ECONOMICS & MANAGEMENT OF

SUSTAINABLE ENERGY
DEN433, DENM023
2013/14
Introduction

Queen Mary University of London

Lectures
Week
1

Lecture 1 Introduction

Background; Energy chain; Overview of sustainable systems

Lecture 2 Energy Technologies1

Schedulable energy sources; Tidal, wave & wind power

Lecture 3 Energy Technologies 2

Solar power; CHP; Energy storage;

Lecture 4 Energy Systems

Variability & intermittency. Back-up & Security;

Lecture 5 Energy Costs

Generation costs; Capacity strategies

Lecture 6 Demand and Supply

Determinants of demand & supply; Monopolies & Oligopolies

Reading Week

Phew!

Lecture 7 Energy Policy

Energy policy changes; New Energy Paradigm; Deregulation & investment

Lecture 8 Energy Pricing

Pricing/costing for multi-energy systems; Marginal analysis;

Energy pricing theory

10

Lecture 9 Design of Energy

Markets

Peak load capacity; electricity markets;

Emissions; Plant utilisation & pricing

11

Lecture 10 Demand & Load

Management

End-user demand management options; Metering; Smart

Grid

12

Lecture 11 Energy Trading

Pre-privatisation; Pool; NETA; International trends; Impact on

renewables

Reading list

Renewable Energy in Power Systems Freris & Infield; Wiley 2008

Renewable Energy; Boyle (ed); OUP 2012

Energy Systems and Sustainability; Everett et al (ed); OUP 2012

Renewables for power generation, status & prospects International Energy

Agency; OECD 2003

Sustainable energy without the hot air David JC McKay;

(http://www.withouthotair.com/about.html)

The New Energy Paradigm; ed Dieter Helm; Oxford 2007

Alternative Energy Systems & Applications; Hodge; Wiley 2009

Other sources will be given during the lectures

Coursework
Each of the two pieces of coursework represents 20% of the total marks for this
module.
Coursework must be submitted to the Office before 15.00hrs on:
Part 1
Monday 2nd March 2015
Part 2
Monday 20th April 2015
A copy must also be emailed to me on t.p.prout@qmul.ac.uk at the same time.
The coursework is intended to make you think about real life situations. Like
real life there are uncertainties which you will have to handle. You will also
have to research the properties and economics of sustainable energy
systems. Some of the information required will have to be guessed and
later refined as you learn more just like real life.

Revising for Examination

Revision
Lectures include a number of case study examples
You are expected to understand the underlying issues
from each case study
You are not expected to memorise the case studies!
Past examination papers are on the Intranet
Revision guidelines will be given in Week 11

Examination
Worth 60% of module
Answer 4 out of 6 questions
Each question worth 25 marks
Each question has typically 3-5 sub-questions
Note change in format from pre-2013 examination papers No Part A or Part B

Stuff you know already but . . .

Power
As in peak demand, plant
capacity, etc.

Energy
As in consumption, tariffs, etc.

1 MW
1 GW
1 TW

1 MWh = 1000 kWh

1 GWh = 1000 MWh
1 TWh = 1000 GWh

= 1000 kW
= 1000 MW
= 1000 GW

8760 hours in one year except for leap years!

Electricity demand challenge

Conventional fuels will continue

to dominate
Economic environment will affect
choice of fuel eg China and
coal
Challenge is to:
Improve economics of
renewable energy sources
Improve energy efficiency of
sustainable sources
Decrease greenhouse gas
emissions
Improve energy effectiveness
of power loads

New Energy Sources

New energy forms will impact on:
Relative cost differentials between fuels
Global political strategies
Fuel prices volatile due to:
Political uncertainties
Demand growth
Supply sources
Fuel prices why bother?
Cover/back-up for variable/intermittent
generation
Price volatility incentive for sustainable
sources
Natural Gas is key fuel for chp systems

Electricity decouples from GDP

Developing economies
Electricity demand correlated with
GDP growth
Growth of manufacturing
Developed economies
Loss of energy intensive industries
Power quality and the digital economy
Climate change:
EU three times 20 by 2020
20% energy consumption cut
20% greenhouse gases cut
20% share by renewables

Renewable electricity:

~ 25% gross power generation in 2018, with non-hydro accounting for 8%.
surpass output from natural gas and double generation from nuclear by 2016,
becoming the second-most important source of electricity behind coal.

