The cost and emission saving potential of wind power

This paper addresses the effect of the increasing wind penetration on the operating performance of a diversified electricity system comprising wind, thermal, hydro and other renewable power plants. A short term optimization model is used to run the exploration planning under different wind power scenarios. The seasonality of the hydro and wind regimes and the hourly variations of supply and demand are acknowledged in the model. Simulations for the Portuguese electricity system are presented in order to establish the use of the proposed model on supporting more informed decision making for future energy strategies. The cost savings and CO2 abatement potential of wind power are estimated along with the effects on the operating performance and costs of thermal power plants.This work was financed by: the QREN – Operational Programme for Competitiveness Factors, the European Union – European Regional Development Fund and National Funds- Portuguese Foundation for Science and Technology, under Project FCOMP-01-0124-FEDER-011377 and Project Pest-OE/EME/UI0252/2011

On the use of MPT to derive optimal RES electricity generation mixes

The use of modern portfolio theory (MPT) is a common practice to derive efficient frontiers and support portfolio decision making in financial markets. Although real projects present different characteristics and technical restrictions, the general objective of the decision maker is the same: to maximize the expected return minimizing the portfolio risk. Long term electricity generation decision making is characterized by high uncertainty, high impact on social welfare and a large set of diversified technologies that may be included in future scenarios. The possibility of applying MPT approach to define efficient electricity generation portfolios is explored in this paper focusing on particular in renewable energy sources (RES technologies). The use of MPT for building RES scenarios is demonstrated for the particular case of Portugal. One year hourly data concerning power output from wind, hydro and solar plants along with the power demand was collected and included in the analysis. Three different approaches were considered for designing the efficient frontiers aiming at maximizing the RES electricity generation, minimizing deviation between the demand and the RES production and minimizing the levelised cost of the RES system. The results demonstrate how this approach can be an effective tool to support decision making but put also in evidence the need to build modified MPT models in order to take into account the technical restrictions of the system.QREN, COMPETE, FCT, under Project FCOMP-01-0124-FEDER-01137

The economic, environmental and strategic value of biomass

Biomass based power plants are one of the few renewable energy sources (RES) units that may be used as base load technologies, contributing also to the reduction of external energy dependency and of the greenhouse gas (GHG) emissions. The availability, heterogeneity and cost of the resource are however important barriers to the effective development and spread of these technologies. This paper aims to make a contribution to the evaluation of biomass power plants based on dedicated energy crops. The particular case of Portugal is analyzed and the strategic, environmental and economic interest of the project is evaluated under the present RES support schemes. The results suggest that the value of the assumed Feed-in Tariff (FIT) may not be enough to attract private investors’ interest for these projects. The need for the creation of a specific FIT for this kind of biomass is highlighted and may be justified both by the perceived project risk and by the expected strategic and environmental value of these investments.This workwas financed by: the QREN e Operational Programme for Competitiveness Factors, the European Union e European Regional Development Fund and National Funds- Portuguese Foundation for Science and Technology, under Project FCOMP-01- 0124-FEDER-011377 and Project Pest-OE/EME/UI0252/2011

Project evaluation for small hydro power investments in Portugal

Due to the increasing concern with sustainable development, renewable energy sources (RES) emerge as an important alternative for electricity production. In this context, for countries like Portugal, hydropower plants assume an important role and several incentives have been granted by the government to promote hydroelectric production. However, due to the deep economic and financial crisis of the last years, a change in the energy paradigm is taking place increasing the perceived risk factors for RES electricity producers. Therefore, this paper focus on identifying and assessing the impact of those risks associated with an investment in a small hydropower (SHP). Although the independent analysis of each risk variable showed that the project is worthwhile, the possibility of having a negative outcome was evident for the investment costs, discount rate and feed-in-tariffs variables. On the other hand, the results of the combined analysis are much less optimistic demonstrating that even under regulated tariffs the probability of having a negative NPV largely surpasses the probability of obtaining a positive value

Designing electricity generation portfolios using the mean-variance approach

The mean-variance approach (MVA) is commonly used in the financial literature for the optimal design of financial asset portfolios. The electricity sector portfolios are also guided by similar objectives, namely maximising return and minimising risk. As such, this paper proposes two possible MVAs for the design of optimal renewable electricity production portfolios. The first approach is directed at portfolio output maximisation and the second one is directed at portfolio cost optimisation. The model was implemented on data compiled from the Portuguese electricity system collected for each quarter of an hour, for a period close to four years. Three renewable energy sources (RES) portfolios were used, namely hydropower, wind power and photovoltaic. This highlighted the resource seasonality demonstrating that hydropower output positively correlates with wind power and that photovoltaic correlates negatively with both hydro and wind power. The results show that for both models the least risky solutions are characterised by a mix of RES technologies, taking advantage of the diversification benefits. As for the highest return solutions, as expected, these are the ones associated with higher risk but the portfolio composition largely depends on the assumed costs of each technology.(undefined

Electricity: A new open access journal

Electricity has fascinated humans since the early days [...

