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Market Driven Distributed Energy Storage Requirements for Load Management Applications

1014668

Effective May 4, 2007, this report has been made publicly available in accordance with Section 734.3(b)(3) and published in accordance with Section 734.7 of the U.S. Export Administration Regulations. As a result of this publication, this report is subject to only copyright protection and does not require any license agreement from EPRI. This notice supersedes the export control restrictions and any proprietary licensed material notices embedded in the document prior to publication.

Market Driven Distributed Energy Storage System Requirements for Load Management Applications 1014668

Technical Update, April 2007

EPRI Project Manager

D. Rastler

ELECTRIC POWER RESEARCH INSTITUTE

3420 Hillview Avenue, Palo Alto, California 94304-1395 ? PO Box 10412, Palo Alto, California 94303-0813 ? USA 800.313.3774 ? 650.855.2121 ? askepri@https://www.doczj.com/doc/2515715416.html, ? https://www.doczj.com/doc/2515715416.html,

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ORGANIZATION(S) THAT PREPARED THIS DOCUMENT

Electric Power Research Institute (EPRI)

Resource Dynamics Corporation

Energy and Environmental Economics, Inc.

This is an EPRI Technical Update report. A Technical Update report is intended as an informal report of continuing research, a meeting, or a topical study. It is not a final EPRI technical report.

NOTE

F or further information about EPRI, call the EPRI Customer Assistance Center at 800.313.3774 or e-mail askepri@https://www.doczj.com/doc/2515715416.html,.

Electric Power Research Institute, EPRI, and TOGETHER…SHAPING THE FUTURE OF ELECTRICITY are registered service marks of the Electric Power Research Institute, Inc.

Copyright ? 2007 Electric Power Research Institute, Inc. All rights reserved.

CITATIONS

This report was prepared by:

Electric Power Research Institute (EPRI)

3420 Hillview Avenue

Palo Alto, CA 94304

Principal Investigator

D. Rastler

Resource Dynamics Corporation

8605 Westwood Center Drive

Vienna, Virginia 22182

Principal Investigator

P. Lemar

Energy and Environmental Economics, Inc

Suite 1700

353 Sacramento Street

San Francisco, CA 94111

Principal Investigator

S. Price

This report describes research sponsored by the Electric Power Research Institute (EPRI).

This publication is a corporate document that should be cited in the literature in the following manner:

Market Driven Distributed Energy Storage System Requirements for Load Management Applications. EPRI, Palo Alto, CA: 2007. 1014668.

iii

PRODUCT DESCRIPTION

Electric energy storage systems are an enabling technology that could help meet the needs of electric utility by managing peak energy demands, helping shift the peak loads to off peak hours and improving the load factor of the electric distribution system. Applications of distributed energy storage systems (DESS) could also provide power quality and reliability benefits to customers and to the electric system. EPRI collaborated with several investor owned utilities to conduct a study to understand the technical and market requirements for distributed energy storage systems to enable customer and electric system load management.

Results

?Market potential emerges when the cost of the energy storage component in a fully integrated DESS falls below $100/kWh. Considering the total societal benefits (utility benefits plus customer benefits), the cost of the fully integrated DESS should be between ~$150/kWh to $250/kWh (or $600/kW to $1,000/kW for 4 hour storage capacity) for mass market adoption. ?The size of DESS for residential applications ranged between 1and 5 kW with 5 kWh to 30 kWh storage capacity. For the majority of commercial applications, the size ranges between

30 and 150 kW with 100 kWh to 1,500 kWh storage capacity.

?The implications of commercially viable DESS on a national basis could range from 20 GW to 150 GW if the cost of the energy storage component in a fully integrated DESS falls in the range of $ 80/kWh to $20/kWh respectively.1 Current technology, however, is a factor of 2 to 5 times this level.

?The analysis showed electric utilities are optimum early adopters and operators of DESS rather than end-use customers because: 1) the technical and performance requirements are less demanding than those required for customer adoption, and 2) these systems could be used by electric utilities to maximize the efficiency of the electric distribution system

operations and 3) the societal benefits could be more easily monetized.

