Transcript An economic framework for the remuneration of smart grid actors

UNIVERSIDAD SIMON BOLIVAR
An economic framework
for the remuneration of
smart grid actors
Prof. Paulo Manuel De Oliveira-De Jesus
Simon Bolivar University, Venezuela
http:\\prof.usb.ve\pdeoliveira
Coimbra, November 19, 2014
An economic framework for
the remuneration of smart grid actors
An economic framework for the remuneration of
smart grid actors
1.- SMART GRID: Looking for a Definition
2.- Who are the Actors?
3.- The Remuneration Frameworks
4.- Newtork Avoided Cost
Evaluation
An economic framework for
the remuneration of smart grid actors
An economic framework for the remuneration of
smart grid actors
SMART GRID: Looking for a Definition
An economic framework for
the remuneration of smart grid actors
IEEE Power & Energy: September, 2005
THE SMART GRID
PARADIGM
Since Electric Supply Industry (ESI) began
your path in the mid of XIX century,
Electrical engineers have tried to introduce
“intelligence” in generation, transmission
and distribution of electric energy.
Inventions as AVR, AGC, OPF, etc
show how intelligence is added to ESI.
When was the first time that You heard
About the smart grid ?
Since 2004 ESI is submereged
in profound changes. A new paradigm
called “smart grid”
An economic framework for
the remuneration of smart grid actors
IS THE SMART GRID A RELEVANT TREND?
1952
1884
1986
2010
An economic framework for
the remuneration of smart grid actors
2.- SMART GRID: LOOKING FOR A DEFINITION
“The smart grid is the integration of an
electric grid, a communications network,
software and hardware to monitor, control,
and manage the creation, distribution,
storage and consumption of energy. The
smart grid of the future will be distributed, it
will be interactive, it will be self-healing, and
it will communicate with every device.”
Andres Carvallo
Austin Energy 2004
An economic framework for
the remuneration of smart grid actors
2.- SMART GRID: LOOKING FOR A DEFINITION
“enables the integration of utility
infrastructure, with buildings, homes,
electric vehicles, distributed
generation,energy storage, and smart
devices to increase grid reliability, energy
efficiency, renewable energy use, and
customer satisfaction, while reducing capital
and operating costs.”
Andres Carvallo, 2004
An economic framework for
the remuneration of smart grid actors
A Short definition:
Intelligent Infrastructure
Energy Infrastructure
SMART GRID is the convergence of three
very well established industries:
- The Electricity Industry
- The Telecommunications Industry
- The Information Technology Industry
Source: EPRI IntelligridArchitecture
An economic framework for
the remuneration of smart grid actors
The Smart Grid Functions according USA's DOE:
1.- Foundation: Smart grid deployments depend upon standards and best practices .
2.- Power Quality and Reliability: Distributed generation can improve system reliability
and address power quality
3.- Energy Efficiency: Smart grid sensing can be used to provide information to
consumers and operators for a more effective use of energy
4.- Operational Efficiency: Automated systems can bring greater value to system
operations.
5.- Clean Technology: The need to reduce or reverse environmental
impact is driving of variable renewable resources
6.- Economy or Capacity. Distributed Generation and Demand Response can help
shave peaks to AVOID, DEFER OR REDUCE investment in generation, transmission,
and distribution
From Ligthner (2010): An Orderly Transition to a Transformed
Electricity System, IEEE TRANSACTIONS ON SMART GRID, Vol 1 No. 1, June 2010
An economic framework for
the remuneration of smart grid actors
Why Smart Grid: Environmental Causes
Environmental impact due to
Carbon-based economy
constitutes a fundamental driving force to
develop smart grid and ensure sustainability.
New technological advances allows distributed generation,
mainly renewable, be competitive respect to traditional
generation.
Then, Smart Grid should integrate, optimize, monitor and
control all distributed generation in order to mitigate climate
changes.
This means the end of economy of scale in centralized
power generation?
An economic framework for
the remuneration of smart grid actors
Why Smart Grid? Economical and Reliability Causes
The need for optimization of energy systems began after the 1973 oil embargo.
