Category: Ireland

DR is the enabling technology…

I have huge respect for Dr. Eddie O Connor but I think he is missing the need for Demand Response. DR is a vital requirement for deep renewable penetration as well as large super grids. I just listened to his address at ASPO-Ireland. He explained that if a wind based grid was large enough then production would be level. Even if this is true, demand is not flat.

I understand that Ireland wants to have 33% renewables by 2025. Since wind farms yield 30% of rated output this means that we will have 110% installed plant versus our average consumption. Given that currently the consumption variation from minimum to maximum is nearly 200% this means that at certain times we will be generating, from wind alone, 146% of our demand. Clearly that will result in large periods of wind farm curtailment.

 As far as I know curtailment was planned to start from this summer for wind farms and we are only on 9% renewables at the moment.

If we are indeed peaking on fossil fuels then 33% renewables is not a destination. It is part of the journey. We need to get to a market of renewables plus nuclear eventually. Even if we have large interconnects from Africa to Iceland we need huge amounts of DR to make this possible.

The electrical grid system has evolved over the last 100 years as a flexible supply designed to meet inflexible but fairly predictable demand. Complicated trading systems have evolved to meet the needs of this flexible supply / inflexible demand market. DR is seen as an ‘ancillary service’. It allows for margins of error or enables peak shaving. However most users continue to use electricity on a single tariff and care little about DR. What if the grid, as we know it, didn’t exist? What if it was being developed from scratch now and the only sources of power were solar, wind, hydro, tidal and wave? This would be described as inflexible supply and demand would have to respond to the variability in supply. In order for this grid to be stable there would have to be huge demand response capability built in. You cannot have inflexible supply and inflexible demand.

To my way of thinking the solution is to have realtime pricing on electricity. It may be necessary to let the price of electricity go near zero or even negative at some times to stimulate new markets such as resistive heating and H2 production. Resistive heating as a way of replacing fossil fuel consuption is far better from a carbon perspective than curtailing the wind farms. An obvious market would be municipal swimming pools and public buildings.

Variable pricing will create new markets for low cost electricity and will create both new generation at high cost times (ie CHP or embedded diesel generation) as well as devices that can load shift (ie HVAC and refrigeration).

It is therefore my thesis that DR based on real time pricing is the enabling technology required to move us to a renewables future.

Time to invest in wind!

On June 8th 2007, Eirgrid published a paper on wind energy cost implications. See my blog, on 14th June 2007, for details and for correspondence I had with them regarding the, in my opinion, very optimistic price projections for gas. In essence that paper seemed to me to suggest that wind wasn’t fully economical unless gas reached €0.80/therm and the projections suggested that might never happen or if it did it might be after 2020.

 

A year ago I was confused that no account for risks associated with peak oil or peak gas were factored into the plans. So what happened?

 

Gas prices now are €0.20/therm higher than they were expected to be in 2026. Is there anyone on the planet that believes gas prices will fall by 30% between now and 2026? If there is I’d like to share their medication.

Generation Adequacy Report 2008 to 2014

The Eirgrid Generation Adequacy Report 2008 to 2014 was published recently.

http://www.eirgrid.com/EirgridPortal/uploads/Publications/GAR%202008-2014.pdf

The report states that Ireland is facing a tight electricity supply situation:

“The most significant factor influencing this is the poor availability of the generation portfolio. Improved availability performance would greatly reduce the risk to security of supply. However if availability continues at the current low levels, then the system is facing immediate deficits.”

We are moving to less diversity of supply as all new generation capacity planned in the near future is either (Russian) gas or wind generated power.

The report recognises the benefits of moving demand to off-peak hours. “Shifting 1% of annual consumption from peak to off-peak hours would remove the requirement for approximately 135 MW.”

