Cost optimal energy sector planning: a Pinch Analysis approach

Abstract

Renewable energy sources can contribute to the increasing energy demand as well as reduction of green-house gas emissions and pollutants. It is desirable to find the optimum mix between renewable and non-renewable energy sources, based on carbon emissions or cost of electricity constraints. In this paper, a Pinch Analysis based method for allocating different energy sources to different demands of a region is proposed. The proposed approach determines the cost optimum mix of various energy sources. Applicability of the method is demonstrated through an illustrative case study of Lakshadweep Islands, India. These islands are too remote to have inter-connections with the mainland and depend on imports of oil for electrical, process, and transport energy requirements. The locally available renewable energy sources can be used to solve problems of energy security, higher energy cost, and environmental pollution. Additionally, the Government of India provides a significant amount of subsidy to supply electricity in Lakshadweep Islands. The proposed method helps in reducing the burden of subsidy significantly by appropriately utilizing locally available renewable energy sources. The proposed Pinch Analysis formulation consider energy as flow, cost of energy as quality, and minimizes subsidized diesel based power generation (formulated as resource). Based on the current acceptable price of electricity, the use of renewable energy sources leads to saving in the subsidy of 317.08 × 106 Rs./y and reduction in emissions from diesel generator set by about 58%. The policy implications for subsidy are also discussed in this paper and therefore, the work is useful to guide policy makers.