DISTRICT HEATING: THE KEY TO UNLOCKING THE POWER GRID’S POTENTIAL TO RENEWABLE ENERGY

District heating (DH) plants in Denmark have supported the electric grid for decades with services from cogeneration (CHP) plants and, within the last decade, with services from heat pumps and electric boilers as well.

By John Flørning, Lead Energy Planner, Ramboll, Sebastian Wulff Holtegaard, Consultant, Ramboll, and Søren Møller Thomsen, Senior Analyst, Kamstrup

This article was published in Hot Cool, edition no. 2/2024 | ISSN 0904 9681 |

In the continued build-out of renewable energy (RE), the consequent increase in intermittent production has led to more hours, necessitating the curtailing of RE. In response, an increasing number of DH plants establish electric boilers to absorb the excess production, and to provide services to the grid. In 2023, it was publicly announced that Energinet will actively use electric boilers to balance the very short-term fluctuations in frequency.

DH systems offer great potential for improving robustness and energy efficiency, reducing greenhouse gas emissions, and integrating renewable and waste heat sources. In addition to the benefits of DH compared to individual heating, flexible DH systems can also support the power grid with balancing services by responding to price fluctuations and grid stability needs.

Electricity planning

In the power market, the marginal costing principle guides the dispatching of the plants. As RE (wind, solar, hydro) has the lowest marginal costs, these technologies are planned in baseload operation. Depending on the actual required capacity, other and increasingly inefficient power plants are dispatched with increasingly lower priority. Therefore, the hourly wholesale price of electricity is a good measure of the grid emission factor as the marginal units settle the power price.

Due to the intermittent nature of wind and, in particular, large-scale solar PV production, it is necessary to install a much higher capacity than the required peak production in the power system. Hence, in the hours when the peaking capacity is needed, there are not necessarily adequately high wind speeds for the wind turbines to operate at full load. Therefore, it will be necessary to operate dispatchable plants.

At other times, at high wind speeds, the consumption of electricity may be limited, and it is necessary to curtail the electricity. In this situation, the DH systems with thermal storage supplied from electric boilers can utilize the otherwise curtailed energy to benefit the power system and, of course, for the DH consumers.

At a high share of RE in the grid, there will be excess electricity production, and the power prices will be zero or even negative. Excess electricity must be either curtailed or utilized. Curtailing RE will have socio-economic costs, and the additional costs are paid by the consumers.

The prices in the power systems are settled every hour, and by planning the production one day ahead, it is possible to plan the production on the power plants with the lowest costs for the power system. Electric boilers or other flexible consumers are often necessary to avoid curtailing RE production.

In an energy system that relies on wind energy at low wind speeds, electricity must be produced from dispatchable sources, and the fuel may be green gas. In the Danish energy system, the gas grid is planned to be 100% renewable from 2030 due to the increasing production of biogas and the political decision that individual gas boilers should be converted to DH or individual heat pumps.

With the very high wind power capacity planned for 2030, it is expected that there will be many hours of excess production of renewable electricity. The electricity will be used to produce hydrogen (and from hydrogen green fuels for other sectors) and green gas, which will be added to the gas network and blended with fossil gas.

The longer-term planning is the day-to-day planning of the balance in the power system, which, among other things, considers expected production from intermittent renewable sources, required supplementing production from dispatchable sources (such as CHP plants), or the operation of units that can down-regulate the power system.

Heat pumps have stabilized the power system for years by planning production according to the day-ahead prices. As an example, if a storm from the West is expected in Denmark, the hourly day-ahead prices are expected to be low due to the abundant amount of wind in the power system. The consequence is that all DH companies plan to operate heat pumps at the same time and thereby absorb the expected excess power production.

The heat production can be supplied to thermal storage systems, which means that at increasing prices for electricity (meaning limited RE in the system), the DH companies supply heat from earlier stored heat and avoid production from boilers or other technologies. Seen from the power system, the production to thermal storage has the same effect as if it were a battery. Therefore, it is often referred to as a “virtual battery.”

In the intraday market planning, imbalances will occur for different reasons, such as unexpected changes in output from RE production, in particular large solar PV plants. To balance the energy system, the TSO procures different kinds of ancillary services, each with a specific purpose in the balancing of the grid. The main difference between these services is the time scale for the required service, as seen in Figure 1. The TSO always prioritizes technologies for balancing with the lowest cost. Examples of available technologies for the TSO are:

• CHP plants, incl. thermal storage for up- and downregulation
• Electrical batteries for up- and downregulation
• Heat pumps, incl. thermal storage for up- and downregulation. Upregulation requires that the heat pumps are planned in operation.
• Electric boilers, incl. thermal storage for up- and downregulation (upregulation requires that the electric boilers are planned in operation)

Increased renewable integration drives the need for technologies that can balance the system. Flexibility in electricity use is important to reduce the need for balancing services. Heat pumps, electric boilers, and the production of green hydrogen are highly flexible technologies since thermal storage can be included, which allows for time-independent electricity consumption and heat supply.

