VALUE OF DISTRICT HEATING SOURCE DESIGN AND STORAGE

The advantages of having a district heating system for heating buildings are multiple, and this article investigates investment benefits compared to individual solutions and how heat source design, including storage, can minimise investments and costs by combining different fuels, technologies, and sources.

By John Tang Jensen, District Heating Specialist

Published in Hot Cool, edition no. 6/2024 | ISSN 0904 9681 |

Introduction

Heat source design for district heating can save investments compared to individual heat source design in four different ways:

• Reducing extra individual capacity need
• Reducing capacity demand
• Reducing cost with classic heat source design
• Reducing costs by combining technologies

In this article, benefits from different heat source designs are made by an example, and it is additionally investigated what influence heat storage will have on both investments and on heat production price if the storage is used to optimise the costs for electricity by using a heat pump, an electric boiler, and income if using a natural gas combined heat and power (CHP) unit. The following standard data are used to keep the comparisons simple: Table 1 shows basic data.

Table 1: Basic scenario parameters. Investment data from the Danish Technology catalog.

A temperature curve for Manchester, which is a typical UK urban area suitable for district heating, is used. The chosen year (2020) shows only 4 days with an average temperature below 0 °C. How low the temperature can get in cold years is important when it comes to choosing the maximum capacity of equipment.

In the above example, a 12.0 kW air-to-water heat pump unit is chosen for the individual demand, which is above the maximum demand on the coldest day (11 kW) in the example. If the temperature is lowered by an average of 10 °C, the 12.0 kW capacity still covers days with average temperatures at – 10 °C. For the same reason, the capacity demand for the district heating network is chosen to be higher than the 2020 temperature curve requires.

For the district heating capacity design, it is for the security of supply reasons expected that reserve capacity is included and can cover if the largest unit is falling out of production.

The investment prices and technology lifetime are all based on Danish Technology Catalogues made by the Danish Energy Agency and converted to British Pounds Sterling. It is assumed that investment costs in the UK are the same as in Denmark. If investments are higher, the benefits of establishing district heating networks may be less significant.

When it comes to CHP production, the investments should be shared between the heat and electricity sides, which will reduce the investment costs paid by the heat side. But if the district heating company 100 % operates the CHP plant independently, then the full investments, which is the case in these calculations, are included in the heat side costs. The income from selling electricity is then used to reduce the costs of producing the heat.

A production model is developed for calculating heat production costs (OPEX) without and with heat storage, including a strategy for producing the heat as cheaply as possible. Daily, the technology with the lowest hourly heat production prices is chosen first. If storage is included, the model allows loading the storage at low heat prices and unloading it in hours at high heat prices. The model without storage can only produce the daily needed heat demand, but the technologies with the lowest heat production price are preferred first.

Summary and conclusion

Table 2 shows investments in an individual heat pump solution (105 million £) compared with six different district heating source designs, from a basic design to a waste heat source design combined with a heat pump and a storage tank.

Delivering heat for households in an urban area around Manchester shows investment savings if a district heating network is established. The investment level can be kept at the same low level even if more technologies are combined and a heat storage system is added (Storage is added in the last three columns).

Table 2: Four ways to reduce investment costs for heating buildings with district heating network systems. (HP= Heat pump, WH=High-grade Waste heat and CHP=Combined heat and Power heat sources)

According to the example, total investment costs can be reduced by between 32% and 45% by establishing district heating networks and using classic or combined heat source design compared to an individual heat pump solution.
The saved investment costs compared to individual solutions on the identified ways to reduce investments are calculated to be 8.1% regarding saving the extra individual capacity, 24.0% by reduced capacity demand, including heat network investments, and 7.0% by making a classic heat source design.

The investment in heat source capacity by combining more technologies is almost on the same level as the classic design, as shown in the last four examples (columns). In the last three heat source designs, a heat storage capacity of 200 MWh (3,450 m3) is combined. See also tables 3 and 4 for more details.

The OPEX cost comparison clearly shows that combined technologies, including heat storage, can reduce heat price costs significantly from a price of around 30 £/MWh to a price below 16 £/MWh. The reason for this is the possibility to choose operation on different technologies in hours where electricity prices result in very low heat prices.

This result is important because society additionally gains value from this by reduced electricity prices, reduced electricity curtailment from wind turbines and solar PV, saved investment in power grids, saved investments in renewable power production capacity, and reduced balancing costs and investment costs for the security of supply in power system.

