by the EU under the SAVE programme). Brussels, European Commission, DG TREN, 9 th July 2002

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4

Status Quo and Developments of DG Technology

In

this chapter, first an overview on present DG technologies and their cost structures is given.

Here, technologies based on renewable energy sources (PV, wind power, hydropower, bio- mass) are covered as well CHP technologies based on natural gas (both combustion machines and fuel cells). Second, the results of a survey on future developments of DG technologies in Europe are pre- sented. This survey and the building of scenarios (cf. chapter 6) were part of the futures study

that was performed in the framework of DECENT.

4.1 Renewable Energy Sources

4.1.1 Photovoltaics

Photovoltaic (PV) solar cells consist of semiconductor materials that produce electric current when exposed to sunlight (photo effect). PV- systems exist in a broad range of sizes, from mi- cro applications in the milliwatt range up to large power generation plants of several mega- watt capacity. Regarding decentralised generation, the commonly used PV-systems combine standard modules of 50 or 100 watt each.

4.1.1.1 Types of photovoltaic cells

Today there are basically three types of industrial manufactured photovoltaic cells in use:

mono-crystalline silicon cells, which hold a share of app. 50% of the world market, multi- crystalline silicon cells with a market share of app. 30%, and amorphous silicon cells, which hold a market share of app. 20%. Crystalline cells are made out of wafers cut from a large silicon block. Mono-crystalline cells reach with 13-15% the highest conversion efficiency, followed by multi-crystalline cells with 12-14%. Significantly higher efficiencies of up to 24% can be reached with high efficiency silicon cells, but they are still in the stage of pilot production 6 . Amorphous cells consist of a very thin and flexible layer of uncrystallised silicon that is de- posited on a carrier material (mostly glass). Their conversion efficiency only reaches about 6- 8%, but since they are better suited to cost- effective mass production processes, they are in- creasingly regarded as the preferred option for PV-modules in the long term. Several other thin-film technologies - notably Cadmium Telluride and Copper Indium Diselenide - are now

approaching the commercialisation stage.

4.1.1.2 Photovoltaic modules

A PV-module is composed of interconnected cells that are encapsulated between a glass cover

and weatherproof backing. The modules are typically framed in aluminium frames suitable for mounting. Typical sizes of modules are 0.5 x 1 m 2 and 0.33 x 1.33 m 2 , and they contain about 40 cells. However, modules of any desired size can be produced, although in practice, modules larger

6 Fuhs, p.14, Umweltbundesamt, p.36f.

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than 1m 2 are not often used. Typical modules reach a performance of 50 or 100, sometimes

150 watt. In Northern Europe, the average energy harvest of a module is 750-850 kWh/kW p ,

in Southern Europe, significantly higher figures are reached.

A sub-optimal placement of a module, e.g. a false angle or orientation, leads to significant

performance losses. If part of the module is shaded, the performance will break in drastically, since the current produced by the other cells is consumed by the shaded cells. To limit these losses, bypass diodes are sometimes built in parallel to a string of cells, so the current can bypass the shaded cells.

4.1.1.3 Photovoltaic systems

A photovoltaic system consists of one or more photovoltaic modules. The PV-modules are

connected in series and parallel to form an array of modules, thus increasing total available power output to the needed voltage and current for a particular application. Because PV- generators are built with PV- modules of 50 or 100 watts each, photovoltaic systems are ex- ceptionally modular, which provides for easy transportation and rapid installation, and enables

easy expansion if power requirements increase. To be able to use the generated electricity, more components need to be added to the system. PV-systems for stand-alone applications may comprise also a control, storage (e.g. battery), cables and a load (e.g. lights, radio, television). PV-systems for grid-connected applications need an inverter to convert the Direct Current (DC), generated by the PV-modules, into Alter- nating Current (AC). Stand-alone systems are rarely installed in industrialised countries. However, even in these countries some off-grid applications exist for which PV-systems prove to be a suitable and

economical attractive option, e.g. lighting and other low-voltage applications in isolated areas.

In the third world, the potential for stand-alone PV-systems is extremely high, since few

countries have an extended power grid.

In a grid-connected system the grid acts like a battery with an unlimited storage capacity.

Therefore its total efficiency will be better than the efficiency of a stand-alone system, even

though the inverter causes energy losses. As long as only the power generation costs are com- pared, nowadays grid-connected PV-systems cannot financially compete with other power generation technologies, neither conventional nor renewable. If the avoided pollution of the environment and the positive image are taken into account, the PV-technology becomes much more attractive.

4.1.1.4 Costs

The investment costs of a photovoltaic system based on mono-crystalline cells are estimated

to

7 €/W p for small plants (~2 kW p ) and 5 €/W p for large plants (~100 kW p ) 7 . More than half

of

the costs are caused by the modules.

The power generation costs are derived to approximately 0.75 €/W p for small plants and 0.50 €/W p for large plants (>100 kW p ) 8 . Another source mentions 0.35 – 0.70 €/W p for multi- crystalline cells 9 .

7 Staiss, p.I-60

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In

the last ten years, the overall costs decreased by almost 50% 10 . A further decrease of 50%

is

expected until 2010 if the production volume will continue to increase by 20% every year 11 .

A

typical distribution of investment cost for PV installations in Germany is given in the fo l-

lowing table:

Table 4-1: Average PV costs in Germany

Component

Cost (€/W peak)

Frame / rack

0.75

Module

3.75

inverters

1.25

Wiring

0.5

Erection

0.75

Total

7.0

Source: Prochaska 2001

4.1.1.5 Environmental considerations

PV-systems pose few environmental problems. The generating component produces electric- ity silently and does not emit any harmful gases during operation. The basic photovoltaic ma- terial for most common modules (silicon) is entirely benign, and is available in abundance. There are, nevertheless, some potential hazards allied to the production of some of the more exotic thin film technologies. The two most promising options, cadmium telluride and copper indium diselenide, both incorporate small quantities of cadmium sulphide, which poses poten- tial cadmium risks during module manufacture and the later disposal. One criticism of early PV-modules was that they consumed more energy during their produc- tion than they generated during their lifetime. With modern production methods and improved operational efficiencies this allegation is no longer true. The exact energy payback is obvi- ously dependent on the availability of solar resource and on the degree to which the system is operational. Typically energy payback will be realized within two years for thin-film and app. seven years for mono-crystalline cells 12 . Other sources estimate payback-times of 2-5 years for poly- and multi-crystalline cells 13 .

