Potential market penetrations of Distributed Generation

Our latest blog post is from Michael Kenefick, another of our students from the MSc in Sustainable Energy Futures. In this post Michael outlines the research the background to, and the work he is doing for, his thesis as part of the course.

Distributed generation (DG) is playing an increasingly prominent role in the UK power network and could become an integral component. However, current regulation and UK Government policy are designed to accommodate the large-scale centralised generation and as a result DG development has been inhibited. DG offers benefits for the environment and the operation of our power networks whilst also bringing in a myriad of new stakeholders to the power generation sector. The conflict exists that Government policy was designed for centralised generation and as result DG and centralised generation do not operate on a level playing field.

Conventional Vs Unconventional power generation in the UK at distribution in 2011, 2012 and 2013
Conventional Vs Unconventional power generation in the UK at distribution in 2011, 2012 and 2013

I completed my degree in Civil and Environmental Engineering at University College Cork, Ireland in 2011 and afterwards spent some time travelling Asia and Australia before arriving in Oxford where I worked as a building services design engineer. It was here that my interest in future energy systems was solidified and in 2014 I enrolled in the Sustainable Energy Futures MSc. I picked this MSc as it unique in its cross-disciplinary approach and has provided me with a great insight into the future of energy, from low carbon technologies: solar, wind, bioenergy, nuclear to the policy and economics that support the energy transition. My time in building services brought to my attention the proliferation of distributed generation (PV, CHP) and my Master’s thesis is building on this by investigating and quantitatively evaluating the effect of Government policy on the development of DG.

DG, generation connected to the distribution network, accounted for 5% of UK generating capacity in 2004. Flash forward to 2013 and that capacity has jumped to 23% with almost 77% of that made up from low carbon energy sources. As well as reduced environmental impacts, DG has the potential to improve the operational efficiency of our power networks due to its proximity to the consumer and thus reducing transmission losses. If strategically located, DG can defer infrastructure investment by relieving grid congestion points and mitigating the need for costly reinforcements to the transmission network. This approach is currently being employed in New York State where utilities aim to defer $500 million in network investment.

Change in conventional Vs unconventional power generation in the UK at distribution in 2011, 2012 and 2013
Change in conventional Vs unconventional power generation in the UK at distribution in 2011, 2012 and 2013

The current regulatory framework does not wholly recognise these benefits and as a result the DG operators do not receive a fair price. The price received is determined by the route to market, the method by which the operator sells its power to the consumer, and the DG operator’s business model. Various routes to market exist already, including ‘private wire’ networks and ‘Licence Lite’, the junior supplier licence of which the Greater London Authority hopes to be the initial recipient. My research is looking at the policy and market structure and attempting to quantify the extent to which DG development is inhibited as a result of the market’s predication for centralised generation.

Further to this work is the study of possible changes that can be made to current UK policy and regulation. These changes can open up new routes to market and allow for the development of new business models that will free DG operators from unnecessary obligations. Examples for these possible policy alterations will come from the study of foreign countries where the integration of DG has been more prevalent, most notably Germany and Denmark. The effect of these changes will be quantified using a market penetration diffusion model to determine the installed capacity for selected generation types and capacities.

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