Why India needs a Smarter Grid
With such enormous deficiencies in basic infrastructure, why would India want to consider investing in smart grid technologies? Ultimately for India to continue along its path of aggressive economic growth, it needs to build a modern, intelligent grid. It is only with a reliable, financially secure Smart Grid that India can provide a stable environment for investments in electric infrastructure, a prerequisite to fixing the fundamental problems with the grid. Without this, India will not be able to keep pace with the growing electricity needs of its cornerstone industries, and will fail to create an environment for growth of its high tech and telecommunications sectors.
Recent grid developments
The Indian National Government, in cooperation with the State Energy Board, put forward a road to improvement when it announced the new Electricity Act of 2003, aimed at reforming electricity laws and bringing back foreign investment. The act had several important measures:
- Unbundling the State Electricity Board’s assets into separate entities for generation, transmission, and distribution, with the intention of eventual privatization
- Adding capacity in support of a projected energy use growth rate of 12%, coinciding with a GDP growth rate of roughly 8%
- Improving metering efficiency
- Auditing to create transparency and accountability at the state level
- Improved billing and collection
- Mandating minimum amounts of electricity from renewables
- Requiring preferential tariff rates for renewables
- End use efficiency to reduce the cost of electricity
There has been a recent push in India to begin labeling appliances with energy use to help consumers determine operating costs. There has also been significant effort to improve energy efficiency, for example to increase the average energy efficiency of power plants up from 30% to 40%, and pushing major industries to reduce energy consumption.
India’s grid is similar in design to the U.S.
As is the case in most of the world, the Indian national grid was not designed for high-capacity, long-distance power transfer. As is the case in the United States, India needs to interconnect regional grids. Although coal and hydro-electric potential has peaked in many parts of India (sound familiar?), there are still several regions with excess capacity. Large wind potential and increasing wind capacity in the south and west also create a need for transmission infrastructure. Unfortunately, like the United States, regions are generally sectionalized, with some asynchronous or HVDC links allowing for minimal power transfer. The biggest difference is that India’s transmission grid only reaches 80% of its population, while the transmission grid in the United States reaches over 99% of its population.
India’s grid is not financially secure
According to its Ministry of Power, India’s transmission and distribution losses are among the highest in the world, averaging 26% of total electricity production, with some states as high as 62%. When non-technical losses such as energy theft are included in the total, average losses are as high as 50%. The financial loss has been estimated at 1.5% of the national GDP, and is growing steadily.
India’s power sector is still largely dominated by state utilities. Despite several attempted partnerships with foreign investors, few projects have actually been implemented. This lack of foreign investment limits utilities’ ability to raise needed capital for basic infrastructure.
This financial frailty, coupled with public ownership of utilities and the related bureaucratic slowness, has made it very difficult for investors to take interest in India’s grid. Despite these problems, prescient U.S. companies such as GE have done business in India for decades and are positioned to help India build the Smart Grid. The first Smart Metering Conference is being held next week in India (Spintelligent’s Metering India) and the first major industrial security conference is being held in India the week of October 22 (IFSEC India.) There is tremendous interest in the business opportunities for India.
India has problems not unlike other developing countries
India’s grid is in need of major improvements. This neglect has accumulated in a variety of system failures:
- Poorly planned distribution networks
- Overloading of system components
- Lack of reactive power support and regulation services
- Low metering efficiency and bill collection
- Power theftWhile the national government’s ambitious “Power for All” plan calls for the addition of over 1 TW of additional capacity by 2012, it faces the challenge of overcoming a history of poor power quality, capacity shortfalls and frequent blackouts.
What issues should India address first?
Without addressing the problems of investment and financial stability, India is not able to solve its inadequate grid infrastructure. Financial stability and concurrent investment only arises from lowering the enormous problems with power theft in India.
