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Distributed Generation Markets in Europe: Expansion, investment and future opportunities

Chinese Version Report Link        Finished:2010-03-01       Product ID:E1707


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European efforts to combat climate change, improve security of supply, drive forward innovation, and boost competitiveness over the next decade will cause the distributed generation (DG) share of Europe's installed electricity generation capacity to grow considerably. These drivers are encapsulated in the EU's Energy and Climate Change Package endorsed for 2020, which sets ambitious headline targets for the EU. Furthermore, the growth of DG is an integral component of an emerging vision of an efficient and highly responsive 'European smart grid', in which the actions of all electricity users are fully integrated, and the liberalization of the EU electricity market is pursued to a 'user-centric' conclusion.
According to Improgres (Improvement of the Social Optimal Outcome of Market Integration of Distributed Generation (DG) and renewable energy resources (RES) in European Electricity Markets), EU-27 electricity generation from DG/RES will rise from 490 terrawatt hours per year (TWh/yr) in 2005 to about 1,280TWh/yr in 2030. The proportionate share of electricity generated will also grow from about 15% to approximately 26% during the same timeframe.
But there are a number of barriers holding back the further spread of DG in the European market. These range from simple commercial issues, such as the fact that the power produced is not currently cost-effective compared to bulk generated electricity, to more complex regulatory reforms. As well as great political will, overcoming all these hurdles involves money. Indeed, it is estimated that Europe will need to spend ? trillion on upgrading its grid infrastructure over the next quarter century.

Key features of this report

?Analysis of the key drivers of Distributed Generation, as well as the major barriers to this sector.
?Clarification of the current share of Distributed Generation in the EU-27 and how this is likely to change over the next 20 years.
?Assessment of the latest legislation impacting the Distributed Generation market in Europe
?Assessment of how the European Grid infrastructure is changing and what developments need to be taken in order to integrate a greater share of DG
?Identification of the key Distributed Generation technologies that are shaping the future of the market.

Scope of this report

?Achieve a quick and comprehensive understanding of the Distributed Generation sector in Europe
?Realize how the European power infrastructure is changing as government’s increasingly focus on reducing carbon dioxide emissions and improving security of supply
?Achieve a comprehensive understanding of the major barriers preventing a wide uptake of Distributed Generation and how these are being overcome
?Identify which countries are leading the way regarding Distributed Generation and which are struggling to embrace this area
?Identify how the legislative landscape is changing and how this will impact the Distributed Generation market over the next decade

Key Market Issues

?Environmental concerns:- Reducing the carbon footprint and finding new and more efficient ways of delivering power are fundamental drivers behind the overall take-up of Distributed Generation. Although CO2 emissions are falling in Europe due to increasing efficiency and measures enacted as a result of the Kyoto agreement, it remains a major polluter, accounting for 16% of the world's emissions.
?Security of supply:- The expansion of Distributed Generation across EU markets, in conjunction with other generating options, has the potential to enhance European energy security, a political motivation of high importance in Brussels. EU states are understandably wary of an over dependence on any single external energy supplier. Russia, in particular, as Europe's leading oil, gas and coal supplier, has triggered alarm bells in recent years after withholding energy from the Ukraine.
?Changing infrastructure:- As the share of Distributed Generation increases this will require the rapid evolution in distribution systems from 'passive' networks, focusing almost exclusively on the delivery of electricity to end-users, to 'active' networks, incorporating many of the control functions, services and tools traditionally associated with transmission systems.

Key findings from this report

?The rate of development for Distributed Generation varies in Europe, with Western Europe leading the drive in this sector, while Eastern Europe lags behind.
?The EU will witness a surge in new electricity production derived from renewable sources of energy, effectively doubling from 450GWh in 2005 to 943GWh in 2030. This includes large-scale plants operated by utilities, as well as smaller facilities. It is possible that by 2030, both CHP and RES will be more important as sources of electricity generation than nuclear power.
?Europe’s future power architecture will include 'microgrids', where network operators control all local loads, storage and generation, which can be separated from the transmission system in the event of an upstream failure, or 'virtual power plants', which electronically connect and aggregate the power from a geographically dispersed set of distributed generation plants.
?Incentive schemes are crucial for the development of Distributed Generation and Renewable Energy, which remains for the most part uncompetitive compared to traditional energy sources.

Key questions answered

?What are the drivers shaping and influencing the Distributed Generation market in Europe?
?Which countries are leading the way regarding Distributed Generation?
?Which technologies are having the most impact on the Distributed Generation market?
?How is increasing power consumption and fears over the environmental impact of power generation increasing support for Distributed Generation at a national level?