Reducing extra individual capacity

When an individual heating solution is established, the heat source capacity must be able to cover demand on the coldest day and hour during the year and heat the hot water immediately, which often requires 25 kW-heat capacity or within an hour to heat a water tank. In our example, the capacity for individual supply must be at least 11 kW.

To ensure capacity demand is covered, the installed equipment is chosen to be the size just above the maximum capacity demand, which in our example means the heat pump capacity is constructed at 12 kW-heat, which is (12-11)/11 = 9.1 % above needed capacity.

This extra individual capacity investment is not needed the same way when a district heating solution is established because a peak and reserve load capacity deliver the security of supply. If, instead, an 11 kW capacity could be installed, the investment would totally be 8.5 million £ lower, which is 8.1 % lower than the original individual heat pump investment. See Table 2.

Reducing capacity demand

District heating systems are not affected by peak load hot tap water demand the same way as individual heat pumps because households in a heating network do not use hot tap water at the same time. The stored energy in the district heating network water can deliver the needed energy in peak load hours either by reducing the forward temperature momentarily or by increasing the forward temperature a couple of hours before the peak load hour occurs.

Figure 1 shows a capacity duration curve for Manchester. The heat production capacity demand for one household is compared with the same need for capacity in a district heating system, including hot tap water and heat loss.

Figure 1: Heat production capacity demand district heating and individual heating per dwelling

In our example, the production capacity in the district heating system only needs to be 4.0 kW-heat compared to 11.0 kW-heat for the individual household. The reason is that the district heating system only needs to deliver average capacity demand on a daily basis compared to an individual heat pump delivering on an hourly basis.

Theoretically, this saves 61.6 million £ investments in individual heat pumps or 59% of investments if the individual heat pump would have been 4 kW instead of 11 kW. This saving, though, is theoretically because of the heat piping network, and each household needs a district heating unit, which requires investments. The district heating capacity for producing heat, including heat loss, is significantly cheaper than individual technology.

The network investments are calculated to be 34.8 million £ and unit investments in production technology, including household units, are calculated to be 37 million £, and then the combined savings by implementing a district heating solution can be calculated to be 25.2 million £, which is 24% lower than original individual heat pump design. See Table 2.

Reducing costs by classic heat source design

The basis for designing a heat source system for district heating is that security-of-supply requires that reserve load capacity should have a size that covers the largest base load unit if it, for some reason, falls out of production. If the heat source design is made carefully, investments in heat sources can be optimised.

Figure 2 shows the classic district heating heat source design principle, dividing the capacity into base, peak, and reserve load capacity.

Figure 2: Classic heat source design

When the demand curve is established, the last 20%—30% of heat production capacity demand often only covers 3- 5% of needed production.

From an investment point of view, it then can be an idea to establish base load capacity covering around 70 – 80% of capacity demand and use cheap boiler technology for peak-load and reserve load capacity. By reducing the base load capacity, investments are saved for both base load capacity and the reserve and peak load capacity, which only need to cover up to 70 – 80% of capacity demand. In our example, the 70% line can be seen in Figure 3.

Figure 3: Capacity demand curve example – 70% of demand

The demand above 70% of capacity is 2.9% of total demand. Table 3 compares the differences between individual heat source investments and investments in a basic or classic heat source design. In the basic design, a total capacity of 30 MW demand is covered by the large air-to-water heat pump and a similar large boiler for reserve capacity.

In the classic design, capacity demand is covered by a 70% air-to-water heat pump (20 MW) and a large gas boiler, both delivering peak load demand and reserve load demand (30 MW). Investments in district heating units and district heating networks are included in calculations, and the total investments are transformed into investments per delivered MWh-heat in a lifetime. The data used from the Danish Technology catalog regarding network investments provide a price per MWh of delivered heat per year.

Table 3: Comparison of individual heat delivery and basic and classic heat source design.

The capacity demand for district heating is calculated to be 28.6 MW, and the chosen capacity is 30 MW, which is around 5% oversized compared to actual demand. The boiler size is kept in classic design, allowing the boiler to cover all heat demand if the heat pump is not running.

The technical lifetime of district heating production technologies and heat networks is substantially longer than that of individual technologies, and results show that total investments are significantly lower than individual solutions when compared per MWh delivered, including DH network investments.

The change in design from 100% base load coverage to 70% coverage of baseload capacity reduces the total investments to 7.3 million £. The heat production costs, though, will be slightly higher in the classic design (2.32 £/MWh-heat) compared to the basic design but not on a level with the saved investment costs (8.19 £/MWh-heat).

