1 Feasibility, beneficiality, and institutional compatibility of a micro-CHP virtual power plant in the Netherlands Patrick Landsbergen 30 June 2009

2 Content of the presentation Motivation for research Main research question + methods What is micro-CHP and VPP? Results technical feasibility and economic viability Impact of institutional environment on feasibility and viability Beneficiality of the system Conclusions

3 Motivation for research Primary energy consumption and the related CO 2 emissions are steadily increasing Dutch households responsible for 22% of electricity and gas consumption and for 10% of CO 2 emissions Micro-CHP (μCHP) can reduce energy use and CO 2 emissions of households Virtual power plant (VPP) has an additional benefit:  μCHP units can be deployed for commercial and technical objectives

4 Main research question Is it technically feasible, economically viable, and beneficial, to implement and operate a μCHP VPP in the Netherlands, and what is the impact of the institutional environment on those aspects?

5 Research methods Literature review Interviews with experts Spreadsheet modeling

6 What is μCHP? μCHP: small scale (1-5 kW e ) co-generation units that simultaneously produce heat and electricity Only Stirling engine and solid oxide fuel cell (SOFC) included in this research

7 What is a μCHP virtual power plant?

8 A μCHP VPP is technically feasible μCHP  Functionality has been proven in laboratory and field tests  μCHPs have some technical and seasonal operating limitations though VPP control system (local controller, software, ICT network)  First versions controller and software already been developed  No major problems were identified Large amounts of μCHP units (50-75% penetration) can be accommodated within existing distribution networks

9 Economic viability (1) Scenario 1: operational and capital costs can not be recovered with electricity trade Scenario 2: operational costs can be covered but capital costs can not with electricity trade/sales  μCHP VPP as electricity only plant not economically viable

10 Economic viability (2) Net present value (NPV) for scenario 2 (calculated with Monte Carlo simulations):  Mean value NPV Stirling: € -133 million  Mean value NPV SOFC: € -303 million Significant changes in these factors needed to break-even with investment costs  Stirling capital cost break-even value: €2200 (-27%)  SOFC capital cost break-even value: € 2400 (-52%)

11 Impact institutional environment on economic viability Regulation with the largest impact:  Purchasing subsidy for μCHP  Current purchase subsidy scheme till 2011 and not for a VPP operator  Stricter heat price regulation because of new Heat law  Double taxation for μCHP VPP  μCHP units do not fall under CO 2 emission trading scheme, and can save costs compared to large power plants

12 Impact institutional environment on technical feasibility Grid Code does not prohibit μCHP VPP implementation, but also does not consider it:  No μCHP specific provisions in Grid Code (yet)  The provisions for large power plants in the Grid Code do not apply for the μCHP VPP

13 Beneficiality of a mCHP VPP *Compared to grid electricity and boiler heat Stirling VPPSOFC VPPCHP + district heating Energy savings (%)* CO 2 emission reduction (%)* Total costs €/GJ heat Capital costs € / GJ energy saving

14 General conclusions μCHP VPP technically feasible if combined with heat storage μCHP VPP not economically viable under current institutional conditions and economic assumptions Institutional change needed to:  make the μCHP VPP economically viable and,  to accommodate the system within the existing power system without problems Beneficial to implement a μCHP VPP?  Energy savings and CO 2 emission reductions possible  μCHP VPP currently not costs effective compared with district heating  However: district heating system limited to densely populated areas and new buildings, the VPP not