1. Potential Benefits of Small-scale Distributed Generation: A Case Study Proposed project for partial fulfilment for a Master of Technology Mandy Armstrong, July 2007

2. Summary This project aims to provide a practical example of what is needed to implement a residential, small- scale DG system (nominally <10kW) employing net- billing, and use this to demonstrate potential economic benefits to relevant stakeholders. The conditions where investment in such systems becomes worthwhile should be established to confirm:  the practical, & economic viability of net-billing small-scale DG  the contribution to design and management of low-energy housing.

3. Definitions Distributed Generation – electricity generation equipment connected to a local distribution network, producing electricity for end users connected to the network, and/or for export back into the network. Net billing – where the electricity imported is measured separately to electricity exported, based on the use of the distribution network for both importing & exporting electricity.

4. Problem Statement Accepting that DG is an option for increasing the contribution of renewables (particularly for local networks):  Potential benefits and opportunities for small-scale on-grid DG employing net-billing for surplus energy are not well understood  Requirements for implementing these systems vary in clarity from region to region  Despite recent regulatory reviews, it is expected that support for DG will continue to be inconsistent in a complex and political energy market.  Net billing could be an opportunity for developing the concept of low-energy housing, which is not well supported in NZ currently

5. Problem “Environment” We have a complex market with extensive Government influence Large stakeholders have a variety of drivers which they are within their legal rights to satisfy There is a raft of recent regulation & policy that should make it easier to pursue DG in a technical and legal sense BUT will this work in the real world – particularly for systems <10kW? Are we deluding ourselves? Innovative energy management solutions exist internationally, down to the household level. Why not here?

6. According to MED… “One specific outcome is to ensure that the use of new electricity technologies and renewables, and distributed generation is facilitated and that generators using these approaches do not face unnecessary barriers.” (Related to Government objectives for the delivery of electricity) Source: MED website

7. Objectives Gain a practical understanding of the barriers & opportunities of implementing a grid-connected small-scale DG system based on net-billing. Establish the conditions if/where investment in net- billing small-scale DG becomes economically viable. Provide guidelines for those interested in implementing residential/small-scale DG, especially if it has implications on house/property design for low -energy housing. Provide recommendations on overcoming barriers to net-billing on-grid DG.

8. Approach Situation Analysis  Understand issues and requirements for implementing the system  Options for economic assessment  International overview – useful lessons System implementation –Case Study  Work with appropriate lines company/retailers to review system design and work through the legislative process  Talk to other market stakeholders – how consistent is the approach? Scenario Modelling  Use the case study design, & economic assessment criteria to model a range of economic benefit scenarios

9. Case Study Wairarapa rural site, with 8 north facing house lots, with energy efficiency criteria requirements for house design. The intent is to utilise one connection to the local grid, with a miniature grid within the development. The final system design & generation options are still open, and will depend on the viability of pursuing net-billing DG. Could potentially use a single residence case study, also based on energy efficient principles.

10. Possible Outcomes From Scenario Modelling:  Economic benefits to the generator, to understand how system size can influence economic attractiveness of supplying back to the grid.  Economics of small-scale generation where on-site energy efficiency/energy management practices could affect the size of the system installed & the subsequent economics of grid supply  Economics for the local network – how many small-scale systems are needed to provide a benefit & how big do they need to be?  Quantify issues of grid layout, grid capacity, and generation type on the viability of such systems What combination of factors are needed to make the investment worthwhile?

11. Support Slides to talk to during the presentation

12. A bit of background 2003 – during initial stages of property development approached PowerCo re metering requirements to enable net-metering. This on advice from our architect who claimed net metering was possible. No success – no systems in the Wairarapa, & as it turned out, no domestic systems in NZ that we could use as an example. Powerco actively dissuaded us from going any further, so conventional meters were installed & the site is fully grid- connected. Buildings were designed & oriented for installation of micro- generation systems, & the house designed for a low imported energy demand (currently using 3200 kWh/yr electricity+gas). Hoping to revisit a net-billing system as the environment changes. Similar scenario with Totara Bank – up front investments made for future generation options.

13. Situation Analysis – detail Issues & requirements to consider:  Technology  Site & system design, including managing energy demand & size of generation (>10kW??)  Applying the new DG legislation  Social & environmental needs, including emissions  Grid & local network infrastructure  Other capabilities needed for implementing  Future of low-energy housing – link to HERS  NZ success stories?

14. Emerging Questions What’s the influence of managing demand profile on the system design, & economics of net-billing? Mini-grid design impact on connection for local grid connection? Will a housing “cluster” be more viable for net billing than a single residence? Availability of technology in NZ vs permitted technology by lines co’s/retailers How well can we value emissions reduction & social drivers? Will the market allow the investment risk to be taken by small generators even if it costs in the short-term? Are there opportunities to incentivise residential DG to manage peak demand & generate a minimum constant base load back into the network? Is it worth it? Is it dependent on the 10kW threshold? Will there ever be incentives to allow energy consumers greater participation in clean energy technology? Is there a political pathway that would produce an environment where small scale DG is encouraged? Implications for remote rural connections after 2013?