Sustainable development and energy sector regulatory models

The need for the inclusion of sustainable development issues in regulatory decision making highlights the importance to expand or modify traditional regulation models frequently used in some segments of the energy sector. These models have indeed been criticised on grounds of their emphasis on cost and financial efficiency. Aspects like the security of supply and climate change are major concerns of policy makers and must be properly assessed and integrated in the regulatory environment. The European Energy Regulators are already aware of the need to expand traditional regulation, beyond pure financial analysis. However, the sustainability concept is still strongly related to the environmental dimension alone and with the internalization of these externalities on the cost functions to be used. This paper presents a comparative study of different regulatory models in three European countries (UK, Portugal and Spain), focusing on the inclusion of sustainable development concerns on these models. This review indicates that regulatory authorities recognize the importance of the integration of the social and environmental dimension along with the economic one, but the formal design of such an integrated model is still emerging.This work was financed by: the QREN – Operational Programme for Competitiveness Factors, the European Union – European Regional Development Fund and National Funds- Portuguese Foundation for Science and Technology, under Project FCOMP-01-0124-FEDER-011377 and Project Pest-OE/EME/UI0252/2011

Renewable energy scenarios in the portuguese electricity system

Portugal has been demonstrating over the years a high dependence of imported fossil fuels, especially with regard to the transportation and electricity production sectors. The urgent need to balance supply and demand as well as the growing concern about environmental issues and reduction of external energy dependency justified an increasing interest in the exploitation of renewable energy sources (RES) looking for more efficient strategies in terms of economic and social or environmental dimensions. The electricity sector represented a clear example of this RES trend with European and Portuguese policies focused on strategies promoting renewable resources and energy efficiency. Following different studies already conducted in other countries, this paper presents an approach to a possible 100% renewable electricity scenario in Portugal, supported by the application of the model EnergyPLAN. The importance of the interconnection as stabilization measure for a system highly dependent on renewable energy sources of variable output is put in evidence. The results also established that the cost structure of each scenario is mainly driven by the low marginal cost of renewable technologies along with their high investment costs.This work was financed by: the QREN – Operational Programme for Competitiveness Factors, the European Union – European Regional Development Fund and National Funds- Portuguese Foundation for Science and Technology, under Project FCOMP-01-0124-FEDER-011377 and Project Pest-OE/EME/UI0252/2011

The evaluation of biomass power projects

Biomass is a renewable energy source attracting increasing attention. At the EU level in the last years a set of activities and programs were implemented in order to support and promote the use of this source of energy. This study addresses the issue of biomass costs for electricity production and the importance of incentives schemes such as feed-in tariff for the economic development of the sector. An economic evaluation of the electricity production from biomass is presented, based on a survey of both financial and social costs applied to the Portuguese case. Economic assessment was carried out by taking into account three types of biomass: energy crops (miscanthus), forestry residues and municipal solid waste. Four set of costs were considered and included: cost of capital, cost of maintenance and operation, fuel costs and external costs.This work was financed by: the QREN – Operational Programme for Competitiveness Factors, the European Union – European Regional Development Fund and National Funds- Portuguese Foundation for Science and Technology, under Project FCOMP-01- 0124-FEDER-011377 and Project Pest-OE/EME/UI0252/2011

A risk analysis of small-hydro power (SHP) plants investments

The increase in electricity consumption has led to a sharp increase in energy demand which rose environmental and sustainability concerns. To address this issue, there has been an incentive to resource to renewable energy sources for electricity production. Departing from a real case study, the investment appraisal of a SHP project under the present market conditions is described, followed by a sensitivity analysis in order to identify the main sources of risk. The main results obtained showed that in the context of a regulated tariff the project is worthwhile due to a positive NPV. However, if electricity had to be sold at market prices, the project becomes unprofitable. This is an important issue because the perspectives for the future are a reduction of incentives and increased difficulties of network access for producers of electricity from renewable sources. The results put also in evidence the vulnerability of an investment of this kind to an adverse change in interest rates. Therefore, future SHP plant investments should take into account the need to operate in a free market, without special rates for renewable energy and that will have to compete with technologies based on fossil fuels or large hydro