Demand Side Management: Evaluating Market Potential in NSW

Transcription

1 Demand Side Management: Evaluating Market Potential in NSW July 2001

2 DSM - Evaluating Market Potential in NSW July 2001 TABLE OF CONTENTS SUMMARY AND EVALUATION OF REPORT FINDINGS 3 Outline 3 Summary of Market Potential in NSW 4 Summary of Costs of DSM Technologies 5 Implications for Greenhouse Emission Abatement 7 Conclusions 7 REPORT ONE REPORT TWO ASSESSMENT OF DEMAND SIDE MANAGEMENT OPPORTUNITIES IN NSW AN ASSESSMENT OF RESIDENTIAL DEMAND SIDE MANAGEMENT TECHNOLOGIES AND PROGRAMS 2

3 DSM - Costs and Market Potential in NSW August 6, 2001 SUMMARY AND EVALUATION OF REPORT FINDINGS Outline This report presents the findings of two studies commissioned by SEDA to assess the potential of demand side management (DSM) in NSW. The focus of the studies is on the potential for reducing peak load in order to defer electricity network augmentation. However, the technologies covered will also be applicable for addressing generation constraints and to varying degrees encouraging energy efficiency and reducing greenhouse gas emissions. The studies were commissioned to improve the awareness of the potential for DSM in NSW, and to improve the understanding of the costs of different DSM technologies, and of other issues involved in using the DSM measures. Residential DSM technologies were given a particular focus, as to date limited attention has been paid to DSM in the residential sector. The reports have three primary focuses, (1) to identify the most prospective sources of DSM in NSW, (2) to estimate the practical potential for DSM in NSW, and (3) to obtain indicative costs for various DSM measures, in order to better understand the potential for these technologies as cost effective alternatives to network augmentation. The first study, An Assessment of Demand Side Management Opportunities in NSW, by Charles River Associates (CRA), gives a top down assessment of the practical potential of different DSM technologies on a statewide basis, both for commercial/industrial loads and some domestic loads, by way of a desktop analysis based on CRA s prior DSM experience. The study also documents the costs of various options and some implementation issues for each technology. Finally, it outlines existing and previous DSM programs implemented in Australia to date, both network and generation load focused. The second study, An Assessment of Residential Demand Side Management Technologies and Programs, by Mark Ellis & Associates, was commissioned in order to improve the understanding of the costs and potential of residential demand side management options. The study estimates cost to the consumer and to the facilitator (for example, an electricity network seeking to defer new network investment) for each DSM technology, and also gives estimates for peak load reduction and energy savings achieved. The study also gives an indication of the current penetration of each technology and an estimate of the likely take-up rate over 3 years if promoted. 3

4 DSM - Costs and Market Potential in NSW August 6, 2001 Summary of Market Potential in NSW As part of the study undertaken by Charles River Associates for SEDA, a top down assessment was made of the technical and practical potential of DSM in NSW. The results are shown in the table below, which is reproduced from the CRA report. Table 1: Summary of DSM Opportunities in NSW DM Opportunity Target Sector(s) Technical Potential (MW) Market Potential (MW) Sheddable Load Standby Generation Medium to large industrial Medium to large commercial to 151 Gas Chilling Large commercial 400 Requires additional analysis Small Scale Cogeneration Medium to large commercial and industrial Energy Efficiency Medium to large commercial and industrial 823 (summer) 682 (winter) 120 (summer) 100 (winter) Direct Load Control Residential and Small Business 305 (summer) Not estimated (winter) 73 (summer) Not estimated (winter) Voluntary Use Reduction Residential and Small Business Not estimated 250 to 500 Fuel Substitution electric water heating Residential 500 (summer) 500 (winter) 500 (summer) 500 (winter) Fuel Substitution electric cooking Fuel Substitution electric space heating Residential Not estimated (winter only) Residential Not estimated (winter only) Not estimated (winter only) Not estimated (winter only) Energy Efficiency Residential to 180 4

5 DSM - Costs and Market Potential in NSW August 6, 2001 The results suggest that there is significant potential for DSM in NSW, particularly when considered in comparison with NSW peak load of around 11,000MW. They indicate that Demand Side Management can potentially provide large amounts of peak load reduction and therefore should be considered and evaluated as an alternative to network (or generation) augmentation wherever practical. Note that in the assessment, each DSM measure was treated as a stand alone resource, and hence, although implementation of an individual measure may impact on the potential of the remaining measures, this has not been incorporated into the estimates. Summary of Costs of DSM Technologies Indicative costs for peak load reduction were derived for most available residential and commercial/industrial technologies in the two studies. These have been converted to a common ($/kva)/y basis for display and comparison with typical network augmentation costs, which have been estimated separately. Figure 1 shows indicative costs of the DSM alternatives in comparison with network augmentation costs. For the purposes of comparing alternatives on an even ($/kva)/y basis, a 2 year network deferment is assumed. This was considered a reasonable timeframe for illustrative purposes, in light of recent DSM experience. Fixed costs of facilitating the DSM measures are therefore split over the 2 year period. The marginal network service cost is derived by dividing the estimated value of deferring specific network augmentation projects for two years by the average reduction in peak load required to achieve a two year deferral. The average cost of network service is derived by dividing average annual network service costs by average annual (coincident) peak demand. Facilitation cost, which is that given in Figure 1, refers to the cost incurred by the electricity network in assisting the DSM measures to be implemented, and assumes that most of the capital cost will be born by the recipient, as they receive financial incentives (such as lower electricity bills) in implementing the changes. Note that the costs shown in the graphs have been derived in a generic manner and are therefore indicative only. Actual costs in specific cases will be site specific and may significantly somewhat from these estimates. Relative costs will also differ depending on what time period for deferral is considered. As the graph shows, many commercial/industrial DSM measures may be cost effective as alternatives to network augmentation. Residential DSM measures tend to be more expensive, although they too may be cost effective in many cases, depending on the specifics of an individual case. As the numbers are indicative only, it is recommended that network businesses assess the costs of alternatives in more detail on a constraint by constraint basis. Note also that many of the DSM measures shown in Figure 1, including many cogeneration, power factor correction, and energy efficiency measures, are cost effective in their own right, having a payback period of 6 years or less. 5