One example: In a demonstration project in nearby Malaysia, TNB Distribution, Malaysia’s largest power company, had to deal with similar problems. Facing enormous power theft, payment delinquency and poor power quality, they chose to implement a new program to reduce losses. They found many significant reasons for their losses, a lack of consistent billing practices, inconsistent meter readers, significant numbers of tampered meters, uncollected debt, and a general lack of information availability at all levels. TNB Distribution successfully dealt with their problems by increasing transparency, and using regular auditing. These are the same issues addressed by the deployment of an advanced metering infrastructure, which helps to increase information transparency and tracking.
A recent presentation at the India Electricity 2006 conference also suggested using demand side management to selectively curtail electricity use for delinquent customers or neighborhoods, while improving power quality for consistently paying customers. While this may not sound like a desirable program to most American utilities, it may make sense in India’s constrained power grid, where high levels of delinquency have increased system load without revenue returns.
Another driver behind the need for a smarter grid in India is its trends towards energy efficiency and increased use of renewables. While blanket energy efficiency is important, India would greatly benefit from intelligent energy efficiency in the form of demand response and grid-responsive appliances.
India ranks seventh in the world in terms of coal resources, and 10th in CBM resources. India has a good resource base for CBM with an estimated resource of 2,000 billion cubic meters (bcm) in 2,000 square kilometres out of which recoverable reserves are about 800 bcm,with a gas production potential of 105 million cubic meters a day over 20 years.
Methane was once regarded by miners as a hazard rather than a resource and many miners died in methane explosions before the introduction of high-capacity ventilation to dilute gasses. However, if methane is not recaptured it is not only lost as a resource but contributes to global warming. Even though the volume of methane contributing to greenhouse gasses is three times smaller than carbon dioxide, its greenhouse potential is 21 times higher. Coal mining is estimated to cause about 9 per cent of global methane emissions.
Methane captured during coal mining could be a significant, ecologically friendly source of energy, producing no particulates and only about half the CO2 associated with coal combustion. Depending on quality methane from mines could be sold to gas companies, used to generate electricity, used to run vehicles, used as feedstock for fertilizer or methanol production, used in blast furnace operators at steelworks; sold to other industrial, domestic or commercial enterprises; or used on-site to dry coal. In the USA today coal bed methane (CBM) represents between two and three per cent of all gas production.
Methane and coal are formed together during coalification, a process in which plant biomass is converted by biological and geological forces into coal. Methane is stored in coal seams and the surrounding strata and released during coal mining. Deeper coal seams contain much larger amounts of methane than shallow seams. Small amounts of methane are also released during the processing, transport, and storage of coal.
Coalbed methane (CBM) is a natural gas formed by geological, or biological, processes in coal seams. CBM consists predominantly of methane. Lower concentrations of higher alkanes and non combustible gases are also often present.
CBM was primarily formed in coal seams as a result of the chemical reactions taking place as the coal was buried at depth. The greater the temperature and duration of burial, the higher the coal maturity (rank) and hence the greater the amount of gas produced. Much more gas was produced during the “coalification” process than is now found in the seams. The lost gas has been emitted at ancient land surfaces, dissipated into the pores of surrounding rocks, removed in solution, and some will have migrated into reservoir structures forming natural gas deposits.
CBM tends to remains firmly locked in the coal at the prevailing pore fluid pressure until released as a result of mining disturbance or by specific gas production activities conducted in boreholes.
If effectively recovered, coal bed methane associated with coal reserves and emitted during coal mining could be a significant potential source of energy.
CBM is the generic name applied to the naturally occurring gas found in coal seams. It is recovered from coal seams as:
Virgin coal bed methane (VCBM) from unmined coal using surface boreholes;Coal Bed Methane (CBM) and Virgin Coal Bed Methane (VCBM) are terms conventionally used for methane drained and captured directly from the coal seams. CBM is generally reserved (in addition to its use as a generic term for all coal seam gas) to describe the gas produced from surface boreholes ahead of mining for coal mine safety and coal production reasons. VCBM is produced by a similar process but completely independently of mining activity. Methane concentrations in VCBM are generally very high, around 99%, and can be used as a replacement for natural gas supplies.