8 Staiss, p.I-60

9 Kaltschmitt/Wiese, p. 233

10 Staiss, p. I-59

11 Fuhs, S.17

12 Fuhs, p. 16

13 IEA, Knapp/Jester

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4.1.2 Wind Turbines

4.1.2.1 Introduction

Within the last 10 years wind power has on a global scale developed incredible fast. In 1990 total installed capacity of wind power in the World amounted to approx. 2.0 MW – by the end of 2000 this capacity has increased to 18.5 GW. This more than nine fold increase equals an annual growth rate of almost 25%. And the rate of growth is still high - in 1999 global in- stalled capacity increased by 37 % and by 32% in 2000. But European countries dominate the wind power scene. In 2000 more than 85% of total installed wind turbine capacity was estab- lished in Europe, and the only major contributors outside Europe were the US with a total installed capacity of approx. 2.6 GW and India with 1.2 GW [BTM Consult 2001]. But even within Europe a few countries are the dominant ones: Germany, Spain and Denmark accounts for approx. 85% of the growth in European installed wind turbine capacity in 2000, and correspondingly these three countries together has installed more than 80% of the total accumulated capacity in Europe. Especially Germany has had a rapid development. In 1991 total accumulated capacity in Germany was approx. 100 MW; by now the annual capacity increase is approx. 1600 MW and total installed wind power capacity is above 6.1 GW. Simi- lar developments are found in Denmark and Spain, although not to the same extent. Denmark by now has a total installed capacity of almost 2.4 GW and a growth rate of almost 35% in 2000, while Spain in total has installed 2.8 GW with a tremendous growth rate of more than 50% in 2000. Other contributors in Europe to be mentioned are the Netherlands (0.5 GW), UK (0.4 GW), Italy (0.4 GW), Greece (0.3 GW) and Sweden (0.3 GW) [BTM Consult 2001]. The main reasons behind the development in these three above-mentioned dominant countries in Europe (i.e. Germany, Spain and Denmark) is a fast improvement of the cost-effectiveness of wind power during the past ten years [Redlinger et al. 1998], combined with long-term agreements on fixed feed-in tariffs (at fairly high levels), altogether making wind turbines some of the most economically viable renewable energy technologies today [European Com- mission 2000]. And the national policies of fa irly high buy- back rates and substantial subsi- dies from governments to a certain extent reflect the need for a development of renewable energy technologies to cope with the greenhouse gas effect. According to the Kyoto protocol the European Union has agreed on a common greenhouse gas (GHG) reduction of 8% by the years 2008-12 compared with 1990. And all the three above-mentioned countries have adopted a policy of GHG-limitations in accordance with the agreed burden sharing in EU.

4.1.2.2 Economics of Wind Energy

Wind power is used in a number of different applications, including both grid-connected and stand-alone electricity production, as well as water pumping. This section analyses the eco- nomics of wind energy primarily in relation to grid-connected turbines, which account for the vast bulk of the market value of installed turbines.

The main parameters governing wind power economics include the following:

Investment costs, including auxiliary costs for foundation, grid-connection, and so on.

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Operation and maintenance costs

Electricity production / average wind speed

Turbine lifetime

Discount rate

Of these, the most important parameters are the turbines’ electricity production and their in- vestment costs. As electricity production is highly dependent on wind conditions, choosing the right turbine site is critical to achieving economic viability. The following sections outline the structure and development of land-based wind turbines’ capital costs and efficiency trends. Offshore turbines are gaining an increasingly important

role in the overall development of wind power, and they are thus treated in detail in a separate section. In general, two trends have dominated grid-connected wind turbine development:

1)

The average size of turbines sold on the market has increased substantially

2)

The efficiency of production has increased steadily.

Figure 4-1 shows the average size of wind turbines sold each year using the Danish market as a proxy. As illustrated in Figure 4-1 (left axis), the average size has increased significantly, from less than 50 kW in 1985 to almost 1 GW in 2000. In late 2000 the best-selling turbine had a rated capacity of 750-1000 kW, but turbines with capacities of the MW-size are increas- ing their market shares.

1980 1983

1986 1989 1992 1995 1998

1000 1000 900 900 800 800 700 700 600 600 500 500 400 400 300
1000
1000
900
900
800
800
700
700
600
600
500
500
400
400
300
300
200
200
100
100
0
0
kW
kWh/m2/year

Average size (left axis)700 700 600 600 500 500 400 400 300 300 200 200 100 100 0 0

Yearly production600 600 500 500 400 400 300 300 200 200 100 100 0 0 kW kWh/m2/year

(right axis)

Development of average wind turbine size sold in the market (left axis) and efficiency, measured as kWh produced per m2 of swept ro- tor area (right axis).

Figure 4-1: Wind turbine sizes and productivities.

Comparing to other countries the Danish market is fairly representative for the development of the average size of turbines sold. The average size sold in Denmark in 2000 was 930 kW – only Germany was above with an average size of 1100 kW, while the average in UK and Sweden was approximately 800 kW and approximately 650-700 kW in Spain and US.

IZT, COGEN Europe, RISØ, ECN, unit[e] and Jenbacher

October 2002

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The development of electricity production efficiency is also shown in Figure 4-1, measured as annual energy production per swept rotor area (kWh/m 2 on the right axis). Measured in this way, efficiency has increased by almost 3 percent annually over the last 15 years. This im- provement in efficiency is due to a combination of improved equipment efficiency, improved turbine siting, and higher hub height. The decrease in efficiency shown in Figure 4-1 are due to a lower average wind speed at those sites available for the latest established turbines 14 . Capital costs of wind energy projects are dominated by the cost of the wind turbine itself (ex works) 15 . Table 4-2 shows a typical cost structure for a 1 MW turbine in Denmark. The tur- bine’s share of total cost is approximately 83 percent, while grid-connection accounts for ap- proximately 8 percent and foundation for approximately 4 percent. Other cost components, such as control systems and land, account for only minor shares of total costs.

Table 4-2: Cost structure for a 1MW wind turbine

 

Investment

Share

(1000 €)

(%)

Turbine (ex works) Foundation Electric installation Grid-connection Control systems Consultancy Land Financial costs Road

870

82.7

40

3.8

20

1.9

80

7.6

2

0.2

8

0.8

15

1.4

10

0.9

7

0.7

Total

1052

100

Note: Based on Danish figures for a 1 MW turbine, using average 2000 ex- change rate 1€ = 7.45 DKK.