Reducing costs by combining technologies

Combining more and different heat sources can be an important strategy from a district heating network company and consumer perspective. By combining technologies, investments may be lowered further, especially if low-investment demanding high-grade waste heat sources can be implemented in heat source design.

Further, it can be important to have more and different technologies that use different fuels and electricity to ensure that the produced heat is always the cheapest possible. Combining complementary heat sources like electricity-producing technologies and electricity-consuming technologies makes heat prices low, whether the electricity price is high or low.

Table 4 is an expanded version of Table 3. It shows more different heat source designs and combinations of heat sources, including storage, to make it possible to avoid peak load on natural gas boilers compared to the classic design. The investment costs for storage are total costs, which include additional costs not directly related to the storage tank (Buildings, etc.)

Table 4: Different combinations of heat source design and total investments per MWh-heat

The technical lifetime used for all technologies is 25 years, which is short for CHP. It could be augmented to be longer, which would only decrease the investment costs per MWh delivered heat.

Combining different technologies can reduce capacity compared with the classic design, especially if heat storage is used for peak load delivery. When the technologies can be divided into smaller and more units with the same costs per MW-heat capacity, peak, and reserve load capacity investment costs can be reduced. If, for some reason, a larger plant is cheaper per MW-heat capacity, some of the benefits from having more and different technologies may be lost.

The design with the lowest investments is the high-grade waste heat combination because most investments are expected to be in the supplier of high-grade waste heat. Investments in connecting the source, which in some cases can be significant and differ greatly depending on the source and distance to the source, are not included in this calculation.

The main conclusion from the different combinations of heat sources is that high-grade waste heat sources should be preferred, but it is also possible to combine different technologies and choose low-carbon solutions without increasing investments.

The large benefit of combining technologies is the possibility of changing technology if fuel and electricity prices change. This not only gives consumers a reliable heat price but also increases the heat network company’s possibility of profit and, at the same time, competitiveness.

A second benefit of combining technologies and heat sources is the ability to choose production patterns according to hourly power prices and deliver flexibility/reserve capacity to the power market, which normally is paid for. The benefits from power prices are investigated in the next chapter for the same technology combinations.

Benefits power prices

To simulate the benefits of having a heat storage system and the flexibility of multiple heat sources, all electricity prices in the first half of 2023 in England are mapped, and a model is made for heat production without and with heat storage on the same heat delivery as above. A storage with a capacity of 200 MWh is included, which will demand an investment of 0.53 million £. Over 25 years, this investment will cost 0.002 £/MWh per MWh-heat delivery to consumers.

Below, Table 5 shows input data for the scenario combining CHP with a heat pump, electric boiler, and gas boiler:

Table 5: Data input for simulating the value of storage

The strategy is to choose production using electricity-based technologies with the lowest heat production prices first. If more production than needed, prioritised heat is allowed to load the storage tank. The heat in the tank can, at a later stage, be unloaded if production from these prioritised sources with low heat production prices is not delivering enough heat. The heat price from each heat source can be seen in Figure 4, which shows the marginal heat price (OPEX costs) for the different technologies.

Figure 4: Marginal heat production price as a function of electricity price.

If the electricity price is below 0 £/MWh, an electric boiler is a priority. If the electricity price is below 120 £/MWh, the heat pump is a priority, and if it is above 120 £/MWh, natural gas CHP is a priority. If hours with the lowest heat price are chosen first daily, the average heat price can be kept at a low level. Additionally, it can be avoided to run the gas boiler more than necessary.

Figure 5: Heat storage level example from Table 5.

At the end of the period, storage is on a high level, which in the plant’s real planning system could make it possible to take out some more of the prioritised technologies with relatively high heat prices, and then the heating price would go further down and value of heat storage up.

Income from selling frequency and capacity on the power market is not included in calculations; only the day-ahead market prices are used. The production would be planned based on a prognosis from power retailers. In summary, the model shows the minimum value of the storage system by only calculating the simplest benefit from the day-ahead power market.

The average heat price is calculated for all scenarios, and the result is shown in Table 6.

Table 6: Average heat price without and with storage.

The average heat price for the Table 4 scenario is 15.55 £/MWh-heat, which decreases to 15.40 £/MWh-heat if a storage system is used. The minimum savings of 0.15 £/MWh-heat by having a storage has to be compared to the average costs of 0.002 £/MWh-heat delivery.

For further information, please contact John Tang Jensen, jtjensen10@gmail.com