Gunnar Boye Olesen, Copenhagen Environment and Energy Office.

Investments in the energy sector are some of the largest and most long-term investments in the industrialized world. Energy investments are often larger than the total industrial investments in a country, and they have great impact on development of society and environmental pollution. Decisions in the energy sector determine the structure in the far future; e.g. we have to live with power plants for more than 25 years and gas mains for at least 50 years.

Cogeneration in Danish Energy Planning Ole Elmose

The story about how and why cogeneration is part of the Danish energy system, is a good example of how many factors influence the energy planning.

The starting point was some political decisions made in 1978. At that time the Danish Government was a coalition between the Social Demcratic Patty and the Liberal Party, each party with its own special energy political interests. The result was that natural gas should be promoted as desired by the social democrats. But only for heat supply, as the liberals were promised to get nuclear energy for power supply in return. The expected profit from the latter should cover the expected deficit in the natural gas project.

This partition of the energy supply system got into trouble, because of the persistent resistance against nuclear power,; which the Parliament took the consequences of in March 1985: nuclear power was withdrawn from official Danish energy planning.

At tbe same time it became increasingly clear that it would have adverse resource and environmental effects to continue covering the: increasing electricity consumption by centralized (coal-fired) power plants, :as the surplus heat :could not be utilized. The typical annual efficiency of a centralized power plant is about $5% ex plant, add to this a significant:loss in:the grid. This is one of the reasons why the government and the social democrats; signed an agreement in June 1986, stating that there should be established 450 MW decentralized cogeneration in Denmark. Decentralized heat and power (cogeneration) plants have a typical efficiency of 90%. As far as cogeneration is based on natural gas or biomass,::it lead): to a better utilization of the resources, which at the same time has big environmnental infuence.

This development towards decentralization of the electricity supply teas later been followed by new energy political agreements, which show a future energy supply based on cogeneration using natural 8a' and biomass However the adverse effects of the political decision from 1978 appear, as a great part of the heat market is lost for decentralized cogeneration today, because of the individual natural gas supply. Now it appears to be difficult to find enough areas with high enough heat demand to use biomass for cogeneration.

It is important that many groups participate in energy planning, so it is based on the widest range of experience, and that most of us in this field take part in forming our common future.

This section describes some important elements in energy planning. There are of course differences between energy planning at municipal or community level, and national planning. A part of the described planning procedure is the easiest to carry out at national level, but with a good will and a little creativity nearly everything may be implemented locally.

Objectives

During the last years security of supply, cheapest possible energy supply, and as little environmental pollution as possible have been in focus as the main goals of energy planning. Among other important objectives can be mentioned: furthering employment, and decreasing import. Some energy planners have other goals, e.g. securing the cheapest possible energy supply to industry, protection of capital interests of specific energy companies, or protection of specific markets for energy and energy technology.

Lately the abundant energy supply has caused that security of supply has receded into the background in Western Europe. The main conflicts are now between the desire for cheap energy, environmental considerations, and the interests of the energy utilities. A good energy plan can provide cheaper and at the same time more environmentally compatible energy supply than the present. But all parts of the planning process need political choices, non-political planning does not exist.

The objective of energy planning should not be to provide energy, but energy services. We do not need electricity or gas. We need light, heat in our houses, heat for industrial processes, and so on. This difference is important, as it is often cheaper and less environmentally harmful to increase energy efficiency at demand side (insulate houses, control industrial processes better, etc.), than to invest in the equivalent energy production.

Physical Value of Energy

When energy systems are planned, it is important to keep in mind that different forms of energy have different values. The more other states a form of energy can be converted into without loss, the higher value it has. Electricity and kinetic energy have the highest value, next come gas, oil, coal, biomass, and other fuels, and at the bottom heat. The higher is the temperature of heat, the higher is its value. Wind and hydro power equal kinetic energy, and solar energy equals heat at a very high temperature.

In practice this means that if gas, coal, or biomass are converted into electricity, there will be a good 50% loss, which becomes heat. This heat can be used for residential heating or in industry. Often industrial processes have a surplus of heat at a lower temperature than needed in the process. This heat can be used for residential heating. An essential element in energy planning is to make use of this connection between the different energy forms.

It also influences the energy planning how easy the different types of energy are to transport and store.

Traditional Energy Planning

Traditional Danish energy planning is based on previous development in energy consumption, e.g. 2% or 5% annual growth. For energy sources distributed by grid: electricity, gas, and heat; a state company or another monopoly is made responsible for extension of the systems corresponding to the predicted growth. The company will do this in the way that at first looks most profitable for its administration. Usually they will establish as big and centralized units as possible, and utilize the energy source the company normally uses.

