Lecture 1 – Introduction & Energy Foundations

Question 1

What are the drivers for Transition of the Electricity Sector?

Answer 1

• Resource Scarcity
• Climate change
• Society
• Technological change

Question 2

What are some reasons for drivers for Transition of the Electricity Sector under resource scarcity?

Answer 2

▪ Availability of resources
▪ Competition for resources
▪ Dependence on imports

Question 3

What are some reasons for drivers for Transition of the Electricity Sector under climate change?

Answer 3

▪CO2 emissions to be reduced
▪ Environmental law
▪ Efficient consumption

Question 4

What are some reasons for drivers for Transition of the Electricity Sector under society?

Answer 4

▪ People are (more or less) informed
▪ Impact through elections and popular votes
▪ Demonstrations
▪ Acceptance important

Question 5

What are some reasons for drivers for Transition of the Electricity Sector under technological change?

Answer 5

▪ New technology is developed
▪ Innovations in power-generation
▪ Increase of demand for electricity, e.g. eVehicles

Question 6

What are the 4Ds of Energy Transition and Energy System Transformation?

Answer 6

• Democratization
• Decentralization
• Digitalization
• Decarbonization

Question 7

What are 4 key physical properties make electricity a unique commodity?

Answer 7

• Electricity can hardly be stored
• The path followed by electricity is difficult to follow
• Disturbances are quickly transmitted and hard to isolate
• Significant voltage or frequency fluctuations are not acceptable

Question 8

What are the parts of the Electricity value chain?

Answer 8

1. Generation
2. Trading (exchange and OTC ie. Over the counter trading currently existing)
3. Transmission
4. Distribution (Trading on consumer level currently not existing)
5. Consumer and services

Question 9

Which part/s of the Electricity value chain are on the grid side?

Answer 9

1. Generation
2. Transmission
3. Distribution

Question 10

Which part/s of the Electricity value chain are on the market side?

Answer 10

2. Trading

Question 11

Which part/s of the Electricity value chain are on the demand side?

Answer 11

4. Distribution

Question 12

What are the 2 main concepts of portfolio theory?

Answer 12

➢ investor goal is to maximize the return for any level of risk
➢ Reduction of risk by creating a diversified portfolio of assets

Question 13

Why do electricity producers use financial methods in energy economics?

Answer 13

➢Liberalization of electricity market means: more competition (on production and retail market), more uncertainty sources
➢Market risks – regarding future electricity demand as well as supply, development of electricity and fuel prices
➢Regulatory risks – environmental and energy regulations, market design
➢Changes in power generation mix – increase of renewable energy technologies in power generation

Question 14

Why do electricity producers apply portfolio theory to power generation assets?

Answer 14

➢ The optimal diversification of different power generation technologies from an economic as well as a resource availability point of view is an important issue for energy planners
➢ helps by reducing the number of alternatives to be considered
➢ Asymmetrical risk measures, such as semi-variance or semi-mean absolute deviation, reflects investor’s real losses and simplifies the calculation
➢ Regulatory change is an important element of uncertainty that has to be taken into account in the investment decision-making process

Question 15

Why is the smart grid more complex?

Answer 15

• Different distributed resource (DR) equipment
• Sudden line drops when loosing DR
• Safety issues with grid switching and islanding
• Interoperability between different protocols

Question 16

What are the properties of a traditional power grid?

Answer 16

▪ Centralized generation
▪ Hierarchical topology following “top-down philosophy”

Question 17

What are the properties of the future power grid?

Answer 17

▪ Decentralized generation
▪ Cellular “bottom-up” approach

Question 18

What is the voltage level for transmission?

Answer 18

Extra-high-voltage sector

Question 19

What are the voltages for distribution?

Answer 19

• High voltage sector (60-220 kV, typically 110 kV)
• Medium voltage sector (6-60 kV, typically 10/ 20 kV)
• Low voltage sector (400/ 230 V)

Question 20

What is the technical problem with low voltage grids?

Answer 20

Coordination of renewable generation devices ➔Technical problem:
− intermittent character of supply
− Supply must equal demand
− Supply independent from demand

Question 21

What is a technical solution for the problem with low voltage grids?

Answer 21

▪ Decentral storage:
- Batteries at home
- Batteries at the generation device
- Thermal storage (cold storage house, fridge)

Question 22

What is a economic solution for the problem with low voltage grids?

Answer 22

▪ Flexible Demand:
- Price elasticity
- Customers‘ behavior
- Automated control
- Smart buildings

Question 23

What is the smart grid concept?

Answer 23

The smart grid concept (intelligent electricity supply systems) includes linking and controlling intelligent generation devices, storage, appliances and network equipment by means of information and communication technology. The objective is a transparent and cost- efficient as well as secure and robust system operation and sustainable and ecological energy supply.

