District Heating Tariffs, Economic Optimisation and Local Strategies during Radical Technological Change

Søren Djørup,Henrik Lund,David Drysdale,Peter Sorknæs,Karl Sperling,Poul Alborg Østergaard,Steffen Nielsen,Jakob Zinck Thellufsen

doi:10.3390/en13051172

Abstract

This paper addresses economic aspects of heat savings in the context of strategic heat planning. The analysis uses the city of Aalborg, Denmark, as a case where municipalisation through a recent acquisition of a coal-fired cogeneration of heat and power (CHP) plant has made an update of a municipal strategic energy plan necessary. Combining datasets on buildings and insulation techniques with economic methods, we investigate how the local district heating tariff can be adapted to improve the conditions for heat savings and support the transition to lower supply temperatures in line with the requirements of future fourth generation district heating systems. The paper concludes that implementing a fully variable heat tariff scheme improves the financial incentive for heat savings, while also making the system development less vulnerable to fluctuations and shortages in capital markets. The paper supplements existing literature on heat savings with novelty in its approach and in its systematic investigation of the interplay between tariff policies and interest rates.

Highlights

In the ongoing international transition towards renewable energy systems, cities and local authorities play an important role [1,2]
The first trend is the phasing out of cogeneration of heat and power (CHP) [3] and the second trend is the re-municipalisation of district heating systems [4,5,6,7]
As explained in the introduction, the heat sector in the city of Aalborg is in a transitional phase from being based primarily on a large-scale coal-fired CHP plant to being part of a renewable energy system

Summary

Introduction

In the ongoing international transition towards renewable energy systems, cities and local authorities play an important role [1,2]. The first trend challenges the viability of district heating systems since it undermines a traditional competitive stronghold; the utilisation of fossil fuels at high efficiencies. Facing this technological change in electricity production, district heating grids are risking being left as uncompetitive stranded assets. Research addressing this issue has identified large potentials for district heating systems in a renewable energy system, the so-called fourth generation district heating (4GDH)

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