Grenaa District Heating Company invests 7.25 million € in solar cells to cover its electricity consumption, and, at the same time, the excess electricity will be sold to the grid. Next step could be a wind turbine to produce additional electricity for heat pumps and electric boilers and to sell more electricity to the grid.
By Joel Goodstein, Photograher: Jesper Voldgaard
In recent years, Grenaa District Heating (DH) Company’s heat production has undergone a green transformation, which has resulted in a combination of wood-chip boilers, solar heating, and heat pumps that supply heat to 5,650 consumers.
– In 2020, we reached a situation where we cover the total annual heat demand completely with green heat produced at our different plants. But simultaneously, we faced a negotiation on a 10-year PPA agreement for buying electricity. We wanted budget security for our electricity expenses in the form of a fixed price agreement. But if someone could get a good deal out of entering a 10-year contract with us, then perhaps we should produce the electricity ourselves, and enter into a fixed price agreement with ourselves, says director Søren Gertsen, Grenaa DH Company.
So, in 2021 a decision was made to establish a solar (PV) cell plant at Grenaa DH Company – essentially an investment of 4.7 million €. In October 2022, 40,000 square meters of photovoltaic (PV) were put into use—expected and guaranteed annual electricity production: 6.2 million kWh.
– A guarantee agreement with our supplier states that the supplier will install more PV cells at its own expense if we do not reach the guaranteed production, says Søren Gertsen.
However, only a few suppliers wanted to bid for the task.
– Together with COWI, we invited four suppliers of PV cells to submit offers. Only two ended up bidding for the job, and one has since gone bankrupt. On the other hand, we have been delighted with our supplier, and we are planning an expansion of our PV cell capacity during 2023 so that we reach an annual production of 10 million kWh in 2024, says Søren Gertsen further.
13.5 € per MWh heat
The total investment for solar cells will be 7.25 million €. The gain is a production price for 1 MWh of the heat of 13.5 € when production takes place with a heat pump.
The calculation looks like this: The electricity production price is 47 € per MWh. It must be divided by 3.5 due to the COP factor in the heat pump. This gives a heating price of 13.4 € per MWh of heat. Only 2 € per MWh will be added for heat pump maintenance.
– A heating price of 13.5 € per MWh is very low, not least when compared to natural gas, which has, in periods, led to heating prices of up to 135 € per MWh, says Søren Gertsen.
He also expects that Grenaa DH Company will be able to sell up to 2.1 million kWh of electricity per year. Income from electricity sales will reduce the heating price.
– But for us, it’s not primarily about making money on the electricity market; the most important thing is to keep the heating price down because we can produce our own electricity, he says further.
The prerequisite for the investment is a calculation with an electricity price of 0.12 € per kWh when sold at Nord Pool.
– The electricity price fluctuates significantly, but in the past year, we have seen very high electricity prices, up to 0.4-0.5 € per kWh. We have set a conservative and cautious price as the basis for our calculations. We have a 25-year mortgage, so that is our repayment period, and it is the advantage for district heating companies that we can think about the long term, which helps to minimize the risk of the investment and thus the heating price, says Søren Gertsen.
An essential prerequisite for a good business case is that you can operate with net billing for the part of the electricity you use yourself, which means that you do not pay net tariffs.
Windmill is on the wish list.
The PV cells will be able to cover the electricity consumption for heat production at Grenaa DH Company in summer, where at the same time, electricity can be sold to the grid. In winter, it will be necessary to purchase electricity. At least for now. Because in 2023, an expansion of the PV plant will be put into operation – and in the long term, a 2 MW wind turbine may have to be established in Grenaa.
– We have started discussions with the municipality, which must grant permission for a wind turbine. We are looking to buy a used German wind turbine of 2 MW, which will increase our electricity production so that we become even more self-sufficient. With PV cells and a wind turbine, we can produce electricity more days a year than just with the sun, says Søren Gertsen.
Today, wood chips make up approximately 74% of the heat production in Grenaa. In the long term, that share must be reduced to approximately 50% as a consequence of own electricity production. On the other hand, the share of heat production from heat pumps based on surplus energy must be increased.
– We want to reduce heat production from wood chips and increase heat production from heat pumps and perhaps a future electric boiler that uses our own electricity. Less use of the chip boilers will have derived benefits in the form of less wear and tear and maintenance, thus an extension of life in addition to saved costs for chips, says Søren Gertsen.
If the plan goes ahead, it will mean that half of the heat in the future will come from heat pumps, solar heating, and electric boilers. And that Grenaa DH Company, viewed over a whole year, covers all its own electricity consumption plus a little more.
Søren Gertsen estimates that other heating companies will benefit from establishing their own production of electricity, even though several factors must be considered carefully, factors which can determine whether a business case is sustainable or not.
– We have been favored by several factors, one of which is that the land where we established the PV cells was already zoned for business. But the negotiations with the electricity network company are probably the part of the process that has required most time and resources. We also have a tax status, so we don’t have to pay tax on our electricity sales, even though we are, in principle, liable to pay tax. As a heat producer, electricity production and sales are a new territory for us – both legislatively, technically, and commercially – so you should expect to use expert assistance along the way. I don’t know if all district heating companies will be able to gain from their own electricity production, but I think that many more than today would, says Søren Gertsen.
5 good tips
- Find a suitable area – preferably a business area (with an approved local plan).
- Apply for a commitment to net settlement (equivalent to the Danish Energy Agency).
- Have a tender document drawn up – with a guarantee for production.
- Involve the network company as early as possible.
- Be aware that financing must be done with a mortgage loan.
Grenaa Heating Plant
Primary production facilities:
- Two wood chip boilers: 38 MW
- Solar heating 1: 8.5 MW
- Solar heating 2: 14.5 MW
- Air/water heat pump: 4.5 MW
- Solar cells: 6,200 MWh of electricity annually (from September 2023, 10,000 MWh is expected annually with the expansion of solar cells).
Planned and on the wish list:
- Utilization of surplus heat from the neighboring company De Danske Gærfabrikker (The Danish Yeast factories) – which will be able to supply 4 MW of surplus heat around the clock, corresponding to 30,000 MWh of heat – via a water-water heat pump.
- 2 MW wind turbine – awaiting approval from the municipality
- 10 MW electric boiler – which can utilize its own electricity production.
- New large business customers at the Port of Grenaa
Source: Søren Gertsen, Grenaa Heating Plant
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