ECONOMICS OF DISTRICT HEATING. Martin Crane

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1 ECONOMICS OF DISTRICT HEATING Martin Crane

2 Gas CHP on heat networks - how to maximise and estimate carbon savings in operation Martin Crane - independent consultant. Carbon Alternatives Ltd martin@carbonalternatives.com

3 Carbon savings from gas CHP supplying heat Most economic sizing = (very nearly) maximum CO 2 saving network Estimating actual CO 2 savings from economically optimised CHP and thermal store 1 st part of paper focuses on benefits of economic optimisation of CHP and thermal storage 2 nd part of paper assess hourly CO 2 emission factors derived from 2016 grid data against modelled hourly CHP operation Same example DH scheme used in both analyses, predominantly domestic (mix of new and exiting flats) and a collage

4 CHP Economics

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7 CHP economics example with simple numbers Costs Gas 2p/kWh CHP O+M 1p/kWhe Income Electricity sales 4.5p/kWh Heat sales? p/kwh kwhe = kwh of electricity CHP efficiency electricity 33% heat 50% Cost of boiler heat, assume 80% boiler efficiency = gas cost / boiler efficiency 2/0.8 = 2.5p/kWh Resulting heat cost: For 1 kwh gas into CHP gives ⅓ kwh electricity ½ kwh heat Costs gas cost 2p = 2p O+M cost ⅓ = ⅓p Total costs = 2 ⅓p Income ⅓ 4.5p/kWh = 1.5p + income from heat Resultant heat cost = 2 ⅓p 1.5p = 0.7p Heat produced = ½ kwh so cost of heat = 1.4p/kWh

8 Electricity Export /MWh Electricity prices Studies tend to use single year round average electricity price. The reality is different : December Weekday CHP sizing based on single average electricity price for CHP does not lead correct CHP / thermal store size for optimum economics

9 CHP heat cost for electricity price and different CHP sizes 2 x 600kWe CHP flat tariff 2x 600kWe day / night 1 x 1487kWe CHP day /night 1 x 2679kWe CHP STOD tariff

10 Comparison of CHP options (highest NPV for each CHP size) CHP size 2 x 600 kwe 2 x 600 kwe 1200 kwe 1487 kwe 1999 kwe 2679 kwe Thermal store size m kwe Electricity tariff flat STOD STOD STOD STOD STOD STOD Heat production cost CHP and thermal store capital cost CO 2 emissions to supply heat load p/kwh k tonnes /yr For comparison boiler only heat cost 2.75p/kWh and the annual cost to supply heat 218k/year The initial CHP option only saves 20k/yr and the optimal CHP heat supply cost is saves 186k/year

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12 Common technical sizing metrics good guidance? CHP operates hours per year CHP utilisation over 60% Achieve HNIP requirement of 75% heat from CHP CHP size 2 x 600 kwe 2 x 600 kwe 1200 kwe 1487 kwe 1999 kwe 2679 kwe 3360 kwe Heat production cost p/kwh CHP utilisation 52% 51% 56% 51% 46% 32% 24% CHP hours run Proportion of heat from CHP 75% 74% 77% 82% 94% 91% 91%

13 Ref Prof Henrik Lund

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19 Thermal store Pic Future flexibility Storing elec emd charts 4DH slides

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22 Grid Carbon Intensity Economically optimised CHP/ thermals stores Will operate more in winter Will not operate at night Will operate at times of highest STOD tariff Hypotheses CHP will operate more at times of higher than average electricity emission factor / less CHP operation at times of lower than average grid emission factor. Data for operating generation plant for every half hour available from Grid operator source data for GridCarbon app.

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24 CHP operating patterns

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26 Assessment methodology Setup energypro model for predominately DH scheme serving mix of new and existing residential properties. Approx 1000 flats energypro setup includes costs etc to assess CHP operating economics. Calculate UK electricity emission factor for every half hour period for 2016 based on Elexon published data. Run energypro to mininise net heat generation cost for range of CHPs and thermal store sizes and electricity tariff structures. Take half hourly CHP generation output data from energypro Calculate CO 2 emissions displaced by CHP generation for every half hour of the year for each

27 Results emission factors of heat supplied from energy centre Electricity emissons factor Grid average for gco2/kwh Bespoke factors from 2016 half hour grid emissions 2 x 2 x kWe 600kWe kwe kwe kwe kwe CHP size Orignal Thermal store size m Boilers only CO2 emissions to supply heat load tonnes/yr Energy centre heat emissions factor g CO2/kWh Calculated electricity emissions factors g CO2/kWh CO2 emissions to supply heat load tonnes/yr Energy centre heat emissions factor g CO2/kWh Reduction in energy centre heat emissions g CO2/kWh factor vs 2016 ave emission factor 28% 28% 33% 35% 44% 42%

28 Emissions factor at times of CHP operation

29 Heat pump examples replacing CHP Replaced CHP with large central heat pump in energypro (assumed COP 3.5) Ran same analysis as for CHP, but STOD electricity tariff means heat pump preferentially runs at times of lowest power costs. Large thermal store allows more heat generation at times of lowest electricity cost Plant size not economically optimised a quick analysis to indicate trends Heat pump with 250 m 3 thermal store used electricity with an average carbon factor of 330 gco 2 /kwh Heat pump with 12 m 3 of thermal storage used electricity with an average carbon factor of 400 gco 2 /kwh. Average grid factor 352 gco 2 /kwh Thermal store makes heat pump heat lower carbon and lowers heat cost.

30 Emission duration curves for central heat pumps, with / without thermal storage Both options supply 100% of DH heat demand, but heat pump size not optimised

31 Danish example CHP / DH responding to electricity price 120 /MWh Elec price Industrial waste heat EfW 0 /MWh Electric boiler CHPs 6am 6pm

32 Thoughts on CHP lifetime Install now as economic and low risk Overtime install heat pumps and other low carbon heat sources CHP operating hours reduce over the years focusing on the short high value, high carbon benefit periods. Big CHP allow bigger CO 2 savings, scope for DH to grow and maintain good CO 2 savings Big CHP maximise electricity system benefits helping to minimise peak demands, benefits from capacity mechansium, Big thermals stores give improves scope and utilisation of waste heat sources, and intermittent sources

33 Concluding comments Economics must size CHPs and thermal store. Use a STOD tariff Big thermal stores add value good modelling can quantify this value CHP has electrical grid benefits Triads, capacity mechanism put an economic value on this. Gas CHP connected to DH delivers higher carbon saving than average carbon factors indicate. Key route to maximising CO 2 savings is to economically optimise CHP and thermal store size Not denying the carbon benefits from CHP are declining over time Great scope for hybrid CHP/heat pump systems both CO 2 and benefits The often forgotten point of DH is to utilise low cost, low carbon heat Change of subject Heat Networks Code of Practice being reviewed and we are seeking comments / extra referenceable data martin@carbonalternatives.com