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Kyoto and the regulation of small CHP plants in DK
Henrik Lund Aalborg University
Denmark
Environmental Management 7. Semester 2003Environmental Management 7. Semester 2003Sustainable Energy System Analysis (SESA)Sustainable Energy System Analysis (SESA)
7th lecture7th lecture
Content:Content:
Rio, Kyoto and Johannesburg Rio, Kyoto and Johannesburg declarationsdeclarationsDanish Energy Planning 1972Danish Energy Planning 1972--20032003The new Danish energy strategyThe new Danish energy strategyProposals for new CHP regulationProposals for new CHP regulationEnergyPROEnergyPRO analyses of optimal analyses of optimal investments under different regulationsinvestments under different regulations
UN 1987: Our Common FutureUN 1987: Our Common Future
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UN 87: Low 2020 and High UN 87: Low 2020 and High 2030 Energy Scenarios2030 Energy Scenarios
Brundtlandreport Low Energy Scenario year 2020, 11,2 TW
0123456789
1011
0 1000 2000 3000 4000 5000 6000 7000 8000
Million inhabitants
kW /
inha
bita
nt
Industrial Development
Brundtlandreport High Energy Scenario year 2030, 35 TW
0123456789
1011
0 1000 2000 3000 4000 5000 6000 7000 8000
Million inhabitants
kW /
inha
bita
nt
Industrial Development
Year 1984, 10 TW
0123456789
1011
0 1000 2000 3000 4000 5000 6000 7000 8000
Million inhabitants
kW /
inha
bita
nt
Industrial Development
35 TW year 2030
11,2 TW year 2020
10 TW year 1984
UN 87 Report ConclusionsUN 87 Report Conclusions
Low Energy Scenario:Low Energy Scenario:is best way to achieve sustainabilityis best way to achieve sustainabilitydoes not necessarily means lack of does not necessarily means lack of important energy servicesimportant energy servicessame level in next 50 years with only same level in next 50 years with only half the resources is possiblehalf the resources is possibleFundamental institutional changes is Fundamental institutional changes is neededneeded
Low Energy Scenario 2020:Low Energy Scenario 2020:
Industrialised countries decrease Industrialised countries decrease from 7,0 to 3,9 TWfrom 7,0 to 3,9 TWDevelopment Development countries countries increase from increase from 3,3 to 7,3 TW 3,3 to 7,3 TW
Brundtlandreport Low Energy Scenario year 2020, 11,2 TW
0123456789
1011
0 1000 2000 3000 4000 5000 6000 7000 8000
Million inhabitants
kW /
inha
bita
nt
Industrial Development
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ImplementationImplementationRio Declaration 1992
Kyoto Protocol 1997Johannesburg 2002
Rio 92 DeclarationRio 92 Declaration
Adopting the objective of stabilising Adopting the objective of stabilising GHG at a level that will prevent manGHG at a level that will prevent man--made climate change.made climate change.Forming the framework for the Forming the framework for the continuation of international actions.continuation of international actions.Commitment from industrialised Commitment from industrialised countries to reduce GHG emissions. countries to reduce GHG emissions.
KyotoKyoto--ProtocolProtocol
Annex B countries: Develop countries Annex B countries: Develop countries + some economies in transition + some economies in transition (Croatia, Slovenia, Czech Rep., (Croatia, Slovenia, Czech Rep., Romania, Russia, etc.)Romania, Russia, etc.)NonNon--annex B countries: annex B countries: Developing countries Developing countries + some economies in transition (Bosnia, + some economies in transition (Bosnia, Yugoslavia, Macedonian, Albania) Yugoslavia, Macedonian, Albania)
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Annex B CountriesAnnex B Countries
Adoption of measurement of GHGAdoption of measurement of GHGStabilise GHG emission to the 1990 Stabilise GHG emission to the 1990 level before year 2000level before year 2000Reduce 6 GHG by at least 5% below Reduce 6 GHG by at least 5% below 1990 levels in period 20081990 levels in period 2008--2012 2012 according to annex B (Denmark according to annex B (Denmark -- 8%, 8%, USA USA -- 7%, Norway +1% etc…)7%, Norway +1% etc…)
All CountriesAll Countries
Adopt national programs for the Adopt national programs for the mitigation of climate changemitigation of climate changeTake in consideration climate change Take in consideration climate change into relevant social, economic and into relevant social, economic and environmental policies.environmental policies.CoCo--operate on scientific matters etc.operate on scientific matters etc.Promote Public education and inform.Promote Public education and inform.
