Sustainability Energy (II): Consequences of EV

 

This year Renault has launched the 100% Electric Vehicles to the market. Leaving at one side constraints in vehicles’ autonomy (up to 100 km by now) and the cost of battery rental (in a range of 50 € per month in the smallest vehicle which has space for two passengers) and the attractiveness to consumers put in place in the delay of the great scale manufacturing of the BYD vehicles since the Chinese-American consortium based their strategy in grants for the retail price of their vehicles which have been cancelled, this briefing uniquely focuses in the impact in the energy sector according the degree of penetration of these vehicles and under the assumption that normal human behaviours are not going to change at least in the mid term.

Hence let’s assume that by one side developed countries are going to maintain their levels of car use and the number of them.

Chart 1: Year Vs. # of vehicles

This chart has been done based upon the following assumptions:

• The range of vehicles in developed countries goes from 500 to 570 vehicles per one thousand inhabitants (current figures taken from Spain, France, Germany and Italy official figures)
• The demographic growth has been taken from the forecast made by the Spanish National Statistics Institute (INE in the Spanish spelling)

The following step shall be to translate the number of vehicles to electricity; power and energy consumption according the best technology available.

In order to be fully loaded the batteries need a voltage of 230 V (standard LV level in Europe) and 13 Amperes during 6 hours[1], what derives in an extra power demand of almost 3 kW and 17.94 kWh of energy consumption per vehicle (and day, at least in standard working days) if no significant technology improvements are made in the following years regarding electricity storage.

The following question to be made is clear, which will be consequences in the entire power system and energy markets? In order to answer, or rather, make a proxy to the answer; let’s focus in the average daily load curve of a normal power system as it is nowadays:

Chart 2: Source Spanish TSO (REE). Load demand on Wednesday May 11^th 2012.

Obviously, the demand curve matches with the normal human activity, very low demand at night (off-peak hours) and peaking hours at noon and 22 hours at night, which corresponds with the hour when families meet together at home.

Hence it is reasonable to think that vehicles would be plugged at the time users arrives at home to prevent running out of power when attending their works the following morning, therefore there wouldn’t be the so claimed “peaking release”. Indeed, most users would connect their vehicles a soon as they arrive at home and the average hour is between 19:00 to 20:00 hours, just when demand starts to increase up to the peak hour.

At this stage, estimation can be made in terms of power availability requirements depending on the degree of EV penetration in different time horizons:

Chart 3: Peak Increase in the whole system according to EV penetration

It can be observed from the above chart that the differences among different time frames derive in no significant differences in the power peak, so the single driver under the assumptions pointed out at the top of the present briefing, is the degree of EV penetration.

In case of Spain, with a current installed capacity of almost 90 GW, with a degree of EV of 50% penetration the total security of supply might be compromised.

In terms of energy prices, the impact would be huge due the fact that the lack of extra capacity would derive in a sharp increase on prices based on the actual lack of competition, and the power demand would be entirely price acceptance.

In terms of power networks, they would be obliged to be increased in terms of transmission, primary distribution and secondary distribution capacity, regardless domestic investment to be made in order to adequate households current supply power installation that would remain out of connection charges or toll tariffs.

In terms of social welfare it can be concluded that an evident CO₂ emissions saving would be attained and the decrease of fossil fuel dependence would provide a healthy Energy Balance of developed countries, depending on their power generation share.

Hence it can be concluded that once the technological restrictions are overcome in EV the following challenges should be strongly faced by Policy Makers, Regulators and Public Institutions:

1.    How CO₂ emissions reductions should be integrated in the cap and trade EUEA Scheme and other international commitments[2]?

2.    How National Energy Plans should be adapted to this new paradigm in terms of RES promotion?, What about Nuclear Power Generation Needs (current and future)?

3.    How would the power markets been adapted to prevent or not, the foreseen electricity price increase?, What about cross subsidies (user with no vehicles)?

4.    How should Energy Regulators face the foreseen increase in regulated tariffs arisen from the power networks reinforcements?

5.    What about the scarcely populated areas and seasonal use of small populations?

6.    When would societies realistically and in a sustainable manner endeavour the EV promotion constrained by the current economic environment?   

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[1] These data are publicly available at EV car makers industry official web pages

[2] A value of  6 tonnes reduction per 1000 vehicles can be assumed as a reasonable figure

Sustainability Energy (I): The real situation of Renewable Energy Sources

This is the first of a set of three papers conveyed to establish certain variables, drivers and facts, from both economic and technical perspectives, that commonly drives some journalist or energy sector professionals to wrong or weak conclusions unfortunately put on “black on white”.

