APPENDIX 58
Memorandum by EDF Energy
CONSIDERATION OF THE CAPACITY OF BOTH MICROGENERATION
AND OTHER FORMS OF DISTRIBUTED GENERATION TO MEET A SUBSTANTIAL
PROPORTION OF UK ELECTRICITY DEMAND
EDF Energy is very pleased to respond to the
Trade and Industry Select Committee Inquiry into the Government's
Energy Review and the extension of Committee's terms of reference
into Distributed Generation.
This evidence draws on EDF Energy's submission
to the Energy Review and develops in more detail our earlier evidence
to the committee on microgeneration.
SUMMARY
Over the next 10-15 years a significant proportion
of the UK's large, centralised transmission-connected electricity
generating capacity will be closed and require replacement. This
provides an opportunity for the UK to demonstrate leadership in
delivering secure, clean, and affordable energy for the long term.
A diverse mix of generation is the right solution to ensure security
of supply, address climate change and provide value for money
for customers. Clean coal, gas, renewables, nuclear, micro and
decentralised generation and energy efficiency all have a role
to play and all should be pursued.
Distributed generation, including micro-generation,
should be encouraged where it can be demonstrated that they contribute
to the significant CO2 reductions required to deliver
UK targets. Regulatory and planning arrangements should be reviewed
to ensure that there are no unreasonable barriers to Distributed
Generation deployment at a scale that maximises the potential
environmental and commercial benefits. It must be recognised however
that, while such forms of generation will have an important role
to play, transmission connected generation will continue to provide
most of the electricity we use for the foreseeable future.
DEFINITION OF
DISTRIBUTED GENERATION
AND MICROGENERATION
Distributed Generation refers to technologies
that connect to the electricity system at the distribution network
level rather than at the level of the National Grid. This therefore,
can include microgeneration, community level CHP and in some cases
Combined Cycle Gas Turbine (CCGT) stations amongst others. We
assume that the Trade and Industry Committee's interest is in
smaller distributed generation technologies, designed to provide
locally consumed electricity, rather than, for example, the large
CCGTs of more than 300MW that can be attached to the distribution
networks. Our answers in this response are in respect of smaller
scale distributed generation of less than 50MW.
In respect of microgeneration, our answers refer
to generation that conform to the description in the DTI Microgeneration
Strategy and Low Carbon Buildings Programme Consultation (June
2005) document which describes microgeneration as, "The production
of heat and/or electricity on a small scale from a low carbon
source."
In terms of size, these units can be placed
in a domestic setting and an output of between 1kW and a realistic
5kW maximum power output.
MICROGENERATION
In our earlier evidence to the Committee we
made clear that micro-generation technologies may offer benefits
consistent with the Government's Energy Review objectives, such
as:
— Some of the technologies being explored
for domestic level generation could significantly reduce the CO2
emissions relating to heat and electricity production, particularly
micro-renewable generation.
— Embedding a range of energy sources
in the electricity network also has the potential to reinforce
security of supply, both of primary energy and in support of the
electricity and gas networks.
However, it is difficult to accurately gauge
the potential of micro-generation because mass-market products
are not yet available. We made reference to an Energy Savings
Trust report that predicted a very large role for micro-generation
technologies in electricity generation, predominantly micro-CHP.
However, a report by the Carbon Trust on early findings from a
trial found that micro-CHP was yet to demonstrate it could deliver
the hoped for benefits in reducing carbon emissions. This technology
is also limited in the contribution it can make to security of
supply, as it increases the UK dependence on gas.
We believe that in the right circumstances micro-generation
may potentially be economic and help to reduce CO2
emissions, but its contribution is currently limited by the existing
technologies and it is unlikely to displace central generation
capacity on a large scale.
Even if the bold assumption were made that half
of all the UK's households had micro-wind or micro-CHP (circa
13 million machines) the electricity produced would be around
28TWh per year, approximately 7% of current electricity demand
(360TWh). The contribution to available capacity, to fill the
generation gap, would be substantially smaller than this due to
intermittency issues both of micro-wind and of those associated
with the running pattern of micro-CHP whereby electricity would
only be produced efficiently when the device was supplying a heat
load.
We believe therefore that further development
of the technologies for micro-generation should be supported and
trials should be run to find out where this technology can be
most effective, so that products that reduce CO2 can
be brought to the mass market.