Abandoned mine methane (AMM) from disused coal mines;
When an active coal mine is closed and abandoned, methane continues to be emitted from all the coal seams disturbed by mining, decaying gradually over time unless arrested by flooding due to groundwater recovery. Depending on the methane concentrations, local regulations and the geology it may be possible, or required for public safety reasons to continue draining or venting this Abandoned Mine Methane (AMM). AMM extraction and utilisation schemes aim to recover the gas left behind in unmined coal above and below goaf (worked-out) areas formed by longwall mining methods. The gas can either be transported by pipeline to a nearby user consumer for combustion in boilers or used on-site to generate electricity for local use or sale to the grid. AMM reservoirs consist of groups of coal seams that have been de-stressed, and therefore of enhanced permeability, but only partially degassed by longwall working. Favourable project sites are those where a market for the gas exists, the AMM reservoir is of substantial size and not affected by flooding and the gas can be extracted at reasonably high purity. A number of schemes are in place in countries such as the UK and Germany.
Coal mine methane (CMM) which is captured in working coal mines to allow safe working.- Methane is released as a result of mining activity when a coal seam is mined out and if not controlled to prevent the accumulation of flammable mixtures of methane in air (5-15%) it presents a serious hazard. Gas drainage techniques are used to enable planned coal production rates to be achieved safely by reducing gas emissions into longwall mining districts to a flow that can be satisfactory diluted by the available fresh air. In some instances gas drainage is also needed to reduce the risk of sudden, uncontrolled emissions of gas into working districts. In well managed mines, in favourable geological and mining conditions, the methane concentrations in drained CMM can reach 70% or more. CMM of such quality may be utilised. However, poorly drained mines will only achieve methane concentrations that are much lower, and may be too low for conventional utilization purposes.
Methane capture and its utilisation from coal mines is generally not practiced in India as current levels of coal production in gassy mines are generally achievable using ventilation controls but even where there may be some safety benefit there is some resistance to introducing gas drainage due to a lack of technology, expertise and experience. Additionally, there is the perception that CMM utilisation is not commercially viable.
In addition, very dilute gas mixed with ventilation air, known as ventilation air methane (VAM), is emitted from coal mines.
Ventilation Air Methane (VAM)
Methane released from coal seams into the ventilation air of the active coal mine is called Ventilation Air Methane (VAM). Concentrations of methane in the ventilation air is generally limited by law, for safety reasons, at 0.5 to 2% in different parts of a mine with variations depending on the country.
Concentrations can be controlled by the volume of ventilation air circulated (dilution) or through special drainage (CMM). The concentration of methane in VAM is typically 0.8% or less and is too low for conventional utilisation purposes. However, technologies are being developed to remove the methane, and where additional gas is available to generate electricity using the thermal energy recovered.
The following drivers indicate that the growth of the RE market in India is likely to be significant and the market fundamentals for investors could be long and enduring.
Access to Energy
The Government of India’s commitment to provide electricity to predominantly rural India will drive the growth of off-grid RE technologies. By early 2007, 44% of Indian households still lacked access to electricity and less than 30% of rural Indian households had access to residential water, primarily due to lack of energy for motive power. There is a current electricity energy shortage of 8% and a peak demand shortage of 11.6%4, with increases in energy requirements projected at 6% per annum and electricity consumption at 7.6% per year and peak demand projected to increase by 77% by 2012. To meet this demand, power generation capacity would need to increase by 2.5 current levels.
The central government has undertaken a strategy to diversify its energy mix to address energy security and RE is assuming an increasingly significant role. India imports approximately 75.5% of its oil, and the International Energy Agency, projects that India’s dependence on oil imports will grow to 91.6% by the year 2020. Energy demand has outstripped domestic production, and India has become a major buyer of energy. Despite doubling its generation capacity over the past decade, India is unable to meet current energy demands. In 2004, India was the 3rd largest importer of ethanol and the 5th largest consumer of energy globally. India currently imports roughly 2.5 million tons of coal annually and is expected to increase coal imports to 7 million tons annually over the next few years.