As some older energy planners from traditional energy companies still follow this pattern, traditional energy planning still emerges every now and then. Traditional energy planning makes it hard to utilize saving possibilities. Usually it causes expensive and excessive construction, and it excludes energy sources that the energy company does not manage. All in all it leads to a more expensive and more polluting energy supply system than modern energy planning does.

Modern Energy Planning

Modern energy planning includes:

- the expected development in energy service consumption

- demand-side technologies and their development

- energy resources

- supply technologies and their development, including combined systems, e.g. cogeneration

- drawing up goals of the planning

- an action plan to reach the goals

- evaluation of the plan's impact on environment, economy, etc.

The planning must have a time horizon that at least covers the life span of the energy installations, which means about 25 years. It is an advantage to work with alternative scenarios to compare the effects of different possible developments.

Energy Service Consumption

The cornerstone is an estimation of the existing energy service level, which is based on the knowledge of residential, commercial and industrial space, industrial production, and so on. From this is made one or more forecasts of the development during the coming decades. The forecasts shall be based on expected development, and the human needs that have to be fulfilled. They should not transfer political desire of economical growth directly to growth in energy services.

Nowadays it is cheaper to expand energy systems later on, than to construct large plants at the beginning, therefore it is important not to overestimate the future energy service level.

Demand-side Technology

Energy consuming technologies transform energy into demanded energy services. There are big differences between how efficient this is done, and there are huge possibilities to improve efficiency. There are many options for influencing the efficiency:

- efficiency standards, where demand-side technologies of too low standard are prohibited. It can be standards for apparatus and vehicles, building codes for new constructions and renovation, etc.

- energy labelling, so the consumers can see exactly how energy consuming/efficient the appliances are

- general education about the needs for, and possibilities of saving energy

- subsidies for implementation of energy saving technologies

- grants for development of energy saving technologies

Energy planning must be based on evaluation of the existing demand-side technology efficiency, evaluation of the expected market development without planning, and evaluation of the expenses and savings of different actions that influence demand-side efficiency. These evaluations create a survey of options to influence the energy consumption by energy planning, without affecting the energy service level.

Energy Resources

The energy resources in and near the planning area must be estimated. In addition to an estimation of the total potential, it must be estimated which reasonable limits exist for utilization. For example it is reasonable to avoid wind turbines in protected areas, like it is reasonable to avoid uranium mining, mining of low-quality coal, and mining and oil extraction in environmentally vulnerable areas in general.

Together with the evaluation of local resources, a projection of price development for imported energy sources must be made.

Supply Technology

The technologies to utilize different energy sources must be evaluated. This both counts for the existing technologies and their distribution, as well as possible improvements, new technologies, and likely development without planning. Supply technologies must utilize the resources as efficient as possible; e.g. heat from power plants and industry must be used for district heating, energy must be transported with as lime loss as possible, and as little as possible.

With supply technology always goes the question, which scale to choose. Pure technical the question can be asked: what is the most effective and cheapest, centralized energy supply with long transmission lines to the consumers or decentralized supply with more local supply units? For a long time the development has headed toward more centralized plants, but during the last decade both economy and efficiency have drastically improved for the smaller units compared to the centralized solutions. In that way the technical arguments for centralized solutions still get less.

Centralized vs. decentralized solutions is not only a question of technology. There is a good part of power concentrated around centralized energy supply systems. Therefore the energy utilities may be interested in centralized solutions, to gain or keep power over the energy systems.

An essential question concerning the energy supply technologies is, how they are owned: public owned, owned by consumers, or commercial. All 3 types can be centrally or decentrally organized ownerships. It is essential for an energy plan that the owners are interested in following the plan, and that they can not hinder parts of the plan through their influence.

There are many ways that the planning can influence owners of energy supply units to follow the desired direction: building licences and other forms of sanctions, competing partnership, information, taxes and subsidies, subsidies for research and development programmes for certain technologies, etc.

Action Plan

Based on the evaluation of development in consumption, and supply options, one or more action plan proposals are made, which meet the aim. As basis and standard of reference the expected development in case of no planning is described (base scenario - business as usual).

Often the plan is made in several steps, where the plan is evaluated on aim and revised for each step. It is then possible to optimize the plan step by step, e.g. aiming at the cheapest energy supply, or achieving certain environmental goals.

An action plan must include a survey of wanted development, and which control mechanisms are needed to achieve it. Often there will also be a physical plan, from which it appears which energy forms are needed in which areas.

Consequence Assessment

The effects on environment, economy, employment, etc., must be calculated to assess the action plans. Economic effects ought to be calculated in total as socio-economic effects, thus including environmental costs and other external costs. Furthermore economic consequences must be calculated for different consumers, energy utilities, state, municipality, and balance of payments. A socio-economically and environmentally reasonable plan may be a strain for a group of low-income consumers. In this case it is better to carry out the plan and compensate the consumers, than to continue to have an expensive and polluting energy system. Consumers compensation, e.g. partly repayment of heating bill, can in itself be formulated in a way that stimulates energy conservation and use of renewable energy.

