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Inaugural IEEE PES 2005 Conference and Exposition in Africa

Durban, South Africa, 11-15 July 2005

A Methodology for Evaluating and Integrating DG Services into a Restructured

Electrical Power Grid
Innocent E. Davidson
School of Electrical, Electronic and Computer Engineering, University of KwaZulu-Natal
Durban, 4041, South Africa
Phone: +27-31-260-1246, Fax: +27-31-260-2727, Email: Davidsoni@ukzn.ac.za

Abstract – Power sector deregulation is a global phenomena but

driven locally by a mix of complex forces peculiar to each country.
Using a case-study example, this paper evaluates distribution
(embedded) generation as an option for developing economies to
ensure system stability and improve reliability.
A methodology for evaluating distributed generation (DG) services
is proposed and a framework for integrating them into the
restructured power system is presented and discussed.


Nigeria with an estimated population of 126.9 million

people, surface area of 923800 square kilometers, a GDP of
US$41.2 billion is the largest electricity market in Africa.
The electric power industry is the largest single industry
typically spanning much of the geographical area and serving
all sectors of the economy. NEPA the state-owned monopoly
utility is undergoing rapid restructuring and privatization. It
maintains a varied portfolio of plants: oil fired, gas turbine,
coal fired and hydroelectric power as shown in Table 1.
Table 1: NEPA’s Power Stations Fig.1. Map of Nigeria
Name Type Sets Total
Year of
of of Capacity
Station Station (MW) (MW)
Operation The country has an installed capacity of about 6.0GW and
Kainji Hydro 4 x 80 320 1968 an average generating capacity of 3500 MW. Several isolated
2 x 100 200 1970 power stations exist and serve major cities, such as Calabar,
2 x 120 240 1978 Kaduna, Makurdi, Maiduguri, Minna and Suleja. These diesel
Jebba Hydro 6 x 90 540 1985
Shiroro Hydro 6 x 100 600 1990
units operate off-grid to serve specified loads. The generation
Sapele Gas 6 x 120 720 1980 pool comprises of 32% hydro, 44% gas, 23% oil, while diesel
Turbine 4 x 75 300 1985 and small power producers (SPP) account for 1%.
Afam I, Gas 1 x 20 20 >1980 The transmission system is made up of 5000 km of 330 kV
(II–IV) Turbine 690
Delta Gas 280
lines, regional lines amount to 6000 km at 132 kV, while the
(I - III) Turbine 1970+ 415 V reticulation network is 55143 km long. Nigeria’s low
Delta Gas 6 x 100 600 1991 electricity consumption of 85kWh per capita [1], served
IV Turbine mainly by NEPA, makes it a highly under served market.
Oji Coal 4x- - 1956
Egbin Oil 6 x 220 1320 1986
Distributed (embedded) generation has been practiced in
Ijora Oil 2 x 30 60 Nigeria but in a hap-hazard manner.
Calabar Diesel 2
EPP CCGT 30 2002 DG schemes are small modular generating machines
IPP CCGT 30.5 2002
ranging from kilowatts to few megawatts capacity, typically
=========================================== kilowatts up to 10 MW power plants at or near the loads,
Total Installed Capacity 5952.5 MW
Total Available Capacity 2597.1 MW operating in a stand-alone mode or connected to a grid at the
Total Generation from EPP/IPP 60.5 MW distribution or sub-transmission level [2, 3]. Table 2 shows a
===================================================== number of electric power generation technologies.

