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CHP development in Denmark
CHP development in Denmark Role and results H.C. Mortensen and B. Overgaard
Energy conservation and restructuring towards more energy-efficient technology have been keywords in Danish energy policy in the 1970s and 1980s. This has been reflected especially in domestic heating, where gross energy consumption per square metre has dropped approximately 45% from the early 1970s onwards. This drop is directly related to the massive expansion of combined generation of heat and power (CHP) effected in the same period. Consequently, some 30% of Danish heat requirements are now met by CLIP. The intention is to increase this share by a further 7% over the next decade, resulting in a 37°/0 share of Denmark's total heat requiremerits by CHP in the year 2000. Keywords: Energy conservation; District heating; Combined heat and power (CHP) This article is concerned with combined heat and power (CHP), in particular dealing with the results achieved in Denmark during the last two decades, and focusing only on CHP production utilized in a district heating network (CHP/DH). However, what is the true sense of 'district heating'? 'District heat' can be defined as 'the heat supply to several buildings or city districts by heating plants', and as 'heat in the low temperature range (up to 200°C/392°F) which is transported from a central heat supplier over longer distances to the consumer (dwellings, trade, industry)'. In other words - the D H system is a transport system, The heat supplier can be a heat plant (supplier of heat exclusively) or a heat/power plant. Heat can come from various sources (decoupled waste heat, heat produced by boilers, heat as a combined proH.C. Mortensen is General Manager, and B. Overgaard is Head of Information, Metropolitan Copenhagen Heating Transmission Company, 4 Krumtappen, PO Box 309, DK-2500 Valby, Denmark. 11 98
duct of industrial processes, geothermy). The transportation medium is a double pipeline system. DH - ADVANTAGES
AND
OBSTACLES The use of D H has many advantages - especially in the light of the present-day problems of energy shortages and the environment. An essential characteristic - and one which is also relevant for future energy supply - is its ability to make a swift change to other alternative, cheaper sources of energy. Add to this that D H is a very reliable source of supply, that it enables several different supply systems to be utilized at the same time and - last but not least - it makes increased energy efficiency possible, leading to a decrease in air pollution. This is especially true if production is based on CHP. So there is no 'shortage' of good arguments. Even so, there is considerable variation from one nation to the o t h e r as regards district heating's m a r k e t penetration. Looking at Figure 1, district heating's share of the total heating market can be seen to vary from being virtually insignificant (the U K and Norway) to over 40% (Denmark). It is, also, immediately clear that the Nordic c o u n t r i e s - Sweden, Finland and Denmark - play an extremely important role in the field of D H (Figure 1). These differences in district heating's penetration cannot be explained simply by referring to climatic conditions. Norway shares similar climatic conditions with the other Nordic countries, and yet district heating's share of the market is insignificant as part of the country's total consumption. When assessing penetration one therefore has to take both marketrelated and also more subjective and marginal factors into consideration. These factors include: •
The accessibility of indigenous resources (gas, coal, hydropower, etc).
0301-4215/92/0121198-09 © 1992 Butterwotth-Heinemann Lid
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Rivalry between natural gas and district heating systems, District heating often only achieves a competitive price when it is based on CHP. This assumes that electricity production can be sold and that the price level is sufficiently high. This is, for example, the case in the Scandinavian countries, where surplus heat can be sold extremely favourably, and where CHP is also fairly extensive. In countries where electricity production is primarily based on hydropower as, for example Norway - this proves to be economically less profitable, District heating does not always appear to be an attractive form of supply for individualists ('my home is my castle', or, put another way, since district heating companies are nearly always directly or indirectly publically o w n e d normally at a municipal or regional level: 'less state, more freedom'),
Among all these reservations the fact that district heating cannot always be marketed as the cheapest source of supply would seem to be of crucial importance. But it is also very important in this connection that increasing attention has been paid over the last few years to the environmental consequences of energy consumption. This increased attention is an important facet to utilize in a marketing strategy,
THE HISTORIC DEVELOPMENT A number of factors may have played a decisive role when district heating's penetration in individual
ENERGY POLICY December 1992
countries is being assessed, including such things as historical traditions both for organizational structure and for the design concept used. In the earliest infancy of district heating, heat supply was carried out from relatively small heatgenerating units which often lay close to the customers, enabling distribution costs to be kept to a minimum. In the USA, the extension of the district heating supply was primarily undertaken by electricity supply companies - as is still the case. This means that in a large number of cases the supply of heating was only considered to be a minor aspect of their business. Seen in a historical perspective this form of organization has proved to be a vital hindrance for the further development of district heating supply in the USA. In E u r o p e development took a different turn at the organizational level. Here the district heating systems were primarily built under municipal control or - as was the case in certain Scandinavian countries - under local and/or cooperative control. In the course of the 1920s and 1930s the development of district heating systems expanded rapidly throughout most of Europe. But so did the establishment of central heating in buildings. The fact that district heating systems are relatively costly as regards capital and manpower in the initial phase probably meant that decision makers refrained for a time from introducing this form of technology. In the Scandinavian countries an efficient heat supply - and an efficient electricity supply - had high priority from a relatively early date. This led to the establishment of a large number of district heating systems at the municipal level. These systems were