Objectives: The project objectives were to:

1.Define DESS parameters suitable for various customer segments based on potential

economic values to both customers and utilities;

2.Assess the cost and benefits of DESS from both the end-user, utility system and society

perspectives and identify the most sensitive parameters;

1The total cost of any storage plant is equal to : Cost for Power Component or the balance of plant in ($/kW) + hours of discharge storage time multiplied by the cost of energy storage component in ($/kWh)

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3.Estimate the US load impacts of DESS based on extrapolation of analysis from several large

investor owned utility systems;

4.Determine DESS size requirements for residential and commercial sectors;

5.Document the findings and transfer results to industry stakeholders, vendors and researchers. EPRI Perspective

This study estimates key technical and performance parameters necessary for DESS to be competitive in commercial and residential market segments under present rate and retail price assumptions. The results, however, were derived from a limited sample of investor utility data and may not be entirely representative of the entire US market. The results may also not represent the market needs in the rural or municipal utility sectors. The analysis of the value of distributed storage can be very system and site specific. This study also did not examine the cost and value for other applications for DESS, such as with renewable power systems. Follow on research is needed to assess the market requirements for those applications with industry stakeholders. An EPRI sponsored Technical Innovation project has started this process and some preliminary results are provided in Appendix D of this report.

Approach

A technical and economic market analysis was conducted with several large investor owned utility systems to understand the cost and economic requirements for DESS. An electric utility systems’ oriented approach was used which assumed electric utilities would own and dispatch the systems. Also, an end-user oriented analysis was performed assuming end-user ownership and dispatch. In both cases a “black box” fully integrated distributed energy storage system was assumed and analyzed using present electric rates.

Keywords

Electric Energy Storage

Distributed Energy Resources

Markets Analysis

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CONTENTS

1 INTRODUCTION....................................................................................................................1-1

Objectives.............................................................................................................................1-2 Approach...............................................................................................................................1-2 Utility Business Model......................................................................................................1-3 End-User Business Model................................................................................................1-3

2 RESULTS...............................................................................................................................2-1

Utility Business Model-Utility Owned and Dispatched DESS................................................2-1 Results..................................................................................................................................2-1 Discussion.............................................................................................................................2-5 End-User Business Model-Customer Owned and Dispatched DESS...................................2-5 Results..................................................................................................................................2-5 Discussion...........................................................................................................................2-10 Cost of Energy Storage Component...................................................................................2-10 Size of DESS..................................................................................................................2-10 Cycle Life........................................................................................................................2-11 On-Peak and Off-Peak Costs.........................................................................................2-11 Drivers for Adoption........................................................................................................2-11

3 SUMMARY.............................................................................................................................3-1

A REFERENCES......................................................................................................................A-1

B DEFINITION OF TERMS......................................................................................................B-1

Energy storage model outputs.............................................................................................B-7

C END-USER ANALYSIS ASSUMPTIONS.............................................................................C-1

D SHAPING MARKET PULL FOR DISTRIBUTED ENERGY STORAGE:

APPLICATIONS, SPECIFICATIONS, AND PRIORITIES........................................................D-1

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Introduction..........................................................................................................................D-1 Imagineering the Grid of the Future.....................................................................................D-2 Prioritization of Most Important Applications........................................................................D-2 Target Specifications for Key Applications...........................................................................D-3 Innovation in Systems Integration........................................................................................D-5 Draft Technology Challenges:..............................................................................................D-6 Action Plan...........................................................................................................................D-7 Scientific..........................................................................................................................D-7 Technical.........................................................................................................................D-7 Business..........................................................................................................................D-7 Educational......................................................................................................................D-7 Commercialization...........................................................................................................D-7 Next Steps:...........................................................................................................................D-8

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LIST OF FIGURES

Figure 1-1 End-User Analysis Approach....................................................................................1-4 Figure 2-1 Residential Sector Utility Owned and Dispatched Energy Storage System.............2-2 Figure 2-2 Commercial Sector Utility Owned and Dispatched Energy Storage System............2-3 Figure 2-3 Sensitivity Analysis from Societal Net Benefit Perspective.......................................2-4 Figure 2-4 Percent Load Impact for Participating Investor Owned Utilities as a function of the Energy Storage Component Costs in $/kWh...............................................................2-6 Figure 2-5 Average DESS Size for Residential Application as a function of Energy Storage Component Costs in $/kWh..................................................................................2-8 Figure 2-6 Average Energy Storage Size for Commercial Sector Applications as a function of Energy Storage Component Costs in $ /kWh...................................................2-9 Figure 2-7 Average DESS Inverter Size in kW Estimated for Residential Sector based on End-User Economics as a Function of the Energy Storage Component Costs in

