Environmental Engineering Reference
In-Depth Information
exceeded their allowances. In February 2005, allowances traded at just under
10/tonne of
€
CO
2
, which corresponds to a premium of
1/MW h on the price of coal fi red generation, and
about half that amount on gas fi red generation.
Another approach to external costs - favoured by some American states - is to use
inte-
grated resource planning
(IRP) to assess future generating plant needs. IRP is a process
whereby the different options for meeting future electricity demand are considered and the
least cost solution for delivering energy is selected within the constraints imposed by ensuring
security of supply. The benefi t of IRP is that, in complying with government mandates to
consider all energy supply options, the regulatory body simply assumes that external costs
are to be applied, without actually imposing any. The precise monetary value of pollution
damage, or the calculation of cost penalties on polluting fuels, becomes less critical. This
straightforward approach does away with many of the complicated mechanisms required to
calculate the monetary value of pollution in electricity generation. It also helps to ensure that
power plants are built in the right place and that the electricity network operates effi ciently.
The result is a competitive market operating under guidelines aimed at long term economic
responsibility. However, this approach has not been without problems. Recent studies in
California and elsewhere indicate that the net result of this approach is simply to shift the
utility plant mixes in favour of gas, which is currently cheap and which has lower external
costs than coal. Renewables profi t, but the additional market share assigned to them so far
remains relatively small. It is important to remember, however, that gas is unlikely to remain
cheap indefi nitely. In addition, government and popular pressure will accelerate the introduc-
tion of renewable energy technologies.
Popular consumer desire for more clean electricity is illustrated in the trend towards
green
pricing
in the US, Australia and Europe. Given the choice, electricity consumers often agree
to pay more for green electricity. In the Pacifi c Northwest of the US, a modest 4% increase
in rates is making a utility 20% 'green' and the initial reaction of the consumers is 75% in
favour. However, while green pricing is a clear signal to governments to promote renewables
in the electricity market, it cannot be regarded as a substitute for an equitable energy policy.
Furthermore, green pricing will not necessarily deliver the most effi cient system overall. It
is likely that a degree of IRP would need to be integrated into the market.
There are various other ways of refl ecting external cost, directly or indirectly, and Table
7.6 gives a brief summary. It should be noted that these support mechanisms historically have
tended to change on a frequent basis as electricity markets have evolved and the renewable
energy industry has developed.
€
7.5 Effects of Embedded Generation
7.5.1 Value of Energy at Various Points of the Network
In the case of small scale renewables there is the potential for an
embedded generation benefi t
.
A simple example may be used to illustrate the point. If a householder were to install a pho-
tovoltaic panel on the roof of her/his house and export the surplus electricity to the local
utility, they would resell it at between 11 and 14
cents/kW h to neighbours. There would
be no backfl ow through the local 33/11 kV transformer and, as a bonus, the locality might
suffer fewer power cuts.
€
