by Linda Bertelsen

The present European energy crisis with both very high gas and electricity prices show that district heating network companies having multiple heat sources and storage systems can keep heat price low. District heating systems able to use various waste- and ambient heat sources and produce renewable electricity can protect consumers from energy poverty.

To achieve resilient heat price, the normal reserve and peak load capacity should be technologies complementing the normal base low technologies. If, for example, the present base load technologies are dependent on low fuel- or electricity prices, the complementing technologies should be dependent on high electricity prices like CHP plants or own renewable electricity production units like wind turbines or solar PV.

By John Tang Jensen, BEIS, and Morten Jordt Duedahl, DBDH


Many district heating network companies manage to keep heat prices on the same level in the present European energy crisis with increasing fuel and electricity prices. For consumers and the national economy, it can be essential to avoid heat prices following increasing fuel and electricity prices, which can lead to recession, fuel poverty, and affect employment. This article investigates and discusses how it is possible to keep heat prices on the same level when fuel and electricity prices go up, which can inspire the design of future district heat source solutions. The story is about using different technologies complementing each other, often called a Smart Energy system or integrated energy solutions.

Original Heat source design

Most district heating systems operate with a base load source, which provides the main heat delivery capacity and a reserve- and peak load source, which provide capacity able to produce heat when the largest baseload capacity is not running and additionally provide capacity for the very few days in a year, when it is extremely cold, and peak load capacity is needed. The reserve- and peak load capacity deliver supply security to consumers and additionally ensure low investment costs, as the combination of technologies is cheaper per MW-capacity compared to expensive base low technologies.

Originally district heating networks were designed around one large baseload heat source like coal CHP, gas CHP, waste incineration CHP, biomass CHP, and in a few cases, industrial waste sources. The baseload capacity initially delivers between 50 % and 80 % of capacity (MW) but up to 95 % of the total heat demand (MWh). The share varies from network to network and depends on local conditions and available heat sources. Figure 1 shows an example of the original design.

Figure 1: Original heat source design

The reserve and peak load capacity has typically the size of the largest base load unit and is often an oil or a gas boiler. If only one base load unit is established, it is usually designed for 70 – 80 % of total capacity needed, optimizing investments.

If the base-load capacity is split between more units, the total base load capacity can be well above 80 % of capacity demand. Then reserve and peak load capacity is only needed in the same size as the largest base load unit.

By combining a CHP plant and reserve boiler capacity, the reserve capacity will also ensure the heating price is not getting too high when electricity price and earnings from power sales are low. Figure 2 shows how the combination of a natural gas boiler and a natural gas CHP plant can ensure the heating price is not too high.

Figure 2: Marginal heat price natural gas technologies. This figure shows that heat production will be based on a natural gas boiler when electricity prices are below 140 £/MWh and on CHP production when above. It is an example including O&M costs and costs for Emission Trade Scheme (ETS) with an estimated 68 £/ton CO2. Combining the two technologies ensures that the heat production price will never exceed the natural gas boiler price.

Unfortunately, the system in figure 2 does not always ensure a low heat price because both the electricity price and the heat production price on the boiler depend on the natural gas price. If the natural gas price goes up, the heating price from the boiler also goes up. The heating price can only be maintained low if electricity price increases as well, which often is the case in fossil natural gas-based electricity market systems, but not necessarily in an electricity system dominated by renewable electricity sources like water and wind turbines and PV panels.

Using technologies designed to produce heat 2000 – 4000 hours (middle load) was not part of the original heat source design. It only emerges if alternative heat sources like industrial waste heat is found and established or if local authorities choose to build waste incineration plants in networks initially having fossil CHP. When waste heat or incineration deliver heat cheaper than fossil CHP, the CHP unit turns into middle load capacity if the heat network is not expanded, which makes heat price less dependent on fossil prices.

Present Heat source design

A high amount of renewable power production from wind turbines and solar PV plants and the day-ahead electricity market changes how heat sources should be designed for district heating networks. When the initial heat source design is kept, and the fossil CHP plants will produce less heat when electricity prices are low. This makes the reserve and peak load boilers produce more heat to cover the decreased heat deliveries from the fossil CHP plant. The heat prices then go up. Fossil CHP units can no longer ensure low heat prices, and the district heating companies must look for other solutions and low-price base load sources than fossil CHP providing low heat prices when the electricity price is low.