As a result, DEREGULATION has been applied in many countries worldwide
focusing on the maximization of the use of electricity infraestructure.
Market forces send strong incentives for generators but poor incentives to network
operators
HOWEVER RELIABILITY HAS BEEN A MAJOR ISSUE
Great blackouts happened in EU and USA in 2003 due to lack of monitoring and
control in electricity networks
The SG paradigm is the way to improve the monitoring and control of power
systems
August 13, 2003,
August 14, 2003,
2003 BLACKOUT: 55Milion people affected
An economic framework for
the remuneration of smart grid actors
An economic framework for the remuneration of
smart grid actors
Who are the Smart Grid
Actors and Stakeholders?
An economic framework for
the remuneration of smart grid actors
TRADITIONAL POWER SYSTEMS
ENERGY FLOWS IN ONLY ONE DIRECTION
INFORMATION FLOWS ONLY BETWEEN UTILITIES AND LOADS
Centralized
Generation
Power
Transmission
Power Distribution
Utility
Load Demand
Energy
Information
An economic framework for
the remuneration of smart grid actors
SMART GRID PARADIGM
ENERGY AND INFORMATION WILL FLOW IN MANY
DIRECTIONS
Centralized
Generation
Power
Transmission
Power Distribution
Utility
Energy
Information
Load
Demand
Distributed
Generation
Transportation and
Electric Vehicles
An economic framework for
the remuneration of smart grid actors
Traditional Actors: The Flow of the Money
Fossil Energy
Providers:
Carbon, Oil, Gas
€
Centralized
Generators
€
€
Energy
Technology
Providers
€
Trasmission &
Distribution
Utilities
€
Inelastic
Demand
Energy Regulators
Regulation defines
Economic Framework:
An economic framework for
the remuneration of smart grid actors
Smart Grid Actors: The Flow of the Money
€
Fossil Energy
Providers:
Carbon, Oil, Gas
Centralized
Generators
€
€
€
Energy
Technology
Providers
€
€
Energy Regulators
€
€€
Trasmission &
Distribution
Utilities
€
€
Distributed
Generators
€
€€
Elastic
Demands
€
€
Telecom/IT
Technology
Providers
€
€
An economic framework for
the remuneration of smart grid actors
An economic framework for
the remuneration of smart grid actors
An economic framework for the remuneration of
smart grid actors
The Remuneration Frameworks
An economic framework for
the remuneration of smart grid actors
Where are THE AVOIDED
Costs?
Fossil Energy
Fossil
Providers:
Enegy
Carbon, Oil, Gas
Centralized
Centralized
Generators
Generators
A= Avoided COSTS on
Fossil Fuel Infrastructure
and Consumption
B=Avoided COST on
Centralized Generation
C=Avoided Network/GRID Costs
D=Avoided Enviromental Costs
Energy
Flow
Trasmission &
T&D
Distribution
Utilities
Utilities
Distributed
Distributed
Generators
Generators
E=Added costs in: Widespread
Distributed Generation +
Smart Grid Infraestructure
Inelastic
Elastic and
Demand
Responsive
Demands
A+B+C+D-E > 0 ?
An economic framework for
the remuneration of smart grid actors
THE MARKET MECHANISM
IF FUEL AND GENERATION
AVOIDED COSTS ARE REAL
ECONOMY OF SCALE MUST MODIFY
SUPPLY AND DEMAND FUNCTIONS
An economic framework for
the remuneration of smart grid actors
T & D NETWORKS
NETWORKS ARE REGULATED AS NATURAL
MONOPOLIES AND REMUNERATED
BY MEANS OF USE OF THE SYSTEM (UoS) TARIFFS
UoS LOCATIONAL MARGINAL PRICING sends
adequate economical signals for efficient generation
location and operation.
UoS AVOIDED COST PRICING could be applied as a
strong strategy for efficient grid expansion under
the transition Smart Gri Stage.