In addition to the environmental impacts associated with resource extraction, the emissions of conventional fuel production have contributed to the global issue of climate change. India, like many other developing nations, is facing challenges with severe air pollution, limited arable land, and water quality issues. These types of environmental concerns lend additional motivation for cleaner sources of energy production.
The Government of India (GOI) has set an aggressive target of electricity for all by 2012, with an objective to add 10,000MW in RE capacity and source 10% of total power capacity from renewables. In 2006, the Indian President, Dr. A.P.J. Abdul Kalam announced a target of energy independence by 2030 and an increase in RE contribution from current levels of 1-5% to 25%.By 2006, India’s Integrated Rural Energy Program using RE had served 300 districts and 2200 villages.
India averages 300 clear and sunny days per year, has an installed wind capacity of over 7,000 MW, 3.8 million biogas plants, and 15,000MW small hydroelectric capacity. India is the 4th largest producer of wind power, 5th largest producer of energy from commercial biomass and small hydro and ranks globally in the top 5 countries with maximum RE power capacity.
India has the human resources to draw on to enable the growth of a new industry based on RE technologies. For example India has a significant amount of engineering students with 464,743 graduating in 2004-05.
If IP rights are enhanced, India can position itself to adopt the world’s best technology as it builds its future energy infrastructure leading to opportunities for RE technology transfer and leapfrogging as new systems are commissioned, invested in and installed.
Health issues are increasingly becoming a driver for uptake of RE technologies. In 86% of rural households, traditional biomass is the primary cooking fuel, and India experiences the largest number of indoor air pollution related health problems in the world with 500,000 deaths each year, primarily women and children who have the greatest risk and domestic exposure.
The Sustainable Development imperative
Affordable energy has been linked to indicators of human development, and access to energy and electricity can increase access to education, reduce indoor air pollution, provide energy for medical equipment and storage, provide water and sewer services, create jobs, stimulate micro-enterprise, reduce poverty and increase life expectancy.
Growth of the Carbon market
India, as a non-annexure I country under the Kyoto Protocol, is eligible for carbon revenue through the Clean Development Mechanism (CDM). India is currently the world leader in development of CDM projects with a large potential for renewable energy generation from agriculture wastes, hydro and wind.
At the end of the third quarter in 2006, India ranked 3rd in the Ernst & Young Country Attractive Indices, which ranks countries based on RE markets, infrastructures and their technologies and 4th in the E&Y Renewables Infrastructure Index. The International Energy Agency (IEA) predicts $16 trillion of investment inflows in the energy sector until 2030, $8.1 trillion of which is predicted to flow to developing economies to meet energy needs. Though there are some mature RE technologies, such as wind, India remains in a position to undertake technology collaborations, import mature RE technologies and processes to fill technology gaps, and scale up current production through both domestic and international investment.
India has a dedicated Ministry of New and Renewable Energy (MNRE) and a number of ministries have taken on specific renewable technologies to develop and support.
Many resource assessment programs have been implemented or are slated as future projects, including:
Wind Resource Assessment Program (WRAP),
National level Biomass Resource Assessment Program (NBRAP),
and Solar and Wind Energy Resource Assessment(SWERA).
RE specific research institutions have emerged
Centre for Wind Energy Technology (CWET) for wind,
Solar Energy Centre (SEC) for solar,
and National Institute for Renewable Energy (NIRE) for bioenergy.
Solar-thermal generated energy is only just emerging from the experimental stage to full-scale electricity production. Solar-thermal power concentrates the sun to heat up fuel such as gas or oil. The heat trapped within is then used to convert water into steam, which powers a conventional steam turbine to generate electricity. Fossil fuels are sometimes used as a back-up to heat the water in the boiler if the sun is not shining. There are three different methods for concentrating
the sun’s rays:
Parabolic Trough — This method uses long, parallel rows of glass mirrors in the shape of a trough to concentrate the sun’s rays toward the “absorber tube” — usually filled with oil — to maximum effect.
