Environmental Engineering Reference
In-Depth Information
between the incremental costs of a plant at its minimum and maximum operating levels may
exceed the difference between its average operating cost and the average operating costs of
the plant on either side of it in the merit order list. The merit order technique is therefore an
inferior tool for economic dispatch.
It should be appreciated that even if the total cost of generated energy by a power station,
for example a nuclear power station, may be higher than that from a coal fi red one, the OED
requires that the nuclear station is fully loaded because of its very low incremental cost. The
rationale is that the loading priority is independent of the original capital sum expended in
the construction of a power station. As the station is present and available it should be utilized
fully because of its low running costs. Whether the station should have been built in the fi rst
place is another matter. It may be concluded that as the energy supplied by RE sources (except
biomass) is characterized almost entirely by a capital cost component, their incremental cost
is negligible. Therefore the OED method would require them to provide at all times all the
energy they are capable of delivering.
7.3.5 Costs on a Level Playing Field
Although generation costs are used to compare renewable energy and fossil generation, that
process is not precise. A so-called 'level playing fi eld' demands that allowances are made
for various factors, some of which add and others subtract value to renewables. Essentially,
the benefi t of a new renewable source of energy for an electricity network may be specifi ed
as (value due to fuel savings ) + (value due to reduction in external costs)
±
(embedded gen-
eration benefi ts/disbenefi ts) + (value of capacity credit)
(costs associated with variability),
where:
The fuel saving value is simply the value of each kW h of fuel saved. In the UK in 2005,
this amounted to about £15-20/MW h. The value varies on an hourly basis so this is a
rough estimate of the annual average. The concept of capacity credit and the penalties due
to variability were discussed at length in Chapter 3.
External costs are costs attributable to an activity that are not borne by the party involved
in that activity. All electricity generating technologies have associated external costs, and
those of the fossil fuel sources of generation are due to the pollution that arises from their
use and from the impacts of global warming due to their CO 2 emissions. Economists argue
that these costs should be added to the generating costs, which is the thinking behind carbon
taxes. However, these would add unacceptable increases to the price of electricity and so
most governments give renewable energy sources a 'bonus' instead.
Embedded generation benefi ts/disbenefi ts acknowledge that many renewable energy
sources are small-scale and so connect into low voltage distribution networks. This means
that losses in the electricity network may be reduced and, possibly, transmission and/or
distribution network reinforcements delayed or deferred. The calculation of these benefi ts
is a complex issue (see, for example, Reference [3]) and varies both regionally and locally.
It is important to recognize, however, that, as mentioned in Chapter 6, concentrations of
embedded generation can increase distribution losses in rural areas where demand is low
and so may result in disbenefi ts.
Value of capacity credit and extra balancing costs due to the RE source variability.
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