Heat storage can optimise the income from selling electricity from CHP plants by turning heat production down and electricity production up when electricity prices are high and vice-versa when electricity prices are low. Heat storages also level out heat demand and make production time independent of heat demand. Heat storage is now beneficial for district heating networks able to sell flexibility to the electricity market but is not enough to prevent heat prices from going up.

The obvious choice is to find a heat sources where the heating price is not dependent on the natural gas or the electricity price. This can be a biomass boiler or -an industry’s high-temperature waste heat source. Both are limited heat sources not available for everyone and everywhere, but if the district heating network can get access, the source can be important for ensuring low heat prices. Figure 3 shows the variable heat price for gas technologies combined with a cheap waste heat source (25 £/MWh-heat).

Figure 3: Marginal heat prices gas technologies combined with a waste heat source. The waste heat source is now the base load technology. The CHP plant is a sort of middle load technology running if the waste heat source cannot deliver enough heat or if electricity prices are very high – above 200 £/MWh. A storage system can optimise income from a CHP plant, making the running time independent of heat demand. This ensures a low heating price. Still, both biomass and high-temperature waste heat sources can be limited sources only available for few DH networks in the future.

The design of heat sources could benefit from a heat source delivering low heat prices when electricity prices are low. A heat pump using ambient[1], infrastructure[2] , and/or low temperature waste heat sources, that can be found almost everywhere, could deliver this. Figure 4 shows how the marginal heat production price develops compared to natural gas sources

Figure 4: Marginal heat price natural gas technologies combined with electric heat pump. The heat pump delivers a heating price cheaper than natural gas CHP if the electricity price is below 175 £/MWh, and the heating price will not be higher than around 55 £/MWh-heat at this point. In this case, the heat pump should be designed and used for base load when electricity prices are below 175 £/MWh. If electricity prices get above 175 £/MWh, the CHP plant will deliver the main base load capacity. This combination usually can ensure low heat prices.

The present energy crises in Europa due to the Russian/Ukrainian war and the following very high natural gas and electricity prices at the same time show that this solution can also increase the heating prices. If the gas price is 150 £/MWh-gas, the electricity price needs to be below 330 £/MWh-electricity before the heat pump is cheapest. Most importantly, the heating price can go up to 100 £/MWh-heat if both natural gas and electricity prices increase to this level, which means there is no heat price security in example figure 4. Low-price waste energy at high temperatures or a biomass boiler is needed, as shown in figure 3.

Future heat source design without fossil fuels and biomass

The zero carbon targets may not make the above solutions possible because fossil CHP may not be accepted, fossil boilers may only be acceptable for reserve load purposes, and biomass may not be allowed or unavailable. Figure 5 shows the possible scenarios without fossil sources and biomass. In this example, a waste heat base load source is available, for instance, from a waste incineration plant with a fixed negotiated heat price.

Figure 5: Marginal heat price Heat pump and waste heat sources. If the electricity price is above app 78 £/MWh, it is better to purchase waste heat than heat production on the heat pump. Depending on the power price level, both technologies can be base-load heat supply sources. Heat price will, in this example, not at any time be higher than the negotiated waste heat price and often lower in times with low electricity prices.

In a situation where waste heat sources are unavailable and heat can only be produced by using a heat pump, the heat price risk is high and almost at the same level as the pure natural gas system shown in figure 2. It is, though, very much dependent on the reserve- and peak load technology combined with the heat pump. The heat price when combining a heat pump and a gas boiler can get very high, and the solution is not ideal for heat price security.     

The only way to equalise the increasing costs of using electricity for a heat pump when prices go up is to produce renewable electricity simultaneously. Suppose the district heating company dependent on heat production from a heat pump instead of renewable CHP, own a wind turbine at a similar size regarding electricity capacity. In that case, the costs for electricity will then be equalised by revenue from this wind turbine. Heat price will then only be dependent on investment costs for both the heat pump and wind turbine, and if the wind turbine is not situated on the same site as the heat pump, also electricity tariffs.

Marginal heat price can be much lower than the 25 £/MWh for waste heat in the previous examples, but higher investment costs, of course, must be included when compared. Figure 6 shows an example of a comparison of a natural gas reserve and peak load boiler, a heat pump alone, and a combined wind turbine and heat pump. The results in this example can vary depending on wind turbine size, compared to heat pump capacity, production profile of the wind turbine and the heat pump, storage capacity, dependency on capacity, etc.

