The Global Community for Sustainable Energy Professionals
1 hour
Konstantin Petrov, Fernando Nuño
EU27 energy losses in distribution transformers reach 33.4 TWh/year.
Starting now, until 2025, EU has the opportunity to save 12 TWh/year and avoid 4 MTonnes CO2 if renovation of old transformers is carried out using efficient ones (instead of conventional ones).
The engagement on energy efficiency is also a matter of electricity networks regulators. The current models don't allow for fully efficient investments. A long term signal is required.
This webinar, issued from a comprehensive report by KEMA, brings some light and presents economic analysis on the right regulatory signals to be implemented for efficient investments and energy loss reduction in electricity networks. The webinar will cover:
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A: The asset life of a transformer is 30 years or more and standards have improved over the years. As presented during the webinar, we carried out a cost-benefit analysis of the investments in energy efficient distribution transformers and determined the dynamic pay-back period (break even point) under different modelling assumptions.
Q: The rates of return (5 and 6%) are actually the rates used by the companies in question? Private or public companies?
A: In our cost-benefit analysis we have used a discount rate broadly based on social time preference. A social discount rate is a rate at which society is willing to substitute present for future consumption and it is often used in cost benefit analysis of public projects and especially in projects with a long time horizon. More information is included in the report. This discount rate does not necessarily coincide with the discount rate used by the companies for their investment decisions or the rate of return (cost of capital) allowed by the regulators.
Q: Which electricity price should be taken into account when calculating energy savings for electricity distribution companies?
A: The benefits from using a more efficient transformer are defined as the energy savings (i.e. the reduction in losses in kWh) multiplied by the expected future wholesale market price. In order to estimate the wholesale market price we used a generation unit commitment model and compute the system marginal price plus a predetermined mark-up to account for possible deviation of the perfect competition equilibrium. For simplicity we don’t include any transmission costs to value the benefits.
Q: If the sensitivity analysis is done for different investments, is there any market signal to reduce the efficient transformers price?
A: Our analysis involves comparing the additional costs with the additional benefits from using a more efficient transformer (in relation to a conventional transformer). Therefore, the sensitivity to transformer investments studies the change in the purchase price differences (i.e. incremental investment) between the conventional transformer and efficient transformer. When these differences decrease the pay-back periods decrease too.
Q: Who should be addressee of efficiency and Quality of Supply regulation; supplier or Distribution Network Operator?
A: Quality of supply has several dimensions and the question on who should address these issues depends on specific regulatory arrangements. In an unbundled environment, typically suppliers are responsible for standards related to billing, customer queries on charges and payments whereas distribution network operators are responsible for reliability, technical (voltage) quality and some network specific aspects of commercial quality. Regulators exercise explicit control on quality provided by distribution network operators. In some case they impose also performance standards on suppliers with respect to the commercial quality provided by them.
Assessment of economic (production and allocative) efficiency is a task of regulators. As networks are regulated, regulators carry out efficiency assessments and impose efficiency increase requirements on network operators. There are methods to integrate quality of supply into efficiency assessments but this is a topic that goes beyond the current project.
Supplies operate in competitive environment and the requirements to their efficiency performance are dictated by the market.