Figure 4-2 shows changes in capital costs over the years. The data reflects turbines installed in the particular year shown. All costs at the left axis are calculated per kW of rated capacity, while those at the right axis are calculated per swept rotor area. All costs are converted to

1999

prices. As shown in the figure, there has been a substantial decline in per-kW costs from

1989

to 1996. In this period turbine costs per kW decreased in real terms by approximately 4

percent per annum. At the same time, the share of auxiliary costs as a percentage of total costs has also decreased. In 1989 almost 29 percent of total investment costs were related to costs other than the turbine itself. By 1996 this share had declined to approximately 20 percent. The trend towards lower auxiliary costs is continuing for the last vintage of turbines shown

14 The efficiency measure is based upon Danish turbine statistics and sites available for new turbines are increas- ingly getting more limited in number.

15 ‘Ex works’ means that no site work, foundation, or grid connection costs are included. Ex works costs include the turbine as provided by the manufacturer, including the turbine itself, blades, tower, and transport to the site.

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(1000 kW), where other costs amounts to approximately 17 percent of total costs. But a little surprisingly investment costs per kW have increased for this last- mentioned machine com- pared to a 600 kW turbine. The reason has to be found in the dimensioning of the turbine. With higher hub heights and larger rotor diameters the turbine is equipped with a relative smaller generator although it produces more electricity. This is illustrated in Figure 4-2 at the right axis, where total investment costs are divided by the swept rotor area. As shown in this figure the cost per swept rotor area has decreased continuously for all turbines considered. Thus, overall investment costs per swept rotor area have declined by approximately 3 percent per year during the period analysed.

1200 600 150 kW 225 kW 1000 500 300 kW 1000 kW 500 kW 600
1200
600
150 kW
225 kW
1000
500
300 kW
1000 kW
500 kW
600 kW
800
400
600
300
400
200
200
100
0
0
1989
1991
1993
1995
1996
2000
€/kW
€ per swept rotor area

Year of installation

Price of turbine per kW1993 1995 1996 2000 €/kW € per swept rotor area Year of installation Other costs per

Other costs per kW1995 1996 2000 €/kW € per swept rotor area Year of installation Price of turbine per

Total cost per swept m21993 1995 1996 2000 €/kW € per swept rotor area Year of installation Price of turbine

Left axis: Wind turbine capital costs (ex works) and other costs per kW rated power (€/kW in constant 1999 €). Right axis: Investment costs divided by swept rotor area (€/m2 in constant 1999 €).

Figure 4-2: Wind turbine costs

Reductions in capital costs are expected to continue for the foreseeable future. EPRI [EPRI 1997], for instance, predicts that capital costs per swept area ($/m 2 ) should decline by 23 per- cent between 1997 and 2000, and by a further 10 percent between 2000 and 2005.

The total cost per produced kWh (unit cost) is calculated by discounting and levelling invest- ment and O&M costs over the lifetime of the turbine, divided by the annual electricity production. The unit cost of generation is thus calculated as an average cost over the turbine’s lifetime. In reality, actual costs will be lower than the calculated average at the beginning of the turbine’s life, due to low O&M costs, and will increase over the period of turbine use.

Figure 4-3 shows the calculated unit cost for different sizes of turbines based on the above- mentioned investment and O&M costs, a 20 year lifetime, and a real discount rate of 5 percent per annum. The turbines’ electricity production is estimated for roughness classes one and

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two, corresponding to an average wind speed of approximately 6.9 m/s and 6.3 m/s, respec- tively, at a height of 50 meters above ground level.

12 10 8 6 4 2 0 95 150 225 300 500 600 1000 kW
12
10
8
6
4
2
0
95
150
225
300
500
600
1000
kW
€cent/kWh

Average wind speed 6.9 m/s12 10 8 6 4 2 0 95 150 225 300 500 600 1000 kW €cent/kWh

Average wind speed 6.3 m/s12 10 8 6 4 2 0 95 150 225 300 500 600 1000 kW €cent/kWh

Total wind energy costs per unit of electricity produced, by turbine size, based on hub height of 50 meters. (€ cents/kWh, constant 1999 prices).

Figure 4-3: Wind Energy Unit Costs

Figure 4-3 illustrates the trend towards larger turbines and greater cost-effectiveness. For a roughness class one site (6.9 m/s), for example, the average cost in 1999 € has decreased from over 7.4 €cents/kWh for the 95 kW turbine to under 4 €cents/kWh for a new 1000 kW ma- chine, an improvement of more than 45 percent over a time span of 10-11 years.

The discount rate has a significant influence on electricity production costs and hence on wind projects’ financial viability. For a 1000 kW turbine, changing the discount rate from 5 to 10 percent per year (in real terms) increases the production cost by a little more than 30 percent.

Observe that wind energy project capital costs as reported by the International Energy Agency [IEA 1997] show substantial variation between countries, due to factors such as market struc- tures, site characteristics, and planning regulations. According to the IEA, total wind project capital costs vary between approximately US$ 900/kW and US$ 500/kW in different coun- tries. Caution should therefore be exercised in making cross-country cost comparisons, par- ticularly as currency exchange rates also significantly impact apparent costs in any given country.

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4.1.2.3 The development of offshore turbines in Denmark

In a number of countries offshore turbines are getting an increasingly important role in the

development of wind power, particularly in the north-western part of Europe. Without doubt the main reasons are that on-land sitings are limited in number and that the utilization of these sites to a certain extent is exposed to opposition from the local population. More over, there seems to be fewer restrictions on the utilization of offshore sitings. This seen in relation to an unexpected high level of energy production from offshore turbines compared to on-land sit- ings (based on the experiences gained until now), has paved the way for a huge interest in offshore development. What follows are mostly based on Danish experiences.

A number of different interest groups are struggling for rights to the sea. Among these can be

mentioned: the fishing industry, the navy, nature conservancy associations and marine ar- chaeologists. To select an area for wind turbine sitings and at the same time meet the most important claims of the other parties, the Danish Government set up a committee to define the main areas in Danish waters suitable for establishing offshore wind farms. In total an area of approx. 1000 square kilometres has been pointed out, corresponding to the siting of 7000- 8000 MW wind turbines. Most of the areas are located at a distance from the coast of 15-30 kilometres, and at a water depth of 4-10 meters [Fenhann et al. 1997]. In total four areas were identified.

In collaboration between the Danish Utilities and the Danish Energy Agency the possibilities

for utilizing these areas for offshore turbines were evaluated and an action plan put forward. The plan states that 750 MW of wind power has to be established before 2008 with the Dan- ish utilities as the main entrepreneur. If the wind farms are equipped with 1.5 - 2 MW tur- bines, it will be possible to achieve a production cost for electricity of approx. 4.7 to 5.1 cEUR per kWh, thus ranging at the same level of production costs as an on-land siting with average wind conditions 16 .