Johannesburg 2002Johannesburg 2002
Climate: Countries that have ratified the Kyoto Protocol strongly urge countries that have not to do so in a timely manner.
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Johannesburg 2002Johannesburg 2002
Energy: The use and production of renewable energy must be substantially increased. Furthermore a regular review of this was agreed upon. Finally, the EU launched a coalition of like-minded countries that wish to go even further and establish specific targets and timetables for the increase of renewable energy.
The Kyoto MechanismThe Kyoto Mechanism
JI (Joint Implementation): Between JI (Joint Implementation): Between Annex B countries.Annex B countries.CDM (Clean Development Mechanism): CDM (Clean Development Mechanism): Annex B countries financing projects in Annex B countries financing projects in Non Annex B countriesNon Annex B countriesEmission Trading: Trade between Emission Trading: Trade between Annex B countries. Annex B countries.
30 years 30 years Primary Energy SupplyPrimary Energy Supply
Danish Primary Energy Supply
0
200
400
600
800
1000
1200
1972 1980 1988 1996 2001
PJ
R.E.N-gasCoalOil
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Danish Danish electricityelectricityproduction production
Big power Big power stationsstations
Small CHP Small CHP plantsplants
Wind Wind turbines turbines
Case: DenmarkCase: Denmark
CO2-målsætninger og udslip
0,010,020,030,040,050,060,070,080,0
1980 1990 2000 2010 2020 2030
Mio
.tons
Faktisk Korrigeret Energi 21
CO2-målsætninger og udslip
0,010,020,030,040,050,060,070,080,0
1980 1990 2000 2010 2020 2030
Mio
.tons
Faktisk Korrigeret Energi 21 Kyoto Mål
CO2-målsætninger og udslip
0,010,020,030,040,050,060,070,080,0
1980 1990 2000 2010 2020 2030
Mio
.tons
Faktisk Korrigeret Energi 21 Kyoto Mål
CO2-målsætninger og udslip
0,010,020,030,040,050,060,070,080,0
1980 1990 2000 2010 2020 2030
Mio
.tons
Faktisk Korrigeret Energi 21 Kyoto Mål Klima2012
New Government Climate New Government Climate Change Strategy Year 2003Change Strategy Year 2003Objective in focus:Objective in focus:
Cost Effective Cost Effective CO2 reductionCO2 reduction
Strategy:Strategy:
Least Cost Combination of:Least Cost Combination of:Kyoto Flexible MechanismKyoto Flexible MechanismDomestic measures:Domestic measures:–– Heat Pumps in small Heat Pumps in small CHPsCHPs–– Conservation (windows)Conservation (windows)–– Biogas PlantsBiogas Plants
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TheThe CO2 MankoCO2 Manko
Environmental Cost Environmental Cost effectivenesseffectiveness
Kyoto MechanismKyoto Mechanism
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Danish Government Danish Government New Climate StrategyNew Climate Strategy
CO2-målsætninger og udslip
0,010,020,030,040,050,060,070,080,0
1980 1990 2000 2010 2020 2030
Mio
.tons
Faktisk Korrigeret Energi 21Kyoto Mål Klima2012 NYKlima
New Danish Regulation of CHPNew Danish Regulation of CHP
Paper of 13th June 2003Paper of 13th June 2003
Law of 9. June 2004Law of 9. June 2004
Proposal of new Law implementation (In Proposal of new Law implementation (In Hearing November 2004)Hearing November 2004)
New Law from 2005 New Law from 2005
Old RegulationOld Regulation
All CHP and RES: Priortised production All CHP and RES: Priortised production NgasNgas CHP: Triple Tariff + 80 DKK/CHP: Triple Tariff + 80 DKK/MWhMWhfor the first 8000 for the first 8000 MWhMWhWaste CHP: Triple Tariff + 70 Waste CHP: Triple Tariff + 70 DKK/DKK/MWhMWhBiogas, Biomass (wood, straw), PV, Biogas, Biomass (wood, straw), PV, Wind, Hydro: Triple Tariff + 270 Wind, Hydro: Triple Tariff + 270 DKK/DKK/MWhMWh
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Two different regulationTwo different regulation
One for Natural Gas One for Natural Gas CHPsCHPs
Another for Biogas (and Biomass Another for Biogas (and Biomass CHPsCHPs))
New Regulation: ContentNew Regulation: Content
Cancel prioritised production statusCancel prioritised production statusAll electricity sold on the market at All electricity sold on the market at market pricesmarket pricesCompensation of difference compared Compensation of difference compared to triple tariffto triple tariffNo change in 70, 80, 270 DKK/No change in 70, 80, 270 DKK/MWhMWh
New Regulation: PurposeNew Regulation: Purpose