6 DSM - Evaluating Market Potential in NSW July CBD upgrade Epping-Ryde constraint ($/kva)/y 200 Without constraint efficient lighting efficient fridge O/P HW to solar heating to gas O/P HW to gas cooking to gas interruptible A/C efficient showerheads energy efficiency cogeneration interruptibles standby PFC Marginal Network Costs Bus Avg Network Costs Res Avg Network Costs Residential DSM Commercial/Industrial DSM Figure 1: Comparison of Indicative Costs of DSM Technologies and of Network Augmentation 12 1 See Reports 1 and 2 for explanations of the DSM Options. 2 A range of costs is given for Efficient Fridges, as the two studies commissioned both provide slightly differing estimates.

7 DSM - Evaluating Market Potential in NSW July 2001 Implications for Greenhouse Emission Abatement It is important to note that many of these measures, particularly the energy efficiency and cogeneration measures, are also effective in reducing greenhouse gas emissions. The costs of promoting these measures can be looked at in terms of the reduction in greenhouse gas emissions achieved, and this shows that many of the relatively more expensive options for peak load reduction are cheaper in terms of cost per tonne of CO 2 reduced (see Figure 2). When the greenhouse gas reduction benefits of these DSM measures are captured (for example, to address NSW Electricity Retailer License Conditions for emissions abatement), the cost of DSM becomes very competitive for many measures. Figure 3 shows the costs per kva per year of peak load reduction when a price of $10 per tonne of CO 2 reduction is allocated to the greenhouse gas reductions achieved from implementing many of the technologies. This shows that, although many measures are competitive for peak load reduction alone, the measures are extremely cost effective when carried out for the dual purpose of greenhouse reduction and network peak load reduction. Conclusions While this report is intended to raise awareness of the scale of cost effective DSM potential rather than to estimate specific DSM opportunities and costs in the context of specific network or generation constraints, several conclusions can be drawn. 1. There appears to be very substantial DSM (including small scale generation) potential available in NSW that could cost effectively defer the need for new network and/or large-scale generation investment. 2. Defining the specific potential in any specific instance requires detailed investigation of the case in question. 3. While DSM is often likely to be cost effective in its own right on purely financial grounds, in many (though not all) instances it can also deliver significant inexpensive (or even negative net cost) greenhouse gas emission abatement. 7

8 DSM - Evaluating Market Potential in NSW July $/tonne 10 N/A N/A N/A 1 Res Avg Network Costs Bus Avg Network Costs Marginal Network Costs PFC standby interruptibles cogeneration energy efficiency efficient showerheads interruptible A/C cooking to gas O/P HW to gas heating to gas O/P HW to solar efficient fridge efficient lighting Commercial DSM Residential DSM Figure 2: Costs of Greenhouse Gas Reduction From the Various Technologies 8

9 DSM - Costs and Market Potential in NSW August 6, 2001 $400 $300 $200 $100 $0 -$100 ($/kva)/y -$200 -$300 -$400 Res Avg Network Costs Bus Avg Network Costs Marginal Network Costs PFC standby interruptibles cogeneration energy efficiency efficient showerheads interruptible A/C cooking to gas O/P HW to gas heating to gas O/P HW to solar efficient fridge efficient lighting Commercial Residential Figure 3: Indicative Costs of DSM Technologies, Assuming $10 Per Tonne Value For Greenhouse Reduction Delivered NB: cogeneration and efficient showerheads have a negative cost in this instance as the value given to them for greenhouse reduction at $10 per tonne is enough to make them cost effective, even before DSM benefits are considered. 9

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11 DSM - Evaluating Market Potential in NSW July 2001 REPORT ONE ASSESSMENT OF DEMAND SIDE MANAGEMENT OPPORTUNITIES IN NSW 11

12 DSM - Costs and Market Potential in NSW August 6, 2001 REPORT TWO AN ASSESSMENT OF RESIDENTIAL DEMAND SIDE MANAGEMENT TECHNOLOGIES AND PROGRAMS 12