In Germany a strong development of offshore turbines is foreseen. In a first phase up to

500 MW will be established (until 2007), followed by 2000-3000 MW until 2010. In the sec- ond development phase until 2030 a total installed capacity of 20000-25000 MW is planned, delivering 70-85 TWh per year.

Looking at the total North Sea area (the seabed of UK, Belgium, The Netherlands, Germany and Denmark) a total potential of more than 1900 TWh/year is estimated, more than three times as much as the total annual electricity consumption in these countries [Greenpeace

2000].

At present a number of offshore wind farms are in operation in the northern part of Europe. To mention some of the larger farms these are [BTM Consult 2001]:

16 Cf. [Action plan for offshore turbines 1997]

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Middelgrunden (Denmark) east of Copenhagen was put in operation in 2001. At present Middelgrunden is the largest offshore farm in the World, consisting of 20 2 MW turbines

Ijsselmeer (Netherlands) is the World’s second largest offshore farm equipped with 28 600 kW, a total capacity of 16.8 MW.

Utgrunden (Sweden) established in 2000 has a total capacity of 10.5 MW and consists of 7 1.5 MW turbines.

Tunø Knob (Denmark) is located east of Jutland with a total capacity of 5 MW (10 tur- bines of 500 kW each). Tunø Knop was installed in 1995.

Vindeby (Denmark) is located northwest of the isle of Lolland with a total capacity of 4.95 MW. The wind farm was established in 1991 and consists of 11 450 kW turbines.

Quite a number of offshore wind power projects are in the planning and implementation phase. In Denmark four large offshore farms with a total capacity of more than 600 MW are on the way, as part of the overall Parliament agreement of establishing 750 MW offshore farms before 2008. The Horns Rev project (west of Esbjerg) with a total capacity of 160 MW (2 80 MW machines) is commissioned by now and expected to be finished in 2002. Rødsand (approximately 150 MW) close to Lolland had called for tenders in the summer 2001 and a decision is expected the autumn. Rødsand is expected to be finalized in 2003-2004.

In Germany approximately 800 MW is expected to be installed within the ne xt 5 years, in- cluding a large offshore farm with Helgoland with a total capacity of 500 MW to be installed by 2005. Ireland are planning to develop approximately 750 MW before 2005, the Nether- lands 340 MW before 2003 and UK almost 340 MW before 2005 [BTM Consult 2001].

Fundamentally, wind power is a decentralised technology. To a certain extent this is the case for offshore turbines as well. Small-scale offshore wind farms (5 – 50 MW) still maintain some of the same characteristics as on-land turbines. Thus, they will mainly produce to fulfil the power needs of electricity customers living fairly nearby. But the larger the offshore wind farms get the more they come to look like actual electricity producing plants. The large off- shore farms of 150 to 200 MW will deliver directly to the high-voltage grid and cannot in their character be considered decentralised. At the same time these large offshore farms are to have a number of regulatory capabilities, required by the authorities.

To illustrate the economics of offshore wind turbines, the Tunø Knob wind farm (located in Denmark) is chosen as an example 17 . The farm consists of 10 turbines each with a rated ca- pacity of 500 kW (total capacity 5 MW) and it is located 6 kilometres from the coast, at a depth of sea of approx. 3.1-4.7 meters. Each turbine has its own foundation (concrete), which is placed at the sea bottom. Through a transmission cable the turbines are connected to the high voltage grid at the coast. The farm is operated from a power plant nearby, and no staff is

17 Tunø Knop is the most recent Danish offshore wind farm, where it is possible to get actual, reliable data.

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required at the site. The investment costs related to this farm are shown in Table 4-3 [Fenhann et al. 1997]. Table 4-3: Investment costs related to the Tunø Knob wind farm

 

Investments

Share

Mill. €

%

Turbine ex work

4.6

40

Transmission cable (sea)

- to the coast

1.4

12

- between the turbines

0.6

5

Transmission cable (land) Electricity systems Foundations Operating and control systems Environmental analysis

0.5

4

0.4

4

2.6

22

0.2

2

1.2

11

Total

11.5

100

Note: 2000 prices, Exchange rate 1 € = 7.45 DKK.

Compared to land-based turbines the main differences in the cost structure are related to 2 issues:

Foundations are considerably more costly for offshore turbines. The costs depend on both the sea depth, and the chosen principle of construction. For a conventional turbine sited on land, the share of the total cost for the foundation normally is approx. 4-6%. In the Tunø Knob project this percentage is 22% (cf. Table 4- 3), and thus considerably more expen- sive than for on-land sitings. It must be mentioned, however, that developing foundations for Tunø Knob was a pilot project, and therefore not optimised.

Sea transmission cables. Connections between the turbines and from the turbines to the coast generate additional costs compared with on-land sitings. For Tunø Knob wind farm the cost share for sea transmission cables is 17%, (cf. Table 4-3).

Finally, a number of environmental analyses were carried out in relation to the Tunø project. These include investigation of the sea bottom especially concerning materiel left behind from military activities, a project for clarifying the impact of the wind farm on bird life and, finally, one visualizing the wind farm itself. The cost share for environmental analysis at the Tunø Knob farm is 11%, but part of these costs are related to the pilot character of this project and is not expected to be repeated next time an offshore wind farm will be established. The total electricity production from the Tunø Knob wind farm has turned out to be higher than expected, showing a utilisation time of almost 3100 hours. Using this production, the above-mentioned investment costs, a real interest rate of 5% and a lifetime of 20 years, the production costs per kWh amounts to approx. 6.8 €cent (2000 prices) [Fenhann et al. 1997]. Recently, a number of projects have been carried out in Denmark, especially in relation to minimising the cost of foundations for offshore turbines. Based on [Elsamprojekt 1997], the most important findings will be stated briefly in the following:

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Using a 1500- kW wind turbine as reference, foundation costs are in general esti-

mated to be only slightly higher (approx. 30%) than experienced for the 500 kW turbines at Tunø Knob wind farm. The main reason for this is that the newly de- veloped foundations are made of steel rather than concrete, as used in the Tunø Knob project. Although, of course, the foundation cost increases with sea depth, this increase is

less than linear. Depending on type of construction and the analysed locality, when the sea depth is increased from 5 to 11 meters the foundation cost goes up only 12 to 34%. Three types of foundations are analysed in [Elsamprojekt 1997]: Mono- pile, Grav- ity and Tripod. The cost estimates are found to be remarkably close for all three types, with a maximum variation of approx. 12% at the same location.