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based on both CHP plants and heating only plants for heat supply. In the 1950s and 1960s the Scandinavian countries witnessed a real boom in district heating. In Denmark, for example, this form of supply already accounted for 15% of the country's total heat consumption by the early 1960s - by the end of the decade this figure had risen to almost 25%. At that time almost a third of the total heat supply was covered by surplus heat from CHP plants. (See Figure 2.) When considering this rapid development it must be admitted that the choice of temperature level in the pipeline network proved to be an essential factor. Denmark in particular has traditionally used low temperatures - more than 90% of the total supply network is operated with a supply-pipe temperature of under 100°C (212°F). This has a number of obvious advantages, both as regards the operation of heat pumps etc, and the choice of components, but also as regards the use of surplus heat. For CHP it is a fact that the lower the temperature that can be used the greater the iraprovement in economy and energy efficiency, Viewing this development in the district heating sector it is possible to claim that the Scandinavian countries were relatively well armed when the first oil price rises struck in the early 1970s. They had at their disposal a well developed supply network which could be adapted relatively quickly to fuels other than oil, as well as decades of experience in planning, implementation and operation of district heating networks, Added to this - as for example was the case in Denmark - there was considerable expertise as regards many different forms of organizational structure. In this respect the Danes were ready to try out
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newer, larger and also more advanced forms of technology and also, in terms of organization, to try out more complex s t r u c t u r e s - based completely on the principle of voluntary connection to the system.
THE DEVELOPMENT
IN DENMARK
A F T E R 1973 Energy planning and legislation The energy situation in Denmark was very serious with the rise in price of fossil fuels at the end of 1973. At that time Denmark was - with the exception of heat utilization from waste incineration plants totally dependent on imported fuels. And more than 95% of this import consisted of oil. After some months of discussion the Danish government decided in 1974 to establish an Interministerial Committee with the task 'to perform a comparative investigation of the appropriateness of different methods of room heating based upon a broad energy political point of view'. The report from the Committee formed the basis of the political decision which guided the development of energy use for room heating in Denmark. Since then great efforts have been deployed to reduce the dependency on oil through development of the country's own sources of oil and gas in the North Sea, development of renewable energy and substitution of oil with coal as the prime energy source for power and CHP production and domestic heating. Today dependence on imported oil has thus dropped to less than 45%, and at the same time energy consumption for heating purposes has fallen by 30% compared with pre-oil crisis levels. These
ENERGY POLICY December 1992
C H P series - C H P development in D e nm ar k
results have to a large degree been obtained due to a very deliberate heating programme involving a heavy expansion of the country's collective heating services, The first overall energy plan for Denmark, Danish Energy Policy 1976, was agreed upon by the Danish Parliament early in 1976. The plan contained the principal objectives for energy for the following decades and had at the same time a number of p r o p o s a l s and r e c o m m e n d a t i o n s for specific initiatives, On a short-term basis it was the aim to improve the security of supply by reducing dependence on oil. This was to be accomplished by building up a diversified supply system where domestic energy resources were to be utilized and the growth in energy consumption was to be reversed. On a long time basis the aim was to secure a slowing down in the use of non-renewable energy resources and to increase the use of domestic and renewable energy, According to the estimates of the 1976 energy plan, about two-thirds of total heat consumption would be based on collective heat supply by the year 2002. Within the same period oil was to be reduced from 50% to 20%, natural gas to be increased from 4% to 15%, and district heating (including CHP) to be increased from 39% to 56%. At the same time it was estimated that this fuel conversion would affect approximately 800 000 individual oil burners,
The 1979 Heat Supply Act In 1979 the objectives of the energy plan were implemented by the Heat Supply Act, which contained provisions for nationwide heat supply planning. The purpose of the 1979 Heat Supply Act was 'to promote the best national economic use of energy for heating buildings and supplying them with hot water and to reduce the country's dependence on mineral oil'. This act can be viewed as the driving force behind the implementation and extension of collective supply systems undertaken in Denmark in the 1980s and 1990s. In the same year, 1979, Parliament also passed a law establishing a nationwide natural gas project based on the supply of natural gas from Danish off-shore gas fields in the North Sea. To achieve the purpose of the Heat Supply Act, a radical restructuring of the heat supply system was initiated. This included a large-scale conversion from individual use of oil to collective heat supply systems based on natural gas and district heating. Parallel with the implementation of this planning, the Danish municipalities and counties started
ENERGY POLICY December 1992
general heat planning in 1982-83. The Heat Supply Act stated that: the local authorities shall arrange for mapping the existing heat requirement, the heating methods used and the quantities of energy, including surplus heat, that are used or can be used in the heat supply, and shall procure an estimate of the future heat requirement and the future possibilitiesfor heat supply in the municipalities. This mapping shall be carried out partly in co-operation with companies supplying piped energy. Each municipal council shall then prepare a proposal for the organization of the municipality's heat supply. Adjustments ofthe Heat Supply Act In the beginning of the 1980s a number of district heating plants were altered to use coal instead of oil. However, in 1985, the Danish government and Parliament decided that the application of domestic resources was to have prime priority in the ongoing heat planning. This meant that district heating cornpanies primarily had to use natural gas, surplus heat from electric power stations, straw, waste and wood. Furthermore, future planning of new power plants should include the possibility of CHP, ie the government would only as an exception approve the constitution of electricity condensation units. At the same time this policy was reinforced by an increase in energy taxes on oil and coal to prevent falling fuel prices from affecting prices to the final consumer. It was also finally decided that Danish energy planning should exclude the option of using nuclear power.