Source: IEE 2013

Sustainable Energy Systems

Sustainable Energy Source

An energy source that:

Is not substantially depleted by continued use
Does not entail significant pollution emissions or other
environmental concerns
Does not involve the perpetuation of substantial health hazards
or social injustices
Source: Boyle 2004

Dream on, but we will do our best

Micropower

Relatively small, modular, mass-producible, quick-to-deploy (hence rapidly

scalable) sources of electricity . (Vijay Vaitheeswaran, The Economist, 2000)
Combines two kinds of micropower:
renewables other than big hydroelectric dams,
cogeneration of electricity and useful heat (combined-heat-and-power, CHP).
Releases little or no carbon.
Enables individuals, communities, building owners, and factory operators to
generate electricity, displacing dependence on centralized generators.
Democratises energy choices, promotes competition, speeds learning and
innovation, and can further accelerate deployment
Since 2000 generation from low and no-carbon, rapidly scalable renewables
(excluding large hydro) and co-generation has grown by nearly 150% and
generates ~24% of global power

Source: Rocky Mountain Institute 2014

Global Low or No-carbon Installed Electricity

Generation Capacity

Source: Rocky Mountain Institute Micropower database July 2014

Global Low or No-carbon Electricity

Generation

Renewable energy flows

Path
Direct heating
Direct radiation

SUN

120,000 TW
Absorbed by Earth

Water evaporation
Heating of atmosphere
Photosynthesis

Gravitational force 3 TW
Earths core

10 TW

Renewable Energy Technology

Thermal electric
Photovoltaics
Hydropower
Wind/wave converters
Biofuels
Tidal schemes
Geothermal schemes
Source: Freris & Infield 2008

Conversion of energy forms to

electricity
Nuclear

Thermal

Chemical
coal, gas, oil
biomass, waste
hydrogen

Gravitational
Hydro/tidal

Wind &
wave

Mechanical

Electrical

Solar

Conversion of energy forms to

electricity
Gravitational
Hydro/tidal

Nuclear

Wind &
wave

Fusion
(Fission)

Thermal
Thermal
Rankine/
Brayton
= 90+%

Chemical
coal, gas, oil
biomass, waste
hydrogen

Heat engines
< 60%

Mechanical

Electrical
generator
= 90+%

Electrical

PV

Solar thermal

Solar

Fuel cells

Note: this diagram can be made more complicated!

Freris & Infield

Renewable & Sustainable energy sources

MSW (municipal solid waste)

incineration
pyrolysis/gasification
Hydro
large
small
run-of-river
high level dam
Biofuels
energy crops
forestry waste
agricultural waste
sewerage and other organic
CHP (combined heat & power)
Power led
Heat led

Wind
onshore
offshore
Wave
shoreline
near shore
offshore
Tidal
stream
barrage
Solar
PV
thermal
Geothermal

(Source: Tyndall Centre 2003 Renewable Energy in UK + additions)

Sustainable Energy Systems

Sustainable Energy Systems impact on:

Environment

Politics

Includes Climate
Change

Economics

Energy Systems
Energy System all processes from the reception of raw inputs to delivery of benefit
Raw Fuel input

Conversion
electricity
heat/coolth
mechanical

Transport
long-distance
local
storage

Usage

Benefit

There are options within the energy supply chain according to application

Energy Systems Electricity

supply
33kV
22k
V

400k
V

132k
V

Large industrial
Small industrial

11kV

Power station

Power station
transformer

Step-down
transformer

Step-down
transformer

240V
*

Domestic &
commercial

Step-down
transformer
* 415V 3 phase

Transmission
system

Sub-transmission
system

Distribution
system

[History of UK power system see Addendum]

Source: Boyle 2004

Energy Systems system losses

Quoted in Energy Efficiency, Taxonomy Overview, Lovins 2004

Energy Chain - Conventional electricity supply

Fuel input

Power
generation

HV
transmission
(+ storage)

Security of supply
Flexible
Minimises spare capacity

MV/LV
distribution
(+ storage)

BUT

Energy
retailer/
marketing

Capital intensive
Energy losses
(Climate change)

End-user

Energy Chain Direct Drive system

Fuel input

Conversion/
Power
generation

Examples:
Gas pipeline compressors
Static construction plant
Oil production
CSP tower producing 50 tons
of steam per day for enhanced
oil recovery in Oman.
(GlassPoint Solar)