9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 500 kW 600 kW 750
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
500 kW
600 kW
750 kW
1000
1500
existing
kW
kW
€cent/KWh

Rated power of turbine

The cost of electricity produced as a function of the rated power of an offshore wind turbine. (2000- prices, exchange rate 1 € = 7.45 DKK)

Figure 4-4: Off-shore wind energy unit costs I

The consequences for the electricity production costs of moving towards larger turbines in the sea are illustrated in Figure 4-4. As reference is shown the electricity production cost at the Tunø Knob wind farm, which is compared with the production cost for turbines with a higher rated capacity. The turbines are assumed to be located at the same distance from the coast and at a sea depth of approx. 5-6 meters. As shown in Figure 4-4 the cost per kWh produced is expected to decrease from approx. 6.8 €cent (Tunø Knob 500-kW turbine) to approx. 4.6 €cent for a 1500-kW turbine.

The closer the wind farm is located to the coast and the higher the energy production from the farm, the lower will be the cost to the sea transmission cable per unit of electricity produced. How these two parameters affect electricity production is illustrated in Figure 4-5. To estab- lish Figure 4- 5, data is collected for three sizes of wind farms: a small one of 7.5 MW (com- parable to Tunø Knob), a medium- size farm of approx. 30 MW (comparable to Middelgrun- den offshore wind farm) and a large wind farm of 100-200 MW (comparable to Horns Rev

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and Rødsand offshore wind farms to be implemented in Denmark). All are equipped with 1.5 MW turbines.

10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 7.5 30 100 200
10.00
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
7.5
30
100
200
€cent/KWh

MW

km10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 7.5 30 100 200 €cent/KWh

30

km10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 7.5 30 100 200 €cent/KWh

15

5 km10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 7.5 30 100 200 €cent/KWh

The cost of electricity production as a function of distance to the coast and the capacity of the wind farm. (2000- prices, exchange rate 1 € = 7.45 DKK)

Figure 4-5: Off-shore wind energy unit costs II

The distance to the coast has a substantial impact for small farms especially on coast. As shown in Figure 4-5 the production cost rises from 4.6 to 6.5 €cent for a 7.5 MW farm, when the distance to the coast goes out from 5 to 30 kilometres. Increasing the capacity of the wind farm lowers the cost per unit of electricity produced significantly. When the distance to the coast increases from 5 to 30 kilometres the electricity production cost for a 200 MW wind farm increases from only 3.9 to 4.2 €cent.

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4.1.3 Hydro power

4.1.3.1 Capacity and potential

Hydropower holds presently the largest share of power production from renewable energy, both world-wide an in the EU. Hydropower accounts for about 17 % of global generating ca- pacity, and about 20 % of the electricity produced each year 18 : With a total global power pro- duction in 1997 of 13,300 TWh the share of hydropower was 2,600 TWh 19 . However, the share of Hydropower in 1997 EU gross inland electricity consumption was only 1,8% 20 , only 3% of which was generated in small hydropower plants < 10 MW 21 :. The amount of electricity produced by hydropower plants is varying significantly throughout weeks, months and years due to varying hydrological conditions. Thanks to the good actual forecasting tools for hydrology resources, long-term planning for hydro energy is possible.

4.1.3.2 Principle

The general principle of a hydro power plant is depicted in the following graph:

of a hydro power plant is depicted in the following graph: source: Power Resources Office Figure

source: Power Resources Office

Figure 4-6: Hydropower Principle

18 IEA implementing agreement

19 Survey of Energy Resources, World Energy Council Report 1998

20 source: Eurostat

21 TERES II

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The dam creates a head or height from which water flows. A pipe (penstock) carries the water from the reservoir to the turbine. The fast- moving water pushes the turbine blades, thus turn- ing the rotor and generating electricity. Today’s hydropower turbines are capable of convert- ing 90 percent of available energy into electricity—that is more efficient than any other form of generation. Due to the fast start or stop of hydraulic turbines and their large operating range, hydro energy is suitable for load control.

4.1.3.3 Plant classification

Hydropower plants are classified by size 22 :

Micro and mini hydropower plants:

Small hydropower plants 100 kW to 10 MW

Large hydropower plants

up to 100 kW

> 10MW

However, there is no consensus in EU member states on the definition of small hydropower:

Some countries like Portugal, Spain, Ireland, and now, Greece and Belgium, accept 10 MW as the upper limit for installed capacity. In Italy the limit is fixed at 3 MW (plants with larger installed power should sell their electricity at lower prices); in France the limit was estab- lished at 8 MW and UK favour 5 MW. On EU level a threshold of 10 MW is widely dis- cussed.

Plant schemes

The large majority of small hydro plants are «run-of-river» schemes, meaning simply that the turbine generates when the water is available and provided by the river. When the river dries up and the flow falls below some predetermined amount, the generation ceases. This means, of course, that small independent schemes may not always be able to supply energy, unless they are sized in a way that there is always enough water. On the contrary, an energy storage in a reservoir can guarantee the energy supply. It permits to store energy during off-peak hours and to release it during peak hours.

4.1.3.4 Costs

The costs for hydropower plants are highly site-specific. A typical structure of costs for a new hydro plant is given in the following figure:

22 Kueny

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Cost structure for a new hydropower plant electrical hydro-steel engineering works 5% mechanical 5% engineering
Cost structure for a new hydropower plant
electrical
hydro-steel
engineering
works
5%
mechanical
5%
engineering
indirect costs
20%
15%
general
interest
construction
10%
45%

source: Giesecke et al., 1998; own presentation Figure 4-7: Cost structure for a new hydropower plant

The available figures on Unit energy costs vary widely: The TERES II study found for the EU the following figures:

Table 4-4: Unit costs for hydropower in the EU

 

Unit costs 1995

Expected unit costs 2020

Large hydro

3-13 € cents/kWh

2.6-11.2 € cents/kWh

Small hydro

4-14 € cents/kWh

3,6-10.1 € cents/kWh

Orienting figures from Germany give higher costs especially for micro plants:

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Table 4-5: Investment and Unit Costs for Small Hydro Plants

 

New construction

Plant re-activation

 

micro plants

small plants

micro plants

small plants

installed capacity

kW

70

1000

70

1000

full load operating hours

h/a

4500

5500

4500

5500

electricity production

Mio kWh/a

0,32

5,5

0,32

5,5

Investment

Mio €

0,6

5,4

0,3

2,6

specific Investment

€/kW

8900

5400

4100

2600

Life-time

a

30

30

30

30

interest p.a.

