06 March 2015

Study Quantifies Benefits from Beyond-Line-of-Sight use of UAVs

AeroVironment Puma being hand-launched
Photo: Sgt. Bobby Yarbrough - http://www.marines.mil/Photos.aspx?igphoto=2000010661 Crop of 130304-M-DE426-001.JPG. Licensed under Public Domain via Wikimedia Commons.
Andrew Shelley Economic Consulting Ltd teamed with Aviation Safety Management Systems Ltd to quantify the potential economic benefits to New Zealand from allowing beyond-line-of-sight use of Unmanned Aerial Vehicles (UAVs) for pasture management, forestry, and monitoring electricity infrastructure. The report, commissioned by Callaghan Innovation, estimates that benefits to New Zealand could be in the order of $151m - $189m per year.

The Civil Aviation regulatory framework in New Zealand currently requires the pilot of a UAV to maintain visual contact with the aircraft at all times, or otherwise to have an observer who maintains visual contact, to ensure that appropriate action can be taken to avoid collision with any manned aircraft. Beyond-line-of-sight use provides opportunities for additional economic benefits to be realised, but that will require additional measures to be in place to ensure that collisions do not occur. Research and practical experience suggest that line of sight is restricted to a distance of from 500m to approximately 1.4km.

The largest gains from beyond line-of-sight use of UAVs arise in the forestry sector, where the use of UAVs for pest and disease monitoring and control has the potential for gains of at least $72m-$95m per year. The nature of forest plantations is such that line-of-sight use of UAVs is highly restricted and little benefit can be gained. When beyond-line-of-sight use is adopted, benefits from enhanced control of Dothistroma in radiata pine plantations could be as much as $69m per year, and improved control of the eucalyptus tortoise beetle could generate a further net benefit of $26m. Control of other pests and diseases would generate further benefits.

The gains from UAV use in pasture management are potentially very large, but the majority of those benefits can be obtained from line-of-sight use. Given assumed high take-up rates in dairy, but relatively small farm sizes that can be covered relatively efficiently with line-of-sight operation, the gains from beyond-line-of-sight use in dairy are estimated to be approximately $29m per year. Sheep and beef farming is assumed to have limited take-up rates (approximately 20% of farms), but the much larger size of these farms means that the gains are larger at an estimated $38m per year.

The use of UAVs in electricity infrastructure inspection allows for more frequent inspections, better targeted maintenance and reduced outage times. Reduced outage times on the electricity distribution system could provide economic benefits to consumers of from $4m to $19m per year. Reductions in the cost of maintenance would yield approximately another $7m per year. Additional safety benefits occur from avoiding having inspections conducted by low-flying helicopters and reducing the amount of time that linesmen may have to work at height, but these have not been quantified.

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24 March 2014

ASEC Calculates Value of Pulse Energy to Buller Consumers

Buller Electricity Ltd (BEL) is the small trust-owned electricity distribution network serving the Buller region. Andrew Shelley Economic Consulting Ltd (ASEC) was retained by BEL to estimate the value to BEL's consumer-owners of the company's ownership stake in Pulse Energy.

Frequent congestion or constraints on the transmission lines providing power to the region means that retailers operating in the area face high levels of wholesale electricity price risk. ASEC's analysis considers the risk management options that are available to a retailer, and how this leads to a regional retail electricity market. Limited risk management options for those retailers without generation increases risk and is likely to reduce competition,

Pulse Energy entered the retail electricity market in Buller region after Buller Electricity entered a recapitalisation agreement with Pulse Energy in 2010. BEL currently owns 59.47% of Pulse Energy. In the space of two years, Pulse Energy gained a market share of over 25% of Installation Control Points (ICPs), and currently maintains a market share of 23%-24% of ICPs. The process of competition would be expected to result in lower retail prices, providing BEL's consumer-owners with a benefit that is unlikely to have occurred absent the entry of Pulse Energy.

The actual market share of retailers is known, as are their actual prices. Estimates are developed of the market share and weighted average retail price that might have prevailed but for the entry of Pulse Energy. Comparing this "counterfactual" weighted retail price with the actual retail price provides an estimate of the benefit per kWh. Average annual loads for consumers on the BEL network then allow the calculation of an annual benefit. This is converted to a net present value over the period 5-15 years, using a social discount rate. The period 5-15 years is the timefame over which independent generation might be expected to enter the regional electricity market, providing opportunities for retailers to hedge their exposure to transmission constraints.

A copy of the ASEC report can be downloaded from the Buller Electricity website here.
View the Buller Electricity press release here.

09 February 2014

ASEC Report finds Benefits from Distributed Generation and ACOT Payments

A new report by Andrew Shelley Economic Consulting Ltd (ASEC) finds that distributed generation (DG) provides significant benefits, and that Avoided Cost of Transmission (ACOT) payments made to distributed generation embedded within distribution networks also provide benefits. ACOT payments are made to generators embedded within a distribution network and which generate at peak periods, thereby avoiding transmission charges based on peak.

In November 2013 the Electricity Authority issued a "working paper" which, in essence, claims that there are little or no benefits obtained from distributed generation that is embedded within distribution networks, and indicating that such payments should be eliminated. Andrew Shelley Economic Consulting Ltd (ASEC) was retained by the Independent Electricity Generators Association (IEGA) to examine the Authority's analysis and, where relevant, to provide estimates of benefits derived from distributed and embedded generation and from ACOT payments themselves.