Electricity as a Product
Few products are as unique as electricity, it is unique in the way that it isn’t. Any produced kilowatt hour (kWh) is identical no matter its origin. Once you dig deeper, however, not all kilowatt hours are created equally. When it comes to the production of electricity, the conversion of primary energy into electricity. The process affects the grid on which the electricity is delivered. Consider personal transport as an analogy, where a seat is the equivalent to a kilowatt hour and the road is the electrical grid. Any seat will provide the same transport function, but the effect on the road will be different. Be it a bus, car or motorbike providing the seat. Similarly, different types of power generation provide different services to the electricity system.
The overwhelming majority of electricity today is generated using electric generators. Used to transform kinetic energy into electricity. This covers steam, combustion, hydro, and wind turbines, as well as all turbines used in heat power systems. Categorized by the driver of the turbine or its source of primary energy. In turn, the turbine drives a generator where the kinetic energy is transformed into electrical energy.
A small but growing share of electricity is transformed via photovoltaics, aka solar power. To an even lesser part from electrochemistry e.g. fuel cells or primal cells aka batteries (no to be mixed up with secondary cells i.e. rechargeable batteries).
Actors in the Electricity System
Electricity systems are can be divided into a few key players. Power plants and consumers marking each end of the system. Between the supply and demand, traders purchase and sell electricity. Traders are responsible for the financial balance between supply and demand. The system operator is technically responsible for safe operation of the power system. Grid owners own the transmission and distribution networks and are responsible for power quality and metering. The grid owner and system operator can be the same actor. Grid owners charge tariffs to both producers and consumers based on e.g., energy produced/consumed (kWh) and installation capacity (kW).
In this article we focus on the cost of the system operator for keeping the power system in safe operation. Maintaining the frequency of the grid and balancing production and consumption. National grids are usually interconnected to increase the robustness in this regard. However, traditionally the demand side have been the only variable. But with the introduction of renewable power production like wind and solar, this fluctuation has moved over also to the production side. In turn increasing the value of aspects in power production that aid safe operation. The smaller the grid the more valuable and needed these features become.
Cost of Power Generation
The benchmark for comparing different types of electricity generation have long been levelized cost of electricity (LCOE). Simplified it is used to calculate the lifetime costs of electricity. This is done by adding together the cost of building and operating a power station and divide it by the total lifetime energy output. Resulting in an average price per unit of energy. LCOE allows comparison of several various types of energy technologies with different life span, size of project and capital investments, risk and capacity. Below is an example of LCOE costs for various types of power generation in comparison with Climeon’s solutions.
Levelized cost of energy for selected power generation sources. Source: Unsubsidized LCOE from Lazard’s levelized cost of energy analysis—version 11.0
LCOE covers for the most part the interest of traders, producers and users of electricity, i.e. the supply of energy. What is not considered are the costs occurring for the system operator for balancing the power system to secure safe operation. For this you need services like frequency response, reserve, inertia, firm capacity and flexibility, as mentioned in a great piece on Total System Cost by Total System Cost by Steph Byrom. Whose article sprung the idea for this one.
Solar and wind have added a new dimension to the balancing act. Instead by being demand driven solar and wind power are producing whenever possible. Increasing the costs for maintaining safe operation on the grid. There are also implications for the grid owner as a new power plant will increase the need for transmission from that area. The further a source is from the consumer the higher the losses and thus higher transmission costs will be. In many cases, LCOE also fails to cover other impacts of electricity generation. Such as emissions of CO2, waste generation (e.g. nuclear waste and ashes from combustion), or even impact on health and natural ecosystems.
The Benefit of Decentralized Heat Power
Climeon’s modular heat power provides many advantages, one being adapting to available heat power sources, geothermal and waste heat. Which mitigates risk related finding water with the right temperatures and flows. But considering the electricity system, a decentralized heat power provides many services to the grid owners and system operators. Services that will become more valuable as other renewables increase in capacity. Heat power generation is by design stable, making it an asset in any grid setup.
Using a modular small scale and decentralized heat power system adds to these advantages. By adding a producer closer to the end user, it can decrease the transmission losses on the grid. While also adding a beneficial supply at what used to be the edge of the grid. If used in a standalone power system it adds resilience for local communities far from traditional power generation. Decentralized heat power can and will be an important asset for a future electricity system made up of renewable power.