Wayne Davies, Energy Markets Programme Manager, Enel X UK
The importance of flexibility in enabling the decarbonisation of our energy system is well understood. Grid operators value sources of flexibility because they can call on it to help balance supply and demand. Furthermore, flexible capacity is the key to deploying more renewable energy; it gives grid operators more control over the energy system when the output from distributed renewable assets is determined by the variability of the wind and sun.
The role that CHP – or cogeneration plant – can play in delivering flexibility, and the benefits available for that flexibility, is perhaps less familiar to energy managers.
Does your CHP have spare capacity?
Research carried out by Enel X found that four out of every five CHP assets in the UK were commissioned three or more years ago, and one in three were specified to meet the site’s past energy needs.
Energy managers who optimised their CHP to meet the site’s past needs may now find themselves with power capacity to spare, especially where energy efficiency measures have reduced demand.
This spare capacity – or flexibility – can be traded in a number of ‘flexibility’ markets, which can be a source of revenue for the organisation.
A challenge for many energy managers, especially those operating small to medium-sized CHP assets, typically up to 10MW, is that they may not have a specialist resource responsible for optimising the CHP or the in-house capabilities to trade this flexibility.
By automating the CHP’s operating schedule, organisations can maximise the return on their investment by fully utilising all of the capabilities of the assets. This approach enables new streams of revenue from trading excess capacity; benefits previously only available to larger teams.
Implementing dynamic operating schedules
CHP units that haven’t been optimised to serve variable site loads typically operate at sub-optimal performance and therefore deliver worse economic returns. Generating heat and electricity that will be surplus to requirements simply wastes energy, reduces site efficiency and is bad for the environment.
By retrofitting intelligent software controls to automate management of a CHP plant, energy managers can both improve the efficiency of their CHP units as well as trading surplus capacity.
Compared with deploying a static operating schedule, using software to control the CHP unit dynamically minimises energy waste and maximises the value of flexible capacity (Figure1).
Monetising flexible capacity
Today’s energy markets offer multiple value opportunities to trade flexible capacity. These include trading in the capacity market, ancillary market, spot energy markets and balancing mechanism.
As grid operators continue to deploy more renewable energy, they will also need more flexible capacity in order to balance supply and demand. According to Aurora Energy Research, revenue for flexible technologies is forecast to grow by 13% CAGR to create a £2.3 billion market by 2030.
The GB electricity system has seen a number of price spikes over recent months in response to low levels of wind generation. In September, for example, prices peaked at over £500/MWh due to a combination of low levels of wind generation and high demand. While these events are relatively uncommon, they do demonstrate the need for grid operators to maintain sufficient capacity to achieve a safe operating margin. Such events are an opportunity for organisations to realise the value of their flexibility capacity.
Smart running schedules
Using smart automated controls can maximise the flexible capacity of CHP assets while meeting site needs in the most economical way. Such an approach further optimises asset operation to maximise cost savings and creates additional revenues from energy markets.
Deploying dynamic management can increase control and monitoring over the whole CHP system. This enhanced level of visibility provides clarity over site energy costs; helps energy managers to understand and accommodate technical and contractual constraints; and minimises energy costs by reducing waste and inefficiencies.
Using software algorithms to combine knowledge of operating parameters with grid signals and market indicators, such as energy market price information, it’s possible to create the best running schedule for the CHP plant. This approach enables operators to identify when it’s best to plan maintenance to minimise revenue loss and provides insight into how to size new CHP plants to maximise profitable operation.
The algorithms can then identify opportunities to trade any flexible capacity in the most appropriate markets. CHP asset participation in the markets can also be automated. Dispatch communication can be sent to CHP assets by interfacing with SCADA or local control rooms, making it possible to realise revenue from the markets in real-time.
The path to good grid citizenship
As Britain continues on its net-zero journey, the country will require more and more distributed assets to provide much-needed flexibility to enable the grid operator to balance supply and demand.
CHP operators now have an opportunity to become ‘good grid citizens’ by making flexible capacity available to the grid. By optimising the operation of their plant and participating in grid services, energy managers can reduce waste and inefficiencies as well as generate additional revenue through market trading.