With regard to wind power generation (WPG) the report states. “There is also considerable investor interest in wind powered generation, however, due to its inherent characteristics, it offers limited generation adequacy benefits. Furthermore if WPG is installed at a linear rate of 270 MW per annum there would be just over 1,700 MW installed by the end of 2010. This should be sufficient to enable 18.0% of the electricity requirement to be provided from renewable sources and would mean that the Government’s target of 15% by 2010 is exceeded.”

The problem with wind energy is, of course, that it’s only available when the wind blows. That means that it has very little effect on supply adequacy.

Furthermore the contribution of WPG towards generation adequacy (i.e. Capacity Credit of WPG) has not keep pace with the growth in installed capacity or energy supplied. In fact, while installed WPG capacity has increased by 40% per annum over the last 5 years, in the same period the capacity credit (as a percentage of installed WPG capacity) has fallen from 35 to 24 %, see Figure 4-7. As outlined in Section 2.3(b), this is due to the inherent inability of WPG to behave as a number of fully independent power plants. All WPG in Ireland tends to act more or less in unison as wind speeds rise and fall across the country. The probability that all WPG will cease generation for a period of time (as a result of wind conditions) limits its ability to ensure continuity of supply and thus its benefit from a generation adequacy perspective.

EirGrid recognise the benefits of moving demand to off peak times. They do not acknowledge in the report that energy demand management (EDM) can improve WPG adequacy if the EDM is operated based on actual current wind energy production rather than on tine based tariffs. In particular the possibility of stimulating demand at times of excess wind energy could reduce or eliminate the need for wind farm curtailment.

Vivid Logic

I have been fascinated by a paper published by Phoebe Bright for some time. Everybody has a theory as to how the world (and the Irish) economy will evolve as a result of peak oil and government reaction to global warming. Phoebe is different from every other commentator I have read or listened to in two fundamental ways.

1) She deals with multiple possible scenarios

2) She presents her analysis in a very humorous form

As a result of our shared interest we have started to communicate regularly. I strongly recommend reading her paper, available via the following URL.

http://www.dcmnr.gov.ie/NR/rdonlyres/54C78A1E-4E96-4E28-A77A-3226220DF2FC/27072/VividlogicRevised.pdf

Last week, Phoebe sent me an email bringing to my attention that ESB, in conjuntion with CER, have launched an RFQ for the purchase of 2,500 smart meters to implement a pilot project. It is clear from the proposed specification that EDM is envisaged as a research objective of this pilot. Below is the URL to the tender documents.

http://www.e-tenders.gov.ie/search/search_show.aspx?ID=NOV094156

The Irish Electricity Market

The Electricity Supply Board (ESB) is eighty years old this year. It was founded in 1927, the same year my father was born. It is hard for me to imagine that as a young child he did not have electricity at home. Up to that point electricity was generated by city corporations for local distribution. The development of the Shannon hydroelectric scheme and the creation of the national transmission grid that resulted triggered the Irish government into forming a single state owned monopoly for electrical generation and transmission. In Ireland, electricity and the ESB became synonymous. Most people in Ireland still view this as the market situation but times have changed considerably.

The European Union (EU) directive 96/92/EC, published in 1996, required member states to open their electricity markets. From the year 2000 this directive is being gradually implemented in Ireland. The ESB lost its monopoly on electricity production and distribution in Ireland. The ESB was divided into two separate business units, ESB Generation and ESB Networks. ESB Generation now competes as any other wholesale elctricity generation company in the state. ESB Networks maintains the distribution network.

Once the ESB monopoly was broken, the Commission for Energy Regulation (CER) www.cer.ie became the overall regulator of the Irish energy market including electricity. A new organisation EirGrid www.eirgrid.com was founded to act as the  System Operator and the wholesale market operator for electricity in Ireland.

How does this new structure affect the regulation and administration of EDM projects, existing or proposed, in Ireland? Any EDM projects must be initiated and licensed by the CER and must be operated by EirGrid.