G E N E R A L INVESTMENT PLAN AND MAIN DISTRICT H E A T I N G PROJECTS
Investments The amount of investment in the energy sector in Denmark from 1975 to 1988 was equal to approximately US$15 billion ($1988). Investment in the large CHP transmission networks largely ceased in 1991. District heating investment will now primarily involve extensions on the distribution side and renovation of existing plants, among these the conversion of coal to natural gas fired boiler units at the major CHP plants. However, large investments in equipment for environmental protection have also to be taken into consideration in the following decade. Regarding the general investment plans for the two main types of collective supply systems which have been promoted during the previous decade,
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CHP series - CHP development in Denmark
Table 1. Estimated investment in relation to annual sales in Danish DH transmission companies (US$1988).
AKV TVIS VEKS CTR
Estimated investment
Yearly sales (net)
Length
Invested
Invested (1000
Sales
(US$) 1 622 1 050 1 995 2 428
(TJ) 11 500 6 000 9 500 15 700
(kin) 100 75 99 52
(USS/TJ) 21 700 26 900 32 300 23 800
US$/km) 2 460 2 150 3 080 7 230
(TJ/km) 115 80 96 302
there is, however, one major difference which should be emphasized. This concerns the liability of the obligations of the natural gas project towards any third party which is held directly by Denmark. In the large i n t e r - m u n i c i p a l - or r e g i o n a l - district heating companies, which are generally organized as partnerships, the liability is, however, held by the partner municipalities themselves which are directly, jointly and severally and with their entire property liable for the obligations of the company, Distict heating c o m p a n i e s Today there are approximately 350 district heating companies in Denmark, four of which are so-called inter-municipal or regional transmission systems. Common to these four systems, all of which were implemented or under construction during the 198091 period, is that they first and foremost have been established in areas where district heating systems already existed and were then linked by means of a number of main transmission networks, The actual spheres of activity of the four transmission companies was, and is, to plan, establish, finance and operate transmission networks for district heating, as the individual company buys heat from the producers, transports it via the transmission network and sells it to the partner municipalities involved. Further transportation of the heat from the receiver points in the municipalities (heat exchanger stations) on to the individual consumer is thus an area that is managed by the connected partners themselves, The four transmission companies in Denmark are: • Aarhus Kommunale Vaerker (AKV); • Trekantomraadets Varmetransmissionsselskab I/S (TVIS); • •
Vestegnens Kraftvarmeselskab I/S (VEKS); C e n t r a l k o m m u n e r n e s Transmissionsselskab I/S (CTR).
The estimated investments in relation to the annual sales of the four networks can be seen in Table 1. As Table 1 indicates, the estimated investments "1202
have no direct relation to the length of the networks or the annual heat sales etc. This is due to the very different conditions under which the four transmission networks have been established. Among these one can enumerate such factors as the fact that construction costs are much more expensive in densely populated areas where already existing underground power and supply cables often have to be rearranged. On the other hand the larger and more concentrated heat demands within these areas also means that a larger amount of heat can be distributed within a shorter distance, ie a larger sale in TJ/kilometre. An e x a m p l e : the C T R t r a n s m i s s i o n c o m p a n y The foundation of the Centralkommunernes Transmissionsselskab I/S (CTR) transmission company dates back to February 1984 and was managed by a group of five municipalities, all located in the greater Copenhagen area. All construction activities were ended by May 1990, and the system now includes 52 km of double pipeline with pipe diameters ranging from 250 to 800 mm. Added to this there are 23 heat exchanger stations and three booster pump stations, approximately 17 peak load stations and four different heat-generating installations (CHP-plants, waste incineration plants and purification plants). (See Figure 3.) As indicated in Table 1, the total net heat requirement is estimated to be 15 700 TJ/year when fully extended on the distribution side in the year 2002, corresponding to 250 000 dwelling units being connected. Estimated consumer connection varies from 90% to 95% in the individual partner municipalities. The CTR system is also connected to a similar system, the VEKS system serving the area west of the Copenhagen area. This coordination of the two transmission systems has a number of obvious advantages as regards production, including a mutually guaranteed supply between the two companies in event of break-downs or other f o r c e m a j e u r e situations at the heating plants. It is also possible to utilize the load distribution between the ENERGY POLICY December 1992
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Figure 3. System lay-out of the CTR transmission network. two coordinated systems which ensures the most economical operation of both the heat and power systems, Altogether the two systems attend to 3/4 million people's energy needs - or 15% of the entire Danish population - thus forming one of the largest district heating systems in the world, Financial aspects Before a new district can be supplied with heat, construction of new or the expansion of existing district heating systems involves, however, considerable capital-intensive investment. At the same time most consumers take a short-time point of view when choosing a heating system so the district heating price and connection charge must be competitive with other heat supply options from the very start, ENERGY POLICY December 1992
