Distributed Generation Markets in Europe: Expansion, investment and future opportunities

Date: March 22, 2010
Pages: 144
Price:
US$ 2,875.00
Publisher: Business Insights
Report type: Strategic Report
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ID: D837F782179EN
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Distributed Generation Markets in Europe: Expansion, investment and future opportunities
European efforts to combat climate change, improve security of supply, drive forward innovation, and boost competitiveness over the next decade will cause the distributed generation (DG) share of Europe's installed electricity generation capacity to grow considerably. These drivers are encapsulated in the EU's Energy and Climate Change Package endorsed for 2020, which sets ambitious headline targets for the EU. Furthermore, the growth of DG is an integral component of an emerging vision of an efficient and highly responsive 'European smart grid', in which the actions of all electricity users are fully integrated, and the liberalization of the EU electricity market is pursued to a 'user-centric' conclusion.

According to Improgres (Improvement of the Social Optimal Outcome of Market Integration of Distributed Generation (DG) and renewable energy resources (RES) in European Electricity Markets), EU-27 electricity generation from DG/RES will rise from 490 terrawatt hours per year (TWh/yr) in 2005 to about 1,280TWh/yr in 2030. The proportionate share of electricity generated will also grow from about 15% to approximately 26% during the same timeframe.

But there are a number of barriers holding back the further spread of DG in the European market. These range from simple commercial issues, such as the fact that the power produced is not currently cost-effective compared to bulk generated electricity, to more complex regulatory reforms. As well as great political will, overcoming all these hurdles involves money. Indeed, it is estimated that Europe will need to spend €2 trillion on upgrading its grid infrastructure over the next quarter century.

Key features of this report

  • Analysis of the key drivers of Distributed Generation, as well as the major barriers to this sector.
  • Clarification of the current share of Distributed Generation in the EU-27 and how this is likely to change over the next 20 years.
  • Assessment of the latest legislation impacting the Distributed Generation market in Europe
  • Assessment of how the European Grid infrastructure is changing and what developments need to be taken in order to integrate a greater share of DG
  • Identification of the key Distributed Generation technologies that are shaping the future of the market.


  • Scope of this report

  • Achieve a quick and comprehensive understanding of the Distributed Generation sector in Europe
  • Realize how the European power infrastructure is changing as government’s increasingly focus on reducing carbon dioxide emissions and improving security of supply
  • Achieve a comprehensive understanding of the major barriers preventing a wide uptake of Distributed Generation and how these are being overcome
  • Identify which countries are leading the way regarding Distributed Generation and which are struggling to embrace this area
  • Identify how the legislative landscape is changing and how this will impact the Distributed Generation market over the next decade


  • Key Market Issues

  • Environmental concerns:- Reducing the carbon footprint and finding new and more efficient ways of delivering power are fundamental drivers behind the overall take-up of Distributed Generation. Although CO2 emissions are falling in Europe due to increasing efficiency and measures enacted as a result of the Kyoto agreement, it remains a major polluter, accounting for 16% of the world's emissions.
  • Security of supply:- The expansion of Distributed Generation across EU markets, in conjunction with other generating options, has the potential to enhance European energy security, a political motivation of high importance in Brussels. EU states are understandably wary of an over dependence on any single external energy supplier. Russia, in particular, as Europe's leading oil, gas and coal supplier, has triggered alarm bells in recent years after withholding energy from the Ukraine.
  • Changing infrastructure:- As the share of Distributed Generation increases this will require the rapid evolution in distribution systems from 'passive' networks, focusing almost exclusively on the delivery of electricity to end-users, to 'active' networks, incorporating many of the control functions, services and tools traditionally associated with transmission systems.


  • Key findings from this report

  • The rate of development for Distributed Generation varies in Europe, with Western Europe leading the drive in this sector, while Eastern Europe lags behind.
  • The EU will witness a surge in new electricity production derived from renewable sources of energy, effectively doubling from 450GWh in 2005 to 943GWh in 2030. This includes large-scale plants operated by utilities, as well as smaller facilities. It is possible that by 2030, both CHP and RES will be more important as sources of electricity generation than nuclear power.
  • Europe’s future power architecture will include 'microgrids', where network operators control all local loads, storage and generation, which can be separated from the transmission system in the event of an upstream failure, or 'virtual power plants', which electronically connect and aggregate the power from a geographically dispersed set of distributed generation plants.
  • Incentive schemes are crucial for the development of Distributed Generation and Renewable Energy, which remains for the most part uncompetitive compared to traditional energy sources.


  • Key questions answered

  • What are the drivers shaping and influencing the Distributed Generation market in Europe?
  • Which countries are leading the way regarding Distributed Generation?
  • Which technologies are having the most impact on the Distributed Generation market?
  • How is increasing power consumption and fears over the environmental impact of power generation increasing support for Distributed Generation at a national level?


