In partnership with Spectral

New strategies for Smart Integrated Decentralised Energy Systems


Executive summary

Rural houses with solar panels. Each house and community could be its own micro-grid.

Transitioning our linear, carbon-based economy into a circular, renewable energy-based economy is without a doubt the single biggest challenge of our time. The energy sector plays a crucial role in tackling this challenge. For this reason, the Dutch government has decided to quintuple renewable power generation by 2030. It is a daunting task that requires radical new ways of thinking about our energy system architecture.

Thanks to recent developments in renewable energy technologies such as batteries, heat pumps and solar panels, it is now possible to produce, convert and store energy locally. As a result, a promising new concept has emerged in which energy flows can be balanced at the distribution system level in so-called microgrids. These microgrids have the potential to significantly contribute to the resilience and flexibility of our energy system, as they can facilitate the large-scale rollout of intermittent renewable energy technologies without requiring expensive infrastructure upgrades.

As part of the system integration studies programme of the Topsector Energie of the Netherlands Enterprise Agency, the goal of this report is to find out what the potential is for Smart Integrated Decentralised Energy (SIDE) systems, a highly sustainable and resilient subset of microgrids, to contribute to the renewable energy transition by increasing the flexibility of the energy system from the bottom-up.

This was done by looking at, and improving on, the techno-economic performance of four different cases that currently represent the state-of-the-art of decentralised renewable energy systems: the Aardehuizen, De Ceuvel, Schoonschip and Republica Papaverweg. Using both real-world data from the Aardehuizen and De Ceuvel, and detailed design criteria for Schoonschip and Republica Papaverweg, a detailed overview of their performance could be attained.

Central to their performance assessment are four key performance indicators: local renewable energy production, self-consumption, capital investment and payback period. In order to find their respective values, an elaborate Energy System Model was developed, that is able to simulate the energy flows of the four cases considered all the way down to the house level on an hourly basis. This made it possible to gain insight into all the different system interactions and to combine them into a holistic overview.

The obtained results are promising, although they vary widely for each scenario. The resulting techno-economic performances of 9 different scenarios do not show a single optimal configuration. Rather, a number of best practices have become clear that can be used for the future development of the next generation of SIDE systems. In the most optimal case (Aardehuizen scenario 3), combining these best practices results in a techno-economically 05feasible system that is nearly completely (89%) self-sufficient – a major increase from its already good baseline performance (32%).

Although there are still plenty of technical, economic and legal barriers to overcome, the rapidly declining costs of decentralised renewable energy technologies combined with an increasingly favourable political climate will lay the foundation for the development of the next generation of SIDE systems.

Ultimately, SIDE systems represent a decentralised design philosophy that has the potential to radically alter the shape of our energy system system architecture. The local integration of heat and power systems not only allows for high efficiencies, resilience, and flexibility, it also requires new models of ownership and ways of thinking about urban planning and governance. This type of disruptive thinking might be just what is needed in the race to transform our energy system and meet our climate targets.

“We cannot solve our problems with the same thinking we used when we created them.”

Albert Einstein

Introduction

The community of Aardehuizen has tried to be self-sufficient in terms of energy.

The energy transition

The Dutch government has set ambitious goals to transform the national energy system. By 2030, it aims to have achieved a 20% share of renewable energy sources (RES) and a share of 51% (of which 46% solar PV and wind) of electrical renewable energy sources (RES-E).

Achieving these targets is no small feat. In 2017, the share of wind energy of Total Primary Energy Supply (TPES) is 1,66%, and the share of solar power of TPES is 0,37%.2 With electricity supply making up 19% of TPES, this results in a RES-E share of wind and solar PV of 10,7%. Therefore, reaching a 46% share by 2030 requires a growth rate of at least 13% per year if electricity demand were to remain stable (which it will not).

Sustaining such a growth rate is a daunting task, as the widespread implementation of wind and solar PV poses serious challenges to the stable operation of the grid. The intermittent electricity generation inherent to solar PV and wind leads to more variability, steeper ramping requirements, and less room for baseload.

In addition, the electrification of the heat and transport sectors – an essential requirement for a successful renewable energy transition – will lead to a very significant increase in both peak demand and total electricity demand.

