Abstract:
Power generation sources which are connected to the medium voltage distribution
system of the National Grid with relatively small installed capacities are presently
classified as Embedded Generators. Most of embedded generators including smallhydroelectric
in many countries have been financed, developed and operated by the
Private sector.
The purpose of this research was to develop an appropriate pricing methodology for
the embedded electricity generation with ernohasis on the Sri Lankan system. The
study recommended that the embedded generation tariff be based on the avoided
cost, and this avoided cost calculation should include the cost of externalities in the
energy sector and the exact cost of avoided network loss.
Traditionally electricity tariff reflects only the cost of production and delivery
electricity to the consumers, which includes cost of labour, capital, operation, taxes
and insurance. But the production of electricity causes some damage to environment,
which associated some cost. Level of environment damage due to electricity
generation varies with the technology, site etc.
Since there are no Sri Lankan studies on the damage costs related to the pollutants
associated with the power sector. Estimation of externalities of electricity production
in this study mainly depends upon the results of studies done elsewhere specially the
"ExternE" Project of the European Commission. Therefore an adjustment was made
to those results by using a factor based on per capita GNPratio to adopt those values
for Sri Lanka. From that, it was found that there is an external cost of 0.22 ECU
cents/kWh for the oil based power generation in Sri Lanka and that would be around
11-14% of the total avoided energy cost.
The study recommends nodal based avoided network loss calculation for the
embedded generation tariff. It is also found that there is a considerable contribution
of the cost of avoided network loss to the proposed embedded generation tariff and
final tariff would vary significantly with the location of the node.
Pricing on 'Embedded. (jeneration
The proposed pricing methodology would provide important information for the
investors to choose the most economical site. This can be done by examine the tariff
at each node, which can also be used to optimize the network use and finally
improving on the benefit of society.
Guidelines were suggested to improve accuracy of the tariff and to minimize the
uncertainty of the calculation. These will allow the developers of embedded
generation facility and the Utility to maximize the potential of embedded generation
and the net benefit of the society.
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