Energy Policy & Enonomics.

Energy Policy & Economics Paul Derwin
Course Code / Year DT 018 year 1
Module Energy Policy & Economics
Lecturer Mr. Martan Barrett
Student Name Paul Derwin
Student Number D07114349
Assignment No. 1
SubmissionDate 08/12/2011
Word Count 1,833
Department
Stamp Where
Necessary

D07114349 Page ii
Declaration
I hereby certify that the material, which is submitted in this
assignment/project, is entirely my own work and has not been submitted for
any academic assessment other than as part fulfillment of the assessment
procedures for the program Bachelor of Science in Electrical Services and
Energy Management (BSc (Hons)) (DT 018). (United Nations Framework
Convention 2011)
Signature of student:…………….………
Date:…………………………

D07114349 Page iii
Table of Contents
Declaration................................................................................................................. ii
Table of Contents......................................................................................................iii
List of Figures & Tables............................................................................................iv
1.0 Introduction..........................................................................................................1
1.1 Energy Policies.....................................................................................................1
1.2 Policy Structure....................................................................................................2
National Factors .........................................................................................................3
Policy objectives & strategy .....................................................................................3
Policy Outcomes .........................................................................................................3
Assessment of outcome.............................................................................................3
1.3 New Technologies................................................................................................4
1.4 Feasibility Evaluation.........................................................................................4
1.5 Site Data.................................................................................................................5
Electrical Load requirement................................................................................................................5
Heating Load requirement....................................................................................................................5
Oil Prices..........................................................................................................................................................6
Monthly running costs for CHP................................................................................6
Bord Gais Gas Rates...................................................................................................................................6
1.6 CO2 Emissions Reductions.................................................................................8
1.7 Comparative Analysis .........................................................................................9
CHP................................................................................................................................9
1.8 Conventional Electricity Generation (Peat or Oil Powered Stations).... 11
Bibliography…………………………………………………………………………………………….12

D07114349 Page iv
List of Figures & Tables
Figure 1: Policy Structure 2
Table 1: Bord Gais Electricity Rates 2008 5
Table 2: The Manufacturing Plants Existing Monthly Electrical Bill 5
Table 3: Pay Back Calculation (Euro) 7
Table 4: CHP Greenhouse Gas Impact (SEI) 8
Figure 2: Assessment of N.V.P. of the Project 8
Figure 3: CHP Operation 10
Figure 4: CHP vs. Grid Electricity and Boiler Generation 11

Page 1
1.0 Introduction
The main purpose of this report is to develop an energy policy and an
economic energy supply strategy for a manufacturing company. A
comparative analysis of the present and future technologies will be carried out
and a financial appraisal. Other aim’s of this assignment is to find a suitable
replacement for electricity being purchased currently by the ESB and the
heating supplied through oil.
1.1 Energy Policies
The Kyoto Protocol requires the significant reduction in Irish emissions of
GHG’s or p (PB Power for The Royal Academy of Engineering n.d.)ay hefty
fines. Under the Kyoto Protocol, industrialized countries are required to
reduce the emissions of six greenhouse gases (CO2, which is the most
important one, methane, nitrous oxide, hydro fluorocarbons, per fluorocarbons
and sulphur hexafluoride) on average by 5.2 % below the 1990 levels during
the first “commitment period” from 2008 to 2012. A five-year commitment
period was chosen rather than a single target year to smooth out annual
fluctuations in emissions due to uncontrollable factors such as weather.
(United Nations Framework Convention 2011)
Key measures published by the National Climate Change Strategy 2007–
2012 include production of electricity from renewable sources to increase to
15% by 2010 and 33% by 2020 Biomass to contribute up to 30% of energy
input at peat stations by 2015 and support for Combined Heat and Power
projects. Measures for industrial, Commercial and Services, include building
regulations and building energy rating, energy agreements programme, bio
heat and CHP programmes and support for eco-efficient technology and
practices (Department of the Environment, Heritage and Local Government
2007)
The EU Emissions Trading Scheme came into operation in January 2005, and
under this scheme the C02 emissions of 12,000 installations across the EU
are controlled on a cap and trade basis, over 100 installations in Ireland are in
the scheme.