Presently, individual heat pumps have limited flexibility since they need to be in operation regardless of the electricity prices and can consequently put high pressure on the electricity system, requiring that in-efficient fossil-based power plants be operated. Therefore, in general, individual heat pumps should be avoided unless they show a clear socio-economic benefit compared to DH.

Figure 1: Ancillary services used by Energinet. Source: Ramboll, but inspired by Energinet

The figure above shows the different tools for the TSO to maintain the balance in the power grid, in the very short-term: Fast Frequency Reserve (FRR), to the longer-term: Manual Frequency Restoration Reserve (FRR). Services can be either manual (m) or automatic (a).
In the two extremes in the figure, some services are required for the ultra-short period (FRR as indicated in the above figure), whereas others are used for the longer period (mFRR as indicated in the figure).
While electrical batteries are very suited for very short-term regulation, they are expensive to install, have conversion losses, require space, and have a limited energy content. Electric boilers connected to DH systems with thermal storage cannot provide services in the very short term (milliseconds) but can provide services in the FFR market (short term) and the longer term. Heat pumps are often planned in the day-to-day planning. Electric boilers can also operate in the longer term. Due to the high flexibility, the limited costs, and the limited requirements for space, electric boilers are a very suited and cost-efficient technology for regulating the power system.
The following table shows the capacity the TSO plans to use in the intraday planning in the western part of Denmark (DK-West) to maintain the balance in the energy system:

Table 1: Balancing tools in Denmark West, MW

From Table 1, it is clear that electric boilers play a significant role in the short-term balancing of the system, as seen in the allocated capacities.

Alternative to electric boilers

The question is, what would be the alternative to balance the renewable power system if electric boilers were not available? Regulation on electric boilers serves two purposes, partly to absorb excess production of electricity, and partly to provide short-term balancing between production and consumption.

In an energy system without any renewable sources, the short-term balance of the system is upheld, with very short-term fluctuations in production from the dispatchable power plants. This is an automated procedure where the plant output is automatically regulated based on the frequency in the electric system. In an energy system almost entirely supplied from renewable sources and with limited production from dispatchable energy, it will be more difficult to keep the short-term balance. In this situation, power plants cannot adjust, and the frequency must be balanced from other sources, such as electric boilers or batteries.

In the Western part of Denmark, which has a very high renewable energy share, the TSO purchases more than 200 MW of short-term services from electric boilers (see Table 1 above). A likely alternative would be to purchase a similar capacity from batteries. The very clear market signals (the hourly electricity prices) catalyze an increasing amount of flexible production/demand to produce or use electricity.

Without clear signals, the flexible use of electricity is not activated, and the need for balancing services would likely be significantly higher than the 200 MW since the active balancing should handle all imbalances alone without assistance from other technologies (flexible use).

Flexibility is important for the electric grid since electric boilers and other flexible sources in this situation help the electric grid and don’t add further costs to the grid.
Without electric boilers, the balancing of the grid will be significantly more expensive.

Heat planning

Unlike individual buildings, DH with heat storage can utilize multiple efficient and RE sources cost-effectively, such as waste heat, heat from large-scale heat pumps, CHP units etc. This is what justifies rather large investments in DH networks integrating the buildings. Furthermore, being connected centrally, buildings can not only use RE via the DH system but also offer significant potential to support and balance the power grid.

At low forecasted wholesale prices for electricity (equivalent to the high share of renewable energy in the grid), heat pumps and potentially also electric boilers are planned to operate. In addition, electric boilers will stabilize the grid frequency.

At higher prices on the wholesale market (limited RE in the grid mix), where additional power is needed from dispatchable power plants, heat pumps are disrupted, and CHP plants are called into operation. Very high electricity prices indicate that the most in-efficient fossil-based power plants are in operation to serve electricity demand, which cannot be disrupted. Therefore, electricity should be avoided as a single source for heat production, and heat should instead be produced from CHP plants.

Conclusion

DH systems can provide very cost-efficient balancing of the power grid, which benefits both DH consumers and the TSO. The Danish experiences show that DH networks ensure a cost-efficient build-out of RE by ensuring that a larger share of the produced electricity can be utilized instead of being curtailed at a cost. Without the shorter-term services delivered to the grid operator, it will be much more expensive to balance the power grid, and the question is whether it is possible at all in a fully RE system.

For further information, please contact:
John Flørning, JNF@ramboll.com