%

6

6

6

6

capital costs

€/(kW/a)

650

390

297

186

operating costs

€/(kW/a)

219

134

205

128

electricity unit costs

€cents/kWh

19

10

11

6

Source: Staiß: Jahrbuch Erneuerbare Energien 2000

Advances in fully automated hydropower installations and reductions in manufacturing costs have made small scale hydropower increasingly attractive. The upgrading of existing hydro- power installations is by far the lowest cost renewable energy available today. It can some- times provide additional energy at less than one tenth the cost of a new project.

4.1.3.5 Environmental impact and its mitigation

Renewable energy can make a significant contribution to CO 2 emissions reduction. The Euro- pean Commission, through the ALTENER programme, proposed as indicative objectives by

2005

to increase the contribution of renewable energy sources from its current level of 4% in

1991

to 8% of primary energy consumption and to duplicate the electricity produced by re-

newable sources. For small hydropower this objective will require the European Union to increase the average annual renewable electricity production from 30 TWh to 60 TWh., and the development of 9 000 MW in new schemes. The achievement of this objective will imply an annual reduction of 180 million tonnes of CO 2 emissions. However presently many authorisation requests are pending approval, the delay being caused mainly by supposed conflict with the environment. Some environmental agencies seem to justify -or at least excuse- this blockade on the grounds of the low capacity of the small plants. 23 At the same time it should be accepted that, although through having no emissions of carbon dioxide and other pollutants, electricity production in small hydro plants is environmentally rewarding, the fact is that due to their location in sensitive areas, local impacts are not always negligible. The significant global advantages of small hydropower must not prevent the iden-

23 source: European Commission: Layman’s Guidebook on how to develop a small hydro site

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tification of burdens and impacts at local level nor the taking of necessary mitigation actions.

A small hydropower scheme producing impacts that almost always can be mitigated is con-

sidered at lower administrative levels, where the influence of pressure groups - angling asso- ciations, ecologists, etc.- is greater. Impacts of hydropower schemes are highly location and technology specific. A high mountain diversion scheme, being situated in a highly sensitive area is more likely to generate impact that an integral low- head scheme in a valley. The upgrading and extension of existing facili-

ties, which will be given priority in Europe, generates impacts that are quite different from an entirely new scheme. Diversion projects in mountains use the large change in elevation of a river as it flows downstream. The tail water from the power plant then re-enters the river, and entire areas of the river may be bypassed by a large volume of water, when the plant is in op- eration.

A recent study by the German Federal Environmental Agency warns that especially new small

scale hydro power plants (< 1 MW e ) are not always environmentally friendly. The smaller the installation and the closer to a natural state the water, the lesser will be the CO 2 - and eco- nomical benefits and the higher the ecological damage for the water. 24 Instead of installing new micro-plants the study proposes to concentrate on the optimisation of existing plants and on construction of plants at sites that are being hydromechanically altered for naval reasons anyway. The conflict between nature protection and renewable electricity generation is pro- posed to be mitigated by adequate spatial planning procedures, like the procedures for wind energy in Germany have shown.

24 UBA-TEXTE 1/2001: “Wasserkraft als Erneuerbare Energiequelle”

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4.1.4 Biomass

Most biogas installations will be run in CHP mode. A point of distinction might be that for fossil CHP applications the environmental advantage will be based on a very high energy use factor in practice, while for biomass firing, the use of the heat is less crucial for the environ- mental evaluation. Biomass-fuelled CHP is making headway in countries such as Sweden, Finland and Austria, where e.g. use of forestry residues is widespread. Typical fields of appli- cation are wood-processing industries, district heating systems, industries with a high process heat demand, and co-combustion of biomass in existing fossil fuel-fired CHP plants. Biomass use for heating purpose only will not be covered. Biomass fuels used can be spilt in four categories: forestry residues, agricultural residues, agro- processing residues and energy crops. The biomass can remain unaltered and used di- rectly for combustion processes, or it can be converted into liquid or gas. Biomass-fuelled CHP schemes include therefore installations designed to run on solid, liquid and gaseous fu- els. In this chapter there is marginal attention for technologies that produce liquids. The bio- liquids are more suitable to compete with the fossil liquids in the transportation sector. How- ever, stand-alone mobile generators can also run on biofuels. This is however, beyond the scope of this study. For biogas plants a number of waste products from households, industry and agriculture can

be used as fuels. These do include manure, organic waste from the food industry and organic

municipality waste. Finally, municipality waste is the dominant fuel in incineration plants. But not all municipality waste can be considered as renewable biomass. This is subject to con- troversial political discussion and handled differently in the EU Member States. The Directive on Promotion of RES-E has provided some clarity by defining biomass as the biodegradable

fraction of products, waste and residues from agriculture, forestry and related industries, as well as the biodegradable fraction of industrial and municipal waste

A small fraction of plastics will normally be included in municipal waste. In Denmark this

plastics fraction accounts for approximately 7% of the total volume of municipality waste.

Waste from biomass can be used for a number of different applications.

4.1.4.1 Use of Biomass as Solid Fuel

Before burning it, the biomass raw material may be chopped up, shredded or otherwise treated mechanically prior to its combustion in a steam cycle CHP plant. This treatment does, how- ever, not modify the material’s chemistry. The two principal combustion technologies are the following.

Grate Firing Grate firing is adequate for fuel types that are moist, otherwise problematic and/or in lumps and require little in terms of fuel preparation. Grates are still used in many small and medium sized boilers. The fuel is charged on a stationary or slowly moving grate. The combustion temperatures are mainly between 1000 and 1300 °C. Whilst reliable and rela- tively inexpensive, grate firing systems are also somewhat inflexible and are usually de- signed to cope with a limited range of fuels.

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Fluidised Bed Combustion Here the fuel burns in a bed of sand or other mineral that is violently agitated by the com- bustion air. The fuel is fed at a controlled rate to keep the temperature of the bed at 800 - 900 °C. This type of boiler is proving very popular for medium-sized and large industrial boilers. A great advantage of the fluidised bed system is its fuel flexibility. Air staging, limestone addition and low combustion temperatures achieve relatively low emissions. For instance, sulphur emission control is not required, and NO x emissions are low. Yet, when recycled fuels are used, halogen, heavy metal, dioxin and furan emissions may need to be controlled. Installation of this system is more expensive and therefore economical only from output capacities above 10 MW. Fluidised bed combustion is ideal for low calorific value fuels.

