ECONOMICALLY EFFICIENT NETWORK CHARGING METHODOLOGY FOR A SYSTEM WITH SIGNIFICANT INTERMITTENT GENERATION

Lead Research Organisation: University of Bath
Department Name: Electronic and Electrical Engineering

Abstract

The planning and operation of electrical-power supply systems are undergoing rapid change following the recent privatisation of the industry. A key goal of these changes is to increase plant-operating efficiency and to reduce electricity costs. Further change is driven by social and governmental pressure to reduce carbon-dioxide emissions. These changes create significant technical, commerical and regulatory challenges. A most pressing techno-commercial challenge is planning of networks in this new environment. Supply networks transport electricity from points of generation to points of consumption. The networks themselves are owned by companies such as The National Grid. Network users, such as generation companies, large industrial customers and suppliers, actually generate and consume the electricity carried by the network. Relationships between the network owners and users are purely commercial. Network investment is very expensive. For example, the cost of even low-voltage distribution lines is in the order of 5M/km. This cost is compounded by the long infrastructure lead times. For example, overhead lines can take 7 - 10 years to install. Forward network planning is therefore critical to the delivery of affordable, reliable and secure electricity.However, the necessary forward planning is very difficult because the network owner cannot control the site, size or type of future electricity generation (power stations), or the future demand itself - except through the use of economic incentives. These incentives take the form of charges made to users for their use of the network. The efficiency and the ability of the present charing structure to support the government energy policies are therefore of great concern to the DTI and Ofgem. Consequently, network owners must develop new network-charging methodologies to face up these challenges. This project will develop novel and efficient network-charging methodologies that for the first time use long-term network cost as a key cost driver and for the first time, properly account for the contribution to a network from renewable generation through a probabilistic approach. The key features of the methodologies are that they will:1. Provide forward-looking, economic guidance on the efficient siting of future generation and demand2. Unify the charging structures for transmission and distribution networks3. Incentivise efficient network usage and development 4. Reflect key cost drivers in the charging models 5. Be simple to implement, applicable to different networks and different degrees of renewable energy penetrationThe methodologies will be developed and validated by modelling the dynamic interactions between network pricing and planning on time-scales of up to 20 years. A market simulator will be developed as part of the project, modelling the interaction of network owners and users in an uncertain commercial environment. The simulator will work in conjunction with decision-making models of generation, demand and network planning to be developed from the applicant's existing research. The tested and validated methodologies will guide future network charging strategies and allow efficient networks with low carbon generation to be developed in a timely fashion.The key strengths of the project are: i) it will place the applicant in a world-leading position in power-market design and regulation, ii) it combines engineering and commercial expertise in a strongly interdisciplinary study, iii) it represents a logical development of the applicant's research, iv) it is strongly supported by the UK's power industry and leading international experts and v) the results will be of great benefit to the electricity supply industry, helping the UK retain its internationally-leading position in power-market design and regulation.

Publications

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Furong Li (2011) Long-Run Incremental Cost Pricing for Negative Growth Rates in IEEE Transactions on Power Systems

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Gu C (2012) Reliability-Based Distribution Network Pricing in IEEE Transactions on Power Systems

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Gu C (2013) Risk Management in Use-of-System Tariffs for Network Users in IEEE Transactions on Power Systems

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Gu C (2011) Long-Run Network Pricing to Facilitate Users' Different Security Preference in IEEE Transactions on Power Systems

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Hamidi V (2009) Demand response in the UK's domestic sector in Electric Power Systems Research

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Heng H (2009) Charging for Network Security Based on Long-Run Incremental Cost Pricing in IEEE Transactions on Power Systems

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Li F (2007) Long-Run Incremental Cost Pricing Based on Unused Capacity in IEEE Transactions on Power Systems

 
Description It is possible to substantially reduce network investment cost from consumers' energy storage. The degree of reduction is affected by three key areas: i) the efficiency of AC/DC and DC/DC energy conversions throughout the home area energy systems, ii) the sophistication of energy management system to take advantage of local photo voltaic and cheap main's supply, iii) consumer energy behaviours vary drastically from one home to another, consumer energy segmentation is essential for developing energy management systems suits each consumer segment.
Exploitation Route The key findings are adopted by a Smart Grid Demonstration Project by Western Power Distribution, testing the possibility of the use of consumer home storages to offsets network investment.
Sectors Energy