Page 2
The installation has to monitor its emissions and report the total emissions on
an annual basis.
The installation is the required to surrender allowances, where one allowance
equals one tonne of CO2, if the installation cannot reduce its emissions during
the course of the year more allowances must be bought or face high penalty
fines. This strategy sets out to reduce emissions by 0.6 million tonnes in the
industrial, commercial and services sector out of a total 3.02 million tonnes by
2012.
1.2 Policy Structure
Figure 1: Policy Structure
Policy Objectives &
Strategy’s
National Factors
Policy
Outcomes
Assessment of
Outcomes

Page 3
National Factors
 High-energy prices.
 High running costs.
 Low profit margins.
 New government/EU policies.
Policy objectives & strategy
 What would the business like to achieve?
 A plan for achieving the objectives.
 Government grants?
 Achieving a cost effective route of delivering its energy requirements.
Policy Outcomes
 Economic energy supply for the manufacturing plant.
 Lower C02 emissions, to stop penalties/fines from EU Emissions
Trading Scheme.
 Ensuring affordable energy.
 Being prepared for energy supply disruptions.
Assessment of outcome
 Feasibility report/ financial appraisal.
 Cost benefit analysis.

Page 4
1.3 New Technologies
The aim of this report is to find an economical replacement to buying
electricity from the ESB and heating supplied through oil for the manufacturing
plan. Large scale CHP plant will be assessed to determine whether it’s a
viable replacement for purchasing electricity from the ESB and using oil as a
heating fuel. The prime mover in large scale CHP will be gas turbine, which
drives a generator that produces electricity. The cost of electricity generated
by a gas powered CHP plant will be constant throughout the day, since gas
tariffs are independent of the time of day so the electricity generated on site
will be cheaper. A CHP plant will provide energy cost savings per KWh. The
savings result from the ability to generate power and use the heat released at
a cost below the imported power costs from the ESB. These savings are
dependent on the prices of fuel, which in turn will lead to a viable project, but it
must be recognized that the evaluation will require investment in both time
and money.
1.4 Feasibility Evaluation
The manufacturing company in question is in full operation 24 hours a day,
seven days a week 365 and days a year. The plant has a combined thermal
and electrical energy requirement as follows, 1GWhr pa supplied by electricity
purchased by the ESB, 90MWhr pa supplied by electricity purchased by the
ESB for the manufacturing plant and office equipment and general services
respectively. The thermal requirement is 2GWhr pa all year round and cooling
at 170MWhr pa in the months between May and August.
(Note: although cooling is just required between May and August. The CHP
will be sized on cooling all year round for worst-case scenario along with the
electrical and thermal energy requirement through an absorption chiller).

Page 5
1.5 Site Data
Electrical Load requirement
Manufacturing Plant = 1000000KWhr ÷ 365 days = 2740 KWhr,
Office equipment and G.S. = 90000KWhr ÷ 365 days = 245 KWhr,
Cooling 170000KWhr ÷ 120 days = 1415 KWhr,
2740 + 245 + 1415 = 4400 KWhr ÷ 24 hours = 183 * factor of 1.3 to allow for
losses = 240 KW per day
Heating Load requirement
Heating = 2000000KWhr ÷ 365 days = 5480 KWhr
5480KWhr ÷ 24 hours = 228 KW * factor of 1.3 to allow for losses = 296 KW
per day
Table 1; Bord Gais Electricity Rates 2008
(Bord Gais) 2008 Rates
Unit per KWh (Euro/KWh) 0.1302
Max Demand Charge (Euro/KW) Av. 1.5795
Service Capacity Charge (Euro/KVA) Av. 1.9809
Standing Charge (Euro/Month) 150
PSO Levy (Euro/KVA Capacity) 0.438
Table 2; The Manufacturing Plants Existing Monthly Electrical Bill
Day charge/month KWh 132000*0.1302 17,186.4Euro
Max demand charge 500*1.575 788Euro
Service capacity charge 500*1.975 987Euro
Standing charge 150 Euro
PSO levy 500*0.438 219Euro
Total 19,330.4Euro