Better market for electricity without Better market for electricity without prioritised production (More prioritised production (More competition)competition)Stop of CHP in low price hours (Socio Stop of CHP in low price hours (Socio economic savings of 0economic savings of 0--90 MDKK/year)90 MDKK/year)Potential of using small CHP for Potential of using small CHP for ancillary servicesancillary services
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How to compensate difference How to compensate difference compared to triple Tariffcompared to triple Tariff
For each CHP the Triple Tariff income For each CHP the Triple Tariff income form year 2001form year 2001--2003 is compared to 2003 is compared to the payment, IF the same production the payment, IF the same production were sold on the market.were sold on the market.After January 2005 this amount is paid After January 2005 this amount is paid independent from the actual electricity independent from the actual electricity production production Instead the payment is dependent on Instead the payment is dependent on the spot price level. the spot price level.
Balancing paymentsBalancing payments
Approximately 10 DKK/Approximately 10 DKK/MWhMWh (Added to (Added to the compensation) the compensation)
How to make the paymentHow to make the payment
Payments each Payments each month 1/12 of month 1/12 of the annual the annual amount amount compensated compensated for the for the dependency of dependency of the spot price:the spot price:
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DurationDuration
20 years form connection to the 20 years form connection to the electricity gridelectricity gridAt least 10 years from January 2005At least 10 years from January 2005
Additional RegulationAdditional Regulation
Replacement of oil and Replacement of oil and NgasNgas in the in the peak load boiler by biomass is not peak load boiler by biomass is not allowedallowed
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New Regulation: New Regulation: Biomass Biomass CHPsCHPs
New Biogas New Biogas CHPsCHPs and RES plants (with and RES plants (with “innovation perspectives”) before 2008: “innovation perspectives”) before 2008: 600 DKK/600 DKK/MWhMWh in the first ten years and in the first ten years and 400 DKK/400 DKK/MWhMWh in the next ten years.in the next ten years.New RES (without “innovation New RES (without “innovation perspectives”): Market price plus 100 perspectives”): Market price plus 100 DKK/DKK/MWhMWh (or RES(or RES--certificates).certificates).
Optimising Small CHP-plant Performance in a Competitive Market
Henrik Lund, Aalborg UniversityAnders N. Andersen, EMD softwareErik Lundsgaard, Hashøj CHP Plant
DENMARK
Russia Power Conference & ExhibitionRussia Power Conference & ExhibitionMoscow, March 10Moscow, March 10--11, 200411, 2004
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ContentContent
Introduction: Introduction: CHP and Competitive electricity markets: 3 different CHP and Competitive electricity markets: 3 different
sales conditions.sales conditions.
Methodology: Methodology: Optimisation of performance and investment designs Optimisation of performance and investment designs
(15 years experience).(15 years experience).
Results: Results: Compare optimal designs for 3 different market Compare optimal designs for 3 different market
conditions.conditions.
Electricity Market ConditionsElectricity Market Conditions
1. Introduction phase: Fixed prices 1. Introduction phase: Fixed prices Electricity sold on a contract with fixed prices.Electricity sold on a contract with fixed prices.
2. Demand adjustment: Triple tariff 2. Demand adjustment: Triple tariff Name Hours Weekdays Month PricePeak load High load Low load
8:00-12:00 17:00-19:00
6:00-21:00
(Apart from peak load)
The rest
Monday-Friday Monday-Friday
Monday-Friday
Monday-Sunday
January-December October-March
January-December
January-December
542 DKK/MWh
424 DKK/MWh
183 DKK/MWhTable 2: The triple tariff electricity sales price setting of the western Danish TSO, Eltra.
Electricity Market ConditionsElectricity Market Conditions
3. Spot Market 3. Spot Market Prices: Prices: NordNord Pool Pool
Electricity sold on Electricity sold on international spot market.international spot market.