URL http://www.westernpowerinnovation.co.uk/Projects/SoLa-Bristol.aspx
 
Description Research at the University of Bath has developed a new network charging methodology, known as Long Run Incremental Cost (LRIC) pricing for electricity distribution systems. The methodology enables the calculation of location-specific annual network charges for electricity generators and suppliers, replacing the flat-rate charging approach used by the industry over the last 25 years. Bath's work on LRIC has led to major impact in two areas. 1) On government policy, in 2008 the UK regulator Ofgem required Distribution Network Operators (DNOs) to adopt LRIC as an industry standard, using the evidence provided by Bath that LRIC's uptake could lead to ~£200M efficiency savings for DNOs over the next 20 years. 2) On industrial practice, the subsequent industrial adoption of LRIC over 80% of the UK distribution area has enabled DNOs to promote the efficient use of the existing infrastructure. In addition, LRIC's adoption in the UK has also triggered a wide review of transmission and distribution pricing in other countries including Brazil, Ireland, India and China. It also led to the establishment of the IEEE International Working Group on Network Charging, chaired by Li (Bath). Many of LRIC's key researchers have subsequently taken roles in network planning and pricing in the UK and internationally.
First Year Of Impact 2007
Sector Energy
Impact Types Societal

 
Description A response to Ofgem's Call for Evidence for 'Future Supply Market Arrangements'
Geographic Reach National 
Policy Influence Type Implementation circular/rapid advice/letter to e.g. Ministry of Health
 
Description Committee Member of Future Charging Forum
Geographic Reach National 
Policy Influence Type Implementation circular/rapid advice/letter to e.g. Ministry of Health
 
Description Network Charges
Geographic Reach National 
Policy Influence Type Implementation circular/rapid advice/letter to e.g. Ministry of Health
Impact Research at the University of Bath has developed a new network charging methodology, known as Long Run Incremental Cost (LRIC) pricing for electricity distribution systems. The methodology enables the calculation of location-specific annual network charges for electricity generators and suppliers, replacing the flat-rate charging approach used by the industry over the last 25 years. Bath's work on LRIC has led to major impact in two areas. 1) On government policy, in 2008 the UK regulator Ofgem required Distribution Network Operators (DNOs) to adopt LRIC as an industry standard, using the evidence provided by Bath that LRIC's uptake could lead to ~£200M efficiency savings for DNOs over the next 20 years. 2) On industrial practice, the subsequent industrial adoption of LRIC over 80% of the UK distribution area has enabled DNOs to promote the efficient use of the existing infrastructure. In addition, LRIC's adoption in the UK has also triggered a wide review of transmission and distribution pricing in other countries including Brazil, Ireland, India and China. It also led to the establishment of the IEEE International Working Group on Network Charging, chaired by Li (Bath). Many of LRIC's key researchers have subsequently taken roles in network planning and pricing in the UK and internationally.
URL https://www.ofgem.gov.uk/ofgem-publications/44256/decision-document-1-october-2008.pdf
 
Description EPSRC
Amount £250,000 (GBP)
Funding ID EP/E04011X/1 
Organisation Engineering and Physical Sciences Research Council (EPSRC) 
Sector Public
Country United Kingdom
Start  
 
Description EPSRC
Amount £75,000 (GBP)
Funding ID EP/H500103/1 
Organisation Engineering and Physical Sciences Research Council (EPSRC) 
Sector Public
Country United Kingdom
Start  
 
Description EPSRC
Amount £70,000 (GBP)
Funding ID EP/E003583/1 
Organisation Engineering and Physical Sciences Research Council (EPSRC) 
Sector Public
Country United Kingdom
Start  
 
Description EPSRC
Amount £75,000 (GBP)
Funding ID EP/H500103/1 
Organisation Engineering and Physical Sciences Research Council (EPSRC) 
Sector Public
Country United Kingdom
Start  
 