Thus, in this first paper we are going to provide the general picture of Renewable Energy Sources (leaving out of the analysis the Hydro Power Generation from reservoirs or dams), hence uniquely those most predominant currently: Solar (mainly Photovoltaic) and Wind Power Generation.

Why RES are not competitive economically nowadays?

Simplifying, it can be concluded that the generation share of a system (technologies and power plants connected in a certain interconnected grid) is optimized by the demand evolution and generation’s Variables Cost of each power plant or technology in case they are considered as a whole. The so many times referred as the Marginal Cost Theory. Of course it is not the aim of the present paper to describe this theory, many references and lectures can be found out in internet.

It doesn’t matter if a Central Planner (some States of US) manages the generation share by launching auctions of certain capacity and technology as long as the demand grows or in the other way around is the market mechanism (Rest of US and EUROPE) which fit the optimal generation share. The common “before RES” generation share in western countries consisted on a base of Nuclear Power Plants (cheapest and complicated to operate for security reasons), coal power plants, Gas power plants (GT or CCGT) and very seldom, peaking fuel turbines (the most expensive ones, that only operates very few hours a day). Since power companies are usually private, they are to make benefits, and given the fact the above mentioned technologies can modulate or generate at discretion, they get those incomes from the operating manoeuvre (regardless strategies, management, fuel price risk hedging etc…), so they ask higher prices or are dispatched in a merit order, and consequently they cover their CAPEX and OPEX and get a certain net benefit. Now, what can RES power generators do to cope with this fact?, they have almost no variable cost (maintenance) but in the other way around they are entitled with very high investment cost (much higher than conventional generators’ ones) and they are constrained by a fact, they depend on random environmental circumstances to deliver energy, no chance to choose the peak hours and consequently getting the higher energy prices. How regulators are fitting this fact? They are obviously leashing the links by means of grants (tax credits or feeding tariffs schemes, apart of compensation in concept of loss of profit to conventional generators), no other suitable solution is available if Policy and Rule makers are concern and committed with GHG emissions reduction.

What was and still is the rationale to keep on trying to bring RES generation to a competitive scheme?

The answer can be summarized as follows: Every stakeholder thought at the earliest 2000 that by one hand commodities (coal, gas and oil) prices would have increased more rapidly than they are doing actually. By the other hand everybody expected at that time that the maturity of technologies and GHG market scheme would have pushed the RES to a total economical competitiveness.

The first prediction failed due the financial crisis and the second one simply didn’t occur; the technology has suffer a notable and remarkable improvement but the weather conditions (solar irradiation and wind flows) do not follow markets or customers’ behaviours what set the demand. This latter was a wrong misconception from the very beginning.

Let’s make a simple estimation according the preliminary assumptions:

Future Gas Prices: 25-30 €/MWh (settlement price at 11/15/2011)
Yield (power generated over heat power) of CCGT: 55% (those which set the highest prices)
Then we may assume the price of energy in peaking hours is in a range of 60 €/MWh (what fits with EU Energy Prices)
Natural Gas Emissions: 0.4 CO2 Tonne/MWh (much less pollutant that conventional coal power plants)
Current future settlement prices for EUA: 10 €/ Tonne CO2 (settlement price at 11/15/2011)

Some references of RES power generation CAPEX:
Solar PV 4000 US-$/kW (the lowest offered by incumbents PV manufacturers)
Wind Power Generation (one of the cheapest wind generators has achieved 1000 €/MW)

There are only 6 hours of peaking hours per day what means a mean of 2000 hours at peak hour prices per year (in addition is a rational value for generation factor of PV technology at nominal capacity).

Let’s assume a plant of 1 MW F-V;
CAPEX: 3,100,000.00 € (according the current exchange rates)
Leverage: 75 %
Interest Rate: 6% (currently commercial Banks are offering higher rates in Europe)
Annual payment (25 years of amortization period; principal plus interests): 163,077.00 €
Annual revenues: 120,000.00 €
Annual deficit: 43,077.00 €
Annual incomes for reduction of CO2 emissions (Displacement of CCGT power plant generation): 8,760.00 €
Annual deficit according GHG trading scheme (cap and trade): 34,317.00€

Only a price of EUA allowances of almost 50 €/Tonne would make the power plant profitable (leaving out the Gas price)

Obviously in a real case this simple estimation should be more accurate (many critical conditions have been deliberately left out), but notwithstanding this above sample gives a range of values to bear in mind when dealing with RES power generation economic competitiveness.