Integrated Resource Planning

In USA some states have introduced an efficient, modern planning method, primarily in the electricity sector. It is integrated resource planning (IRP), also called least cost planning (LCP).

The method is to set up all possibilities for supply, and for control and rationalization of consumption (demand-side management, DSM), and then choose the socio-economically cheapest solutions. In USA the system works in a system with private power utilities having monopoly in certain areas. On the other hand the utilities are controlled by Public Utility Commissions (PUC).

The method has already led to considerable savings in e.g. California, and a study forecasts that it will reduce USA's electricity consumption 20% by the year 2010.

Integrated resource planning is based on three fundamental principles:

- utilities have to make total investigations frequently, of all options to cover the consumers' demand for energy services

- reduction of the energy demand by increasing energy efficiency is an important economical alternative to electricity production

- all advantages and disadvantages according to supply and conservation options must be estimated, to find the combination which is best for all the involved parties: utility, consumers and society.

There are 6 critical elements involved to succeed with integrated resource planning:

1. There must be a controlling authority, which has strength and will to introduce IRP, and guarantee fulfilment of the plans. It must ensure public participation in the utilities planning. The authority has three main tasks: to make sure the utilities make the plans, to set guidelines for and evaluate the plans, and to establish controlling mechanisms which secure that the utilities fulfil the plans.

2. The next critical issue is the IRPs themselves. Normally they consist of at least: an electricity demand forecast, a survey of possible increase in efficiency to reduce future demand, an examination of possible import from other utilities, selection of an optimal combination of supply and efficiency measures, and an action plan on how to reach the optimal system. It is the utilities who make the plans within the conditions given by authorities.

3. To enable the utilities to find the optimal combination of supply and efficiency options, it is needed to compare these very different options. A third critical element is therefore that there must be clearly defined directives for comparison of savings and costs connected to supply and increasing efficiency. Usually efficiency costs are calculated as costs related to marketing, supply, and installation of the energy saving device. The savings are calculated as costs saved by the utilities when they distribute less electricity. Here must be included both short-term savings like saved fuel, and long-term savings like saved investments in new power plants.

4. The fourth critical element is employ of competition to select, evaluate, and use resources from independent companies. Invitations for tenders enable the utilities to let the market forces act, and choose the cheapest supplier of power or efficiency. The invitations were originally reserved for independent power production based on renewable energy and cogeneration. Now the method also includes traditional power production and energy savings.

5. The fifth critical element is control of the power sector, to guarantee the utilities profit from investing in efficiency instead of new power plants. The utilities may be allowed to profit from investing in efficiency according to the yield they get by supplying, or they may be allowed to get a higher rate of profit. This is practically done by letting the power utilities incorporate expenses and profit relating to energy efficiency measures in the electricity price. This gives a slightly higher electricity price, but will in total profit the consumers.

6. Environmental costs must be included in the calculations. It is difficult to price environment, but the only price that for sure is wrong is 0. Therefore it is better to set a price on uncertain background, than setting no price. A recent estimation from USA puts environmental costs for power produced at coal-fired power plants with desulphurification at 5 cents/kWh, and nuclear power at 3 cents/kWh.

Savings due to integrated resource planning are largest in an electricity system without overcapacity. In this case there is a direct choice between savings and construction of new power plants. The method also leads to savings in systems with overcapacity, compared to traditional energy planning.

The Role of Popular Organizations

In some states in the USA, independent organizations have the possibility to take part in the integrated resource planning. Part of this work is payed by the utility. This agreement is made to give the consumers an independent assessment; it is after all the consumers who via the electricity bills pay for the utilities planning.

In Denmark it has not been possible for the grassroots organizations to get the same directly influence on the power utilities planning. On the other hand popular environment and energy offices have succeeded in getting an officially recognized role in implementing the national energy plan. The energy offices manage dissemination of information targeted at consumers and private initiators of renewable energy. Activation of these groups is a condition of changing to renewable energy in a free market economy.

Literature

1. Energy Action Plan 2000. The Danish Energy Agency, Copenhagen 1990.

2. Handbog i lokal energiplanlogning (Handbook in local Energy Planning), OVE's forlag, Copenhagen 1986.

3. Energihandlingsplan 90 (Energy Action Plan 90). Frede Hvelplund, Hans Bjerregaard and Karl Emil Seerup, AUC's forlag, Aalborg 1989.

4. Alternativ E;nergiplan 83 (Alternative Energy Plan 83). Niels 1. Meyer, Frede Hvelplund et.al. 1983.

5. Integrated Resource Planning in E;urope, Association for the Conservation of Energy, London 1992.