Distributed Generation: Impacts and Cost Analysis

 
 
Priyanka Priyadarshini Padhi, R. K. Pati & Akhilesh Arvind Nimje
School of Electrical Engineering, KIIT University, Bhubaneswar -751024, India
E-mail : [email protected] ,[email protected]

 
Abstract - This paper presents the reason for the current interest in distributed generation and the challenges that are faced while
increasing its share in the electricity generation mix. Under the present centralized generation paradigm, electricity is mainly
produced in bulk amount at large generating stations, wheeled though the transmission and distribution grids to the end consumers.
However, the recent quest for energy efficiency and reliability and reduction of greenhouse gas emissions led to explore possibilities
to alter the existing generation paradigm and increase its overall performance with the implementation of distributed generation.
Keywords - Distributed generation, grid, solar PV cells, voltage regulation, reliability, renewable energy sources, and cost
effectiveness. 

I. INTRODUCTION II. DISTRIBUTED GENERATION

TECHNOLOGY
Distributed generation (DG), defined as generation
Commercial energy technologies include:
located at or near the load centers, is being recognized
as an environment friendly, reliable, and secure source • IC engines
of power that not only has minimal negative social
• Gas turbines
impacts but also serves to promote social welfare. The
technologies for DG are based on reciprocating engines, • Micro turbines
photovoltaic, fuel cells, combustion gas turbines, micro • Energy storage technologies
turbines and wind turbines. The technologies are also
called alternate energy systems as they provide Renewable energy technologies include:
alternative ways to the traditional electricity sources i.e. • Fuel cells
oil, gas, coal, water etc. and can also be used to enhance
the performance of existing electrical power system. • Solar photovoltaic
DGs are becoming increasingly popular due to their low • Wind & Wave Energy
emission, low noise levels and high efficiency. One of
the main advantages of DG is its close proximity to the • Hydro electric energy
consumer loads. DG can play important role in
improving the reliability of the grid, reducing the III. IMPACTS OF DISTRIBUTED GENERATION
transmission losses, provide better voltage support and Interconnecting a DG to the distribution feeder may
improve the power quality. The major obstacle for the have significant effects on the system such as power
distributed generation has been the high cost. However, flow, voltage regulation, reliability etc. A DG
the costs have decreased significantly over the past 20 installation changes traditional characteristics of the
years. The distributed generation also reduces green distribution system. Most of the distribution systems are
house gas emission addressing pollutant concerns by designed such that the power flows in one direction. The
providing clean and efficient energy. Distributed installation of a DG introduces another source in the
generation is the key to meet growing power demand, system. When the DG power is more than the
provide benefits to consumer by improving the quality downstream load, it sends power upstream reversing the
of life, relieves utility to supply additional loads and direction of power flow and at some point between the
opens the opportunities for power trading in competitive DG and substation; the real power flow is zero due to
environment. back flow of power from DG. The rules are defined for
power flow reversal, optimal DG placement for

 
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 Distributed Generation: Impacts and Cost Analysis