Table of Contents

Table of Contents
Distributed Generation Markets in Europe
Executive summary 10
Introduction 10
Market outlook 11
Legislation and environmental landscape 11
Distributed generation systems 12
Distributed generation networks 13
Case studies 14
Future development of distributed generation 15
Chapter 1 Introduction 18
Summary 18
Introduction 19
Reducing CO2 emissions 22
Security of supply 26
Barriers to DG 28
Chapter 2 Market outlook 32
Summary 32
Introduction 33
Energy demand in the EU-27 34
EU-27 electricity generation 37
DG role in generation 38
National variations in DG/renewable energy capacity 40
Case study - Germany 41
United Kingdom 44
Chapter 3 Legislation and environmental landscape 48
Summary 48
Introduction 49
EU legislation - framework 49
The EU 20-20-20 renewable energy targets for 2020 51
2009/72/EC Electricity Directive 53
Option 1: full ownership unbundling 54
Option 2: ISO 55
Option 3: ITO 55
Support schemes 56
Feed-in tariff schemes 56
Prime premiums 56
Quota systems 56
Tendering systems 57
Net metering 57
Effect of support schemes on DG 58
National legislation 59
Case study: Germany: 2009 Renewable Energy Sources Act (Erneubare- Energien-Waermegesetz - EEG) 59
Environmental effects of DG 62
Chapter 4 Distributed generation systems 66
Summary 66
Introduction 67
Traditional fossil fuel-based systems 68
Gas turbines 68
Microgeneration systems 70
Turbine optimization 71
Reciprocating engines 72
Gas engines 72
Diesel engines 74
Dual fuel engines 74
Fuel cells 75
Proton exchange membrane fuel cell technology 77
Case study: UK 79
Case study: Germany 79
Renewable technologies 81
Introduction 81
Solar 82
Wind power 84
Marine energy 86
Small Hydro 87
Biomass 87
Chapter 5 Distributed generation networks 90
Summary 90
Introduction 91
Today's electricity network system 91
Active transmission networks 93
Passive distribution networks 93
Local voltage and fault current levels 94
Predictability of power output 95
Data collection 97
Power quality 98
TSO and DSO interactions 99
Future evolution of the distribution network 100
Electricity storage technologies 101
Microgrids 103
Virtual power plants (VPPs) 104
Offshore Grids 105
Conclusion 108
Chapter 6 Case studies 112
Summary 112
Introduction 113
UK: Legislation helps drive DG 113
Innovative funding incentive (IFI) 116
RPZ on the Orkney Islands 117
Ireland: ending its energy isolation 120
Storage technologies in the wind sector 124
Malta: Becoming a 'smart' island 126
Chapter 7 Future outlook 130
Summary 130
Future development of distributed generation 131
Cost of distributed generation 133
Utilities partnering with DG 138
Appendix 141
Glossary 141
Index 142
List of Figures
Figure 1.1: Combined heat and power generation share of gross electricity generation (%), 2007 22
Figure 1.2: EU-27 energy dependence (%) 27
Figure 2.3: EU-27 final energy demand by sector (ktoe) 35
Figure 2.4: EU-27 and EU-15, combined heat and power generation share of gross electricity generation (%), 2007 40
Figure 3.5: Germany renewable capacity (GW), 2008 62
Figure 4.6: Cost of energy for DG applications (US$/KW), 2006 69
Figure 4.7: Grid connected microgeneration system 83
Figure 5.8: Traditional electricity network 92
Figure 5.9: Renewable energy sources share of gross electricity generation (%) 96
Figure 5.10: Smart grid 97
Figure 5.11: Wind power electricity generation (GWh) 106
Figure 6.12: UK, renewable energy share of total electricity (%) 114
Figure 6.13: Ireland renewable electricity generation forecasts (GWh), 123
Figure 7.14: Forecast of CHP share of electricity generation in selected European countries (%), 2015 and 2030 135
List of Tables
Table 1.1: Combined heat and power generation share of gross electricity generation (%), 2007 21
Table 1.2: EU-27 emissions of carbon dioxide (MMTCDE) 24
Table 1.3: EU-27 energy dependence (%) 26
Table 2.4: EU-27 final energy demand by sector (ktoe), 2008 34
Table 2.5: EU-27 population projections (thousands), 2008?0 37
Table 2.6: EU electricity generation (TWh) 38
Table 2.7: EU electricity generation by fuel type (GWh), 2005?0 39
Table 2.8: EU-27 and EU-15, combined heat and power generation share of gross electricity generation (%), 2007 40
Table 2.9: Electricity prices for household consumers, (?per 100kWh) 43
Table 3.10: EU legislation impacting DG 50
Table 3.11: EU renewable energy targets for 2020 (%) 53
Table 3.12: Germany renewable capacity (GW), 2008 61
Table 3.13: Emissions output for DG 63
Table 4.14: Cost of energy for DG application ($/KW), 2006 68
Table 4.15: Microgeneration systems 76
Table 4.16: Cost and potential of renewable energy sources at selected locations in Germany, 2030 82
Table 4.17: Wind power installed capacity in Europe (MW), 2008 85
Table 5.18: Renewable energy sources share of gross electricity generation (%) 95
Table 5.19: Wind power electricity generation (GWh) 106
Table 6.20: UK, renewable energy share of total electricity (%) 114
Table 6.21: Grid connection cost share of investment total (%), 2007 116
Table 6.22: Savings from DG compared to centralized generation (%), 2008 121
Table 6.23: Ireland renewable electricity generation forecasts (GWh), 123
Table 6.24: MEC application fee excluding VAT (?, 2008 125
Table 7.25: EU-27 DG share (%), today and 2030 132
Table 7.26: Forecast of CHP share of electricity generation in selected European countries (%), 2015 and 2030 135
Table 7.27: Distribution network costs per KW of DG (?KW), 2009 136
Table 7.28: Distribution unit investment costs per KW of DG (?KW) 136
Table 7.29: Cost of DG for the residential sector, 2009 138

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