District heating companies, therefore, have to accept that there will be a relatively long pay back period. Typically, planning periods of 15-20 years have to be reckoned with when the price of heat is set as an average for the entire period. This means that the initial low revenue yield is compensated for by loans, thereby transforming the long-term economic advantages for the district heating companies into an immediate benefit for the consumer. However, it should be stressed that district heating systems have a lifetime, typically about 50 years, which is much longer than the pay back period for the investment. This means that the economic and financial situation improves considerably after the initial build up phase. In addition, in order to provide the lowest possible starting price for the consumer, thus guaranteeing the competitiveness of district heating vis-a-vis other 1203
C H P series - C H P development in D e n m a r k
supply systems, special arrangements are often made concerning heat purchase from CHP generating units, Generally, for the first 10-15 years the heat consumers pay only the marginal costs of heat extraction thus indemnifying the electricity consumers. In other words for a certain grace period the total benefit of combined production is allocated to the heat consumers compared with the best alternative heat supply option. The reason for this approach is that there is really no benefit to be shared until the investment in the transportation systems are paid back. Electricity prices will not be affected by the heat production in the period agreed upon and after the grace period the benefit of the combined production compared with the best alternative heat supply option is shared, mostly fifty-fifty, with the result that both the electricity price and the heat price are reduced in the long term. Main competing alternative to district heating As regards the competitiveness of collective supply systems there is a condition within Danish legislation that has to be mentioned: through the nationwide heating plan introduced according to the 1979 Heat Supply Act, certain geographical areas were what might be called 'reserved'. Within these areas individual district heating companies were allowed to gain a monopoly as regards heat supply, ie competition is not allowed to come from other collective supply companies including the natural gas cornpanies, At the same time, the tariff principle also states that each individual district heating company must, to confirm its status as a collective supply company, be economically autonomous. This means that the price of heat must only cover the costs connected to the generation and transportation of heat, and that the company - even though it may be under intermunicipal control - must still be able to be considered as a consumer-owned company. In this way no extra profit can be accumulated by the company. In terms of sales of heat the business decisions of the various transmission companies have to be compared to that of wholesale companies. That means that the price policy that underlies the actual selling price to the individual consumers, eg the heat price paid by the consumer, is a concern which is attended to by the individual partner municipalities. Environmental benefits Factors other than the actual price of heat may, however, also play a vital role when comparing the competitiveness of district heating with that of other 1204
supply options. Among these the concern for environmental protection can be mentioned, not least when looking at the energy deliberations that are currently being made. It is quite clear that the reduction of emissions will be the focus of attention in the years ahead. According to the Energy 2000 action plan mentioned previously, CO2 emissions are expected to see a 20% reduction over the next 15 years, and within the same period SO2 emissions are expected to drop some 60%, and NO by approximately 50%. It seems obvious that it is more feasible to control emissions from a few large plants than from thousands of household boilers spread over a city. Also, if less energy is consumed through combined generation of heat and power and utilization of waste heat in a district heating network, the emissions per delivered unit of heat are reduced. Increasing political demands for environmentally acceptable disposal of waste products such as garbage, chemicals, straw etc, has, moreover, given the district heating option a new dimension, as energy from almost any combustible material can be exploited. Additionally it has to be mentioned that the Danish government seems to be prepared to take more decisive and extensive steps than seen before in order to fulfill the objectives of the new energy plan, thus ensuring the extension of collective heat supplies. A statute has recently been made which requires the connection to collective networks existing buildings over a certain size. This decision is a most unusual step in the history of Danish heat supply. It has been estimated that the emission of CO2 will be reduced by approximately 50% of present levels (equal to 750 000 tonnes), and the emission of SO2 some 35%, when the CTR network has been fully extended by the year 2002. (A considerable improvement of the air quality in the area has already been obtained.) At the same time the computed oil substitution effect will be some 450 000 tonnes of oil, and the equivalent of net energy saving of some 290 000 tonnes of oil. In economic terms, this will save the Danes approximately 500 million DKK (equal to US$ 77 milllion) per year. Previous situation Changes in heat supply through the establishment of new collective supply systems and consumer connections, requires a relatively long time. Not all results of the planning have come through yet, although significant results have been achieved already. ENERGY POLICY December 1992
CHP series 125
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CHP development in Denmark
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Figure 4. Sources of energy for room-heating in Denmark.