$/kWh.................................................................................................................................2-9 Figure 2-8 Average DESS Inverter Size Estimated for Commercial Building Sector based on End-User Economics as a function of Energy Storage Component Costs in

$/kWh...............................................................................................................................2-10

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LIST OF TABLES

Table 2-1 U.S. Load Impact Extrapolated from Sample Utility Load Impact Analysis................2-7 Table 3-1 Examples of current and projected battery energy storage systems.........................3-2 Table 3-2 Summary of the Results............................................................................................3-3

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1

INTRODUCTION

Low cost and reliable electricity is a critical economic growth driver in the United States. The use of distributed energy storage systems (DESS) could help meet utility2 needs in meeting demand and managing associated peaks. Systems which store electricity during off-peak hours and use it during on-peak hours to reduce the peak load demand could provide benefits to both electric utilities and end-users. Such systems could provide utilities with an option to shift load to off peak hours and increase the utilization of grid assets, thereby improving system load factor. Such applications could also provide utilities with added end-user service offerings in the form of power quality and added reliability. This could provide customer satisfaction benefits for the utilities and greater customer flexibility and choice.

DESS which utilize battery and other energy storage technologies could help utilities and their customers overcome increased costs often associated with peak demand. Although there are technologies available in the market, only a limited number of system providers exist today that can provide and deliver fully integrated storage systems at affordable prices. Fortunately, storage technologies continue to advance3 and there are technologies in the R&D pipeline which could be used in stationary distributed energy storage applications. Also, vendors and system integrators developing energy storage products may be unaware of the electric utility market electricity storage needs. See Table 3-1 in Chapter 3 for a listing of current available energy storage technologies and the references in Appendix A for a more detailed description on the status and trends of energy storage systems.

In this report the following terminology is used:

? A fully integrated DESS consists of the energy storage component and the balance of plant to enable a fully functional, dispatchable and grid interconnected unit.

?The energy storage component of an integrated system stores and releases kWhs. In this study, it refers to the battery component. It does not include balance plant equipment. ?The balance of plant equipment (BOP) includes the power conditioning system, thermal management systems and communication & controls.

?The power conditioning system (PCS) consists of the inverter and associated controls. The inverter is a solid state device which converts dc voltages into ac voltages compatible with the grid, and delivers the necessary power (kW) rating of the system. In this study the

inverter was assumed to be the dominate cost element of the BOP.

2 In this report “utility” is defined as either an electric distribution company or a vertically integrated utility. Some of the distributed benefits detailed in this report may be under estimated for fully integrated utilities that operate generation assets.

3 The growing trend in hybrid and plug-in hybrid vehicles is creating an opportunity to leverage R&D investments in advanced batteries for stationary distributed energy storage applications.

1-1

Introduction

1-2

? The total cost of a fully integrated DESS is the combination of the cost of energy storage component and BOP. A mathematic relationship of the cost is shown below.

Storage

of Hrs kW BOP kWh nt ageCompone EnergyStor kWh DESS __)/($)/($)/($+= or )/($)__()/($)/($kW BOP Storage of hrs x kWh nt ageCompone EnergyStor kW DESS += This project seeks to understand the electric utility system and end-user requirements for DESS. This report and the results will help facilitate an electric utility industry market-driven process that will engage the utility industry stakeholders with energy storage vendors and system

integrators and to help drive energy storage technology R&D and product development towards a successful commercialization pathway of value for the electric enterprise.

Objectives

The overall goals of this project are to identify specific requirements, including technical, functional and economic criteria for DESS to serve electric system and end-users needs. The project is also intended to identify and scope the costs and benefits of fully integrated DESS from different stakeholder perspectives including electric utilities and end-users resulting in societal benefits. Specific project objectives are detailed below:

1. Define DESS parameters suitable for various customer segments based on potential

economic values to both utilities and customers;

2. Assess the cost and benefits of DESS from both the utility system, end-user and resulting

society perspectives and identify the most sensitive parameters;

3. Estimate the US load impacts of DESS based on extrapolation of analysis from several large

investor owned utility systems;

4. Determine DESS size requirements for residential and commercial sectors;

5. Document the findings and transfer results to industry stakeholders, vendors, and researchers. Approach

The market requirements for a fully integrated and installed DESS were estimated using two approaches: 1) a utility business model; and 2) an end-user business model. In each approach, a life-cycle analysis was used to estimate the value of energy storage. This includes the total cost of capital, installation, operation and maintenance costs evaluated over the life of the battery system.