As a conclusion, we can sustain that we are rather far from the point to release grants to RES power plants if GHG emissions reductions commitments want to be met and in order not to hamper the RES promotion which provides other undisputed “intangible” global benefit apart of the environmental aspect as is the case of the energy dependency release.

Remark:

In Spain by 2007 a Royal Decree was enacted which settled a Feed-In Tariff of 44 c€/kWh  440 €/MWh what jointly with another wrong measures led to increase the PV RES sources in 10 times the amount expected by the year 2010 with disastrous impact in the Tariff Shortfall which reached 20 billion Euros this year.

Ofgem, NETA & BETTA new challenges to achieve the EU RES policy commitments

New Energy Trading Arrangement (2001) and its successor British Energy Transmission Trading Arrangement (settled in April 2005 as long as Scotland joined the England and Wales transmission and trading system and leading to an UK wide market), are to be modified in order to face the new challenges addressed to achieve the committed 20% of RES (Renewable Energy Sources) power generation by 2020 as a compulsory target stated by the European Union’s Directives (20/20/20 2020).

The new challenge should be sought by reviewing and analyzing the current market scheme in case the UK policy’s aim is to promote RES at large scale and market based (long term contracts and balancing and settlement undertaken by National Grid and ELEXON for the Real Time operation of the entire system and economically fixed after the operation according the maturity of contracts and agents deviations) or in the other way around changing the paradigm due the lack of success with the current Feed In Tariffs (hereinafter FIT) that uniquely promote small scale facilities (less than 2 kW primarily for self consumption) , what additionally might lead in a very complex operation of Power Distribution Companies and its consequent increase in regulated remuneration of this activity.

The achievement of the targeted 20 % of power generation, in order to maintain the integrity of the whole system, can be addressed uniquely by the promotion of big Wind Generation farms (regardless certain promotion of other technologies as Photovoltaic or Geothermal in a limited scale) for the following reasons given the maturity of this mentioned technology:

1. Wind Power Generation is capable to maintain power factor under certain limits, even compensate it to prevent blackouts
2. The Offshore option provides with high amount of capacity and low environmental impact (2 MW in a single mill with less permits and environmental requirements that those potentially required inland)
3. As it has been evidenced in other countries or systems’ experiences, the uncertainty of power delivered in a day ahead is not subject to suffer significant deviations (in many cases less than 10%)
4. The CAPEX or unitary cost per MW has been sharply decreased.

Notwithstanding it shall be remarked that these set of strengths of the Wind Power generation do not match properly in the current market scheme as it exist by the time being, since even the lack of the uncertainty in the day-ahead power delivery, it is currently impossible setting long term contracts and compete with the conventional power generation (Coal, Nuclear and Gas) in terms of CAPEX (regardless the Marginal Cost usually misunderstanding by some authors, and the compensation for programme deviations). Nowadays RES (but Hydro Power Generation) need grants or compensations in a market based model with no scarcity of installed capacity (therefore Not Supplied Energy is not a driver) and in a rather messed power system (leaving out of this briefing the isolated systems).

Therefore the single solution to achieve RES promotion and deterring “dramatic” reforms in the current trading arrangement shall be leaving out of the current scheme the RES technology (but hydrogenation).

One suitable solution would be to transfer liquidity to the day-ahead spot market (as the SSE Power Company’s initiative) and settling a floor price reviewed each certain time-frame or period (with no retroactivity and maintaining the stable legal framework) in order to avoid of excess of Wind Power Installed capacity what could be managed by the Government and/or Ofgem regulation and market and system monitoring.

Regarding technical constraints, Ofgem is to settle the conditions to be fulfilled by these types of generators in the Grid Code and/or Connection Conditions, which can be designed in order to release or increase the ancillary services’ responsibilities and connection charges (shallow-deep charges) or conditions’ duties in the same direction than market pricing (floor price) to manage the RES capacity installed .

Finally, assuming that the Green House Gas emissions reduction leads to common benefit, the total cost burden of whatever solution is adopted it should be carried out by every market participant and therefore the cost shared among them.