The gross energy consumption for heating purposes has decreased considerably since 1979, surpassing the expectations of the Danish Energy Policy 1976. This drastic fall, approximately 45%, is the result, among other things, of energy savings, utilization of surplus heat, introduction of more efficient energy technologies and changes in consumer behaviour, In addition, the net heat demand distributed according to heating systems shows an important shift from individual oil burners to collective systems, especially district heating. In 1990 district heating covered 44% of the accumulated net heat requirements (compared to 25% in 1972). During the same period natural gas supplies rose from literally nothing to approximately 10% in 1990. As regards to the fuel mix within the heating sector the following changes have been accomplished: • The share of oil in gross energy consumption is now 44% compared with 95% in 1972. • The share of coal has increased from 6% in 1972 to 40% in 1990. • Improved utilization of surplus heat from power stations and industry, CHP, now supplies 54% of the total consumption of district heat-
for room-heating in Denmark and this figure is expected to increase even further to 37% around the year 2000. The goal is to supply 75% of total heating consumption by collective heat supply systems by the turn of the century. CHP is, in this connection, considered to be an important way of reaching this goal.
ing in Denmark. A significant Danish production of renewable energy based on new technologies is well under way and is presently providing some 6% of
The purpose of this Act is, from an economic and environmental point of view, to promote the best possible use of energy for heat and hot water supply to buildings and to reduce the dependence on oil of the energy supply.
total energy requirements. As can be seen from Figure 4, the supply of CHP already meets almost 30% of the total consumption
At the same time it is also expressly stated that 'the adaption of heat supply has to be carried out so as to promote the combined production of heat and pow-
•
ENERGY POLICY December 1992
F U T U R E E N E R G Y PLANNING A N D LEGISLATION While security of supply and efficient use of energy have been major considerations for introducing and extending the collective supply systems in the past, environmental protection has gradually come to the forefront from the mid-1980s and onwards. In 1990 the Danish Ministry of Energy thus published a new energy plan, E N E R G Y 2000, as a response to the Brundtland Commission's report on environment and development, Our Common Future. A few months later this energy plan was followed by a new Heat Supply Act 1990. Here the concern for environmental protection has been included in the very purpose and definition of the Act which says:
1205
C H P series - C H P d e v e l o p m e n t in D e n m a r k
er as much as possible', a statement which refers to a very ambitious programme for a continued expansion of CHP, including small-scale back-pressure power stations based on natural gas and waste, straw, wood and wood-chips, The new Heat Supply Act also states that emission standards have to be applied to the various heat supply plants, concerning the emissions of COe, SO2 and NO.
CONCLUSION Denmark has a long tradition in district heating, with the first plants erected early in this century. Today more than 350 district heating systems operate throughout the country, meeting over 40% of the total heat demand in Denmark. Up to 1973, the year of the first oil crisis, about 95% of Denmark's power production was based on oil, with only 5% from coal. The ratio has now been reversed. This restructuring has been accompanied by greater utilization of surplus heat from CHP plants, waste incineration plants and industries. A considerable expansion of heat transmission and distribution networks has taken place while power stations and CHP plants were carrying out their major fuel source switch. One of the more important developments in the heating picture has been the growth of district heating systems serving almost an entire city or region, Energy conservation and restructuring towards more energy-efficient technology have been
1206
keywords in Danish energy policy in the 1970s and 1980s.This has been reflected especially in domestic heating, where gross energy consumption per square metre has dropped approximately 45% from the early 1970s onwards. This drop is directly related to the massive expansion of CHP capacity, effected in the same period. The CHP share of total district heating has risen steadily- from 29% in 1972 to approximately 55% in 1989. Consequently some 30% of Danish heat requirements are now supplied by combined generation of heat and power. The intention is to increase this share by a further 7% over the next decade 37% of Denmark's total heat requirements being met by CHP. According to the estimates of the 1990 energy planning and legislation, about 80-90% of total heat consumption will be based on collective heat supplies in the year 2020. The planning will subsequently result in an additional substitution of oil in individual oil burners and fuel oil and coal in existing district heating plants with other indigenous sources, thus continuing the objectives of the previous energy plan. The share of oil and coal is thus to be reduced to 37% and 42% respectively (or even more, as the large CHP plants are converted from coal to natural gas supplies), while the share of natural gas will reach at least 12% and renewable energy 9%. At the same time the new energy plan aimed at a 15% reduction of total fuel consumption within the next 15 years - a reduction which has to be compared to the 9% rate of growth which elsewhere is forecasted by the year 2005.