Introduction Utility Business Model

The economic costs and benefits for DESS were estimated from an electric utility system’s perspective in an analytic and modeling effort. EPRI contracted Energy and Environmental Economics to perform this work based on previous methodology used to assess the cost and benefits of distributed energy resources (Reference 4 in Appendix A). Details of the input assumptions and the model can be found in Appendix B. The objective was to estimate the magnitude and range and the DESS benefits, if such systems were owned and dispatched by an electric utility. Input assumptions considered energy and capacity values for each hour of the year and included: distribution capacity; transmission capacity; generation capacity and energy values. Proxies for utility values were used to estimate the value of energy storage from the electric system’s perspective4.

Sensitivity analysis of key input parameters was also performed to show the impact of key assumptions.

A life-cycle analysis was used to estimate the value of DESS. This includes the total cost of capital, installation, operation and maintenance costs evaluated over the life of the system.

It is important to note that the analysis and results presented in the next section are based on present utility rates. The impact of possible future rate changes to the results of this study were not addressed.

End-User Business Model

In the end-user analysis approach, a business model was used which assumed end-users owned and dispatched the DESS to save energy costs. A “black box” fully integrated DESS was presumed to be installed at customer locations in the service territory of several investor owned utilities. These large investor owned utilities represented about 30 % of the U.S. market and had customers that cover a wide range of geographical areas and end-user segments. Analysis of both commercial and residential market segments was performed using present rate methodologies to determine the ideal system sizes (in terms of both peak capacity and energy component) and the allowable economic installed cost from the end-user’s perspective.

Resource Dynamics Corporation’s Distributed Power Economic Rationale Selection (DISPERSE) model was used to estimate the achievable technical and economic market potential for storage systems by comparing on-site storage economics with competing grid prices. The model not only determined whether storage is more cost effective, but also which energy storage sizes appear to be the most economic to meet facility load and energy needs. The model was developed over the past seven years and has been used in a variety of distributed energy resource 4The value streams used as proxies in the energy storage model were based on the adopted values in the energy efficiency proceeding, California Public Utility Commission Rulemaking 04-04-25. The report can be downloaded at the following URL. https://www.doczj.com/doc/2515715416.html,/CPUC/E3_Avoided_Costs_Final.pdf

1-3

Introduction

1-4

(DER) peak shaving, base load, and combined heat and power (CHP) assessments for utilities, equipment manufacturers, and research organizations.

Figure 1-1 below provides an overview of the model inputs, analysis, and output in an electric energy storage analysis for end-users. .

Figure 1-1

End-User Analysis Approach

The model run begins with a database of commercial and residential sites, which are organized by region, NAICS/SIC code and size. In addition, based on the site SIC code, the model

assigned an electric load profile representative of that customer building type. The size of facility was used to “scale” up or down the magnitude of the load profile. The load profiles for the commercial sector in the DISPERSE model were derived from the Department of Energy’s

DOE-2 model. Load profiles are by building types (e.g. office building, restaurant, school) and location (e.g., Philadelphia). Each facility was assigned a building type/location, based on the SIC and geographic region. Regional residential load profiles were provided by EPRI and the participating utilities.

Using this information, combined with the baseline energy storage price and performance data, the model performed a life-cycle cost economic analysis, determining year 1 savings from using the electric storage system. The model then compared savings from storage systems with costs of purchasing from the grid (from the database of grid prices), and counted the application if it provided “bill savings” with a sufficient payback. This process was repeated tens of thousands of times, once for each group of sites with the same region/size range/SIC code, and the results were then aggregated to obtain market potential.

An iterative process was used to determine peak capacity and energy storage ratings and sizes and costs that lead to economically-viable applications for a given customer type (NAICS/SIC codes or building type). To perform this step, the model was run with different sets of

technology price and performance data (i.e. low/high cost, low/high storage capacity). Iterations

Introduction were also made holding the price and performance constant and finding what rate structure could lead to favorable economics.