0-7803-9327-9/05/$20.00 ©2005 IEEE 66

DG schemes may harness alternative energy resources
such as biomass, wind, ocean tides and waves, solar, and CURRENT
geothermal. Small power sources have been developed and INDUSTRY ONE VERTICALYINTEGRATED
employed for industrial, commercial, space, underwater, and STRUCTURE ORGANISATION - NEPA
biomedical applications. Another area for DG application is
in remote rural areas far removed from grid infrastructure.
Here, integrated renewable energy systems (IRES) may be
suited for these situations. PROPOSED
Specialisation encouraged by
Table II: Power Conversion Technologies competition & regulation emphasising
different key success factors
Item Description
1. Coal fired steam plant
3. Combined cycle gas turbine (CCGT)
4. Micro combined heat and power Competitive Regulated Regulated Competitive
5. Hydropower
6. Micro hydro Industry Regulator to ensure fair play
7. Hydro pumped storage
8. Tidal power and ocean flows
Fig.2. Proposed Structure of Nigeria’s Deregulated ESI
9. Conventional nuclear (AGR, PWR)
10. Pebble bed Modular Reactor (PMR)
11. Onshore wind Under this structure, generating companies will compete
12. Offshore wind with each other (that is horizontal unbundling) to export
13. Land-fill gases power to a single company controlling the high voltage
14. Municipal incineration transmission network which will then supply electricity to
15. Biomass (waste organic matter) distribution companies controlling the low voltage network in
16. Diesel (Standby engine driven generator sets)
17. Photovoltaic/solar thermal-electric conversion
their franchise areas of the country. An industry regulator will
18. Electrochemical storage (Fuel cells/hydrogen) be setup to have oversight over the activities of industry
19. Geothermal participants to ensure fairness in all their operations and
protect consumers’ interests. The transmission and
distribution sectors will operate as monopoly business in
Since DG schemes are located on-site or nearby the location designated franchise areas, with strong oversight from the
where the energy is used, they usually operate at the low regulator. This arrangement is expected to transform the ESI
voltage (i.e. 11kV and 33kV) supply chain of bulk electric into an effective, innovative and profitable industry.
power transport infrastructure. Their on-site location provides
the opportunity for greater local control and more efficient
utilization to boost efficiency and reliability [4].
A factor in favor of distribution generation especially in
II. NIGERIA’S DEREGULATION PROGRAM developing economies like Nigeria is the unreliability of
monopoly electric utilities to meet the electricity demand by
The global recognition of the importance of involving the large industrial customers’ [6]. Hence distribution or small
private sector in national infrastructure development has industrial (i.e. embedded) generation should be encouraged,
encouraged reform of the electricity supply industry (ESI). because of their benefit to industrial customers, whilst
Market liberalization and industry privatization trend is not complementing the activities of NEPA’s electricity
limited to the electricity industry, but also applies to the distribution service. The benefits brought about by DG to
communications, petroleum, defense and other industries in such large industrial customers include [7]:
many countries. The poor performance of NEPA in ƒProvision of a stand-alone power supply in areas where
providing reliable electricity supplies has influenced the transmission and distribution infrastructure does not exist
decision of government to deregulate the industry by or are grossly inadequate.
unbundling the single vertically integrated organization into ƒReliability of electricity supplies, which is critical for the
three sectors, namely: generation, transmission, conduct of economic activities.
distribution/supply sectors. Constituent companies will then ƒProvision of backup and other ancillary services in times
be privatized and allowed to operate under competitive of stress on the distribution networks.
market principles [5]. Figure 2 shows the proposed structure ƒProvision of necessary power quality needed in industrial
of the unbundled industry. applications that are dependent upon sensitive electronic
instruments and controls.

ƒEfficiency gains in transmission for on-site applications Under deregulation, the delivery network is the vehicle
which minimizes line losses and voltage sag. through which competition occurs. The stronger the network,
ƒAlleviation of congestion on the distribution network the less incidents of line congestion, the easier it will be to
through peak load shaving. site generating plants across the system. The dispersal of
generation across the network will facilitate competition in

Distribution generation in Nigeria is generally a point-to- In liberalized electricity markets, four key strategic issues
point radial connection from the generating machine straight relating to distributed generation (DG) are high on the agenda
on to the load centre. Examples are major cities such as of any distribution company [8], namely:
Calabar, Kaduna, Makurdi, Maiduguri, Minna and Suleja.
NEPA’s electricity distribution service to consumers cover a
ƒHow much distributed generation will appear in the
wider geographical area involving both radial and mesh
distribution networks?
networks used to supply electricity to several customers on
ƒWhat effect will the DG have on the technical
the low voltage end of a bulk electricity delivery industry
performance of the network?
value chain.
ƒWhat effect will the DG have on the financial
Figure 3 shows an application of embedded generation
performance of the utility?
interconnected with the grid to serve large customers and
ƒWhat changes in technical design or commercial practice
provide grid support.
will be effective within a distribution utility DG strategy?