Power Tower — Similar in principle to parabolic-trough technology, the mirrors are placed in a circular pattern. At the center of the circle is a tower, at the top of which is a receiver filled with water, air, liquid metal or molten salt that moves to a power block and is used to power a steam turbine.
Parabolic Disk System — In this system, dishes rather than troughs are used to concentrate the power of the sun. An example of this type of solar project is the 500-megawatt Solar Energy Systems plant is operational in the Mojave Desert in California.
Distributed Generation (DG) and Renewable Energy Sources (RES) have attracted a lot of attention worldwide. Both are considered to be important in improving the security of energy supplies by decreasing the dependency on imported fossil fuels and in reducing the emissions of greenhouse gases. Distributed generation refers to the local generation of electricity and, in the case of a cogeneration system, heat for industrial processes or space heating etc. The economics of DG and RES depend on many factors. The main cost items are the initial investments, fuel costs, energy prices (electricity and heat) and the cost of connecting to the grid. Biomass generally gives the lowest cost electricity of all RES-based options, with onshore wind and hydro capacity coming second and solar cells being the most expensive.
The term ‘renewable energy sources’ refers to ‘everlasting’ natural energy sources such as the sun and the wind. Renewable energy systems convert these natural energy sources into useful energy (electricity and heat). RES are often related to electricity generation, but the generation of heat for space heating (geothermal energy solar collector) etc. is also feasible. However, this Note considers only RES that are related to the generation of electricity (RES-E). Accordingly renewable energy sources include:
_ Hydro power (large and small)
_ Biomass (solids, biofuels, landfill gas, sewage treatment plant gas and biogas)
_ Solar (photovoltaic, thermal electric)
_ Wave and tidal energy
_ Biodegradable waste.
For distributed generation, DG mostly refers to systems that generate electricity (and possibly heat) and this text is limited to electricity-related DG. Generally, distributed generation takes place close to the point where the energy is actually used.
Other features of DG include:
_ Not centrally planned and mostly operated by independent power producers or consumers
_ Not centrally dispatched (although the development of virtual power plants, where many
decentralised DG units are operated as one single unit, infringes on this definition)
_ Smaller than 50 MW (although some sources consider certain systems up to 300 MW to be classed as DG)
_ Connected to the electricity distribution network which, although it may vary by country,
Generally refers to the part of the network that has an operating voltage of 240/400 V up to 110 kV. Most renewable energy systems are also distributed generation systems, although large-scale hydro, offshore wind parks and co-combustion of biomass in conventional (fossil fuelled) power plants are exceptions.
Distributed Energy Resources refer to distributed electricity generation and electricity storage (near to or at the load centre) with a value greater than grid power (e.g. emergency power). Combined heat and power generation (CHP), also referred to as cogeneration, indicates the joint
generation and use of electricity and heat. Generally, a portion of the electricity is used locally and the remainder fed into the grid. The heat, on the other hand, is always used locally, as heat transport is costly and involves relatively large losses. Generally, distributed generation based on fossil fuels is also cogeneration as the local use of ‘waste’ heat is an important benefit of DG. Typical uses of DG are:
_ Domestic (micro generation: electricity and heat)
_ Commercial (building related: electricity and heat)
_ Greenhouses (process related: electricity, heat and carbon dioxide for crop fertilisation)
_ Industrial (process related: electricity and steam)
_ District heating (building related: electricity and heat through heat distribution grid)
_ Grid power (only electricity to the grid).
The economic feasibility of distributed generation and renewable energy systems depends on many things. Investments are important, as are the fossil fuel prices and the market price for electricity. The latter two are, of course, related. The market price for electricity will depend heavily on fuel prices as long as conventional fossil fuelled power plants dominate the market. Costs can be grouped as initial costs (before operation) or continuing costs (during operation) and as fixed costs (independent of the usage pattern) or variable costs (dependent on the usage pattern).
