Appunti del corso Management of energy

RENEWABLE ENERGY SOURCES: MARKET, TECHNOLOGY AND REGULATORY OVERVIEW

Renewable energy sources RES are ways to generate energy from unlimited natural resources. These

resources are either available with no time limit or replenished more quickly than the rate at which they

are consumed. Market overview

General market overview: over the last years RES cover the most of investments in energy resources, solar

and wind are the most important, while hydro remains constant. China makes the biggest investments.

PV business models:

 Individual self-consumption (can be increased by storage and user behaviour)

 Energy selling

Wind market segmentation (most important on-shore wind farms and the business model is energy selling)

Technology overview PV

The photovoltaic effect: based on the direct conversion of the incident solar energy on the earth’s surface

into electricity -> possible thanks to semiconductors (typically siliceous). The semiconductor is treated

(doping process) in order to create an electric current.

Doping process: by inserting atoms of third group (boron) and fifth group (phosphorus) in the crystalline

structure of the silicon, and then putting in contact the 2 different layers doped in different ways you

obtain an electric field that generates voltage when the photovoltaic cell is exposed to light.

PV plant constructive elements:

 Phovoltaic modules

 Power conditioning system PCS -> used for the conversion from DC (produced by the plant) into AC

(used by electrical equipment)

 Supporting structure (with or without tracking system)

 Switchboards and cables

 Energy meter

 (energy storage system)

Available PV cells technologies:

 First generation -> sillicium based (mono/poly crystalline) main issue is the high energy

consumption required for silicon production and related emissions

 Second generation -> thin film of photovoltaic material on a substrate

 Third generation -> organic cell, hybrid cell. The main advantage of organic is that is uses organic

pigments instead of inorganic semiconductor that can be deposited on large surfaces as a very thin

film and at very low cost.

Capex: decreased during the last years a part from 2022 in which cost of raw materials and energy

increased.

Emerging trends for rooftop PV: (barriers are CAPEX, competition with traditional PV and limited

knowledge)

 Glazed photovoltaic -> facades and windows

 Photovoltaic roof tiles

 Solar roofs

 Solar shading systems

 Solar cloth

Emerging trends for grounded-mounted PV: PV panels can be mounted with fixed orientation or with a

tracking system: single axis tracking system track only during the day -> 25-30% more efficiency. Dual axis

follows yearly movement -> 40% increase.

Technology overview WIND

Conversion of energy associated to the movement of air masses into usable energy carrier. Wind energy is

a renewable and inexhaustible energy source, even if it is possible to use it only in a discontinuous and

heterogeneous manner, because wind intensity, speed and direction are variable and strongly dependent

on the geographical location.

Wind turbine: collection of operating systems that convert the kinetic energy of the wind into electricity.

Wind moves a rotor, equipped with 2/3 blades connected to a horizontal axis. The rotation is transferred,

by a dedicated mechanical gearbox system, to an electricity generator. The electricity produced, after being

adequately transformed to a HV level, is fed into the grid. The wind turbine is placed on a tower, to allow

the rotation of the blades and, to avoid disturbance of air flow in the ground.

2 rotor configurations:

On-shore wind

Wind farm: group of wind turbines which are electrically connected, can have installed capacity up to

hundreds of MW, it occupies 0,13 km^2/MW in which 90-95% can be used for other purpose such as

agriculture. CAPEX 1-1.1 mln €/MW now china is reducing the price a lot, the price could be higher for

development and design stages, land acquisition and arrangement of necessary transport infrastructure.

R&D trends: increased wind capturing efficiency

through: 1) more complex positioning and control

systems of the rotor blades 2) increasing scale of wind

turbines 3) reduction of losses in electrical energy

transformation -> synchronous electric generators

Adoption (based on permanent magnets principle) 4) increase penetration of IT technology and digital

solutions for managing performance and data analysis of wind farms.

Mini wind: plant useful life 20 years. Very high capex, several application fields.

Off shore wind

The technology for the turbine is the same as on-shore.

Advantages:

 Higher productivity (up to 30%) due to more constant and less turbulent winds

 Less environmental impact (visual)

Disadvantages:

 Investment cost 30-50 % higher

 Ad hoc infrastructure is required to connect with electricity grid.

Trends:

 Increase in the scale of the turbine

 Projects for off-shore floating power plants

Types:

 Single pile: most diffused solution for its simplicity and low cost for seabed below 50 m.

 Jacket: second most diffused solution, best for seabed 10-60 m, lower steel consumption compared

to single pile but higher logistic and installation costs.