ENERGY POLICY December 1992
Energy conservation and restructuring towards more energy-efficient technology have been keywords in Danish energy policy in the 1970s and 1980s. This has been reflected especially in domestic heating, where gross energy consumption per square metre has dropped approximately 45% from the early 1970s onwards. This drop is directly related to the massive expansion of combined generation of heat and power (CHP) effected in the same period. Consequently, some 30% of Danish heat requirements are now met by CLIP. The intention is to increase this share by a further 7% over the next decade, resulting in a 37°/0 share of Denmark's total heat requiremerits by CHP in the year 2000. Keywords: Energy conservation; District heating; Combined heat and power (CHP) This article is concerned with combined heat and power (CHP), in particular dealing with the results achieved in Denmark during the last two decades, and focusing only on CHP production utilized in a district heating network (CHP/DH). However, what is the true sense of 'district heating'? 'District heat' can be defined as 'the heat supply to several buildings or city districts by heating plants', and as 'heat in the low temperature range (up to 200°C/392°F) which is transported from a central heat supplier over longer distances to the consumer (dwellings, trade, industry)'. In other words - the D H system is a transport system, The heat supplier can be a heat plant (supplier of heat exclusively) or a heat/power plant. Heat can come from various sources (decoupled waste heat, heat produced by boilers, heat as a combined proH.C. Mortensen is General Manager, and B. Overgaard is Head of Information, Metropolitan Copenhagen Heating Transmission Company, 4 Krumtappen, PO Box 309, DK-2500 Valby, Denmark. 11 98
duct of industrial processes, geothermy). The transportation medium is a double pipeline system. DH - ADVANTAGES
AND
OBSTACLES The use of D H has many advantages - especially in the light of the present-day problems of energy shortages and the environment. An essential characteristic - and one which is also relevant for future energy supply - is its ability to make a swift change to other alternative, cheaper sources of energy. Add to this that D H is a very reliable source of supply, that it enables several different supply systems to be utilized at the same time and - last but not least - it makes increased energy efficiency possible, leading to a decrease in air pollution. This is especially true if production is based on CHP. So there is no 'shortage' of good arguments. Even so, there is considerable variation from one nation to the o t h e r as regards district heating's m a r k e t penetration. Looking at Figure 1, district heating's share of the total heating market can be seen to vary from being virtually insignificant (the U K and Norway) to over 40% (Denmark). It is, also, immediately clear that the Nordic c o u n t r i e s - Sweden, Finland and Denmark - play an extremely important role in the field of D H (Figure 1). These differences in district heating's penetration cannot be explained simply by referring to climatic conditions. Norway shares similar climatic conditions with the other Nordic countries, and yet district heating's share of the market is insignificant as part of the country's total consumption. When assessing penetration one therefore has to take both marketrelated and also more subjective and marginal factors into consideration. These factors include: •
The accessibility of indigenous resources (gas, coal, hydropower, etc).
0301-4215/92/0121198-09 © 1992 Butterwotth-Heinemann Lid
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Rivalry between natural gas and district heating systems, District heating often only achieves a competitive price when it is based on CHP. This assumes that electricity production can be sold and that the price level is sufficiently high. This is, for example, the case in the Scandinavian countries, where surplus heat can be sold extremely favourably, and where CHP is also fairly extensive. In countries where electricity production is primarily based on hydropower as, for example Norway - this proves to be economically less profitable, District heating does not always appear to be an attractive form of supply for individualists ('my home is my castle', or, put another way, since district heating companies are nearly always directly or indirectly publically o w n e d normally at a municipal or regional level: 'less state, more freedom'),
Among all these reservations the fact that district heating cannot always be marketed as the cheapest source of supply would seem to be of crucial importance. But it is also very important in this connection that increasing attention has been paid over the last few years to the environmental consequences of energy consumption. This increased attention is an important facet to utilize in a marketing strategy,
THE HISTORIC DEVELOPMENT A number of factors may have played a decisive role when district heating's penetration in individual
ENERGY POLICY December 1992
countries is being assessed, including such things as historical traditions both for organizational structure and for the design concept used. In the earliest infancy of district heating, heat supply was carried out from relatively small heatgenerating units which often lay close to the customers, enabling distribution costs to be kept to a minimum. In the USA, the extension of the district heating supply was primarily undertaken by electricity supply companies - as is still the case. This means that in a large number of cases the supply of heating was only considered to be a minor aspect of their business. Seen in a historical perspective this form of organization has proved to be a vital hindrance for the further development of district heating supply in the USA. In E u r o p e development took a different turn at the organizational level. Here the district heating systems were primarily built under municipal control or - as was the case in certain Scandinavian countries - under local and/or cooperative control. In the course of the 1920s and 1930s the development of district heating systems expanded rapidly throughout most of Europe. But so did the establishment of central heating in buildings. The fact that district heating systems are relatively costly as regards capital and manpower in the initial phase probably meant that decision makers refrained for a time from introducing this form of technology. In the Scandinavian countries an efficient heat supply - and an efficient electricity supply - had high priority from a relatively early date. This led to the establishment of a large number of district heating systems at the municipal level. These systems were
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based on both CHP plants and heating only plants for heat supply. In the 1950s and 1960s the Scandinavian countries witnessed a real boom in district heating. In Denmark, for example, this form of supply already accounted for 15% of the country's total heat consumption by the early 1960s - by the end of the decade this figure had risen to almost 25%. At that time almost a third of the total heat supply was covered by surplus heat from CHP plants. (See Figure 2.) When considering this rapid development it must be admitted that the choice of temperature level in the pipeline network proved to be an essential factor. Denmark in particular has traditionally used low temperatures - more than 90% of the total supply network is operated with a supply-pipe temperature of under 100°C (212°F). This has a number of obvious advantages, both as regards the operation of heat pumps etc, and the choice of components, but also as regards the use of surplus heat. For CHP it is a fact that the lower the temperature that can be used the greater the iraprovement in economy and energy efficiency, Viewing this development in the district heating sector it is possible to claim that the Scandinavian countries were relatively well armed when the first oil price rises struck in the early 1970s. They had at their disposal a well developed supply network which could be adapted relatively quickly to fuels other than oil, as well as decades of experience in planning, implementation and operation of district heating networks, Added to this - as for example was the case in Denmark - there was considerable expertise as regards many different forms of organizational structure. In this respect the Danes were ready to try out
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newer, larger and also more advanced forms of technology and also, in terms of organization, to try out more complex s t r u c t u r e s - based completely on the principle of voluntary connection to the system.
