INTERNATIOKAL lNERGY AGEHCY COGEH EUROPE ANNUAL CONFER,ENCE 2002 1 1 t . - €PJJl!lter'1tioıı, 'Wasu ıı . . . . . . fi-fe �illl� . 1 because of higher fuel efficiency and small incremental capital costs (compared to distributed generation without CHP). Principally !he fuel savings and !he cost of displaced electricity drive !he economics of CHP. Appropriate sizing of !he CHP system to match the heat load produces more robust economics. Economies of scale alsa matter: over 80% of CHP are in large industrial applications, with most of !his in four industries, paper, chemicals, petroleum refining and food processing. Even so, much of !he CHP capacity in !he OECD has been developed as a consequence of supportive government policies. Such policies have alsa encouraged systems to be more oriented towards power exports. A great of interest has been developed in domestic -level CHP, so-called "microCHP" particularly using external combustion (Stirling) engines and in some cases fuel cells. Despite !he potential far a favourable payback period, high capital costs far the domestic consumer will be a significant barrier to !he penetration of these technologies. The economic value of reliability is becoming applications. While !his is obviously more attractive when the point of use is remote from !he nearest distribution grid, !here exist applications e.g., adding a single street light, where !he costs of connection to a grid can exceed !he capital cost of installing a PV-based lighting system. Distributed generation in Japan, the United States, the Netherlands and the United Kingdom The status of distributed generation differs in each OECD country. While economics is certainly a fundamental factor, differences in policy can alsa affect !he role that distributed generation plays, particularly !he role of market structure, electricity market reform, and other policies. This report examined the role of these and other influences on !he development of distributed generation in Japan, the United States, !he Netherlands and !he United Kingdom. Distributed generation, is a viable option to many electricity consumers in Japan increasingly important far some consumers and represents the most important market niche far DG. Emergency diesel generating capacity in buildings is generally not adapted to export power to !he grid, but could represent several percent of total peak demand far electricity. The existence of this largely neglected source of grid power is gaining increased attention, particularly in Much of the CHP capacity because of high electricity prices and limited electricity market opening. There are three common types: oil-fired capacity in in the OECD has been developed as a "monogeneration" designed consequence of supportive principally to clip peak demand, oil-fired CHP using diesel engines and steam turbines, and gas-fired CHP with engines, gas or steam government policies. Such the United States where demand growth has led to tighter capacity margins. in the policies have alsa turbines. The high retail price of natura! gas in Japan makes summer of 2001, system operators in New Mexico and Oregon arranged far !he use of existing standby generators to supply additional power to the grid under encouraged systems to be gas-fired monogeneration uneconomic. The economics of gas-fired cogeneration is marginal, but is !he only option in Tokyo, Yokohama and Osaka thanks to tight environmental regulations. A survey by !he Japan Engine Generator Association (NEGA) estimates !hat from 1997 to 2000, more oriented towards emergency conditions. Electric utilities have co-ordinated !he operation of these standby generators through communications network power exports. and software !hat permit the utilities to remotely operate the standby generators as needed. Similar, for electricity consumers !hat require higher electric reliability than the grid can normally provide (e.g., in continuous manufacturing processes or !he "digital economy" services) distributed generation is being used to assure a continuous supply of power. Two distributed generation technologies stand aut as having very high potential in this regard. Backup systems such as gas engines combined with uninterrupted power supplies (UPS) such as flywheels have recently been commercialised. Fuel cells can alsa be used far this purpose. While !his capacity generally contributes little to overall electricity production, it can be expected to become an increasingly important source of peak supply. in this way, distributed generation is contributing to improving the security of electricity supply. DG can alsa have economic applications to meet off-grid needs, such as in communities remote from !he main grid. Photovoltaics combined with battery storage can be the most economic method of remote lighting, telephone and other low capacity factor 5 o I ECOGENERATION WORLO installation of distributed generation (excluding emergency power) grew by 2418 MW, about 1 1 % of !he amount installed by !he utilities during !hat period. Distributed generation is recognised as a business opportunity far !he utilities. Eight of !he ten electric utilities in Japan have established subsidiaries to offer distributed generation services. Several regulatory barriers have been removed in order to encourage the development of distributed generation and particularly cogeneration systems. These include adjustments to fire regulations, and on-site staffing requirements. However, some regulatory barriers remain. Selling excess distributed generation to another electricity customer is generally not allowed. The costs far electrical protection equipment can be quite substantial (about 10% of !he total cost of !he facility or even more) and could be simplified. Distributed generation in the US is affected by relatively low electricity prices and a widely varied pace in retail electricity market liberalisation. CHP accounts far 50.4 GW,
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