OTHER FORMS
OF DISTRIBUTED
GENERATION
Although micro-CHP for domestic scale customers
has yet to demonstrate widespread potential benefits, Combined
Heat and Power (CHP) at a larger scale already offers an efficient
option where a constant need for local heat, such as in industrial
processes, swimming pools or hospitals, is combined with the ability
to produce electricity; this will also avoid transmission and
distribution losses.
The heat loads necessary for such efficient
operation are not available everywhere, but clearly there is good
scope for finding sites that require large and constant heat loads
within urban areas such as London.
The development of local Energy Service Companies
(ESCos) is a positive development in promoting distributed generation
where the right conditions for its efficient operation can be
found. Such companies are a way of creating local partnerships
to explore opportunities to invest in both more efficient heat
and electricity generation and, in particular, combined heat and
power (CHP).
Where high geographical concentrations of heat
demand occur, such as in urban areas, CHP has the potential for
reducing CO2 emissions associated with producing both
heat and electricity. London is clearly a prime location for exploring
the possibilities for this approach, due to its high density of
heat demand and the many new developments planned for the city
in the next few years. This is why EDF Energy has agreed with
London's Mayor to create a London ESCo—a joint venture public/private
partnership to help deliver the Mayor's Energy Strategy. The vision
is to create a world class energy infrastructure company which,
within five years, will lead the way in delivering commercially
viable, environmentally friendly, decentralised energy systems.
The London ESCo will use a variety of existing
and developing technologies in order to achieve its aims. Initially,
conventional gas-fired CHP plants will be used, since these provide
a relatively quick and proven route to lower CO2 emissions.
Once a commercially viable biomass supply chain has been established,
then these schemes could be replanted to achieve renewable status.
A combination of renewable sources of energy such as wind, ground
source heat pumps, Photo Voltaic (PV) and thermal solar heating,
will also be used where appropriate.
OVERCOMING THE
BARRIERS TO
DISTRIBUTED GENERATION
INCLUDING MICROGENERATION
Our previous submission highlighted some of
the barriers to the more widespread use of microgeneration, including
costs, planning consents and metering. These same barriers also
apply to larger distributed generation technologies. In addition,
many of those regulations which exist to protect the interests
of domestic customers were created before the recent interest
in microgeneration and local CHP schemes. Consequently, some licence
conditions and exemption classes do not provide an incentive for
such schemes and, in a few cases, act as a deterrent.
These regulations should be reviewed and amended
where necessary, and we welcome the review by DTI and Ofgem into
barriers to distributed generation announced in "The Energy
Challenge" published in July.
EDF Energy believes that support for microgeneration
technologies while they are high cost to the point at which they
are commercially viable is important and necessary. This can be
achieved through more flexibility in schemes such as the EEC to
trial products and help manufacturers gain manufacturing economies
of scale, and also from support through mechanisms such as the
RO.
As part of the Renewables Obligation 2005-06
Review we also supported proposals to reduce the administrative
burden on micro-renewable generation to claim Renewable Obligation
Certificates. The measures proposed were the removal of the requirement
for "sale and buyback" arrangements and the ability
to allow agents to act on behalf of number of micro-generators.
We understand that both of these measures are to be brought forward
for implementation in April 2007. Trials can also be conducted
to provide an opportunity to test the effectiveness of different
technologies and establish, in an open way, the potential for
carbon reduction and other benefits. The Carbon Trust trial of
micro-CHP is a good example of this approach. Once a technology
has been supported to the point of being a commercial product
it will then be able to compete with all other technologies on
a level playing field to meet the Energy Review goals.
We welcome the Government's announced intension
to introduce "fundamental change to the planning system"
as planning permission may be a barrier to all forms of distributed
generation—for example where externally-sited renewable
technologies such as micro-wind are installed.
If micro-generation becomes viable for a large
number of customers then an installation industry will need to
be created. Government should support employers in training this
new workforce and ensuring the quality of installation through
standards applicable to, and accreditation of, the installers.
Substantial investment in networks would be
required to accommodate distributed generation if it is installed
in large numbers and high concentrations. We welcome Ofgem's intension
to publish long-term scenarios for the development of the networks.
CONCLUSION
Distributed generation can make a positive contribution
to meeting the Energy Review objectives. We support efforts to
find where they can be most effectively deployed and to overcome
the barriers to their being used. However, the current distributed
generation technologies mean that they can have only a limited
impact on meeting the overall demand for electricity, due to the
intermittent nature of some of them and the need for the right
operating conditions, and a constant heat load for others, such
as district CHP schemes.
3 October 2006
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