Page 6
Oil Prices
Conversion Factor: 1 Litre of Oil = 10.83kWh
Cost of Oil = 0.70 Euro per Litre (DIT 2008/09)
2000000kWh ÷ 10.83 = 184,672.2 Litres of Oil is required to heat the
premises for the year at a cost of 0.70 Euro * 184,672.2 = 129,270.5 Euro.
Monthly running costs for CHP
The Technical specification of the CHP plant is based on the Combined Heat
and Power Installation Case Study in the Rochestown Park Hotel, Co. Cork.
(Board Gais Networks 2008)
 CHP Model ENER.G 210
 345KW Heat Output
 240KW Electrical Output
 720 Hours Operation, monthly
 Electrical Output = 240 * 720 = 172800KWh
 Heat Output = 345 * 720 = 248400KWh
Bord Gais Gas Rates
The gas rates for 2008 is 0.0281 per KWh of gas (seai 2009)
In generating 240KW of electricity and 345KW of heat the CHP consumes
640KW of gas at 0.0281 Euro/KW, 8640 hours * 625KW * 0.0281 = 155,382
Euro per year.
Therefore the CHP will cost 155,382.00 Euro per year + a maintenance
charge. Annual maintenance costs per year costs 4000 Euro.
Energy savings increase of 2% per annum
Maintenance increase of 6% per annum
Cost of plant 230,000 Euro
Maintenance per annum 4000 Euro
Scrapage of old boiler 20,000 Euro
CHP fuel (Gas) costs 155,382.00 – ((Electricity) 231,964.8 + (Oil) 129,270.5)
=(Energy Savings) 205,853.3 Euro.

Page 7
Table 3; Pay Back Calculation (Euro)
Year Capital
Costs
Energy
Savings
Maintenance Tax @
30%
Net After
Tax
D.C.
F.
P.V.
0 -230,000 -230,000 1000 -230,000
1 205,853.3 -4000 145,297.3 .893 129,750.5
2 209,970.4 -4240 148,251.3 .797 118,156.3
3 214,169.7 -4494.4 151,267.1 .712 107702.2
4 20,000 218,453.1 -4764.1 154,346.4 .636 118164.3
Total 243,773.3
From the data in figure 2 on page 10, it is noted that the project of installing a
more energy efficient plant for meeting the energy needs of the manufacturing
plant is viable, Installing a CHP unit is an effective route in achieving its
energy requirement. Investing 230,000.00 euro on a new gas powered CHP
plant the project breaks even after 1 year and 10 months and in year 3 the
project has made savings of over 100,000.00 euro and it increases above
200,000.00 euro in year 4.

Page 8
Figure 2; Assessment of N.V.P. of the Project
1.6 CO2 Emissions Reductions
CHP can be used to achieve environmental targets for the manufacturing
plants emissions reduction. The environmental benefits of installing CHP are
significant and the emissions savings are shown below.
Table 4; CHP Greenhouse Gas Impact (SEI)
Gas Estimated net reduction in emissions per
kWh of electricity produced (g/kWh)
Carbon dioxideCO2 1,000
Sulphur dioxideSO2 17
Nitrogen oxide NOX 4.6
Carbon monoxide CO (3)
Carbon tetroxide CO4 3.9
-300000
-200000
-100000
0
100000
200000
300000
0 1 2 3 4
N.V.P.
YEAR

Page 9
1.7 Comparative Analysis
CHP
CHP is the simultaneous production and utilization of heat and electricity from
the same primary fuel source, minimizing the waste of the heat byproduct of
the electricity generating process and converting the heat into hot water or
steam. Combined heat and power recovers the heat as well as generates
electricity-providing efficiencies up to 90%. CHP can provide a secure and
highly efficient method of generating electricity and heat. “Due to utilization of
heat from electricity generation and the avoidance of transmission losses
because electricity is generated on site, CHP achieves a significant reduction
in primary energy usage compared with power stations and heat only boilers”
(SEAI 2000). The heat generated by the CHP system can also provide chilled
water using an absorption chiller. The absorption process uses a condenser
and evaporator just like vapor compression systems, but replaces the motor
and compressor assembly with a thermal fluid compressor to transfer low-
temperature energy to high-temperature heat rejection. The absorption cycle
uses thermal energy or waste heat, not electricity, to create chilled water.
CHP Components
All CHP plants consist of standard components such as,
 The prime mover (engine) to drive the electrical generator, an electrical
generator that produces the electricity.
 A heat recovery system to recover usable heat, a cooling system to
dissipate heat rejected from the engine that cannot be recovered.
 Combustion and ventilation air systems to carry away harmful exhaust
gases away.
 Control system to maintain safe and efficient operation and finally an
enclosure to achieve physical and environmental protection for the
engine and operators and to reduce noise levels.