Application

End-user

Issues:
Dedicated
Modular
Capital saving on cabling
Efficiencies can be poor

Energy Chain Device Drive system for

isolated sites
Small PV/
small wind

Storage

Application

End-user

Note: also applicable to solar heating systems

Examples:
Telecommunication, signalling, etc
Remote buildings
Issues:
Capital saving on cabling
Low cost storage (e.g. automotive batteries)
Flexible, mobile
Low power LV applications generally

Energy Chain Island Generation system

Fuel input

Power
generation

Private
MV/LV
distribution

Examples:
High security supply
Remote communities; no Grid
supply
(Micro-grids)
bloody mindedness

End-user

Note: no external connection

Issues:
Capital saving on Grid
connection
Operation savings on use of
system
Back-up capacity
Potential for CHP

Energy Chain Combined Heat & Power

(CHP) systems

Fuel input

MV/LV
distribution

End-user

Heat/coolth
generation

Heat/coolth
storage

Power
generation

Examples:
Process heat industries
Community/district heating
Large HEVAC

Heat/coolth
distribution &
conversion

End-user

Issues:

Potential for improved efficiency

Operation savings on use of system
Heat/load balance
Interconnection

But what about wind and wave based systems?

Energy Chain Large variable/intermittent

system
HV
transmission

MV/LV
distribution

Power
generation

Energy
retailer/
marketing

End-user

Reserve capacity/storage/load
management

Examples:
Onshore/offshore wind
Large solar

Issues:

Variability/intermittency
Interconnection
Dispatchability
AC/DC

Energy Chain Distributed generation

.
.
.
Energy
sources.

.
.
.
Small
Gen.

HV
transmission

MV/LV
distribution

Microgrid

Energy
retailer/
marketing

End-user

Examples:
Small generators
Non-schedulable generation

Issues:
Variability/intermittency
Interconnection
Dispatchability

Distributed generation - definitions

Distributed Generation (DG) any dispersed generation less than 100 MW.

Distributed Energy Resources (DERs)

small-scale power generation technology that supplies less than 10 MW
located throughout the distribution network; frequently renewable energy
and energy storage.

Demand Response (DR) management of consumption, anywhere along a

feeder, in response to supply conditions

Microgrid
local network of DERs that is a subset of the distribution network
can operate in an isolated manner or be connected.
Microgrid management targets local energy supply and demand .

Energy Chain Distributed generation

Grid-control

Energy Mgt.
System

Energy Exchange

Billing

Biomass

CHP

Power &
communicatio
n network

Manageable loads

Meter reading
Distributed loads
Solar
Distributed microchp

Wind turbines

Communication only
Communication + power

Source: RWE Deutschland

The new systems nature of the power sector

Power is going from a linear supply-demand model towards a model where:
Power consumers become producers (prosumers),
One-way electricity and information flows become bi-directional,
Decentralisation challenges and complements the old centralised architecture,
Closer real-time management becomes feasible as well as necessary to
handle more variable generation
EURELECTRIC, May 2013

Disruptive challenges
Recent technological and economic changes are expected to challenge and
transform the [US] electric utility industry. These disruptive challenges arise
due to a convergence of factors, including:
Falling costs of distributed generation and other distributed energy resources
(DER);
Enhanced focus on development of new DER technologies;
Increasing customer, regulatory, and political interest in demand-side
management technologies (DSM);
Government programs to incentivize selected technologies;
Declining price of natural gas;
Slowing economic growth trends;
Rising electricity prices in certain areas of the country.

Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business Edison
Electric Institute; January 2013

Financial risks to Utilities from Disruptive

Challenges
The financial risks created by disruptive challenges include:
declining utility revenues, increasing costs, and lower long-term profitability
Increased DER and DSM market share, reduced utility revenues
Higher DER integration costs + increased subsidies for DSM and direct
metering of DER profitability squeeze
Regulators may allow recovery of lost revenues in future tariff cases, but nonDER customers will have to pay for (or absorb) lost revenues.
Increased DER penetration political pressure to undo cross subsidies
utility stranded cost exposure.
Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric
Business Edison Electric Institute; January 2013

Vicious Cycle from Disruptive

challenges
Technology Innovation
(DER)