reduction of losses and the impacts of DG on over- network using commercial software tools that shows
current protection. The rules for modeling DG improvement in the reliability indices [12]. The
interaction and its zero point analysis have been analytical approach to calculate the reliability of the
reported in the literatures so far. The 1547 series of system that included some intrinsic attributes of the DG
IEEE standards for interconnecting distributed resources and the distribution system including DG failure,
to the power system is a set of standards consisting of 6 component failure, change in load demand etc [21].
parts [2]. The standards provide criteria and requirement Many factors were considered for the reliability indices
for interconnecting distributed resources to the power calculation in the proposed technique The location for
system. The IEEE 1547.1 defines the requirement for the placement of DGs is of key importance. In [14], the
interconnecting equipment that connects the DG to the authors studied the effects of DG on system reliability
electric power system is presented [3]. The IEEE 1547.2 on an Iranian Distribution system. The positive impacts
provides technical details and application to understand included faster restoration and reduced voltage sags
the IEEE standard is presented [4]. The IEEE 1547.3 while the negative impacts could be sympathetic
guide addresses engineering concerns for design, tripping, increased fuse blowing etc. A few papers had
operation and integration of DG island systems [5]. The presented validation models for calculating reliability
IEEE 1547.6 standard focuses on criteria, test and indices . In [17], the basic data for reliability assessment
requirements for interconnection distribution secondary of distribution system was presented. The paper also
network of area electric power system (Area EPS) with contained basic results of continuity studies for a range
Local EPS having Distributed Resource generation [6]. of sensitivity analysis and alternate configurations. The
The impacts of installing DG on voltage, losses and impact of installing DG as backup at various locations
reliability indices of a residential distribution network on the distribution circuit is also explored in this
are studied based on various criteria. research.
A. Losses C. Voltage Impacts
Installation of DG impacts the losses and overall The DG installation can impact the overall voltage
power factor of the total system. The reduction of profile of the system. Inclusion of DG can improve
transmission losses with DG using power summation feeder voltage of distribution networks in areas where
method have been reported [7]. The loss analysis at voltage dip or blackouts are of concern for utilities. The
various penetration levels of DG and distributing were DG has a greater impact on electric losses, voltage
presented [8]. profile, flicker, harmonics, short circuit levels, islanding
and reliability. The optimal location of DG allocation is
B. Reliability
an important aspect. wer system were analyzed. The
Distribution system reliability is an important factor paper also addresses DG impacts on short circuit levels
in system’s planning and operation. The reliability and the islanding operation of DG. The approach makes
indices such as System Average Interruption Duration use of controlling DGs reactive power based on its real
Index (SAIDI), System Average Interruption Frequency power to satisfy system voltage requirements. The DG is
Index (SAIFI), Customer Average Interruption installed at the lowest voltage location and distributing it
Frequency Index (CAIFI), Customer Average across several locations to explore the impacts. Also, the
Interruption Duration Index (CAIDI), Average Service implication of installing DG on one phase and its impact
Availability Index (ASAI), Average Service on the other phases has been investigated.
Unavailability Index (ASUI), Energy Not Supplied
(ENS) etc presented by the IEEE guide are used to IV. COST ANALYSIS
evaluate reliability of the system. The methods of data
A. The Levelized Cost of Energy
collection to calculate the reliability indices of system is
crucial [9]. It takes into account the power consumption The Levelized Cost of Energy (LCOE) is the most
pattern, selection of relevant index, outage data transparent metric used to measure electric power
collection and actual consumer perceptions and hence generating costs, and is widely used as a tool to compare
would contribute towards improving the reliability. The the generation costs from differing sources. The LCOE
results showed that SAIDI, SAIFI, CAIDI and ASAI is a measure of the marginal cost (the cost of producing
were the mostly used indices [10]. However, a general one extra unit) of electricity, over an extended period,
Distribution Reliability (DISREL) program can used to and is sometimes referred to as Long Run Marginal Cost
validate the impact of distributed generation on system or LRMC. The LCOE is representative of the electricity
performance improvement and its reliability [11]. It price that would equalize cash flows (inflows and
shows that DG is a cost-effective solution that could outflows) over the economic life time of an energy
benefit both utility and customers. The modeling generating asset. It is the average electricity price
techniques for DG, and its application to a radial needed for a Net Present Value (NPV) of zero when

 
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 Distributed Generation: Impacts and Cost Analysis

performing a discounted cash flow (DCF) analysis. With reports wind construction periods of 1 year (unlike
the average electricity price equal to the LCOE, an AEMO), and the effects of this are explored.
investor would breakeven and so receive a return equal
TABLE 1. Construction Periods and Economic
to the discount rate on the investment.
Lifetimes

= Technology
Construction
Period
Economic
Lifetime
Where: Wind 2year 30years
n = Project lifetime (yrs). Solar PV 1year 30years
t = Year in which sale or cost is incurred. Solar Thermal 2year 30years
r = Discount rate (%) D. The Capacity Factor
By definition this is the point at which the Net In the case of renewable energy generators the
Present Value (summation of the Present Values, PV, of assumed capacity factor of a facility has a significant
the cash flows) for a project is zero: impact on the LCOE. For renewable energy generators,
the capacity factor is generally dependant on the quality
NPV = = 0 of the renewable resource. In the interests of a consistent
approach, constant capacity factors were used for each
Where : technology type. These capacities were based on
reasonable resource qualities for Australian conditions,
PV = summarized below in Table 2, as used in the EPRI
study.
EBIT = Earnings Before Interest TABLE 2. Capacity Factors
Tax DEP = Depreciation Capacity
Technology Resource Quality
Factor
CAPEX = Capital Expenditure
Wind 6.8m/s 30%
T = Corporate Tax rate (%)
Solar PV 2445 KWh/m2/yr 20%
B. Global Assumptions
Varried by
Tax: The corporate tax rate is assumed to be 30% Solar
2400 KWh/m2/yr plant storage
for the purposes of all cash-flow analysis. Thermal
configuration
Depreciation : The electric utility industry typically uses
the straight-line method, which was used in this V. RENEWABLE ENERGY TECHNOLOGY
analysis. For a 25 year lifetime, the annual depreciation COST REVIEW
is 4%, and for a 30 year lifetime, the annual depreciation This paper has undertaken a review of current and
is 3.33%. future costs of three forms of renewable energy
Exchange Rate : In line with the Mid Year Economic technology, comparing data from a range of
Financial Outlook approach, the exchange rate is international and Australian-specific studies, taking care
assumed to remain around the levels seen at the time the to compare data on the same basis of financial
forecasts were prepared3. As of March 01 2011, a US$ assumptions (discount rates) and resource quality. The
exchange rate was $0.985 used, and an EU€ exchange purpose was to compare both the current costs, along
rate of $0.70 was used. with the rate of decrease, and the reason for differences
between the studies. The Australian-specific datasets are
C. Construction Period and Economic Lifetime the ‘Australian Energy Generation Technology Costs’
The construction period and economic lifetime can report by EPRI, and the 2010 dataset used by the
have a considerable affect on the levelized cost of Australian Energy Market Operator (AEMO), largely
generation. This is particularly important for protracted based on the EPRI data with a review from ACIL
construction periods (lead times). The economic and Tasman. The assessment reviewed technical and
lifetimes and construction periods used are presented in economic parameters of wind, photovoltaic and solar
Table 1, and are based on the AEMO dataset. The IEA thermal energy generation technologies, considering
technology specific learning rates and cost reduction
potentials. It includes a detailed exploration of the