The prevailing CHP technologies with regard to solid biomass combustion are steam boiler and turbine applications. Combustion of biomass is a proven technology. New developments include integration with fossil-fuel streams in existing power plants, resulting in higher over- all efficiencies compared to stand-alone systems. Combustion of energy crops in dedicated power plants is in development. Some demonstration projects are underway, but are still too early a stage. There is a constant drive to improve the combustion efficiency up to more than 30% and a reduction in emissions. The major development in this area is in large CHP plants. Direct combustion processes for heat production and driving a steam cycle are commercia l- ised already. One promising development is co-combustion. New boiler concepts, where bio- mass is combusted together with coal, peat, RDF (refuse-derived-fuel) or other fuels can achieve high efficiencies, due scale factors and reduced risks as more than one fuels can be used, e.g., to compensate seasonal influences in bio-feedstock supply.

The Torbed plant

The Torbed co-firing plant is in its development stage, wood chips are burned in a pulverised coal fired power pant. This option has the advantage that the net generating efficiency of bio- mass conversion into power is higher than in conventional coal fired power plants. Moreover, the investment costs are lower. At present, several research institutes are working on the de- velopment of a stand-alone Torbed reactor. Based on a qualitative comparison with more de- veloped and commercialised incineration techniques, it was concluded that Torbed has enough potential as a competitive incineration technique to current technologies with an in- stallation size of 20-60 MW th . Torbed appears to be best suitable for burning fine material that needs no further pre-treatment. Stand-alone Torbed reactors are already in commercial use, but only in waste recovery processes.

4.1.4.2 Gasification Gasification technology offers the potential for cost-effective and environmentally acceptable reuse of waste, and high-efficiency biomass conversion. Several demonstration plants for the gasification of biomass and/or wastes have already been built. The resultant producer gas can be used in a gas engine, a gas turbine or (co-)combusted in a boiler. To date, the predominant technology used with regard to biogas-fuelled CHP appears to be the reciprocating engine. The challenge remains to use the produced gas in a high-efficiency integrated gasification

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combined cycle (IGCC) unit. Much effort is currently being put into gas cleaning research to make the gas suitable for such use. In future it should be possible to determine whether this technology can be applied on a large scale. Intermediate scale biomass gasification projects are mostly based on air gasification, unlike oxygen gasification in case of coal fuelled IGCC. The use of air as a gasifying agent requires bulky gas cleaning equipment compared to oxygen gasification. More experience is needed in order to determine the optimum scale of biomass gasification. The same holds for optimal gasification pressure and gasifying agent.

Biomass Gasification Combined Cycle

One of the most promising options for power generation from biomass is Biomass Gasifica- tion Combined Cycle BiG-CC. BiG-CC is limited to larger capacities, >30 MW e and have

electrical efficiencies of 32-41% and total efficiencies up to 83%. The efficiency strongly depends on the moisture of the biomass and the corresponding energy needed for pre-drying.

It is assumed that clean wood with moisture of 10% by weight is used as fuel.

Biomass Gasification Solid Oxide Fuel Cells

Several systems have been investigated consisting of a pressurised biomass gasifier (BiG) and

a solid oxide fuel cell (SOFC) coupled to a combined cycle. This combination offers the per-

spective of very high efficiencies. It is also possible to feed biomass to a fuel cell with an in-

ternal reforming technique. The highest efficiencies are attainable with a system consisting of

a pressurised gasifier, high temperature gas cleaning, high temperature fuel cells and a com-

bined cycle. Such a system can be applied to district heating, offering an additional efficiency gain. Although fuel cell capital costs are falling, increasing environmental restrictions are required before fuel cells will begin to replace conventional techniques in either power gen- eration or transportation.

Gibros two-stage gasification

Gibros offer a technology based on a combination of two-stage gasification and pyro- metallurgical smelting. This process converts waste materials into synthesis or fuel gas, met- als, metal mixtures and construction material. First pyrolysis takes place in an externally heated kiln. The tar containing gasses are subsequently gasified at high temperature (1200 -

1300 C) to produce syngas. Gasification takes place in the presence of either air or oxygen.

The pyrolysis residue is smelted into synthetic basalt and metallic mixtures, using the remain- ing coal fraction as energy source and producing additional syngas.

4.1.4.3 Pyrolysis Pyrolysis is a thermal conversion process carried out in the absence of oxygen, yielding sol- ids, liquids and gases. The relative proportions depend on the reaction parameters such as temperature, reaction time and rate of reaction. The heat is usually indirectly added employing relatively low temperatures of 400-800°C. Within the context of electric power production, pyrolysis can be used as a pre-treatment step for the (co-)combustion or gasification of bio- mass and/or waste streams. The intermediate product has well-defined characteristics, which offers new opportunities for power production. Much of the present interest in pyrolysis fo-

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cuses on the liquid products due to their high energy density and potential for premium liquid fuel substitution. The problems relating to pyrolysis are heat transfer into the feedstock, proc- ess control to give the required product mixture and separation of the products. It typically has a lower heating value of 13-17 MJ/kg. The water content is considerable (15-30%), which is important since this influences both chemical and physical stability and could affect the sub- sequent upgrading processes. Since the water is difficult to remove, utilisation on a wet basis is preferred. The quality of the original product is not comparable with gasoline, and cannot be used as a transport fuel. Upgrading is needed but expensive and leads to lower yields. Py- rolysis oil can be catalytically upgraded, which is proven in concept but has not been deve l- oped well so far. Most attention has been paid to either hydrotreating or zeolite cracking. Nei- ther technology is yet available commercially, nor have robust mass balance and performance data been produced. As more financial scope for cleaner and/or better systems is expected in the medium- to long-term, the importance of pyrolysis as a pre-treatment step will increase.

Hydropyrolysis

Recently, new interest is coming up for hydropyrolysis. It is a pyrolysis process under a high pressure of hydrogen. Actually the name is erroneous, since it has more in common with gasi- fication in a hydrogen atmosphere. It has been identified as a promising option for converting biomass and hydrogen to synthetic natural gas. The quality of the synthetic natural gas is comparable with that of natural gas.

Waste pyrolysis

Pyrolysis of waste is now mainly carried out as a pre-treatment for high-temperature combus- tion or gasification processes.

