DNV GL Report: From a system perspective, large-scale renewable energy projects remain more cost efficient compared to decentralised alternatives

DNV GL, the world’s largest resource of independent energy experts and certification body, has recently published the findings of its report on a cost benefit analysis between large-scale centralised and micro-distributed (DG) renewable generation. The report’s main conclusion is that centralised wind and solar generation is between 33-50% more cost-efficient than the evaluated decentralised alternatives in all the conditions defined in the report in established power systems.

DNV GL’s report acknowledges the impact of regional boundary conditions, such as available renewable sources, electrification maturity and the flexibility of the existing generation mix on the cost estimation differences. For DG, the report also notes that the share of network integration costs in total costs is very small compared to the overall expenditure, although it may vary by DG option and network structure. For some distribution companies such as those operating in Europe, these costs can be considerable when a very high penetration level of DG is reached. For remote supplies, the competitiveness of DG versus centralised generation depends on the distance the load has to cover between the main grid and the consumer.

The report’s methodology involved the use of renewable energy sources under different conditions, including established power systems and electrification of remote areas. In this cost report, DNV GL has included different renewable sources and technologies, the expected impacts on the reinforcement of the of the distribution network (focused on lower voltages where micro-generation is installed), the backup generation required as result of system operation modelling (based on different initial state generation mix scenarios, including a scenario of poor electrified network), forecasted energy demand and possible combinations of these boundary conditions for both renewable generation approaches. The combination of these boundary conditions that represent possible system and network topologies shows different expected costs of electricity depending on the centralised or DG option.

Further findings include:

In established power systems, DG is more costly than the evaluated centralised generation alternatives, under the conditions defined in this report. When comparing between the cheapest centralised generation and DG technologies, the range was found to be between 46 and 112 EUR/MWh, making DG at least 50% more expensive in the best case scenario than centralised generation, but 100% more expensive in the worst case.

Cost comparison between centralised renewable energy generation and DG shows an important impact of the regional wind and solar conditions in the results, considering that PV is present in all the DG selected technologies as well as some of the centralised generation ones. Based on this observation, it it can be concluded that small PV and to a limited extent small PV/ battery are the most competitive DG alternatives to centralised generation, assuming favourable solar conditions and an established power system. Small PV/ μCHP are the best DG options in moderate solar conditions.

Regarding centralised generation, it can be concluded that the relative advantage of PV over wind or vice versa is mainly driven by the resource availability of wind and solar power. “The report presents a comprehensive analysis of the integration of renewables considering varied options and scenarios, focusing on the overall efficiency of the system. Ultimately, optimised grids are key for the development of a sustainable energy sector, not only will they allow energy to be produced in large centralized plants to reach consumers, they will also enable the integration of decentralized generation without major cost contributions,” commented Christian Hewicker, Senior Technical Advisorat DNV GL – Energy “Our report highlights that large scale renewable projects are currently the leaders in the drive to solve the energy trilemma by providing a reliable, sustainable and affordable energy supply. Micro-generation is a vital complement to large scale projects, however to make it a viable alternative for future energy supplies its investment costs need to become even more competitive.”