 Gravity based: third most diffused solution, used when single pile cannot be inserted in the seabed,

adequate for depths under 30 m

 Suction-bucket: not diffused, ideal for depth 5-60 m and soft clay seabed. Faster, easier and

cheaper to install, needs preparation of seabed

Regulatory overview

Despite the rapid growth of RES investments in the last years, their investment costs have remained high

compared to conventional sources, to promote RES diffusion it has been necessary to equalize the CAPEX

between RES and conventional.

LCOE (livelised cost of electricity): It is a measure of the competitiveness of different electricity production

technologies. It represents the unitary cost of building and operating a generating plant over an assumed

financial life and duty cycle. The cost is assumed to be constant in the years and expressed in EUR/MWh.

Key inputs to calculate LCOE:

 Overnight capital costs

 Fuel costs

 Fixed and variable operations and maintenance M&O costs

 Financing costs

 Utilization rate for each plant

Threefold policy approach to support RES diffusion:

 Financial support mechanisms -> additional revenue streams to RES plant owners.

 Priority access to grid -> dispatching priority: energy generated from RES plants is dispatched on a

priority basis with respect to the other energy sources -> reduce risk of unsold shares

 Discourage carbon-emitting power generation -> emission trading scheme ETS: non RES plants

have to purchase allowances equivalent to their emissions

Financial support schemes

Feed-in-tariff: a public authority offers a tariff higher than the electricity spot market price for the

electricity produced or fed in the grid by a RES plant for a certain number of years -> the only source of

revenue is the tariff. The tariff value can be fixed in the period or set for each plant. More used for small

installations.

Feed-in-premium: a tariff is offered by a public authority as an incentive to the RES plant owner, 2 sources

of revenue: the tariff + the market value of electricity (simplified for small installations -> net metering).

The tariff value can be fixed in the period or set for each plant. Used for big installations.

How to sell energy produced by RES plants:

 Net metering: arrangement through which producers can manage the discrepancy in time between

the energy production and consumption. The electricity generated by a producer and injected into

the grid can be used to offset the electricity taken from the grid.

 Indirect selling: arrangement through which producers sell the electricity injected into the grid to a

public authority, with pre-defined rules for the pricing.

 Direct selling: trader

How to control expenses for incentives (in both cases the total power is defined ex ante -> competition to

access incentives scheme):

 Plant registers: after a RES plant has been authorized to obtain incentives the investors must

submit an application to the public authority. The public authority applies a set of priority criteria to

examine the submitted applications and identify those eligible. -> list of plants eligible for

incentives.

 Tender or auction: RES plant owners have to bid in an auction to access incentives (FIT FIP). Such

auctions have a max and mix value acceptable. Plants admitted to access to incentives are those

with the lowest bids. Auctions take place in a periodic basis and can provide minimum

requirements in terms of technical feature and financial strength of the bidder.

Quota obligations (e.g. green certificates): a public authority defines that a certain share of the electricity

sold on the market should come from RES. This scheme awards RES plant owners with certificates mirroring

the amount of energy generated. Some innovative RES technologies may receive a larger amount of

certificates compared to more established ones to reflect the different cost structure CAPEX and OPEX.

Fossil fuel plants are subject to obligations, they need to collect and deliver to the authority as many

certificates as those corresponding to their obligation every year. They can meet this by investing in their

own RES plant or buying certificates from RES plants owners otherwise they meet penalties. For each MWh

generated a certificate is awarded, there can be a coefficient according to different RES -> market for

certificates is created -> RES producers have 2 sources of revenue: market of energy and market for

certificates.

Tax exemption: favourable tax treatment for RES related investments, can be extended to the supply chain.

RENEWABLE ENERGY SOURCES: BUSINESS MODELS OVERVIEW

Existing business models (incentivized):

 Individual self-consumption -> prosumer: produce at least a portion of the electricity that he needs,

make money by reducing energy bill and energy fed in the grid with FIT in Italy. Distributed

generation: technologies that generate electricity near where it will be used (RES or not, under 10

MW)

 Pure selling -> FIP incentives, MW scale

Emerging business models (pushed by reduction of incentive schemes):

 Merchant -> non-incentivized plants, built to sell energy in the spot market, big risk to go full

merchant because of obtaining financing and revenues stability -> idea to exploit CfD instead of FIP,

the CfD goes in function of the spot market and can give a more linear shape over time. The strike

price is fixed in function of the spot market and the incentives. (CfD can be with one price or 2 price

system).

 ESS (energy storage system) integration

Functionalities of the ESS can be classified in:

 Energy intensive applications -> exchange of relatively constant amount of energy for long ti