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AN OVERVIEW OF REGULATION FOR EMBEDDED GENERATION. LAGOS – JULY, 2014.

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Presentation on theme: "AN OVERVIEW OF REGULATION FOR EMBEDDED GENERATION. LAGOS – JULY, 2014."— Presentation transcript:

1 AN OVERVIEW OF REGULATION FOR EMBEDDED GENERATION. LAGOS – JULY, 2014.

2 Outline of Presentation: 1.Definition & Types of Embedded Generation (EG) 2.Benefits of Embedded Generation 3.Technical & Economic Considerations of Embedded Generation 4.Aim of EG, Legal & Regulatory Provisions 5.General Provisions 6.Connection of Embedded Generation 7.Commercial Arrangements 8.Participation in other regulated activities 9.Miscellaneous Provisions 10.Conclusion

3 Embedded Generation:  Embedded Generation (EG) is when a generator is connected to a distribution network operated by the Distribution Company (DisCo) licensed by the Commission.  The generators are connected directly to or near the load centre on the distribution network (i.e., 33kV, 11kV or 0.415kV).  Embedded generation ensures that power generated is utilized in a particular locality, state, or geo-political region, and/or supplied to an eligible customers and others. Therefore, if a State or Local Government builds an embedded generation facility, the power generated can be supplied to its constituents.

4 Technology Types of Embedded Generation: Generally, EG tends to consist of smaller or modular generators that use a variety of generation technologies such as the following:  Modular Combined Cycle Turbines  OCGT  Wind Turbine  Small, Mini/Micro Hydro  Micro Steam Turbine  Solar (PV or Thermal)  Oil-fired Power  Geothermal  Biomass  Diesel and Oil fired  Tidal Wave

5 Benefits of Embedded Generation (EG):  Business Activities – Provision of opportunities for various manufacturing and service activities in Nigeria.  Economy – Growth in the revenue of businesses, and in the country’s economy.  Investment – Will attract investments, both from local and foreign sources (in the power sector, and other sectors)  Government Participation – Increases the participation of Local and State Governments in the power sector.  Reliability of Supply – Reliable power supply protects sensitive industrial equipments, and ensures optimal operation of the equipments.  Minimise line losses and voltage sag - Closeness to load results in more efficient power transportation.  Substitute for supply from the Grid - Source of power in areas not connected to the grid (i.e. rural areas).  Backup / Stand-by Generation - Ensure regular power when supply from grid is temporarily insufficient to meet the demand.  Ancillary Services – Provision of Voltage or Frequency Control.  Employment – Increase in power supply encourages industrialization, which translates to a decrease in the unemployment rate.

6 Technical Benefits of Embedded Generation  Reduced cost of connection.  Transmission use of networks costs is avoided.  Ease of deployment of the infrastructure.  Network Loss Factor is reduced.  Improved utilization of distribution assets by the Discos.  End users can benefit through adequate supply of electricity, lower end user tariffs, and potentially increased reliability and quality of supply.  EG has lower capital cost, modular construction and short build times.  Growth in EG will contribute to fuel diversity, mix and security of supply as diverse sources are tapped including Renewable Energy Plants.  Reduction of GHG emissions in Nigeria.  In the long term, reduction of overall costs of energy consumed by providing a more efficient electricity system that generates and supply power close to the point of use.

7 Technical Considerations for Embedded Generation: Load Requirement - Profile of load plus running regime at load centres Network Protection - Over current protection of Embedded Generation infrastructures under short-circuit conditions (e.g. protective devices), reverse power protection etc.. Connection to Distribution network - Conditions for connecting to Distribution network (e.g. min/max generation, metering etc.) Technology of plant - Suitability of Embedded Generation type to load condition

8 Economic Considerations for Embedded Generation: Cost / Benefits of Embedded Generation - Measure and quantify the costs and benefits of / against supply from the grid network. Income Generation - Expected revenue from sale of excess power to the Distribution network. Operating Costs - Start up and running costs and expected payback period. Fuel requirement - Source and reliability of fuel supply, especially for hydro carbon fuel based Embedded Generation (e.g. gas, oil, diesel etc.)