Yorgos Papandreou, the New European Lehman Brothers:

Too big to fall, -somebody will help us-, -public funds are needed-, these are many of the excuses and last resort weapons that Lehman Brothers, Bearn Stearns, and the rest of the financial industry thought about and took into consideration when denying to declare their bankruptcy or going directly to the edge, they already knew that they would receive bailout since the system relied on their own financial institutions.

They were right, the evidences were shown in the mid 2008 credit crunch. Now the tame has passed and a similar blackmail is on the table, the public debts, bonds and obligations, it doesn’t matter the maturity of them, one five or ten years, the single difference is that the menace is not the financial behaviour of a small group of bankers traders or a handful of greedy bankers, now comes directly from a Government.


Once again we are facing the tricky and mafia-style situation, who is actually the borrower and the debtor? When a borrowing entity relays in a single debtor with a huge amount of money the situation could (or will) derive in an out of control situation, confidence is the single collateral in that case, and the default of the debtor a total disaster.

Going back to the credit crunch situation, the Wall Street bankers knew that they were managing the situation and that at the end of the day, the Government (FED and Treasury), should have to interfere in their own affairs since otherwise the whole financial system would had collapsed and the wrong defined as “real economy” would be dragged down with them. Now Mr Papandreou’s Government is playing their own strengths and advantages in the same way, he and the Greece Government got financing from French and German banks (regardless other financial institutions overseas that have already suffered the impact of this dishonest politician behaviour), and now, who is actually in a risky situation?, for sure Greece has taken the lead, and European Union’s politicians have lost the initiative since they currently have a deep hole in their financial system.

At the end of the day, every single European Union citizen is going to pay for the Greece debt (note that 50% of them have been already deducted), and maybe the “euro never ending tap and bailout agreements” might be closed after this blackmail in order to prevent the rest of PIGS to use the strongly damaged confidence path and environment of the European Union Rescue Fund uniquely for domestic sort term political aims whatever the impact might be.

Thus, it is the lack of regulation and laisser faire scheme the real cause of the crisis or in the other way around the politicians interference and policy making currently are actual basis and seed for the present situation?, note that the sub-prime mortgages problem arose from Freddy MAC and Fannie Mae lending policy (see URL below) that were GSE (Government Sponsored Enterprises) the latter founded in 1970 and the former in 1938 as part of the New Deal even though Fannie Mae was reformed in order to promote indebtedness of house owners, overall it is to be remarked that was a transitional period from a Democrat to Republican administrations, no unique political blaming then.

(1) http://en.wikipedia.org/wiki/Fannie_Mae
(2) http://en.wikipedia.org/wiki/Freddie_Mac

El déficit tarifario…, la culpa no es de nadie

Resulta que en España arrastramos un déficit de tarifa de 20000 M€, casi nada. Lo díscolo de este asunto es la causa de cómo hemos llegado a este punto: Tenemos un mercado liberalizado de la energía mayorista pero los costes no se reflejan en la tarifa al usuario final. Aun recuerdo y me río cuando un colega de profesión afirmaba que un mercado libre podía funcionar con una tarifa regulada. Es decir, que el mercado del maíz puede funcionar siempre que el usuario o consumidor final pagase un precio impuesto por el estado, esencialmente es lo mismo. Se ponía por ejemplo al mercado del crudo, donde los países productores de petróleo fijan la oferta, afectando al precio de la demanda. El ejemplo es la causa de este desastre regulatorio y político además del propio absurdo de la afirmación de mi ilustre colega. La diferencia es que los consumidores de hidrocarburos pagamos, no un precio spot sino un precio de futuro del oro negro, es decir, un precio fruto de un mercado NO libre, pero que refleja los costes.
Bueno, a nuestro queridísimo Gobierno se le ha ocurrido el imponer los llamado peajes a los generadores de energías renovables, esto es, hacerles pagar por las pérdidas de energía que conlleva introducir energía en la red, sin embargo, el usuario final, ya está pagando por eso desde hace años. El sistema Español se fundamenta así, se considera tan suficientemente mayado que los generadores no pagaban por las pérdidas en las redes, y en cierto modo es cierto aunque injusto ya que no se daban señales a los generadores de su localización óptima.
Al final del día esto no es más que un cambio en las reglas del juego para reducir las primas a renovables, no engañan a nadie. Se ha quebrantado el principio de las reglas del juego, el marco legal estable.
Una vez más la política, o los políticos, han sido culpables de un diseño del sistema energético deficiente. No se dieron cuenta de dos cosas esenciales: El fijar primas (feed-in tariffs) al pairo y la delegación en las Comunidades Autónomas en materia energética. Esta mezcla explosiva ha hecho que el Plan Energético Nacional volase por los aires y explotase en la cara de los consumidores, dado que la implantación de la energía fotovoltaica se multiplicó por 10 respecto a lo previsto y los aerogeneradores pueblen toda la geografía Española. Nota: No me sirve el que uno de los requisitos fuese inscribirse en el registro nacional de generadores, dado que los permisos esenciales (de carácter medioambiental) están cedidos a las comunidades autónomas, lo que es la segunda derivada de este descontrol.
La única solución al déficit de tarifa, no pasa por incluirlo en la inmensa deuda nacional, sino por reflejar los costes en las tarifas, reguladas o indexadas a precio de mercado, haciendo que los consumidores se den cuenta de las decisiones que se han tomado en los últimos años, de lo que cuesta realmente el suministro energético, y más aun el convertirnos en uno de los países más “verdes” del planeta, esa es la única manera de reducir la demanda y concienciar a los consumidores, que entonces, podrán opinar si quieren estar con Al Gore y su planeta caliente o adoptar medidas y optar por el sentido común, dado que los políticos está visto, no lo van a tener.