THE DEVELOPMENT
IN DENMARK
A F T E R 1973 Energy planning and legislation The energy situation in Denmark was very serious with the rise in price of fossil fuels at the end of 1973. At that time Denmark was - with the exception of heat utilization from waste incineration plants totally dependent on imported fuels. And more than 95% of this import consisted of oil. After some months of discussion the Danish government decided in 1974 to establish an Interministerial Committee with the task 'to perform a comparative investigation of the appropriateness of different methods of room heating based upon a broad energy political point of view'. The report from the Committee formed the basis of the political decision which guided the development of energy use for room heating in Denmark. Since then great efforts have been deployed to reduce the dependency on oil through development of the country's own sources of oil and gas in the North Sea, development of renewable energy and substitution of oil with coal as the prime energy source for power and CHP production and domestic heating. Today dependence on imported oil has thus dropped to less than 45%, and at the same time energy consumption for heating purposes has fallen by 30% compared with pre-oil crisis levels. These
ENERGY POLICY December 1992
C H P series - C H P development in D e nm ar k
results have to a large degree been obtained due to a very deliberate heating programme involving a heavy expansion of the country's collective heating services, The first overall energy plan for Denmark, Danish Energy Policy 1976, was agreed upon by the Danish Parliament early in 1976. The plan contained the principal objectives for energy for the following decades and had at the same time a number of p r o p o s a l s and r e c o m m e n d a t i o n s for specific initiatives, On a short-term basis it was the aim to improve the security of supply by reducing dependence on oil. This was to be accomplished by building up a diversified supply system where domestic energy resources were to be utilized and the growth in energy consumption was to be reversed. On a long time basis the aim was to secure a slowing down in the use of non-renewable energy resources and to increase the use of domestic and renewable energy, According to the estimates of the 1976 energy plan, about two-thirds of total heat consumption would be based on collective heat supply by the year 2002. Within the same period oil was to be reduced from 50% to 20%, natural gas to be increased from 4% to 15%, and district heating (including CHP) to be increased from 39% to 56%. At the same time it was estimated that this fuel conversion would affect approximately 800 000 individual oil burners,
The 1979 Heat Supply Act In 1979 the objectives of the energy plan were implemented by the Heat Supply Act, which contained provisions for nationwide heat supply planning. The purpose of the 1979 Heat Supply Act was 'to promote the best national economic use of energy for heating buildings and supplying them with hot water and to reduce the country's dependence on mineral oil'. This act can be viewed as the driving force behind the implementation and extension of collective supply systems undertaken in Denmark in the 1980s and 1990s. In the same year, 1979, Parliament also passed a law establishing a nationwide natural gas project based on the supply of natural gas from Danish off-shore gas fields in the North Sea. To achieve the purpose of the Heat Supply Act, a radical restructuring of the heat supply system was initiated. This included a large-scale conversion from individual use of oil to collective heat supply systems based on natural gas and district heating. Parallel with the implementation of this planning, the Danish municipalities and counties started
ENERGY POLICY December 1992
general heat planning in 1982-83. The Heat Supply Act stated that: the local authorities shall arrange for mapping the existing heat requirement, the heating methods used and the quantities of energy, including surplus heat, that are used or can be used in the heat supply, and shall procure an estimate of the future heat requirement and the future possibilitiesfor heat supply in the municipalities. This mapping shall be carried out partly in co-operation with companies supplying piped energy. Each municipal council shall then prepare a proposal for the organization of the municipality's heat supply. Adjustments ofthe Heat Supply Act In the beginning of the 1980s a number of district heating plants were altered to use coal instead of oil. However, in 1985, the Danish government and Parliament decided that the application of domestic resources was to have prime priority in the ongoing heat planning. This meant that district heating cornpanies primarily had to use natural gas, surplus heat from electric power stations, straw, waste and wood. Furthermore, future planning of new power plants should include the possibility of CHP, ie the government would only as an exception approve the constitution of electricity condensation units. At the same time this policy was reinforced by an increase in energy taxes on oil and coal to prevent falling fuel prices from affecting prices to the final consumer. It was also finally decided that Danish energy planning should exclude the option of using nuclear power.