For end-user’s, the DESS could be used to reduce either: peak demand (which would result in lower demand charges) or electricity consumption during on-peak hours; or they could be operated during periods of time when wholesale electricity was expensive (in a demand response role). An iterative analysis was used in determining which combinations of the three main variables (installed cost, peak capacity (power), and energy ratings of the energy storage component) made the energy storage systems competitive. Results were extrapolated to estimate a rough U.S. market size estimate. Given the number of variables, the approach was tailored to vary the more sensitive parameters such as the cost of energy storage component, while initially fixing the less sensitive parameters such as the cost of the BOP, storage life, and overall efficiency.

Cost targets for the BOP were assumed to be based on the discounted pricing of inverter/charger systems used for current photovoltaic solar system battery energy storage applications. It was also assumed that the remaining component costs for BOP and installation could be included in the base case costs presented when they reach mass production at volume of hundreds of thousands of units.

The baseline analysis focused on the inverter/BOP costing from $400/kW for smaller residential sites dropping to $200/kW for larger commercial sites. Sensitivity analysis was conducted with inverter/BOP costs double these ($800/kW dropping to $400/kW).

1-5

2

RESULTS

This section provides a summary of the analysis results. The potential economic/societal value of DESS from a utility business model perspective (utility owned and dispatched) is presented first, followed by the findings from the end-user business model (customer owned and dispatched).

Utility Business Model-Utility Owned and Dispatched DESS

Results

An analysis was performed to estimate the range of values for utility-owned and dispatched DESS based on underlying utility system costs and assumptions regarding the performance of the DESS. The lifecycle costs and benefits of energy storage applications from utility, customer and societal perspectives were evaluated to understand the potential value. Definitions of terms used for the input assumptions and model outputs is provided in Appendix B. A promising DESS would have to cost less than the lifecycle net benefits from a societal perspective, and a promising DESS utility program would make both the utility and customer better off to achieve a “win-win” outcome.

The costs, benefits and net benefits for residential and commercial applications are shown in Figures 2-1 and 2-2 using proxies for key input parameters. The base case results for the residential analysis, shown in Figure 2-1, illustrates the estimated benefits and the economic value of DESS of $ 148/kWh ($ 592/kW) for a four-hour storage system. Given assumptions about utility system costs, the DESS was economic to dispatch ~ 80 cycles per year and resulted in net utility benefits of $89/kWh including lost revenue due to time-of-use pricing differential of a residential customer. The customer value in this analysis is $ 59/kWh. Therefore, if the fully integrated DESS costs less than $148/kWh installed, it should be possible in this scenario for a utility to purchase the system and install it at a customer site in return for a customer payment (up to $59/kWh) and still have a net positive benefit. This would be a ‘win-win’ to both the customer and utility.

2-1

Results

2-2

Figure 2-1

Residential Sector Utility Owned and Dispatched Energy Storage System

Results for the commercial market segment applications are shown in Figure 2-2, using the same assumptions about the DESS, utility system costs and the dispatch of the energy storage system. However, since the rate structures for the commercial application are different (lower time of use price differential and the inclusion of a demand charge) the customer bill savings in this segment is lower ($29/kWh) and the utility net benefits is higher ($119/kWh).

Results

Figure 2-2

Commercial Sector Utility Owned and Dispatched Energy Storage System

This type of analysis is extremely sensitive to the capability of the DESS and estimates of future utility energy and capacity costs. To facilitate a better understanding of the key input parameters in this analysis, a model was utilized5 which facilitates easy changes to input assumptions and provides sensitivity analysis of key parameters (see Appendix B).

Using base case scenario of a 4 kWh per kW DESS at cost of $148/kWh or $592/kW for a 4 hr system, Figure 2-3 shows the results of the sensitivity analysis from the “social net benefit” perspective and the impact of various changes to the input parameters. In Figure 2-3, the name of the input parameter appears at the bottom of the chart along with the range of base case values of that parameters as well as values corresponding to the high and low values. The base case is also illustrated with the range of break-even storage costs in $ per kWh for each range of inputs.