The income from DG and RES is mostly related to selling electricity (and heat in the case of cogeneration). Additional cost benefits might be grid related services (e.g. balancing, deferred grid investments, avoided grid losses) or environmental subsidies and taxes. These subsidies and taxes are generally aimed at stimulating the clean generation of electricity. Examples are green certificates or higher feed-in tariffs for electricity generated from RES, tax reductions for investments in CHP and RES, CO2 taxation and carbon credits.
The cost of electricity from DG and RES is calculated by using a net present value method. In this calculation, the value of money over time is taken into account by using a certain discount percentage to value future income and expenses. This discount percentage includes the normal interest rate for borrowing money and a risk premium depending on the risk profile of the project. Fluctuations in fuel prices and the electricity market impose risks as do the weather conditions (e.g. wind speed for wind parks). The long-term durability of subsidies for RES is another risk item.
The connection of DG (including RES-based DG) to the grid is an important item and many current projects cover this subject . The liberalisation of the electricity market and the separation between electricity supplier and network operator , where the electricity supplier operates in a liberalised market and the network operators in a regulated market, have drawn attention to the subject of connecting DG to the grid (costs, barriers, benefits).
Due to the predomination of centralised power, electricity grids are laid out rather uniformly as a top-down supply system. The transmission grid (operated by the transmission system operator or TSO) is a high voltage grid for high power flows. It operates typically at voltage levels higher than 110 kV. This high transmission voltage reduces grid losses. Interconnections are made at the transmission grid level and large power stations are directly connected to the transmission grid. The boundary voltages that define the distinction between high, medium and low vary according to country so typical values are used in this description. The distribution grid can be divided into a high voltage distribution grid (typically 60-110 kV), a medium voltage distribution grid (typically 10-50 kV) and a low voltage distribution grid (240/400 V). Distribution grids are operated by distribution network operators (DNOs).
Distribution grid operators have an obligation to connect users to the grid and to ensure the security of supply. They are also responsible for the power quality from the grid. The grid code that describes both the obligations of the DNOs and the obligations of generators connected to the grid (e.g. control characteristics, fault current contribution, etc.). Generally, a DNO is obliged to connect a compliant generator to the grid on application.
Depending on the size of a DG/RES system, the DNO may require the connection to be at a particular voltage level. Connection charging might be ‘shallow’, ‘deep’ or somewhere in between. Under a deep approach, a generator owner is required to pay all the costs involved in connection, including reinforcements further up the grid. With shallow charging, only the connection to the nearest grid access point is chargeable.
It refers to any product, service or process that delivers value using limited or no nonrenewable resources and/or creates significantly less waste than conventional offerings .Area of focus of the Clean Technology sector include energy, water, agriculture, transportation & manufacturing where the technology creates less waste or toxicity
Sectors of application:
Renewable energy technologies
Wind Energy, Hydro energy, solar energy, energy from waste
Water Filtration, Industrial Air Pollution, Effluent treatment from Industries, Vehicular Pollution, Waste water treatment/ solid waste management
Technologies/ processes to improve the energy efficiency in households/ Industries
Clean Technology in Indian Context
Increasing focus on Environmental Management
Deterioration in Air quality due to vehicular emission & untreated Industrial smoke
Particulate Matter in major Indian cities >10 times the legal limit
Only 7% of the solid waste is treated
While 20% of waste is recyclable, 35% compostable, 35%-40% inert
Regulations pertaining to air and water pollution levels forcing industries/ government bodies to adopt cleaner technologies to meet the legal norms
Overdependence on coal & oil as a source of energy more than 90% of India’s energy requirement being met through Coal & Crude Oil
Carbon emissions in India has grown by 65% over the past five years (2nd highest growth next only to China)
Innovations in microelectronics, biology, chemistry & physics have improved performances of clean technologies
Sustainable Development imperative
Recognizing the need to balance the environmental, economic and social interests
Through adoption of clean, affordable, and resource efficient technologies
Changing Political winds
Recognition by the Governments that future competitiveness is directly linked to being more resource efficient
….And Most importantly….