Question 24

What differentiated smart grid from super grid?

Answer 24

▪ Low voltage grid
▪ ICT to link and control devices
▪ Decentral generation
▪ Demand flexibility

Question 25

What differentiated super grid from smart grid?

Answer 25

▪ Wide area transmission network
▪ High-voltage direct current
▪ Large generation sites

Question 26

What is an essential component of a smart grid?

Answer 26

Smart meter is an essential component of a smart grid

Question 27

How does a traditional meter compare to a smart meter?

Answer 27

• Electricity is “double invisible”
• Limited load information
• No price information

Question 28

How does a smart meter compare to a traditional meter?

Answer 28

• Price signal enable customer response
• Required for improved consumption control
• Better understanding can result in behavioral change

Question 29

Discuss the Economic viability of energy investments

Answer 29

➢ Capital budgeting and profitability accounting are necessary for assessing the economic viability of energy investments
➢ The methodology for energy investments does not differ fundamentally from other applications, but there exist some unique characteristics of investment in energy technologies, e.g. long planning, construction, and operation periods that make the result of an investment decision strongly dependent on the discounting of future cash flows
➢ Financial appraisal techniques require a forecast of future flows of costs and revenues over the lifetime of the investment
➢ In this context, only the costs and revenues directly associated with the considered investments should be taken into account

Question 30

Describe the generation technology for super grid?

Answer 30

Large-scalegeneration:
= Conventional power plants (nuclear, coal)
= Renewables (PV, solar thermal, wind)

Question 31

Describe the generation technology for smart grid?

Answer 31

Decentralgeneration:
= PV and Wind turbines
= (small) CHP plants

Question 32

How does the grid structure look for super grid?

Answer 32

≡ High voltage transmission system
≡ Wide area transmission network
≡ Centralized supply model
≡ Highcross-system transmission capacity by HVAC or HVDC
≡ Transmission of electricity from generation centers to consumption centers

Question 33

How does the grid structure look for smart grid?

Answer 33

≡ Low voltage distribution system
≡ Decentralized supply model
≡ Bi-directional low and medium-voltage electric network
≡ Devices and components linked by ICT, controlling distributed generation and loads
≡ Smart Meter necessary

Question 34

How does the asset ownership look like for super grid?

Answer 34

≡ Generation units mostly owned by big international companies or investors
≡ Grids owned by large grid operating company (TSO)
≡ Existing large-scale institutions with high investment capacities

Question 35

How does the asset ownership look like for smart grid?

Answer 35

≡ Small generation unit owned by private household, enterprises and communities
≡ Grid owned network provider (DSO)

Question 36

How does the organisation of a super grid look like?

Answer 36

≡ Centralized and top-down approach
≡ Mainly existing frameworks, regulations and markets

Question 37

How does the organisation of a smart grid look like?

Answer 37

≡ Decentralized and bottom-up approach
≡ A digitally enabled grid which acts intelligent with the gathered information of the supplier and the consumer to optimize production and consumption of energy by transparency and direct feedback

Question 38

Strengths of super grid?

Answer 38

≡ Less power reserve necessary
≡ Security of supply
≡ Cheaper electricity generation
≡ Economies of scale in generation and transmission
≡ Top down electricity distribution is maintained

Question 39

Strengths of smart grid?

Answer 39

≡ Optimizes the energy consumption (peak leveling)
≡ Many small independent power suppliers (private households/ municipalities) → increased competition
≡ Short transmission distance → less losses
≡ More generation flexibility (if one power plant shuts down)

Question 40

Weaknesses of super grid?

Answer 40

≡ Extension of transmission network necessary → expensive, less acceptance
≡ Electricity supply of a country may depend on electricity generation of foreign countries
≡ Lack of consumer’s sense of accountability for social and environmental consequences resulting from own energy demand
≡ Interoperability of different systems → Requires high coordination and organization effort

Question 41

Weaknesses of smart grid?

Answer 41

≡ Increased level of complexity
≡ More generation and storage capacity necessary → expensive
≡ Current funding of Super Grid extension reduces financial benefits of Smart Grid
≡ Restructuring of the distribution grid necessary → bi-directional power flow instead of top-down power flow
≡ Privacy concerns
≡ Higher volatility of electricity generation

Question 42

Risks with super grid?

Answer 42

≡ Large-scale blackouts
≡ Local resistance against planned transmission lines
≡ Political threats

Question 43

Risks with smart grid?

Answer 43

≡ Privacy concerns reduces acceptability of smart meter roll-out
≡ Hacker and cyber attacks
≡ Distributional justice: increasing electricity prices for consumers who cannot afford distributed energy resources (DER)