In order to facilitate wind energy penetration, EDM must be real time. The only real time EDM in Ireland is STAR and that is limited in size, is currently closed to new entrants, and is designed to assist in rare cases of generation plant failure. Obviously if I am to implement an EDM business in Ireland I will need the necessary regulatory and administrative procedures to be implemented bt CER and EirGrid. The question is therefore, how disposed to EDM are CER and EirGrid.  The following link answers that question:-

http://www.cer.ie/DSM

CER are planning to implement a pilot Demand Side Management (DSM) project involving smart metering and time of day tariffs. Surprisingly the discussion document in the above link does not mention wind energy at all. I think that this is because the project is in response to initiatives at a European level and it is only in the Irish context that EDM takes on a specific signifiacance in relationship to wind energy.

Also you will notice that CER use the acronym DSM while I use the acronym EDM. Do these mean the same thing? From the published literature, demand side management appears to be a very broad term that includes all kinds of energy efficiency projects at the consumer. DSM includes EDM as a subset. Energy demand mangement is specifically about the real time generation, curtailment and consumption of electricity to achieve grid stability.

Wind Power Economics

Last Friday, 8th June 2007, Eirgrid published a paper on Wind Powered Generation which was subtitled ‘An analytical framework to assess generation cost implications’.

http://www.eirgrid.com/EirgridPortal/uploads/Announcements/Windreportv.16.pdf

The report is a very competent analysis establishing the relative cost of electricity generated by wind energy versus by natural gas. The wild-card variable in this analysis is, of course, the variability in price of natural gas from now to 2025 the period of analysis in the report. I was very confused by the predictions for natural gas prices and so I sent EirGrid a question regarding same. The question and their answer are shown below. It’s very interesting that natural gas prices more than doubled and then halved again in one year. No wonder I was confused.

Question

I am studying the energy market in Ireland to identify business opportunities. I need your help understanding one issue. I just read your report about the relative cost effectiveness of wind energy.The report comes out very neutral on the topic. Wind is OK in small doses but we can’t have too much because it destabilises the network. Fair enough! But the whole case of the document was comparing wind to natural gas. The authors had to estimate what the price of natural gas is going to be from now until 2025 to do the sums. They had three scenarios, best, worst and most likely. A consultancy group, Popry, was quoted as a reference for these price estimates.By my interpretation of the natural gas price prediction graph in your report:-

  • Best scenario: gas will halve in price from now to 2010 and then hold that price until 2025
  • Likely scenario: gas will come down by 30% between now and 2025
  • Worst case: gas will go up by 25% to 2025.

Either I am reading this incorrectly, or the whole peak oil thing is not on Eirgrid’s radar. If you put a 5% increase on gas prices per annum, which I would have thought reasonable) then surely the economics swings hugely in favour of wind energy. Are you really basing your predictions on the worst case expectation that energy prices will increase less than general inflation over the next 18 years? The likely and best case scenarios seem bizarre to me.

I’m totally confused. Can you help? Please explain how I am misinterpreting your report.

Answer

Thank you for your question on our Wind Powered generation paper. We would point out that it is a contribution to the discussion on the issue of the economics of wind generation and has been discussed with industry stakeholders and that we do welcome comment.

The price forecasts are based on a period when there was a gas supply shortage in the UK. This had driven prices to historically high levels of 80 cent/therm. The forecast was that these prices would fall back again once additional gas pipeline capacity from Europe to the UK was commissioned in early 2007. So far the predictions have been correct with gas prices now down to 30 cent/therm or less (on the UK gas balancing market).  The low gas price scenario continues on at this low level based on the UK ‘s ability to tap into the global gas market through the construction of large scale LNG terminals.  In the long term if gas prices went to the higher levels quoted, you may see some switching to clean coal technology for electricity generation.

The paper identifies the break even price of gas to be above 80 cent. The reader can then take a own view on the probability of average gas prices over a year being in excess of 80 cent. In the long term as fossil fuels get scarce, it is fair to say that prices could be expected to rise, the unknown is by how much and when.