 
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 Distributed Generation: Impacts and Cost Analysis

factors contributing to the learning rates and cost

reductions. Common financial assumptions (in
particular discounting rates) are used, to provide a
common basis of comparisons and analysis. These
parameters were utilized in Levelized Cost of Energy
(LCOE) calculations to develop cost outlooks, and
compare the outlooks to other projections. Where
relevant, LCOE is calculated from capital & operating
cost data at a common renewable resource level, and
includes the revenue generated from the sale of
Renewable Energy Certificates, priced under a
simplified assumption at an unchanging $50/MWh.
However, especially in the case of the solar technologies
(both PV and thermal), the rate of cost reduction
expected from the global analyses is faster than that in
Fig. 1: Solar photovoltaic cost projections (Direct
the AEMO dataset. In both cases, AEMO costs in 2030
Normal Irradiation = 2445 kWh/m2/yr)
were higher than, and outside the range of, the 2020
costs from the international analyses. The renewable B. Wind
technologies of PV and wind have historically shown
Wind energy generation has expanded rapidly in the
that a large proportion of cost reductions have come
previous decade 2000-2010, with installed capacity
from the learning’s and economies of scale associated
growing at 28% and doubling every 3 years. Wind
with large-scale global deployment, and not just
capital costs have tracked along a learning curve as this
improvements in technical efficiency. With this in mind,
capacity has grown, and the expectation of all of the
when considering scenarios for new energy technology
studies reviewed is for the trend to continue as the
development and deployment, especially in the context
expansion of the wind industry continues. Key
of shifting away from greenhouse gas emitting energy
commodity constraints and supply chain bottle necks
sources, initial higher costs of renewable energy should
have hampered cost reductions in the past few years.
not be considered a barrier to deployment. Rather, the
The IEA and the Global Wind Energy Council (GWEC)
focus should be on whether learning curves can give
expect that modest cost reductions will continue, due to
confidence that the technology is able to achieve
economies of scale (as a result of continuing industry
desirable cost reductions within an acceptable
expansion, especially Chinese manufacturing),
timeframe, and how much the rate of deployment is
alongside stronger supply chains and technological
expected to change the rate of cost reduction. The key
improvements. The major technical cost reduction
findings of this assessment are summarized below for
opportunities include increasing turbine size, hub height,
each of the three technologies.
and the elimination gearbox losses via the use of direct
A. Photovoltaic drive turbines.
The installed capacity of photovoltaic has grown at
rate of 40% over the last decade. As the industry has
grown PV module prices declined along a well
established learning curve, which has seen cost
reductions of 22% for each doubling of cumulative
capacity, over the last few decades. An excursion from
this historical rate occurred due to supply bottlenecks
and market dynamics from 2003 to the end of 2008. The
learning curve has since returned towards the historic,
and the global installation capacity increased to 10
Gigawatt-peak (GWp)/annum in 2010. The International
Energy Agency (IEA) and the EPIA expect further cost
reduction with increased production capacities,
improved supply chains and economies of scale. China
has experienced a 20-fold increase in production
capacity in four years, increased expansion of global
production capacities for key components (including
modules and inverters) and is continuing to exert Fig. 2 : Wind power cost projection
downwards pressure on prices.

 
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 Distributed Generation: Impacts and Cost Analysis

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