District heating cost modelling and advised billing cases

This report showcases the main findings from the RELaTED pilot sites of Tartu and Belgrade regarding the economic viability of their transition toward ultra-low temperature district heating

To facilitate the conversion towards Ultra-Low Temperature District Heating (ULTDH), the RELaTED project has developed an innovative concept of decentralised ULTDH networks, which allows for the incorporation of low-grade heat sources with minimal constraints. But to increase the uptake of this system, it is vital to ensure the economic viability of District Heating (DH) systems in their transition to ULTDH.

The RELaTED project has addressed this issue in its Economic feasibility & business analysis. This report serves as a summary of the main findings for this task as it relates to the profitable operation of the RELaTED DH networks. The main findings are divided into three sections: (1) Energy Price Assessment; (2) district heating cost modelling; (3) and the customer case for residential & tertiary customers, as well as heat producers.

Energy Price Assessment:

The following are the key findings of the Energy Price Assessment:

  • Costs associated with fossil fuels are extremely variable. During the initial 2 decades of the XXI century, oscillations in the range of [-80% – +200%] have occurred. Price evolutions of fossil fuels are related to many macroeconomic conditions and are highly impacted by geopolitical stability.
  • In all scenarios, fossil fuel costs will steadily rise over the next decades.
  • Local fuels such as biomass are virtually stable but limited in capacity. Price variations are mainly related to local production/consumption balance. In large systems (i.e., Belgrade), the potential use of biomass shall be checked against local production capacity. Otherwise, supply shortages may appear.

Renewable energy sources are difficult to price. In most cases, energy costs for solar systems are linked to particular investment costs and marginal heat supply costs in each DH network. To achieve operational economies in DH systems, heat supply costs associated with renewable energy sources should be indexed to the operational costs of these systems rather than to the marginal energy cost in the system.

District heating cost modelling:

The district heating cost modelling section assessed the costs associated with different heat production plants on the long-term energy planning of DH. This assessment was done in the context of two case studies, one of the Belgrade DH network (Serbia) and one of the Tartu DH network (Estonia). The following results were obtained:

Belgrade Case study results of the energy and economic analysis:

  • The interconnection between different heating districts in Belgrade would highly reduce the total generation costs in the network. However, some existing plants should be removed (or at least reduce their importance) from the production mix.
  • Moreover, the functioning mode (increased interconnection of DH networks) together with the incorporation of some renewable energy sources to the generation mix will reduce the total cost of the heat and reduce the CO2 emission to the environment.
  • In fact, large renewable energy sources utilization factors could be achieved with ~3000 full-time operational hours for large solar thermal systems. Thus, greater installed capacity should be explored for renewable energy sources.

Tartu Case study results of the energy and economic analysis:

  • Current state of the network results to be a highly-efficient energy system with a very competitive heat price. The biomass-fired CHP and waste streams are the basis of the heat production in most part of the year.
  • However, increasing demand on the buildings’ side can exceed the production capacity of the existing heating plants. Due to the perspective of the operator the demand to increase, new heat producers will be needed in the future.
  • Recovery of waste heat results to be a very efficient and economically feasible option. The optimal functioning mode for this DH network starts from the gradual reduction of the supply temperature, increasing the efficiency of all the plants.
  • The next step is the introduction of renewable energy sources and, most optimally, waste heat to the production mix. Heat pump introduction shall be considered only with heat pumps at greater performance levels.

The customer case for residential customers, tertiary customers, and heat producers

The customer cases of the transition towards an ultra-low temperature DH for residential and tertiary customers were conducted in the context of cases in Belgrade (Serbia), and Tartu (Estonia). To make the transition to ULTDH feasible, it is needed to make it cost-competitive compared to single building heating
technologies. The case studies applied the RELaTED concept – using triple function subsystems, solar panels, and reversible heat pumps – with the following results for both customer segments in each city:

Belgrade – Residential and Tertiary conclusions:

  • The savings for both residential and tertiary buildings is highly dependent on the energy prices.
  • For both residential and tertiary buildings, higher savings are related to glazed collectors coupled to a Heat Pump (HP) that operates according to heat/electricity price. Small increases in the electricity price sharply reduce the profitability of the solar system coupled with HP.
  • For residential buildings, savings in the energy bill led to payback times of around 15 years.
  • For tertiary buildings, savings in the energy bill led to payback times of around 6 years, but small increases of the electricity price, sharply reduce the profitability of the solar system coupled with HP.
  • Thus, the solar irradiation availability is sufficient to warrant the use of solar panels throughout the year and the heat and electricity prices are favourable and the RELaTED technology is a promising solution that can be applied for residential buildings in climates like Belgrade.

Tartu – Residential and Tertiary conclusions:

  • For both residential and tertiary buildings, solar irradiation levels in Tartu are seasonal dependent. Values are very low in winter and increase in spring and summer.
  • Low irradiation levels and cold outdoor temperatures during the winter limit the opportunity for solar energy to only 4 months in the year.
  • High DH heat and low electricity prices allow having significant economical savings in absolute terms, but since the contribution to the solar systems to buildings’ heat loads is rather small, payback periods remain high.
  • Therefore, a solar thermal façade for residential buildings in Tartu is not an economically attractive option.

Heat Producer case:

For the feasibility analysis of potential new sources for existing ULTDH, a business model is developed considering the price of heat and the investments needed for general heat producer cases. When applied to study the viability of specific heat purchase study cases, the following conclusions are obtained:

  • The use of ULTDH network in combination with CHP, reversible heat pumps for heating & cooling, solar systems, and waste heat improves the performance in every case.
  • Investments in renewable energy sources typically require important investments, but marginal costs may be almost non-existent. In these cases, heat prices should be set to guarantee a fair return of investment, but avoid the indexing of these heat sources to fuel costs in international markets.
  • For heat recovery investments in industrial plants, payback periods in the range of 5 years are possible if stable heat consumption is achieved with competitive costs of heat.