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Content archived on 2024-04-30

Financial analysis of the integration of renewables in electricity supply

Objective



Objectives
The FAIRE project aims at developing a methodology for the economic assessment of the impact of the introduction of renewable energy sources (wind, biogas from waste, wood gasification, small hydro) into an electrical supply network. The point of view taken is the supply utility and includes both technical and financial issues.
The economics associated with the introduction of renewable sources will be compared with those associated with system expansion using conventional and demand-side sources. The methodology developed will be based on simulations taking into account random variables (availability, hour by hour marginal costs, unplanned shutdown of plants, surges in demand, variation in sources). One objective is to develop a common software and methodology which will allow simulation of prospective scenarios.

Technical Approach
The research includes a characterisation of renewable sources, and then a prospective simulation of specific systems. These sources can be ranked against more traditional supply of the grid in an hour by hour simulation using variable and investment costs, in addition to availability and maintenance characteristics. The modelling will build on existing software to simulate the action of the electricity grid dispatch centres. Such simulations will be applied in several electricity supply situations, designed to cover a wide range of electricity supply arrangements and institutions : a large vertically integrated grid (France), an Island networks (Madeira, Portugal; Corsica, France); a regional distribution grid (EWEAG, Styria, Austria); independent producers (Independent Cogenerators, Denmark); a town and rural electricity company (Ronneby, Sweden); a regional grid with third party access (North of Scotland).
Both conventional and renewable energies will be assessed and efforts will be made to ensure that the comparison criteria applied will take account of the particular advantages of each energy source. For example, renewable energies tend to have a short construction time, low variable costs and the possibility of deferred construction. This will allow an accurate economic ranking of different investment options, based on actual system costs, and avoiding more crude ranking using only the long term marginal cost approach.

Expected Achievements and Exploitation
Common approaches and criteria are needed to include renewable electricity in the Integrated Resource Planning procedures such as the ones proposed by the EC. This will allow communication between the many agents involved in electricity planning, such as independent generation companies, distribution companies, integrated utilities, regulators, regional energy agencies, NGOs, industries... The development of a practical European methodology including both renewables and conventional sources will help these complex decision procedures. In particular, the FAIRE methodology will help quantify benefits associated with renewable energies but often described in qualitative terms, such as the modularity (small units whose construction can be deferred in time), quick completion of projects (and so low interest on capital), and other advantages of decentralised energies including a decrease in transmission losses.

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Funding Scheme

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CSC - Cost-sharing contracts

Coordinator

Institut d'Évaluation des Stratégies sur l'Énergie et l'Environnement en Europe
EU contribution
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Address
5,5 rue Buot
75013 Paris
France

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Total cost

The total costs incurred by this organisation to participate in the project, including direct and indirect costs. This amount is a subset of the overall project budget.

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Participants (6)

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