Page 10
Figure 3; CHP Operation
The CHP plant operation uses different types of fuel such as natural gas,
diesel or oil, which powers a reciprocating engine or gas turbine. An electrical
generator, which produces electricity, is connected to the prime mover. Heat
from the prime mover is captured and used for heating water for central
heating or for hot water.
Cooling needs of the building can be met by using an absorption chiller. The
type of prime mover that is used to drive the electrical generator classifies
CHP plant. The two most common types used are,
 Steam turbine, this is a common CHP component, different types of
fuels are burned in a boiler to produce high-pressure steam that
passes through a steam turbine to produce power.
 Gas turbine, a gas turbine uses large amounts of intake air, which is
compressed and then expanded by adding fuel, which is ignited. The

Page 11
expanded air rotates the turbine blades, similar to a jet engine; light oil
or gas can be used as a fuel.
 The gas turbine drives an electrical generator; the exhaust gas goes to
a heat recovery boiler, which produces heat and steam (Canadian
Centre for Energy 2002).
1.8 Grid Electricity and Boiler Generation (Peat or Oil Powered Stations)
Figure 4; CHP vs. Grid Electricity and Boiler Generation
From figure 4 above it is noted that CHP reduces primary energy consumption
in comparison to conventional methods involved in the generation of heating,
hot water and electricity. There are considerable losses of electrical energy
starting from the power plant through the transmission lines, transformers and
then into the consumer building, anything from 35% to 55% can be expected.
According to SEAI, “The full advantage of natural gas-fired CHP technology is
achieved when the production of power and heat is combined. For this to be
technically and economically feasible, it generally requires a simultaneous
demand for heat and electricity on the premises, for a minimum of 14 hours

Page 12
per day or around 5,000 hours per annum” (SEAI 2000). The manufacturing
plant in question with the CHP operating 720 hours per month, 24 hours a day
is very much suited to CHP technology. In case of breakdown and
maintenance on the CHP plant, the manufacturing plant will still be connected
to the grid. Surplus electricity will be sold to the electricity grid if required.
Schemes for receiving a feed-in tariff for this electricity will be worked on.
Bibliography
Board Gais Networks 2008, Rochestown Park Hotel Tri-Generation/Combined
Heat & Power Installation (CHP), viewed 26 november 2011,
<http://www.temptech.ie/pdf/4_bg-rochestown.pdf>.
Canadian Centre for Energy 2002, Centre for Energy, viewed 3 Dec. 2011,
<http://www.centreforenergy.com/AboutEnergy/Energy/Electricity/Generation/
Overview.asp?page=11>.
Commission for energy regulation 2009, viewed 1 november 2011,
<http:/cer.ie/>.
Department of Communications 2006, CHP in Ireland, viewed 28 october
2011,
<http:/www.seai.ie/About_Energy/Energy_Policy/.y_Drivers/CHP_Policy_Rep
ort_18082006.pdf>.
Department of the Environment, Heritage and Local Government 2007,
Ireland National Climate Change Strategy 2007-2012, viewed 13 november
2011.
DIT 2008/09, DIT library, energy_policy_and
_economics_semester_1_examinations_2008/09, viewed 26 november 2011,
<http://DIT.ie/Library/Exampapers>.
PB Power for The Royal Academy of Engineering, The Cost of Generating
Electricity, viewed 26 november 2011,
<http://www.raeng.org.uk/news/pubblications/list/reports/Cost_Generation_Co
mmentarty.pdf>.
SEAI 2000, A Guide to Combined Heat and Power in Ireland, viewed 13
november 2011,

Page 13
<http://www.seai.ie/Publications/Your_Business_Publications/Guide_to_CHP
_in_Ire_low_.pdf>.
SEAI 2002, SEAI, Building Energy Rating, viewed 1 november 2011,
<http:/www.seai.ie/Your_Building/BER/>.
SEAI 2002, Sustainable Energy Authority of Ireland strategic plan 2010-2014,
viewed 1 november 2011, <http:/SEAI.ie/>.
seai 2009, Electricity & Gas Pirices in Ireland, viewed 5 december 2011,
<http://www.seai.ie/Publications/Statistics_Publications_Electricity_&_Gas_Pri
ces_in_Ireland.pdf>.
United Nations Framework Convention 2011, United Nations Framework
Convention on Climate Change, viewed 18 November 2011,
<http://unfccc.int/2860>.

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