INTERNATI0NAL ENERGY AGENCY COGEN EUROPE AHHUAi. C0NfERENCE 2002 or about 6% of the total electric generating capacity, nearly all of it large industrial plants. Emergency power generators have been identifıed as a potential source of emergency grid capacity. A detailed survey of standby generators in California by the California Energy Commission revealed 3.2 GW of such capacity, equivalent to over 6% of peak electricity demand in the state. The main issues with respect to distributed generation in the US are a need to improve economics, a point because of falling electricity prices and rising natural gas prices. Permitting processes make it difficult and expensive (on a per kilowatt basis) to get siting approval. The lack of a national standard tor interconnection further increases transaction costs tor distributed generation developers, although such a standard is now under development. lncomplete regulatory reform have left distribution utilities in competition with distributed generation, in some cases resulting in high backup power charges and concerns over the electricity rate implications of increased distributed generation. Environmental standards have been greatly toughen in some states, adhering to the same standard regardless of the size of the generator, effectively ruling out fossil-fıred DG in certain locations. Finally, US distribution networks may require more reinforcement than networks in Europe. The Netherlands has an advanced liberalised market where distributed generation is well established principally thanks to government policies that have favoured CHP and renewables. However, the general policy thrust is to avoid using the grid to subsidise the development of these technologies, relying instead on other policy instruments. The substantial experience with distributed generation has had some important advantages. Unlike the US, interconnection rules are not a problem. Market rules were adjusted so that CHP producers could more accurately predict their supply to the grid. Power parks are operating where the main power producer is the only customer with a direct connection to the grid. However, CHP producers have experienced difficulties because of rising gas prices and falling electricity prices and have led the government to increase direct subsidies. The government has also encouraged distribution companies to study means to ensure that network value of distributed generation is appropriately compensated in tariffs. The United Kingdom has an advanced liberalised market and policies to favour the development of CHP and renewables. The government has set targets to increase the contributions of both renewables (from around 2% to 1 0% by 201 O) and CHP (from 4.6 GW to 10 GW by 2010). in addition to these measures, the government had identified the development of embedded generation in general as an important to increase competition among electricity producers. However, the creation of new electricity trading rules, the New Electricity Trading Arrangements (NETA) in 2001 have proved disadvantageous to small embedded generators. One of its main impacts on embedded generators is its requirement that all generators predict their output at least 3.5 hours in advance and must pay penalties if they produce less than forecast but only receive modest remuneration tor supplying excess power. Early experience with NETA has resulted in large price reductions but also a significant reduction in power produced for the grid by embedded generators (Figure 3). Change in exported electricity quantities and prices during fırst 3 months of NETA Percentage Reduction in Export Prices and Volumes - ... .... .... - - - cı• ,.,.. ....,_ ■1-l't.ı...ıtMWtij in anticipation of these issues, the UK government commissioned the Embedded Generation Working Group to examine the role of DG in the liberalised market. The report, issued in January 2001, identified a number of practical measures to increase incentives tor distributors to use distributed generation, to address issues associated with connection of distributed generation to the network, valuing distributed generations costs and contributions to the distribution network, and identifying implications of greater DG on the evolution of the distribution network. The government and regulator have both taken a role in following up the report's recommendations, including proposing new charging principles and simple rules tor grid connection, and requiring distributors to provide additional information on the value of distributed generation at different points in their grid. A Distributed Generation Co-ordinating Group has also been established to follow up on the Working Group's recommendations. Policy /ssues Policy issues with regard to distributed generation can be classified by the three Es of energy policy: economic efficiency, environmental protection and energy security. Economic efficiency issues include connection of distributed generation to distribution grids (a market access question) and access to distribution networks, pricing issues inc.luding how to incorporate benefits and costs of distributed power in distribution network tariffs, and market organization issues arising from application of electricity market rules. Environmental issues consider emissions impacts and regulations affect different distributed generation technologies. Energy security implications of distributed generation tor diversification of fuels and electıic sector reliability can also be considered. Economic efficiency Connecting distributed generation to the distribution network can affect the performance and reliability of the distribution network, which is normally designed to deliver power from the transmission network to ultimate consumers. This creates a technical problem in dealing with distributors particularly when ECOGENERATION WORLO Li]_
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