  • Distributed Generation Markets in Europe
    Executive summary 10
    Introduction 10
    Market outlook 11
    Legislation and environmental landscape 11
    Distributed generation systems 12
    Distributed generation networks 13
    Case studies 14
    Future development of distributed generation 15

    CHAPTER 1 INTRODUCTION

    Summary 18
    Introduction 19
    Reducing CO2 emissions 22
    Security of supply 26
    Barriers to DG 28

    CHAPTER 2 MARKET OUTLOOK

    Summary 32
    Introduction 33
    Energy demand in the EU-27 34
    EU-27 electricity generation 37
    DG role in generation 38
    National variations in DG/renewable energy capacity 40
    Case study - Germany 41
    United Kingdom 44

    CHAPTER 3 LEGISLATION AND ENVIRONMENTAL LANDSCAPE

    Summary 48
    Introduction 49
    EU legislation - framework 49
    The EU 20-20-20 renewable energy targets for 2020 51
    2009/72/EC Electricity Directive 53
    Option 1: full ownership unbundling 54
    Option 2: ISO 55
    Option 3: ITO 55
    Support schemes 56
    Feed-in tariff schemes 56
    Prime premiums 56
    Quota systems 56
    Tendering systems 57
    Net metering 57
    Effect of support schemes on DG 58
    National legislation 59
    Case study: Germany: 2009 Renewable Energy Sources Act (Erneubare- Energien-Waermegesetz - EEG) 59
    Environmental effects of DG 62

    CHAPTER 4 DISTRIBUTED GENERATION SYSTEMS

    Summary 66
    Introduction 67
    Traditional fossil fuel-based systems 68
    Gas turbines 68
    Microgeneration systems 70
    Turbine optimization 71
    Reciprocating engines 72
    Gas engines 72
    Diesel engines 74
    Dual fuel engines 74
    Fuel cells 75
    Proton exchange membrane fuel cell technology 77
    Case study: UK 79
    Case study: Germany 79
    Renewable technologies 81
    Introduction 81
    Solar 82
    Wind power 84
    Marine energy 86
    Small Hydro 87
    Biomass 87

    CHAPTER 5 DISTRIBUTED GENERATION NETWORKS

    Summary 90
    Introduction 91
    Today's electricity network system 91
    Active transmission networks 93
    Passive distribution networks 93
    Local voltage and fault current levels 94
    Predictability of power output 95
    Data collection 97
    Power quality 98
    TSO and DSO interactions 99
    Future evolution of the distribution network 100
    Electricity storage technologies 101
    Microgrids 103
    Virtual power plants (VPPs) 104
    Offshore Grids 105
    Conclusion 108

    CHAPTER 6 CASE STUDIES

    Summary 112
    Introduction 113
    UK: Legislation helps drive DG 113
    Innovative funding incentive (IFI) 116
    RPZ on the Orkney Islands 117
    Ireland: ending its energy isolation 120
    Storage technologies in the wind sector 124
    Malta: Becoming a 'smart' island 126

    CHAPTER 7 FUTURE OUTLOOK

    Summary 130
    Future development of distributed generation 131
    Cost of distributed generation 133
    Utilities partnering with DG 138
    Appendix 141
    Glossary 141
    Index 142

    LIST OF FIGURES

    Figure 1.1: Combined heat and power generation share of gross electricity generation (%), 2007 22
    Figure 1.2: EU-27 energy dependence (%) 27
    Figure 2.3: EU-27 final energy demand by sector (ktoe) 35
    Figure 2.4: EU-27 and EU-15, combined heat and power generation share of gross electricity generation (%), 2007 40
    Figure 3.5: Germany renewable capacity (GW), 2008 62
    Figure 4.6: Cost of energy for DG applications (US$/KW), 2006 69
    Figure 4.7: Grid connected microgeneration system 83
    Figure 5.8: Traditional electricity network 92
    Figure 5.9: Renewable energy sources share of gross electricity generation (%) 96
    Figure 5.10: Smart grid 97
    Figure 5.11: Wind power electricity generation (GWh) 106
    Figure 6.12: UK, renewable energy share of total electricity (%) 114
    Figure 6.13: Ireland renewable electricity generation forecasts (GWh), 123
    Figure 7.14: Forecast of CHP share of electricity generation in selected European countries (%), 2015 and 2030 135

    LIST OF TABLES

    Table 1.1: Combined heat and power generation share of gross electricity generation (%), 2007 21
    Table 1.2: EU-27 emissions of carbon dioxide (MMTCDE) 24
    Table 1.3: EU-27 energy dependence (%) 26
    Table 2.4: EU-27 final energy demand by sector (ktoe), 2008 34
    Table 2.5: EU-27 population projections (thousands), 2008–30 37
    Table 2.6: EU electricity generation (TWh) 38
    Table 2.7: EU electricity generation by fuel type (GWh), 2005–30 39
    Table 2.8: EU-27 and EU-15, combined heat and power generation share of gross electricity generation (%), 2007 40
    Table 2.9: Electricity prices for household consumers, (€ per 100kWh) 43
    Table 3.10: EU legislation impacting DG 50
    Table 3.11: EU renewable energy targets for 2020 (%) 53
    Table 3.12: Germany renewable capacity (GW), 2008 61
    Table 3.13: Emissions output for DG 63
    Table 4.14: Cost of energy for DG application ($/KW), 2006 68
    Table 4.15: Microgeneration systems 76
    Table 4.16: Cost and potential of renewable energy sources at selected locations in Germany, 2030 82
    Table 4.17: Wind power installed capacity in Europe (MW), 2008 85
    Table 5.18: Renewable energy sources share of gross electricity generation (%) 95
    Table 5.19: Wind power electricity generation (GWh) 106
    Table 6.20: UK, renewable energy share of total electricity (%) 114
    Table 6.21: Grid connection cost share of investment total (%), 2007 116
    Table 6.22: Savings from DG compared to centralized generation (%), 2008 121
    Table 6.23: Ireland renewable electricity generation forecasts (GWh), 123
    Table 6.24: MEC application fee excluding VAT (€), 2008 125
    Table 7.25: EU-27 DG share (%), today and 2030 132
    Table 7.26: Forecast of CHP share of electricity generation in selected European countries (%), 2015 and 2030 135
    Table 7.27: Distribution network costs per KW of DG (€/KW), 2009 136
    Table 7.28: Distribution unit investment costs per KW of DG (€/KW) 136
    Table 7.29: Cost of DG for the residential sector, 2009 138

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