9 Legal and Regulatory provisions for Embedded Generation EPSR Act S. 62 states that engaging in the business of electricity generation of 1MW and above requires a licence be issued by NERC, excluding captive (i.e., strictly for own use). Specifically, S. 64 explains further the activities of a generation licensee, which includes successor companies or IPPs. Distribution Code - Part 2 S of the Planning and Connection Code provides for the requirements for connecting generators to distribution networks. Market Rules - Sections & 2 permits the distributor to purchase embedded generation under certain conditions. The main aim of this Regulation is to provide a regulatory framework for fair competition between grid supplied power and distribution connected supplied power that will ultimately result to improved availability, reliability, quality, safety and affordability of supply to meet the demands of the consumers.

10 Eligibility  Distribution Licensees intending to procure embedded generation shall first apply to the Commission for permission and shall satisfy S &2 of the Market Rules prior to approval by the Commission.  The maximum embedded generation capacity allowable for a given Distribution System shall be a percentage of the peak system load as determined by the Commission from time to time.

11 Commercial Arrangements:  Network Agreements: The Embedded Generator and the Distribution Licensee shall enter into the following Agreements: o Connection Agreement/Interface Agreement o Use of Networks Agreement o Ancillary Services Agreement  The Distribution Licensee shall develop and publish standard agreements, and such other additional terms and conditions approved by the Commission.  Network Charges : All Charges by the Distribution Licensee shall be as approved by the Commission.  The Distribution Licensee shall provide in the connection offer a disaggregation of the proposed charges which shall indicate the cost of the following:  dedicated connection assets required for the connection;  extension of the existing asset ;  modification and augmentation of the existing network;  metering and data collection; and  any provision for operation, repair and maintenance of relevant network assets.

12  Eligible Customers: Subject to the declaration of eligible customers by the Hon. Minister, the EG may enter into agreements with eligible customers (not covered by MYTO). o The EG shall agree with the Distribution Licensee on the use of its network. o The Distribution Use of System (DUoS) Charge shall be guided by the provisions of the tariff methodology in force.  Distribution and Trading Licensees: The tariff methodology in force shall apply, subject to the satisfaction of conditions specified in Section (a)&(b) of the Market Rules.  Feed-In-Tariffs (FITs): Feed-In-Tariffs (FITs) approved by the Commission, shall be applied for energy supplied by Renewable Energy Embedded Generators.  Recovery of Costs by the Embedded Generator: Where the Distribution Licensee cannot undertake the re-enforcements and extension needed to evacuate the power into its network, the Connection Agreement shall provide for the recovery of the cost incurred by the EG. Tariff

13 Billing and Metering  Metering of Customers and Embedded Generators shall be mandatory.  Billing shall be consolidated in the master database system of the Distribution Licensee for proper energy accounting irrespective of metering technology.

14 Licensing Requirements and Procedures: General Provisions  The process of licensing of an Embedded Generator shall not exceed six (6) months.  An application shall be submitted in the form and manner approved by the Commission. Conditions for Grant of a Licence The Commission may issue a licence to construct, own, operate and maintain, or to procure the construction, operation and maintenance of an Embedded Generation facility; provided that a licence shall not be issued unless the Commission is satisfied that S &2 of the Market Rules as well as other conditions stipulated in these regulations are complied with. Embedded Generation Licence Application Procedure All applications for an embedded generation licence, and related proceedings shall be governed by NERC Application for Licence Regulations 2010.

15 Licensing Requirements and Procedures: The application shall be accompanied by the following documents:  Power Purchase Agreement (PPA);  Connection Agreement;  Use of Distribution System Agreement;  Ancillary Services Agreement;  Fuel Supply Agreement (FSA);  EIA Approval (above 10MW) or plan for managing effluents if below 10MW;  Registered title deed; and  Corporate Documents.

16 Miscellaneous Provisions: Proceedings before the Commission All proceedings before the Commission shall be governed by the Business Rules. Amendment or repeal The Commission may amend or repeal any provision of the Regulation. Dispute resolution Disputes between the Distribution Licensee and Embedded Generator which are not resolved by the parties will be handled in accordance with the procedure outlined in Rule 43 of the Market Rules (market participants), or the Dispute Resolution procedure approved by the Commission (non-market participant).

17 Conclusion :  Approval of this Regulation – A positive move towards laying out the regulatory frameworks and conditions for the operation of EG, which will be a better option for several investors intending to participate in the market. (e.g., state and local governments).  Network Access – The Commission shall ensure open access to the distribution networks by all EGs by supervising the activities of the Discos regarding applications for connections ( e.g., review of the periodic reports submitted by the Discos).  Provision of information - Information regarding the distribution network(s) must be freely available to prospective investors and EG for the project to succeed (e.g., all necessary information required should be easily accessible).


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