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Optimal PerformanceOptimal Performance
Task: Task: Optimising revenues from electricity sales. Optimising revenues from electricity sales.
Means: Means: Identifying the best performance strategy in terms Identifying the best performance strategy in terms
of when to start and stop CHP units and boilers of when to start and stop CHP units and boilers and when to fill or empty the heat storage. and when to fill or empty the heat storage.
Considerations: Considerations: As few start and stops as possible. Best utilisation of As few start and stops as possible. Best utilisation of
heat storage capacity.heat storage capacity.
Optimal Investment DesignOptimal Investment Design
Task: Task: Identifying optimal CHP size and heat storage Identifying optimal CHP size and heat storage
capacity before making the investment. capacity before making the investment.
Means: Means: Identifying the best performance strategy for Identifying the best performance strategy for
different CHP units and heat storage capacities. different CHP units and heat storage capacities.
Considerations: Considerations: Electricity market sales conditions and sensitivities.Electricity market sales conditions and sensitivities.
MethodologyMethodology
Restrictions: Heat demandRestrictions: Heat demandPlacing CHP productions in high price Placing CHP productions in high price
hours using the following loops:hours using the following loops:Creating continuous productionCreating continuous productionExpanding to neighbour periodsExpanding to neighbour periodsForced start of productionForced start of productionProduction when fuel storage is fullProduction when fuel storage is fullProduction if thermal storage is emptyProduction if thermal storage is emptyFully exploitation of production abilitiesFully exploitation of production abilities
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ToolTool
Methodology is Methodology is implemented implemented into the into the computer tool:computer tool:
energyPROenergyPRO
Case: Typical small CHP plantCase: Typical small CHP plant
District heating demand District heating losses District heating payment CHP investment costs Heat storage investments costs Natural gas fuel price Natural gas energy- and CO2-tax Electricity CO2-subsidy Boiler efficiency CHP electric efficiency CHP thermal efficiency Financing
24,000 MWh/year25 per cent
500 DKK/MWh5 million DKK pr. MW
1700 DKK pr. m31.75 DKK/Nm32.24 DKK/Nm3100 DKK/MWh
0.950.390.51
10 percent, 15 yearsTable 1: General assumptions used in all calculation designs
Result:Result:
Fixed prices optimisation
0
1
2
3
4
5
6
0 1 2 3 4 5 6 7
MW CHP unit
MD
KK/y
ear
54 EUR/MWh40 EUR/MWh27 EUR/MWh
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Result:Result:
Triple tarif optimisation
0
1
2
3
4
0 1000 2000 3000
m3 Heat storage
MD
KK/y
ear 6 MW
5 MW4 MW2 MW0 MW
Result:Result:
Nord Pool market price optimisation
0
1
2
0 1000 2000 3000
m3 Heat storage
MD
KK/
year
6 MW5 MW4 MW2 MW0 MW
Conclusions:Conclusions:Million DKK Reference Fixed prices Triple tariff Market pricesOptimal design: CHP size Heat storage capacity
- -
3 MW
-
4 MW
900 m3 4 MW
500 m3
Sold heat Sold electricity Fuel costs Taxes (fuel) Subsidies (electricity) Operation (CHP Investments (CHP) Investments (Storage) Annual Revenue Potential heat price
12.00
- - 5.02 - 6.43
- - - -
0.55
500 DKK/MWh
12.00
6.09 - 8.69 - 5.13
1.95 - 1.15 - 1.97
-
3.10
390 DKK/MWh
12.00
7.58 - 9.18 - 4.95
2.21 - 1.31 - 2.63 - 0.20
3.53
380 DKK/MWh
12.005.58
- 9.17- 4.95
2.21-1.30
- 2.63- 0.11
1.61
450 DKK/MWh
Table 3: Optimal CHP plant designs for three different sales price conditions
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Kyoto and the regulation of small CHP plants in DK
Henrik Lund Aalborg University
Denmark
Environmental Management 7. Semester 2003Environmental Management 7. Semester 2003Sustainable Energy System Analysis (SESA)Sustainable Energy System Analysis (SESA)
7th lecture7th lecture
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