Thermoselect

The Thermoselect concept comprises pyrolysis of municipal solid waste, followed by high- temperature gasification with oxygen. The resultant producer gas is burned in a gas engine to generate power and heat. Thermoselect offers processing lines each with capacities of 50 kton/yr. of MSW. The maximum capacity offered is 400 kton/yr. (8 lines).

Flash Pyrolysis

Flash Pyrolysis has a reactor residence time below 1 second. These fast reaction rates also minimise charcoal formation, and can be used to either maximise gaseous or liquid products. Pyrolysis oil is produced at short flash pyrolysis time and at a temperature of 500°C. Liquids are formed trough very high heating rates at moderate temperatures and rapid product quenc h- ing. Flash Pyrolysis can produce up to 80% mass yields of pyrolysis liquids.

4.1.4.4 Biological/biochemical processes

Biological/biochemical processes are anaerobe and aerobe fermentation and distillation. These processes are commercialised for sugar and starch substrates. While sometimes biogas

from fermentation processes is considered as a by-product which has a commercial value.

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Anaerobic digestion

Anaerobic digestion (fermentation) can be an attractive conversion method for certain types of wet waste and biomass. In principle, the biogas can be used after treatment (and eventually upgrading to natural-gas quality) in the same way as natural gas. Production and utilisation of landfill gas based on MSW may also be an option for power production. Many demonstration and commercial plants are in operation around Europe. However, it should be noted that in most cases power generation in digestion processes is a by-product of the process. Like waste incineration, the main purpose of digestion is the processing of waste, not power production. Anaerobic digestion is the digestion of plant and animal material by various types of bacteria in absence of oxygen. Optimal temperatures are around 35-37°C. the main product is biogas, which consists mainly of methane (CH 4 50-70%) and has a lower heating value of 19-27 MJ/Nm 3 . Most of the biogas production comes from the anaerobic digestion of sewage

sludge, but the largest potential is in digestion of farmyard manure and agro-industrial wastes. Typically, between 40 and 60% of the organic matter present is converted to biogas. The re- mainder consists of odour free residue with appearance similar to peat that has some value as

a soil conditioner and also, a liquid residue, which has potential as a fertiliser.

Landfill gas (LFG)

Landfill gas (LFG) is a mixture of basically CH 4 (circa 50%) and CO 2 , resulting from the an- aerobic degradation of organic waste. The gas is collected and cleaned and then either burned to provide process heat or used for electricity production. Landfill gas can also be used as a chemical feedstock or in fuel cells, but these are still at the research and development stage. Although landfill gas is produced once anaerobic conditions are established within the land-

fill, it may take several years before the landfill gas production rate is large enough to sustain

a landfill gas use scheme. For a typically well engineered and well operated landfill, the ex- pected period over which gas will be produced may range from 50-100 years, but a useable gas production rate can be expected for only 10-15 years.

4.1.4.5 Hydrothermal Upgrading (HTU)

HTU is a high- pressure (120- 180 bar) process, which contacts wet biomass with water at tem- peratures of 300-350°C for 5-10 minutes. The oxygen content of the biomass is reduced from 40% on wet basis to about 10-15% on wet basis by the selective formation of CO 2 . Under these conditions an organic liquid or 'biocrude' is formed that resembles crude oil and which can be transported. The biocrude can be used for direct combustion as a liquid, for co- combustion as a solid fuel or for electrical power generation. Further upgrading of the biocrude is also possible by removal of the remaining oxygen (by catalytic hydrodeoxygena- tion). This has been proven (by laboratory experiments) to produce a good quality gas oil, but requires considerable amounts of hydrogen. However, upgrading costs are compensated by the higher product value. The upgrading product can be used as a fuel, in high-efficiency gas turbines or it can be used as a feedstock for the production of chemicals. The HTU process can use different feedstocks, and can be an attractive option for feedstock with a higher water content such as agricultural and domestic waste or biosludge, since no drying is required. It is further assumed that the residual lignin from ethanol production would be a suitable feedstock

IZT, COGEN Europe, RISØ, ECN, unit[e] and Jenbacher

October 2002

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for the HTU process, resulting in a "biorefinery' that produces both gasoline substitutes and gasoil substitutes. Little is known about the use of lignin, but the principle itself has been demonstrated. Probably, yields of HTU oil are little lower than those achieved from wood and the product quality might be less.

4.1.4.6 Economics of biomass systems

Cost of biofeedstocks

The costs of biomass depend on the dynamics of local markets, as well as on agreements, such as contracts between biomass users and producers. This cost includes all necessary transportation and handling, as well as pre-treatment (drying, size changes). Exact estimates are very difficult to make, as the markets are "immature" and changes occur rapidly.

Costs of bio-electricity

Many economic evaluations of electricity generation systems utilising biomass as a feedstock have been carried out. In the following Table, a comparison of such calculations for the main technologies available is presented. Table 4-6: Cost of biomass technologies

Technology

Efficiency

Generation capacity investment [MWe]

Cost

 

Applied

[%]

 

present

future

k€/kW e

€ct/kW th,e

Combustion

15

- 35

1 - 50

100

1.1

- 2.8

2.8

- 6.2

Co-combustion

Of existing power station

0.5

3.6

- 10

Gasification

20

- 35

0.1 -

?

1.5

- 2.0

?

 

25

 

Gasification - combined cycle Flash pyrolysis - diesel Biogas from urban waste Biogas from landfills

30

- 47

<

12

25 - 120

1.3

- 2.4

4.4

- 8.4

30

- 35

15 - 15

50

0.8

- 1.8

3.9

- 7.8

20

- 30

1?

< 10

9 - 15

23 - 80

20

- 30

<

1

?

0.5

- 1.2

2.9

- 5.6

Today the upper limit of plants that are fuelled exclusively with biomass is within a range of

50 to 100 MW th since fuel acquisition, transport and logistics of the supply for higher outputs become too costly. The energy density of fresh biomass is low. This makes it uneconomic to transport it over distances longer than 100 km. Investment costs for smaller plants are signifi- cantly higher than for larger plants.

A recent case study from Finland on the economies of biomass fuelled CHP schemes supports

arguments that the use of solid biomass in Rankine steam cycle plants imposes lower capital and operation costs compared to engine schemes based on gas from biomass gasification and pyrolysis liquid fuel from biomass (see next chapters).

In terms of cost-efficiency, co-firing approaches and the use of biomass in existing CHP

plants can become an interesting alternative to the construction of new plants and/or the ex- clusive combustion of biomass. The share of biomass has a bearing on the whole process. If the quantity of biomass is

less than to 5% it can often directly be mixed with the fuel.

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