Furthermore, wind and solar generation is often spread out over many small power plants (e.g. rooftop solar), instead of a single large scale plant. The decentralised deployment of renewable technologies requires a shift in the power system architecture from the traditional centralised model towards a decentralised model.

All these developments put tremendous stress on the energy suppliers and system operators that are responsible for balancing supply and demand. As such, they require massive and costly adaptations to the energy infrastructure, while the utilisation of assets (e.g. transmission lines and existing power plants) is expected to reduce from 55% to 35% by 2035.3 The transition also brings along the need for complex new control, market and ownership models, as well as the need for new regulations to facilitate these models.

In order to meet the Dutch climate targets for 2050 (80-95% reduction of CO₂ levels compared to 1990), “pretty much all available reduction options and potentials will have to be deployed.”

Local energy communities

One of these reduction options is the decision of the European Union to help facilitate the creation of local energy communities. By bringing citizens together in local energy cooperatives, they can help drive the energy transition by improving competition, providing local investment and increasing renewable energy production. By 2050, almost half of all EU households will be producing renewable energy, of which more than a third is participating in a local energy community.

Despite the recent gesture of the EU to support local energy communities, these communities still face significant market and regulatory barriers that are not well understood, or acknowledged by national energy regulators. Hence, there is a large gap between the current situation and the desired implementation and enforcement of EU rules that will allow these energy communities to engage in market participation. In order for local energy communities to thrive, there needs to be a level playing field and active monitoring and enforcement of EU rules so that prosumer rights are protected and discrimination is prevented.

EU Clean Energy Package

Article 16: Local energy communities

1. Member States shall ensure that local energy communities:

  1. are entitled to own, establish, or lease community networks and to autonomously manage them;
  2. can access all organised markets either directly or through aggregators or suppliers in a non-discriminatory manner;
  3. benefit from a non-discriminatory treatment with regard to their activities, rights and obligations as final customers, generators, distribution system operators or aggregators;
  4. are subject to fair, proportionate and transparent procedures and cost reflective charges.

Microgrids

Recent technological developments have put forward several interesting opportunities that can enable us to overcome some of the challenges of the renewable energy transition. Along with wind and solar PV, a promising new set of decentralised technologies has emerged. Examples of these technologies include – but are not limited to – heat pumps, batteries, district heating, micro CHP’s and fuel cells. Combining these technologies into local, integrated heat and power networks opens up many possibilities for exploiting technical and economical synergies, while increasing the resilience and sustainability of our energy system from the bottom up.

Hence, a solution to many of the renewable energy transition challenges is the development of microgrids: decentralised energy grids that can balance supply and demand locally through the utilisation of distributed energy resources. A microgrid is created by transforming a local distribution grid from a passive to an active network. This means that power is flowing both in and out of the system, and that it is controlled locally, which is what distinguishes a microgrid from distribution grids with local generation.

A microgrid provides benefits to multiple stakeholders. For the end users, it ensures a stable energy supply with higher power quality, and potentially a lower price. The utility companies benefit from added flexibility, congestion relief and increased power quality, as well as providing network support in times of stress by aiding restoration after faults. The owner of the microgrid (which can be the end consumers, utility company, or a third party) can reap the economic benefits of selling energy. Finally, there is the system-level benefit of increased energy efficiency as a result of reduced transmission and distribution losses.

For these reasons, ‘’Microgrids have been identified as a key component of the renewable energy transition for improving power reliability and quality, and increasing system energy efficiency.’’

For all their potential benefits, the challenges facing microgrids are immense. From a technical perspective, the system integration of many components requires advanced design, operation and control architecture. Equally important are the economic challenges; current market conditions prevent the implementation of microgrids through a lack of liquidity in the power market. Moreover, there are various laws and regulations that prevent the implementation of solutions that make sense from a technical perspective.

“Microgrids have been identified as a key component of the renewable energy transition.”

Overcoming these challenges will require close cooperation between end users, utility companies, lawmakers and energy companies. The first step towards the widespread implementation of microgrids is to recognise their potential to play a key role in the energy transition.

SIDE-system definition

A SIDE System is defined as a highly self-sufficient and sustainable microgrid, characterised by a high degree of integration between heat and power technologies, resulting in a flexible and resilient energy system at the local level.