Energy Efficiency
(EE, DSM)

Lost Revenue

DER

Tariff increase

Behavioural
change

Customer reaction

Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business Edison
Electric Institute; January 2013

Grid Defection
Entrepreurial attack
Declining technology costs
Alternative business models
Demand for alternative supplies (greenness, resilience, etc)

Re-allocation
effects encourages
external competition

Traditional Model under siege

Must deliver supply which is
Reliable
Cost-effective
Environmentally responsible
Meet shareholders financial demands

Defection spreads
fixed costs over
fewer consumers

Upward price pressures

Grid and resilience upgrades
Environmental controls, retirements
Smart Grid investment
Energy efficiency successes
Economics of Grid Defection; CohnReznick et al; Feb 2014

E.ON the shape of things to come . . ?

E.ON proposes to split into two separate companies in 2015:
A new (as-yet-unnamed) company:
the coal, gas and nuclear assets, plus its trading business and
hydropower plants.
E.ON:
renewable energy,
energy efficiency,
digitizing the distribution network
customer-sited energy sources like storage paired with solar.

Distributed Generation Technical Issues

Proliferation of distributed energy without proper grid integration negative,
consequences for the price, quality and reliability of power.
Most DERs not connected to supervisory control and data acquisition
(SCADA) systems.
Difficult to monitor and control their security and efficiency.
Renewables impact grid with transient voltage variations and harmonic
distortions
Clustered DERs can function as a single virtual power plant (VPP) with
centralized voltage control, storage, demand response, and distribution
automation. RWE began a pilot VPP in 2012 with ~80 MW capacity
DERs can complement utility plant rather than competing.
Utilities have potential to postpone generation investments and improve grid
stability.

Energy Outputs
Energy System
Conversion
electricity
heat/coolth
mechanical

High Voltage Direct Current

Transport
long-distance
local
storage

Usage

Alternating Current vs. Direct Current

Benefit

Alternating Current

Historically the most important

Ease of changing voltages through transformers
AC voltages chosen for each stage from generation to consumer

Transmission power loss = I2R [I = current and R = resistance]

Increased Voltage decreased Current lower power losses

BUT Increased voltage increased radiation losses

Reactive elements (inductance and capacitance) limit transmission capacity

and distance;
may require additional compensating equipment on the line

Linking AC systems can system instability, increasing short-circuit levels

and undesirable power-flows.

Direct Current

Historically difficult to change voltages without heavy losses

Limited number of DC networks
BUT
Solar PV produces DC (also fuel cells)
Other renewables capable of DC
Most storage technology is DC

Most IT and digital technology is (low voltage) DC

AC high energy (heat) loss
AC spikes, etc.

Take a data centre as an example. [More in Addendum]

Direct Current Example: data centre

If mains AC to data centre DC and then distributed DC power:

less power loss in multiple conversions (AC to DC; DC to AC)
reduced energy consumption; > 5-10% of energy saved (more if
DC feed from solar)
less space required by the DC infrastructure (less equipment; direct
connection by IT equipment to backup batteries)
decrease in cooling requirements

Lawrence Berkley Labs (LBL) study (quoted Sinopoli 2012) indicated:

7% reduction of energy consumption
28% efficiency gain,
more reliable, and potentially cost less in the long run.
Facebook and SAP have piloted DC power in their data centers.
[Note DCC+G consortium, led by Siemens, studying an optimized 380-volt
DC network in an office building and a superstore. Reporting 2015]

High Voltage Direct Current (HVDC) 1

Issues with high voltage, long distance AC transmission:
Reactive elements (inductance and capacitance) limit transmission capacity
and distance;
may require additional compensating equipment on the line
Linking AC systems can system instability, increasing short-circuit levels
and undesirable power-flows.

High Voltage DC
Commercial HVDC started in the 1950s based on mercury arc valves ,
(20-MW Gotland submarine-land project)
Introduction of silicon-controlled rectifiers (thyristors) in the 1960s

High Voltage Direct Current (HVDC) applications

Key applications:
Developing countries with fast growth in electric energy demand (e.g. China,
India and Brazil)
long overhead transmission lines from hydro and fossil energy sources
expanding their systems with ultra-high-voltage (UHV) grids including
HVDC. Projects 800 kV, 6,000-MW and higher under construction
European utilities connecting hydro, wind, storage and other sources of energy
Wayleave difficulties underground and underwater transmission.
Mainly HVDC; 64 - 80 km claimed break-even point [?]
Sources:
http://tdworld.com/overhead_transmission/power_war_currents_update/#ixzz24MhjS16R
http://tdworld.com/overhead_transmission/hvdc-transmission-evolution-040112/#ixzz24Mnbzj7p

High Voltage Direct Current (HVDC)

For 6,000-MW transmission:

7x 500-kV AC power lines = 2x 600-kV DC lines = one 800-kV DC line

Ideal for underwater cables Iceland geothermal?