Que paren todas las centrales nucleares

Así se han desquitado todos los dirigentes europeos cuando ocurrió el desastre de Fukushima. La verdad es que esta iniciativa es más propia de ciertos personajes folclóricos “que lo sepa todo el mundo”, “que lo sepa toda España”, en fin, en cierto modo los políticos no dejan de ser eso, personajes folclóricos, aunque, y más con los tiempos que corren, deberían de dejar de serlo.
Analicemos lo ocurrido, un terremoto descomunal seguido de un tsunami de proporciones bíblicas. En fin un desastre total, nadie ni nada está preparado para eso, aunque ahora salgan expertos en los medios de comunicación con mapas sísmicos, pues nada, un nuevo Aquila en Lorca, Murcia, y los expertos pues dale que dale, que hay una falla, que choca con la otra y tal, al final, más de lo mismo, que no se podía hacer nada, aunque los presentadores de los noticieros y políticos se dediquen a preguntarse, “¿Se podía haber evitado?”, les respondo yo, no. Volviendo al asunto de las centrales nucleares, el problema ha sido, una vez más, político. Honestamente desconozco el sector energético nipón, si bien en Europa (con la excepción de los vecinos Franceses y sus empresas energéticas públicas, sustentadas en Directivas Europeas redactadas a medida), no se han hecho los deberes, mucho menos en España. Tenemos un Consejo de Seguridad Nuclear cuyas funciones se limitan a auditar el estado de las centrales tal y como se construyeron, hace mucho por cierto, que se lo digan a los de Garoña. Ahora bien, en un mundo perfecto, debería de existir un organismo que se dedicase a la tecnología energética en materia nuclear, al I+D+i en este sector. Existen los profesionales, pero falta visión y desarrollo institucional. Fukushima puede que fuera inevitable (¿o no?), pero la lectura no debe ser “no a la nuclear”, otro eslogan basado en la sinrazón y negación de la realidad que quedará para la posteridad y se convertirá en una arenga religiosa más que en una afirmación sensata. Es más complicado, pero también constructivo, el analizar las situaciones sin vincularse personalmente, evidentemente hay un drama humano y medioambiental detrás. Sin querer poner la solución, el que el reactor en cuestión fuese de tecnología BWR (boiling water reactor, reactor de agua en ebullición en sus siglas en inglés) en vez de un PWR (presurized water reactor, reactor de agua a presión) es el comienzo del debate que se debería establecer, es decir, establecer instituciones con voz más allá de las aulas, que propongan mejoras técnicas, y para eso se necesitan medios institucionales y económicos, que lamentablemente, ahora no existen. Al igual que con la industria de la aviación, de cada accidente se encuentran, bajo un escrupuloso análisis, mejoras en la seguridad, pero en este caso las compañías están incentivadas a hacerlo, no así en el caso de la energía nuclear que llegó a una vía muerta hace ya casi 20 años y que se ha convertido en una tecnología “muerta”, donde las centrales existentes, por imperativo legal, no lógico, son zombies que generan electricidad y cuyo único futuro es el desmantelamiento (incluso pagamos su “funeral” en el recibo de la electricidad todos los usuarios).
¿Que pasaría si todo el esfuerzo económico-regulatorio realizado para la promoción de renovables se hubiera dedicado a la optimización de la generación convencional?