Vast new business opportunities presented by the Cleantech revolution
Forward seeking entrepreneurs coming ahead to develop and commercialise many clean technologies
Trend driven by improvement in technology leading to decreasing costs
More and more projects becoming commercially viable vis-à-vis conventional Technology
Specific opportunities exist in the following sectors
Industrial Pollution Abatement
Water Supply & Sanitation
Environmental monitoring & measuring
How big is the business opportunity in greentech today? Are there any estimates about the Indian market?
The cleantech markets may dwarf the IT markets by orders of magnitude
—$trillions versus $billions.
For sustainable India’s growth story to continue, India needs two things
— Energy and Human capital.
The government has recognized this and has aggressively invested in both these sectors. There is a great opportunity for public-private partnerships to foster innovation and move India to the forefront of cleantech. And India could do the same in the energy sector as it has done in the telecom sector. India leapfrogged generations of technology in the wireless telecom infrastructure.
If demand reduction and off-peak power consumption continue to command substantial discounts in electric power costs, the question arises, “Why will thermal storage continue to be an attractive method of achieving load shifting in the deregulated energy market?” Several reasons include: Thermal storage systems target the most egregious contributor to poor load profiles-commercial cooling systems. Also, the technology exists and is proven. Thermal storage represents one of the few legitimate tools for shifting load. Energy efficiency benefits society and the customer, but thermal storage also benefits the industry setting the price for that energy.
- Thermal storage systems are designed for the commercial customer (who always pays the highest time-dependent rates).
- Storage systems do not negatively impact a facility’s operation, as other load shedding or load control programs almost always do.
- Existing thermal storage technology is easily adaptable to central chilled water plants. Even though centralized chillers only serve about 25% of commercial floor space, Thermal storage systems can make a significant difference in relatively few installations.
- Thermal storage is versatile. Other than the certainty that on-peak power consumption will continue to command a premium, there is little assurance concerning the form those rates will take. In many cases customers will have a choice as to the structure of the demand penalties. Traditionally, a simple demand charge (kW) and energy charge (kWh), often including a time-of-day differential, have been used to discourage on-peak electrical use. Rate design will surely be more exotic in a deregulated environment as providers maneuver to offer the most competitive plans possible. Real-time rates, often superimposed on a traditional demand structure, and interruptible rates, a fairly common tool in natural gas pricing, will also grow in availability.
Thermal storage is also cost effective. DSM programs have helped to foster the growth and acceptance of thermal storage. The generous terms of these programs often made it economical to install storage capacities capable of avoiding all the on-peak chiller operation. This is referred to as “full storage.” Often forgotten is the fact that if the goals are more modest, thermal storage can be installed with little or no cost penalty as compared to conventional chiller systems. DSM incentives are certainly welcome, but not necessary to make thermal storage a good investment. There are no defined limits on the quantity of storage that can be theoretically applied to a building.
An alternative referred to as “partial storage” minimizes or eliminates any additional initial capital investment. By operating a chiller for the entire day, on-peak at standard conditions and off-peak at ice-making conditions, its size is usually reduced to 40% to 50% of the conventional design.
Storage is only needed for about 40% to 45% of the required ton-hours. Both chiller and storage are greatly reduced in size, compared to the “full storage” design. Peak demand savings of 50% to 60% of the standard chiller demand are usually achieved.
Many examples exist of effective thermal storage systems that were installed for little or no additional cost over their conventional alternatives and that also provide significant energy and energy cost reductions.
The economics of thermal storage can usually be justified under any power rate that significantly penalizes on-peak power consumption.
As Laurence J. Peter once said, “An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.” The same can easily be said of electric industry analysts. Engineers will take refuge in whatever facts they can grasp within the confused and nebulous nature of today’s electric power industry.