  • Smart: managed intelligently through a local energy management system.
  • Integrated: maximising synergies between all components.
  • Decentralised: the system operates at the local level and has a clear system boundary.
  • Energy: heat and power systems powered by sustainable technologies
Note: a SIDE system is not necessarily an off-grid energy system. It can still be connected to the main grid. In fact, only 1 out of 9 scenarios considered in this report has no grid-connection.

Side systems

As part of the Topsector Energie Systeemintegratie Programme, the focus of this report’s analysis is to see how the flexibility of the national energy system can be increased so that a larger share of renewable energy production can be achieved. The flexibility challenge posed by the large-scale deployment of intermittent renewable energy sources is extremely complex and multifaceted. It should therefore be addressed from both the top-down and the bottom-up. In this report, however, we will purely focus on the local level.

This report will build on the knowledge obtained from several state-of-the-art microgrid pilot projects that focus on sustainability, self-sufficiency and smart energy management. To distinguish this special category of microgrids, they will be defined from now on as a Smart Integrated Decentralised Energy system, or SIDE system.

An example of a sustainable decentralised microgrid architecture.
Example of a SIDE system

A SIDE system is characterised by a high degree of system integration of various renewable energy technologies. Although there is no clear threshold defined that determines the minimum number of components that constitute a SIDE system, as we will come to see, a SIDE system entails more than just a few solar panels and a heat pump (the current state-of-the-art for renewable energy systems).

At the root of each SIDE system is a holistic design philosophy, aimed at exploiting as many synergies as possible between components. For instance, a solar PV/heat pump combination can be used to convert excess PV power into heat, which can then be stored in a hot water tank that provides heat during the rest of the day. Pairing solar PV with a combined heat and power (CHP) unit enables energy generation in both summer and winter. This helps alleviate the seasonal variability on the grid, especially when the heat pump can be reversed in order to provide solar-powered cooling in summer.

As a rule of thumb, the higher the number of featured technologies within a SIDE system, the greater the potential for exploiting synergies becomes. On the other hand, the higher the number of components, the more complex the integration becomes. Therefore, to fully utilize their potential, it is crucial that the perceived complexity of SIDE systems is reduced through comprehensive design guides and easily accessible information on best practices.


The goal of this report is to generate knowledge on the potential for SIDE systems to help improve the flexibility of the energy system. This is done by determining the technical, economic and legal feasibility of SIDE systems for different existing use cases. This knowledge will assist new initiatives in the development of integrated energy systems at the neighbourhood level, in order to help strengthening the energy system from the bottom up.

The four use cases are:

  • Aardehuizen:  a self-sufficient ecovillage consisting of 23 earthship-type houses
  • De Ceuvel: a former shipyard turned cleantech playground
  • Schoonschip: Europe’s most sustainable floating neighbourhood
  • Republica papaverweg: a highly circular mixed area development

For a detailed breakdown of the methodology, as well as an analysis of multiple scenarios in each use case, please refer to the PDF. An extract of the conclusions is included below.

This report examines four projects, each with some element of a decentralised electrical grid: schoonship, de ceuvel, republica paperverweg and aardehuizen.

Conclusions

By looking at four different cases, each with their own unique set of boundary conditions, a detailed overview of the performance of a set of widely different SIDE system configurations was constructed. Central to their performance assessment were four KPI’s: production, self-consumption, capital investment and payback period.

Detailed analysis using a time-series simulation model revealed widely different outcomes for the four KPI’s, both per case individually and across the cases themselves. This variability in outcomes makes it hard to generalise the conclusions. Still, it has become clear that there is a wide range of techno-economically feasible SIDE systems for an evenly wide range of use-cases. Although SIDE system configurations and performance are highly context-specific, residential neighbourhoods, office parks and mixed area developments can all benefit from the system integration that SIDE systems can offer.

The goal of this study was to investigate the feasibility for Smart Integrated Decentralised Energy (SIDE) systems to contribute to the resilience, flexibility and circularity of the Dutch national power system infrastructure, so that the ambitious renewable energy targets for 2030 can be met. The potential for SIDE systems to support the energy transition from the bottom-up is clear; some of the systems outlined in this report, such as Aardehuizen scenario 3, demonstrate an almost fully (89%) self-sufficient and techno-economically feasible energy system. It’s highly synergetic local energy systems like these that can greatly improve the flexibility and resilience of our national energy system, without requiring expensive infrastructure upgrades.