Parameters are sorted in order of importance. Sensitivity to both DESS performance and drivers of utility cost are included. If a reliability value is assigned to customer at $100/kWh, it becomes the biggest single driver to the customer. The energy/capacity ratio (kWh/kW) of the energy storage system was the second most sensitive parameter. The lower the better for utility applications because one can more precisely target high value hours. Once again, each of these variables is further defined in the Appendix B.

5 This model has been used by EPRI’s Distributed Energy Resources program to estimate the range of cost and benefits of combined heat and power and other types of distributed generation applications. This model was applied to the analysis of distributed energy storage for this project. It continues to be developed and refined in EPRI’s energy storage research program area (see Reference 5).

2-3

Results

Discussion

The electric utility-owned and dispatched analysis was performed from the utility, customer and societal perspectives. Some general observations can be made:

?Utility-dispatched applications are cycled relatively few hours per day because high-cost hours on the utility system are on the order of 100-200 hours per year. Thus, this application requires lower duty DESS equipment.

?The study showed that utility owned and dispatched DESS could potentially realize multiple benefits such as T&D capacity, generation capacity and energy values. As shown in the

Figures 2-1 and 2-2, the benefit to utilities was $89/kWh and $119/kWh respectively for residential and commercial customers. However, from a customer perspective, the value of DESS was only $58/kWh and $29/kWh. In addition, the primary customer benefit was

shown to be reduced energy charges, it could result in utility revenue loss.

?The total societal benefits in these examples were ~ $150/kWh. Utilities could potentially justify a much higher investment in DESS if they could receive an adequate return for

delivering the societal values. Customers owning DESS could receive compensation for societal benefits too, but given the historical challenges of monetizing the benefits of end-user owned distributed generation, stakeholders would have to work on an approach that enables the monetization and sharing of distributed storage benefits. This may be more

difficult than that in a utility owned business model.

?Across the range of the sensitivity analysis for each of the variables, the societal benefit of the DESS ranged from approximately base case of $148/kWh to as high as $260/kWh

($592/kW to $1040/kW) for a four- hour DESS. It is possible that the benefit could exceed the $260/kWh if benefits for multiple parameters are combined.

?Since the high-cost hours on utility systems are relatively few, utility-dispatched DESS could also be available for customer reliability and backup for other times of the year. Customers who have a high value of reliability might be willing to pay for utility operated and

maintained DESS.

End-User Business Model-Customer Owned and Dispatched DESS

Results

The estimated load impacts of the DESS within the service areas of the sample investor owned utilities is shown in Figure 2-4. The percentages of the load impact shown in the figure were calculated based on the aggregated potential storage capacity from each of the utilities divided by their total peak demand (for the residential/commercial sector). It is a function of the cost of the energy storage component. The market potential for residential and small commercial applications was estimated to emerge initially at energy storage component costs of $100/kWh, and reached the load impact of 23% when the cost dropped to $20/kWh.

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多能互补分布式能源关键技术发展研究

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能源环境危机使可再生能源的开发利用提到前所未有的重 要地位。当前,清洁能源的高效利用、可再生能源利用、工业余热余压利用的相互结合,共同构成了分布式能源的体系,成为当今世界迅速发展的绿色新兴能源产业。二、分布式能源的特点:天然气分布式能源系统具有节能、减排、经济、安全、削峰填谷、促进循环经济发展等多种不可替代的优势。1)提高能源综合利用效率 天然气分布式能源的节能不是单纯的设备或工艺的节能,而是整个供能系统的节能。由于系统建在用户现场或邻近,减少了能源输运过程的损失。以供电为例,大型电厂远离用户,通过高压输变电网的逐级降压后进入配电网,再分配给低压用户,远距离输电损失一般占到总发电量的 5%-10%,,配电网中的电能损耗更大。分布式能源不仅避免了输配电损失,还应用了能量梯级利用原理,先发电,再利用余热,体现了由能量的高品位到低品位的科学用能,且使一次能源综合利用效率和效益大幅度提高。 分布式能源学习讨论QQ群:616168925 2)降低排放,保护环境 由于采用清洁燃料,大量减少了烟气中温室气体和其它有害成分,一次能源综合利用率的提高和当地的各种可再生能源的利用进一步起到减排效果。据测算,在满足同样电热负荷条件下,天然气分布式供能方式与传统燃煤发电分供方

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