Description EPSRC
Amount £70,000 (GBP)
Funding ID EP/E003583/1 
Organisation Engineering and Physical Sciences Research Council (EPSRC) 
Sector Public
Country United Kingdom
Start  
 
Description EPSRC
Amount £250,000 (GBP)
Funding ID EP/E04011X/1 
Organisation Engineering and Physical Sciences Research Council (EPSRC) 
Sector Public
Country United Kingdom
Start  
 
Description Peer-to-Peer Energy Trading and Sharing - 3M (Multi-times, Multi-scales, Multi-qualities)
Amount £1,000,000 (GBP)
Funding ID EP/N03466X/1 
Organisation Engineering and Physical Sciences Research Council (EPSRC) 
Sector Public
Country United Kingdom
Start 06/2016 
End 05/2019
 
Description Royal Academy of Engineering
Amount £5,921 (GBP)
Funding ID 10508/312 Distinguished Fellowship 
Organisation Medical Research Council (MRC) 
Sector Public
Country United Kingdom
Start  
 
Description Western Power Distribution
Amount £250,000 (GBP)
Funding ID 123434 
Organisation Western Power Distribution 
Sector Private
Country United Kingdom
Start  
 
Description Western Power Distribution
Amount £897,122 (GBP)
Funding ID 6351 
Organisation Western Power Distribution 
Sector Private
Country United Kingdom
Start  
 
Description Western Power Distribution
Amount £897,122 (GBP)
Funding ID 6351 
Organisation Western Power Distribution 
Sector Private
Country United Kingdom
Start  
 
Description Western Power Distribution
Amount £100,000 (GBP)
Funding ID 6501 
Organisation Western Power Distribution 
Sector Private
Country United Kingdom
Start  
 
Description Western Power Distribution
Amount £50,000 (GBP)
Funding ID EP/H500103/1 
Organisation Engineering and Physical Sciences Research Council (EPSRC) 
Sector Public
Country United Kingdom
Start  
 
Description Western Power Distribution
Amount £50,000 (GBP)
Funding ID EP/H500103/1 
Organisation Engineering and Physical Sciences Research Council (EPSRC) 
Sector Public
Country United Kingdom
Start  
 
Description Western Power Distribution
Amount £250,000 (GBP)
Funding ID 123434 
Organisation Western Power Distribution 
Sector Private
Country United Kingdom
Start  
 
Description Western Power Distribution
Amount £100,000 (GBP)
Funding ID 6501 
Organisation Western Power Distribution 
Sector Private
Country United Kingdom
Start  
 
Description DC Equipment Donation from Western Power Distribution to the University of Bath 
Organisation Western Power Distribution
Country United Kingdom 
Sector Private 
PI Contribution University of Bath developed a number of innovations for Western Power Distribution's smart grid demonstration project - Solar Bristol. This includes: i) local dc grid design, ii) smart tariffs, iii) local energy management systems. The demonstration was to trial if and how to use consumer resources to allow high density PV generation to be connected to the existing system whilst support grid constraints. These innovations have been deconstruction have been implemented over 26 homes, 4 schools and data centre, involving each premise PV panels, energy storage and integrated energy management systems.
Collaborator Contribution Western Power Distribution (WPD) has provided in-depth practical knowledge concerning their low voltage networks, challenges from integration renewables and data sets concerning customers and networks. Upon the completion of Solar Bristol project, WPD has donated the demonstration equipment to the University of Bath in December 2016 for education and research purposes. They provide continued support to Bath research and teaching in community energy with the view to develop the University of Bath capability in research, development and testing.
Impact The DC laboratory provides an in-house facility for teaching and research from 2017. There are 2 research assistants and 2 undergraduates using the facilities for their research, this is expected to grow very substantially as we develop further the laboratory capability for future undergraduate teaching and postgraduate research.
Start Year 2016
 
