Economic Benefits
DE can reduce costs for both electricity consumers and electricity producers.
The wider application of Decentralized Energy (DE) can dramatically cut the cost of energy. Reduced cost is arguably the most important benefit that DE offers. There are two levels on which this cost saving can be assessed – the individual consumer level and on the level of national/international economies as a whole.The former can be analysed on a case-by-case basis and will depend to a great degree on local market and regulatory conditions.
Cost Reduction through DE – Project Level
Examples of DE projects that save their owners money are too numerous to list here. Part of the reason is because there are few applications where DE cannot somehow be incorporated. Possibiliites range from large scale CHP plants at major oil refineries to small wind turbines in remote villages or homes.
A prime example for DE solutions at consumer level is the Shanghai Pudong International Airport, which installed CCHP technology to power the area (a gasfired engine with a capacity of 4MW and the heat boiler producing 11 t/h of steam). Becoming operational in 2000, payback of installation costs was achieved in 2001.
Another replicable industry application can be found in the case of Tetra Pak which was looking for an environmentally friendly combined cooling and power solution. A 2.6 MWe generator was installed at Tetra Pak India Private Limited, Takwe, Pune. The solution utilises waste heat more effectively to improve power reliability and reduce operating costs. By investing into a CHP installation, Tetra Pak could double its energy efficiency levels at this particular plant.
Cost Reduction through DE – National Level
WADE has conducted a number of surveys and economic model applications to estimate possible savings from DE investment at a regional or national level. The results have so far demonstrated fairly consistenly that often substantial gains are possible for those regions that invest in DE. The results suggest that DE reduces capital investment costs for electricity, and lowers retail costs for consumers.
For example WADE analysis based on the WADE economic model concluded that the UK could save 15% of its delivered electricity costs relative to central generation (CG). Capital costs could be reduced by even more- 27% relative to CG. This assessment is based largely on an analysis of gas turbine based cogeneration in comparison to central plants using a variety of fuels. It also takes into account reduced fuel costs, transmission and distribution savings – as well as other cost items (operation & maintenance, installation costs) for which DE may be less competitive than central power. The main cost savings result from reduced T&D requirements as well as reduced need for central capacity in order to meet peak load. The analysis did not consider the hidden environmental and public health costs that can be reduced by using DE as opposed to many forms of CG.
Other countries can even achieve higher savings than the UK as WADE research has illustrated (see graph below).
DE versus CG Capital cost savings
In this analysis, DE is cheaper than CG in most countries while differences in savings across countries mainly depend on the local circumstances. DE technologies are highly flexible and adaptable to local circumstances, allowing for more efficient local electricity generation. The below table summarizes the results of previous studies modelling retail and capital cost effects resulting from increased investment in DE.
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Results of previous WADE Economic Model applications: Savings from DE compared to CG |
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|
Region |
Brazil |
China |
EU |
Germany |
Ireland |
Ontario |
UK |
USA |
World |
|
Capital cost savings |
46% |
38% |
45% |
-5% |
29% |
58% |
27% |
44% |
30% |
|
Retail cost savings |
40% |
28% |
37% |
40% |
16% |
42% |
15% |
15% |
29% |