HVDC power transfers controllable and precisely measured

directing exactly where the power is injected into the AC grid
no transmission congestion.

Note: DESERTEC and others!

Sources:
http://tdworld.com/overhead_transmission/power_war_currents_update/#ixzz2
4MhjS16R
http://tdworld.com/overhead_transmission/hvdc-transmission-evolution040112/#ixzz24Mnbzj7p

Addendum
Development of UK transmission and distribution system
Power usage in Data Centres and Servers

1880 - 1920: Electrification begins

Electricity Demand and
Generation Capacity

Load factor still

160
only 10%

300

120
100

150

80

First electrified
tramway
commissioned

40

50
0
1890

Worlds first 3
turbo-alternator
commissioned
(150kW, 40Hz)

20
1891

1892

1893

1894

1895

1896

1897

1898

1899

0
1900

Year
Generation Capacity

Electricity Demand

Electricity Dem and and Generation Capacit y

3.5

2.5

Voltage raised to
20kV

2
1.5
1

3
2.5
2

3transmissio
n system
6.6kV, 40Hz

1.5
1

0.5
0
1900

0.5
1902

1904

1906

1908

1910

1912

1914

1916

Year
Generation Capacity

Electricity Demand

1918

0
1920

Elec Demand (TWh)

100

60

Elec Demand (GWh)

200

140

Typical UK power
station:
8 x100 kW

Gen Capacity (GW)

Gen Capacity (MW)

250

Ele ctricity De m and and Ge ne ration Capacity

16
14

CEB despatch 140

power stations
(public/private)

12
10
8
6
4
2

50
45
40
35
30
25
20
15
10
5
0

Central Electricity
Board (CEB)
created

0
1920

CEB complete
most of 132kV, 50
Hz grid

1924
1928
1932
1936
1940
1944
Generation Capacity Ye ar Electricity Demand

1948

E le c D e m a n d ( T W h )

G e n C a p a c ity (G W )

1920-1947: High Voltage

Transmission era

1947-1990: Nationalised
Industry era
Demand and
Generation

Grow th in Electricity Demand and Generation Capacity

80
70

300

200
150
100
50

60

Privatisation

250

50
40
30
20
10

0
0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995
Electicity Demand
Generation Capacity
Year
Maximum
Demand
1950: Need to build 275kV grid
recognised
1951: Capacity shortage
persists (17% load-shed)
1955: Nuclear power
programme announced

Max Demand/Gen Capacity

(GW)

1948: British Electricity

Association created:
- 14 area boards
- 14 generating divisions

350

Elec Demand (TWh)

1947
Nationalisation of 200
electricity companies and 370
municipality supply
obligations
Capacity shortages lead to
disconnection at peak load
Government intervention to
limit choice of turboalternators to 30MW or 60MW

1947-1990: Nationalised
Industry era
Demand and
Generation

Grow th in Electricity Demand and Generation Capacity

80
70
60

250
200
150
100

Privatisatio
n

50

Privatisation

1955: South of Scotland

Electricity Board created

Elec Demand (TWh)

300

50
40
30
20
10

0
0
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995
Electicity Demand
Generation Capacity
Year
Maximum Demand

1958: CEGB created with

responsibility for:
-Generation (262 power stations,
24 GW)
- Transmission (15,000 km Over
Head Lines)
- Wholesale reselling

1958: 12 area boards

created with responsibility
for:
-Distribution
-Retailing

Max Demand/Gen Capacity

(GW)

350

AC-DC conversions within data centers

Numerous AC-DC conversions within data centers, each resulting in energy losses

Electricity Use In A Server (Watts)

Based on a typical dual processor 450W 2U Server;
Approximately 160W out of 450W (35%) are losses in the power conversion process.

Source: Brian Griffith: INTEL