Transmission Network For Nigeria, the on-going ESI restructuring process needs
to address pertinent issues regarding DG and their impact on
the operations of local Distribution Network Operators
Distribution Network (DNO):
ƒWill the DNO created from NEPA to serve franchise
areas have the monopoly status as the sole provider of
Distributed Generation
(e.g. wind turbine) electricity in their region, especially in rural areas, and are
they required to oversee the operations of DG connected
Industries with CHP to their networks, as they affect their wider network
generate electricity which
flows back to the network system integrity? The main concern here will be how to
Flow from the network Domestic customers and small businesses with stop DNO abusing their monopoly power.
Domestic Generator can also generate electricity
Flow from, and to the network which flows back onto the Distribution network ƒDG owners are also concerned about reliability of DNO
networks after deregulation and privatization, taking cue
from the current performance of NEPA’s distribution
Fig.3. DG Operating Environment
sector [9].
ƒWhat impact will DG connected to the local distribution
Such innovative deployment of typical DG technologies network have on network reliability?
can serve the coastal regions like Lagos, Warri and Port ƒLastly, the issue of remuneration for services provided by
Harcourt where wind energy can be harnessed. Major DG to support local DNO.
manufacturing and mining cities such as Kaduna and Jos in
the interior as well as Lagos can benefit from CHP To encourage investment and promote competition, the
technologies as well as surrounding settlements. In Nigeria, following is proposed: introducing DG into the power
small-scale on-site distribution or embedded generators have planning mix and load forecasting, the standardization of
been established along side NEPA’s 11 to 33kV distribution network requirements (DG) and open access to the network.
networks. These small generators (mainly diesel or furnace Both the DNO and DG operating and maintaining electricity
oil-fired) supply power to industries and in some cases distribution service in their franchise area must be
communities/estates attached to them, through indigenous accountable to the customers and the industry regulator.
private distribution networks. NEPA has not taken advantage These should be clearly spelt out in the policy, which should
of the opportunities provided by DG to alleviate the problem undergo development as the new era unfolds.
of power shortage especially in rural electrification program
in the country. Over emphasis on costly conventional large It should be noted that there will be financial, geographical
centralized electricity supply facilities has deprived many and environmental constraints on quick capacity expansion of
customers the benefits that DG located in their area could generation, transmission and distribution facilities which

NEPA’s successor companies will face during post can be used in a combined mode cycle to fire a small steam
deregulation and privatization. turbine thereby improving efficiency. Their maintenance
costs per unit of power output are among the lowest of all
V. DG TECHNOLOGY OPTIONS FOR NIGERIA generating technologies. They are most suitable for light
industrial and commercial establishments, plus rural domestic
In the short to medium term demand for electricity will use.
continue to out strip supply, because of constraints of time
lag of building conventional large generating, transmission C. Solar Power
and distribution infrastructure. The huge demand for
electricity calls for investments in more DG across the Solar power systems use sun tracking mirrors to reflect and
country. Private investors and DNO should be encouraged to concentrate sunlight unto a receiver where it is converted to
set up DG closer to consumers. DG should be considered as high temperature thermal energy. The heat is then used to
an option to other co-operative solutions as: network drive an engine or electric generator. At a cost of US$650 for
upgrades, up-rating and integration of protection, metering, a 55W solar power system [10], such power source is
control, and voltage support. DG should be used as an
unaffordable to most rural households in Nigeria. However,
additional measure to bring electricity to the masses, and
this type of DG is suitable for remote rural energy supply
industrial concerns especially in rural areas. Figure 4 shows
applications for powering telecommunication base stations
typical cost trends for the electricity supply. In the context of
Nigeria with abundant fossil resources and year round and outpost rural emergency services locations like police,
sunshine, the following DG options are credible: health centres etc.
It should be mentioned that the use of micro-fabrics for DG
A. Combined Heat and Power (CHP) has been canvassed as a means of eliminating the problem of
gas-flaring in on-shore and near shore oil rigs in the Niger-
It involves capturing waste heat from power production Delta region of Nigeria. This will minimize the impact of
and putting it to some useful purpose at the customer site. these gas-fired DGs on the environment.
They are mostly gas-fired plants. It offers fuel operational
efficiency of 70% in pulp, paper, chemical/petrochemical and VI. TECHNICAL AND ECONOMIC EVALUATION
refining industries. OF DG OPTIONS

Cost of Investment In assessing a customer’s energy needs, and to determine

for Power System the suitability of investment in stand-alone or grid connected
systems, regulatory, economic, and technical issues must be
considered. These must be weighed against other important
Centralised System Decentralised Systems
considerations, such as:

ƒReal time pricing

ƒEmbedded generation
ƒDemand-side management (DSM)

Distributed Generation Large Power Stations

An approach for assessing distribution generation
investment is shown in figure 5. The flow chart considers the
customer’s need for adequate electrical energy and the supply
kW 20 - 50MW GW (DNO and DG) options available. The result of these inputs
Homes Settlements Villages Towns Urban Industrial
will determine whether the investment in DG goes ahead. DG
Areas Regions development will not cease after deregulation, owners of DG
will need the professional services of engineers, economists
Fig.4. Cost Trend for Electricity Supply
and others to negotiate with DNO and to design, answer
critical questions, provide adaptive models and solutions
B. Advanced Industrial Turbines and Micro-turbines about electricity, such as [11]:

These are a class of modular gas-fired generators that ƒQuantify the costs/values that energy produced by DG
produce high-temperature high-pressure gas to induce shaft contributes to the cost of good/services or the quality of
life in the DNO area. Cost and benefits would include
rotation by impingement of the gas on specially designed
ecology, opportunity, risk, depletion and the traditional
blades. Typical efficiencies (without use of external exhaust
direct cost/value set.
heat) range from 21 to 40%. Their high quality exhaust heat