Figure 6: Marginal heat price heat pump, gas boiler, combined heat pump, and wind turbine. The figure shows it can be very feasible to combine a heat pump with a wind turbine delivering electricity to a heat pump directly or, in this case, by using the public power grid. The electricity price needs to be below 40 £/MWh before it is feasible to stop the wind turbine and purchase electricity directly from the grid for the heat pump. If a heat pump needs to run more than the wind turbine produces electricity, the heating price will follow the purple line.

How to combine heat sources in future

The above examples regarding which heat source is the best compared to electricity and fuel prices show that almost all heat sources can deliver low heat prices if the price conditions are right and heat storage is included in the system for flexibility reasons.

Biomass, electrical boilers, and to some extent, natural gas CHP plants may, in the future, be middle load capacity for heating systems in years with average and low electricity prices. Co-production[3], infrastructure, ambient, and waste (surplus)[4] heat sources may be base load. This will switch in years with high electricity prices for the heat sources combined with a heat pump, which then will be middle load. This delivers a flexibility to the electricity system and to some extent disconnects heat price from varying fuel costs and electricity prices.

Heat pumps using ambient heat as a source will have middle load capacity in heat networks with heat from waste incineration, infrastructure sources, and waste heat from the industry as base load.

Future base load heat sources will typically be purchased from a heat supplier. Middle load and peak load sources will typically be developed and owned by a district heating network company.

Figure 7 shows an example of a new heat production design.

Figure 7: Heat production design – can vary depending on local conditions.

The size in capacity (MW) and delivery (MWh) may vary dependent on accessible heat sources, available capacity, reliability, fuels, and electricity prices. To get low average marginal heat price from the technologies the total sum of capacities for base- and middle load technologies may need to include needed reserve and peak load capacity as well. This will increase the investments but decrease use of often expensive fossil fuels in reserve- and peak load technologies

In the end, a district heating network can end up having more capacity than needed, but this “extra investment” in capacity will be levelled out by having different options dependent on the market prices the sources are operating on. The heat price can always be optimised if other options are available, and a heat storage is included to absorb cheap heat produced when the market price is best.

For district heating network companies, the difficulty is to get this financed and, at the same time, avoid too high heat prices from a depreciation of investments in multiple technologies in the first 10-15 years. It must be recognised that heat networks and heat source technologies have a long lifetime—at least 30 years for heating networks. If the -producing technologies are kept warm when not running and maintained properly. Most technologies have a lifetime above 60,000 hours of the entire load operation. The lifetime in years then can variate from 15 up to 30 years. To keep the heating price low, it should be allowed to depreciate the heat production technologies according to actual total load hours running time instead of linear annual depreciation independent of running time. This will ensure low heating prices according to used heat sources and technologies.

It is better to have many technologies with different heat price profiles designed to use heat sources optimal compared to a few heat sources with price dependency on fossil fuels and electricity.

The district heating network company should own ambient infrastructure, reserve, and peak load heat source technologies to ensure supply security and competitive heat price if base load waste heat sources are purchased from external sources. Base load heat sources like heat from waste incineration and other co-production sources should be designed for 24/7 heat production to minimise capacity investments and ensure low heat prices, including capacity costs.

For further information please contact: John Tang Jensen, JohnTang.Jensen@beis.gov.uk Morten Jordt Duedahl, md@dbdh.dk

[1] Ambient Heat sources: Air, sea, rivers, lakes, solar, ground water or geothermal sources

[2] Infrastructure: Wastewater treatment, sewage, water pipelines, mines, underground railway, electric transformers, gas compressors, etc.

[3] CO-production: Waste incineration, Nuclear heat, Data centre and other industrial sources running 24/7

[4] Waste (Surplus): Unreliable surplus heat from industry running in daytime, working days, in seasons, etc.

“Multiple heat sources protect consumers from energy poverty” was published in Hot Cool, edition no. 7/2022
Multiple heat sources protect consumers from energy poverty
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Meet the authors

John Tang Jensen
Policy adviser departement of Energy Security and Net Zero
Morten Jordt Duedahl
Business Development Manager, DBDH