Description Network Charges for Southwest and South Wales Electrical Systems 
Organisation Western Power Distribution
Country United Kingdom 
Sector Private 
PI Contribution 1. Fundamental science in techno-economic principles and new set of mathematical equations that underpins cost-reflective methodologies for charging network users to use the infrastructure network to transport electricity from points of generation to points of consumption 2. Scaling the basic methodologies from 200 busbars to 2000 busbars 3. Extending the methodologies to consider year-round scenarios 4. Enhancing the methodologies to consider the security of supply 5. Improving the methodologies to consider differing load growth rates 6. Improving the methodologies to consider differing load reliability
Collaborator Contribution 1. Providing guidance on research problems and all necessary research data 2. Assessing research methodologies, outcomes and potential impacts 3. Ad hoc support on all network related issues on phone and emails 4. Supporting the university to recruit undergraduate students to power engineering 5. Supporting the university to review our undergraduate teaching programmes 6. Exposing the University with new challenges in smart grids 7. Promoting Bath's research and reputation
Impact The key outcomes are 55 publications, 1 software license, which has led to major industrial consultation, Ofgem decisions that require the industry to move to Bath charging methodology, and adoption of Bath charging methodology by Western Power Distribution in 2007 and 80% adoption by the UK distribution network operators by 2011. This collaboration also lead to 1 EPSRC Advanced fellowship, 1 Royal Society Wolfson Merit Fellowship, 2 further Smart Grid demonstration projects with Western Power Distribution - Low Voltage Network Templates and Solar Bristol. This partnership is instrumental to 3 EPSRC consortia: i) Integrated Operation and Planning for Smart Electric Distribution Networks (OPEN); ii) High Energy And Power Density (HEAPD) Solutions to Large Energy Deficits, iii) Economics and Power System Planning for Smart Electric Mobility. A large number of researchers from the WPD and related EPSRC projects have taken up key positions in the power industry and academic communities in the UK, China, India, and Botswana.
Start Year 2006
 
Description The Future Structure of Distribution Systems 
Organisation Northern Powergrid
Country United Kingdom 
Sector Private 
PI Contribution Develop quantitative evidence back up by laboratory demonstration for introducing different markets to the distribution system, inform how the industry should move from the present passive industry structure that largely address the problem through investment to an active structure with substantially increased operating efficiency.
Collaborator Contribution Provide practical guidance on the key issues, keep us updated with concurrent industry development, such as industry-led Open Network and Future Power System Architecture. They will critically review our development, and identify early opportunities for achieving major impacts.
Impact "System Architecture for Customer-led Distribution System", abstract accepted by European Electricity Market conference, 2018. "Assessment of Relative Efficiency of Differing Energy Markets for Community Energy", abstract accepted by CIRED 2018.
Start Year 2017
 
Title Home Area Energy Management System Considering Uncertainties 
Description This is the first software that can deal with natural volatilities existing in consumer homes, many conversion efficiencies cross subsystems, such as DC/DC conversion, DC/AC conversation. This is achieved by substantially simplifying the management problem by converting all efficiency issues into the impact to the main's supply. 
Type Of Technology Software 
Year Produced 2015 
Impact The software has been used by Western Power Distribution on its Smart Grid Demonstration Project - Solar Bristol, managing energy flows. 
 
Title Network Charging Software 
Description The software combines technical modelling of power system and economic appraisal in the Excel platform, able to quantify the long-term network investment cost from connecting a generator or demand at each node in the system. Using the traditional approach, the process is an iterative method between technical modelling and economic appraisal and requires operates to transfer data from modelling to economic analyses. Not only it takes nearly 100 times of Bath platform, it is prone to human errors. The software development is supported by the University of Bath IAA fund and WPD's cash support. 
Type Of Technology Software 
Year Produced 2007 
Impact The software has been validated with local utility, Western Power Distribution, with their power system engineers and charging manager, showed confirming results and with substantially reduced time (from 1 months effort down to 20 minutes). UK Power Network and Northern Powergrid expressed strong interests to adopt the software. This has now on pause as the charging methodology is on major reform and more recently, the charging reform on the distribution system is undergoing further reform to be consistent with that of the transmission system. The industry's view is once this is completed, then it would be a good time to consider upgrading the software to take into account of the new charging standards.