ƒIdentify a method for quantifying cost and benefits that is challenges confronting government officials and their
more appropriate than the current distribution tariff advisers fall into these broad categories:
ƒIdentify method(s) for resource planning and modeling A. Legal and Regulatory Framework
that is responsive to real-time cost and new technology,
and compatible with distributed, disparate resources. The The structure of the legal and regulatory framework must
method should be able to evolve, adapt, and learn as part offer incentives for current and future DG to participate in
of its architecture. electricity trading after deregulation, whilst accommodating
ƒDefine an operational methodology that supports and the wider responsibility and interest of local DNO. In this
encourages participation (e.g. easy entry and exist) in a regard the issue and modality of open access regime and
deregulated energy market. The method must be cost connection agreement by which the DG has access to the
effective and developers must define the information DNO’s network must be well defined.
required to enable the method.
ƒDevelopers must define the characteristics of the
B. Network Access Regulation
information (such as resolution, latency, size, speed and
volume), identify ways to collect, interpret, store, share
DG modes of operation should be identified alongside the
and value the information.
ƒDevelopers must define the information management appropriate engineering and commercial boundaries. This
regime (data access, reduction, storage, response, will require supporting infrastructure such as protective
interpretation, aggregation, ownership, archiving). relays (e.g. voltage/frequency relays), metering, and data
collection. Payment for services provided by DG operators to
Regulatory Economic
DNOs to support the system must be provided, as well as
Legal / Operational
Start Up &Running
services provided by DNOs.
Environmental Avoidable cost Manufacture Data
Planning permit Payback period Security / Safetyof Equipment
Reliability / Power Quality C. ESI Operation and Financial Management
Qualify Operator

An appropriate environment that offers adequate financial

Investor Assessment incentives whereby the DG operator and DNO can offer
mutual assistance must be provided. Thus, consideration
Non Viable Viable should be given to establishment of an appropriate
Connect to Purchase Power
Invest in DG
commercial forum in which DG owners and DNOs can meet
DNONetwork fromDNO
to discuss industry matters affecting their operations.
Operate DGto meet
Load Shape

Sell Power
Any Excess
Yes DG meets No To overcome the above challenges and provide an
total Power
to DNO Power ? requirement appropriate environment to enable effective technical and
viable commercial operation of DG after deregulation, the
No following recommendations are proposed:
Yes Buy Short Fall
1) DG Definition: A definition is required of what
constitutes distributed generation. Such definition should
Fig.5. Assessing Viability of DG Investment provide a clear explanation of DG operators’ technical
and commercial boundaries within the geographical area
VII. CHALLENGES OF DG UNDER ESI of the DNO. This must be included in the electricity
DEREGULATION reform bill that will give legal authority to the
restructuring and unbundling of electricity industry. For
As countries all over the world deregulate and restructure example a DG owner may be restricted to a point-to-
their electricity industry; they are confronted with the point radial connection to serve demand requirement of a
challenges of setting up appropriate regulatory and properly recognized load (e.g. an industrial plant). In
contractual arrangement that accommodate and promote the consented cases, allowing for any excess energy
interest of DG embedded within the wider geographical produced and not required by the demand to be split or
boundary of a franchised local DNO [11]. In the process of passed on to the DNO network at a mutually agreed
deregulation of the electricity industry, the probable quality and time, and meet statutory requirements.

2) Legal and regulatory codes: Appropriate legal and
regulatory codes must be set up: These codes will be the The author wishes to thank Abimbola Odubiyi for
bases for legal contractual arrangements that govern the providing useful information and comments which have
interactions between a DG and a DNO. The codes that added value to this work.
ƒTechnical and commercial design codes such as
connection standard, metering and payment. REFERENCES
ƒProvision of ancillary services such as voltage
support, backup reserve, load management (DSM) [1] International Energy Agency (IEA), Energy Prices and Taxes –
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Department of Energy, September 2000).
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of SA Institute of Electrical Engineers, September/October, 2001, 44-

As Nigeria proceeds decisively with the deregulation of

the electricity industry and privatization of NEPA, it is
essential to keep abreast with and learn from the experiences
of other countries, and adapt these to the local environment.
Local experience acquired in the process must be well
managed and proposed outcomes implemented with a
delicate balance of competing factors, for maximum benefit.
A careful evaluation of local issues, concerns of DG owners
and the peculiarities of the development of Nigeria’s
electricity industry should be carried out. The challenges of
ownership, control and operation of transmission systems
operation (TSO), property rights and protection must be
worked out amongst all stakeholders. To make the overall
process of deregulation a success, a viable legal framework
must be developed that gives due weight to the benefits of
distributed generation.