The decentralisation of production and consumption of renewable energy allows for interesting new business cases that force us to rethink the way we structure, design and control our energy system. The line between producers and consumers of energy is blurring, as more and more people take matters into their own hands and form energy cooperatives that produce and distribute their own renewable energy. Ultimately, the bottom-up design philosophy that SIDE systems embody may prove to be an essential cornerstone on which to build our fully renewable energy system.

Rural neighbourhoods are a less-tested but ideal place for decentralised energy grids. De Ceuvel is pictured here.

Takeaways

With the outcomes of the analysis of nine different scenarios, several conclusions, recommendations and best practices have been identified that can aid the development of the next generation of microgrids, i.e. SIDE systems. They are summarised below:

  • Both solar panels and heat pumps are essential components to any SIDE system. They have good technical and economic performance and provide the basis for local heat and power production. A solar PV – heat pump combination can result in approximately 25% extra self-consumption of solar power, although it also results in high seasonal power imbalances
  • Solar power performs very well in combination with cooling systems; reducing power peaks while increasing self-consumption.
  • Solar heating panels become obsolete in the presence of a heat pump and solar panels, and therefore do not play a well-defined role in SIDE systems.
  • Urban wind turbines can be a good option provided that the circumstances are right and there is local opposition. Their business case is highly dependent on wind speed, thereby excluding most urban locations.
  • Combined Heat & Power units can be a very effective addition to a SIDE system as they flexibly provide heat and power at those times it’s needed most (winter). However, they require active control and maintenance, as well as an external biomass source. On top of that, their business case is heavily reliant on subsidies.
  • Based on energy storage alone, batteries are still a factor 3-10x too expensive to incorporate in SIDE systems economically, depending on the height of the feed-in tariff. However, their economic feasibility may increase if there is a need for other services the battery can provide, such as backup power supply, power quality management, or offering flexibility to the power market. By 2030, their business case should be solid.
  • Electric vehicles are an essential component of any sufficiently advanced SIDE system, as they allow for substantial local energy management. Smart charging algorithms can greatly increase the self-consumption of renewable energy.
  • District heating systems are a good choice for any SIDE system. They greatly improve the system integration, energy efficiency and overall flexibility of a SIDE system. High capital costs can be mitigated by the resulting scaling advantage of the heating systems.
  • The difficulties surrounding traditional Seasonal Thermal Energy Storage systems can be mostly overcome through smart integration with other technologies. STES systems can therefore be a great addition to many SIDE systems.
  • Local energy trading allows for a modest increase in self-consumption and can help incentivise smarter energy systems, provided that regulatory barriers can be overcome. Ideally, smart-grid technology will allow for a real-time local energy price, similar to the stock market. Local price signals will then help create a highly flexible system.
  • Although combinations between two individual SIDE components tend to have modest synergies with one another, most components have synergies with multiple other components. These effects stack up to create a highly symbiotic energy system, as exemplified by the latest scenario of each case.
  • Local Energy Management Systems are complex in nature and raise many important issues regarding our energy infrastructure and legal architecture. It is safe to say that LEMS technology is not yet mature. Hopefully the lessons learned from pilot projects such as the ones considered in this report can help LEMS technology get through puberty.
  • Hydrogen systems (fuel cell, storage, electrolyser), despite some unique properties that can aid SIDE system performance, are too inefficient and expensive to be a realistic component of most SIDE systems, with the exception of off-grid cases (e.g. islands).
  • The experimenteerregeling in its current state is still too restrictive to fully unlock the potential of SIDE systems. Ideally, the experimenteerregeling allows a microgrid to have a single connection, with every house or connection behind it aggregated into a single entity. Although difficult for tax reasons, it will improve local energy trading and help create more interesting business cases.
  • The brutoproductiemeters required for the SDE+ subsidy have a severely negative effect on the business-case of microgrids with many different small-scale PV-owners such as the ones assessed in this report.