An economic framework for
the remuneration of smart grid actors
An economic framework for the remuneration of
smart grid actors
Newtork Avoided Cost
Evaluation
An illustrative Example
An economic framework for
the remuneration of smart grid actors
PROPOSAL:
THE CONCEPT OF GRID AVOIDED COST:
If Distributed Generation and Demand
Response are well specified, it is possible to
shave peaks to AVOID, DEFER OR
REDUCE investment in transmission and
distribution systems
An economic framework for
the remuneration of smart grid actors
TO EVALUATE AVOIDED GRID COSTS
A NETWORK EXPANSION PLANNING
PROBLEM MUST BE SOLVED
IN TWO STAGES:
1.- IN A TRADITIONAL FORM (WITHOUT
THE NEW SMART GRID ACTORS)
2.- CONSIDERING ALL NEW SMART GRID
ACTORS
An economic framework for
the remuneration of smart grid actors
Multiple Objective NETWORK
EXPANSION Problem:
Minimize Network Investment,
Minimize Operational Cost
Maximize Reliability
Subject to:
Network Constraints
and Capacity Constraints
An economic framework for
the remuneration of smart grid actors
EXPANSION PLAN : NO SMART GRID
100
kWh
300kWh
200 kWh
NEW
LOADS
An economic framework for
the remuneration of smart grid actors
EXPANSION PLAN : NO SMART GRID
300kWh
Solution 1:
Investment: 1000€
Operational
Cost: 100€
An economic framework for
the remuneration of smart grid actors
EXPANSION PLAN : NO SMART GRID
300kWh
Solution 2:
Investment: 1500€
Operational
Cost: 60€
An economic framework for
the remuneration of smart grid actors
EXPANSION PLAN : NO SMART GRID
300kWh
Solution 3:
Investment: 2000€
Losses: 60€
An economic framework for
the remuneration of smart grid actors
Solution 1
Operational
Costs
Solution 2
100€
60€
Solution 3
40€
Investment
1000€
1500€
2000€
An economic framework for
the remuneration of smart grid actors
EXPANSION PLAN : With SG: DG, PHEV and Storage
250kWh
100
kWh
150 kWh
Distributed
Generation
400 kWh
Loads
300 kWh
NEW LOADS
Incl. PHEV
An economic framework for
the remuneration of smart grid actors
EXPANSION PLAN : With SG: DG, PHEV and Storage
250kWh
150 kWh
Distributed
Generation
400 kWh
Loads
Solution 1:
Investment: 600€
Operational
Cost: 40€
An economic framework for
the remuneration of smart grid actors
EXPANSION PLAN : With SG: DG, PHEV and Storage
250kWh
150 kWh
Distributed
Generation
400 kWh
Loads
Solution 2:
Investment: 700€
Operational
Cost: 25€
An economic framework for
the remuneration of smart grid actors
EXPANSION PLAN : With SG: DG, PHEV and Storage
250kWh
150 kWh
Distributed
Generation
400 kWh
Loads
Solution 3:
Investment: 900€
Operational
Cost: 15€
An economic framework for
the remuneration of smart grid actors
Solution 1
Avoided Cost: 1400€
Operational
Costs
Solution 2
100€
Solution 1
60€
Solution 3
Solution 2
Avoided Cost
40€
25€
Solution 3
15€
Investment
600€ 700€
900€ 1000€
1500€
2000€
An economic framework for
the remuneration of smart grid actors
Conclusions:
1.- SmartGrid Paradigm is founded on the fact of all
investments in control devices and optimization systems
will PRODUCE global AVOIDED COSTS
2.- If AVOIDED Costs are Real, Economy of scale due
to widespread implementation of smart grids SHOULD
be reflected on global energy market.
3.- Remuneration of natural monopolies (as T & D
systems) should integrate avoided costing tariffs for
Network Actors in order to ensure the correct
deployment of Smart Grids under this transition stage.
An economic framework for
the remuneration of smart grid actors
Thank you very much for your attention:
My web page:
http:\\prof.usb.ve\pdeoliveira
Further Reading:
Jesus, P. Remuneration of Distributed Generation –
A Holistic Approach, Ph. D Dissertation,
Porto University.