G E N E R A L INVESTMENT PLAN AND MAIN DISTRICT H E A T I N G PROJECTS
Investments The amount of investment in the energy sector in Denmark from 1975 to 1988 was equal to approximately US$15 billion ($1988). Investment in the large CHP transmission networks largely ceased in 1991. District heating investment will now primarily involve extensions on the distribution side and renovation of existing plants, among these the conversion of coal to natural gas fired boiler units at the major CHP plants. However, large investments in equipment for environmental protection have also to be taken into consideration in the following decade. Regarding the general investment plans for the two main types of collective supply systems which have been promoted during the previous decade,
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CHP series - CHP development in Denmark
Table 1. Estimated investment in relation to annual sales in Danish DH transmission companies (US$1988).
AKV TVIS VEKS CTR
Estimated investment
Yearly sales (net)
Length
Invested
Invested (1000
Sales
(US$) 1 622 1 050 1 995 2 428
(TJ) 11 500 6 000 9 500 15 700
(kin) 100 75 99 52
(USS/TJ) 21 700 26 900 32 300 23 800
US$/km) 2 460 2 150 3 080 7 230
(TJ/km) 115 80 96 302
there is, however, one major difference which should be emphasized. This concerns the liability of the obligations of the natural gas project towards any third party which is held directly by Denmark. In the large i n t e r - m u n i c i p a l - or r e g i o n a l - district heating companies, which are generally organized as partnerships, the liability is, however, held by the partner municipalities themselves which are directly, jointly and severally and with their entire property liable for the obligations of the company, Distict heating c o m p a n i e s Today there are approximately 350 district heating companies in Denmark, four of which are so-called inter-municipal or regional transmission systems. Common to these four systems, all of which were implemented or under construction during the 198091 period, is that they first and foremost have been established in areas where district heating systems already existed and were then linked by means of a number of main transmission networks, The actual spheres of activity of the four transmission companies was, and is, to plan, establish, finance and operate transmission networks for district heating, as the individual company buys heat from the producers, transports it via the transmission network and sells it to the partner municipalities involved. Further transportation of the heat from the receiver points in the municipalities (heat exchanger stations) on to the individual consumer is thus an area that is managed by the connected partners themselves, The four transmission companies in Denmark are: • Aarhus Kommunale Vaerker (AKV); • Trekantomraadets Varmetransmissionsselskab I/S (TVIS); • •
Vestegnens Kraftvarmeselskab I/S (VEKS); C e n t r a l k o m m u n e r n e s Transmissionsselskab I/S (CTR).
The estimated investments in relation to the annual sales of the four networks can be seen in Table 1. As Table 1 indicates, the estimated investments "1202
have no direct relation to the length of the networks or the annual heat sales etc. This is due to the very different conditions under which the four transmission networks have been established. Among these one can enumerate such factors as the fact that construction costs are much more expensive in densely populated areas where already existing underground power and supply cables often have to be rearranged. On the other hand the larger and more concentrated heat demands within these areas also means that a larger amount of heat can be distributed within a shorter distance, ie a larger sale in TJ/kilometre. An e x a m p l e : the C T R t r a n s m i s s i o n c o m p a n y The foundation of the Centralkommunernes Transmissionsselskab I/S (CTR) transmission company dates back to February 1984 and was managed by a group of five municipalities, all located in the greater Copenhagen area. All construction activities were ended by May 1990, and the system now includes 52 km of double pipeline with pipe diameters ranging from 250 to 800 mm. Added to this there are 23 heat exchanger stations and three booster pump stations, approximately 17 peak load stations and four different heat-generating installations (CHP-plants, waste incineration plants and purification plants). (See Figure 3.) As indicated in Table 1, the total net heat requirement is estimated to be 15 700 TJ/year when fully extended on the distribution side in the year 2002, corresponding to 250 000 dwelling units being connected. Estimated consumer connection varies from 90% to 95% in the individual partner municipalities. The CTR system is also connected to a similar system, the VEKS system serving the area west of the Copenhagen area. This coordination of the two transmission systems has a number of obvious advantages as regards production, including a mutually guaranteed supply between the two companies in event of break-downs or other f o r c e m a j e u r e situations at the heating plants. It is also possible to utilize the load distribution between the ENERGY POLICY December 1992
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Figure 3. System lay-out of the CTR transmission network. two coordinated systems which ensures the most economical operation of both the heat and power systems, Altogether the two systems attend to 3/4 million people's energy needs - or 15% of the entire Danish population - thus forming one of the largest district heating systems in the world, Financial aspects Before a new district can be supplied with heat, construction of new or the expansion of existing district heating systems involves, however, considerable capital-intensive investment. At the same time most consumers take a short-time point of view when choosing a heating system so the district heating price and connection charge must be competitive with other heat supply options from the very start, ENERGY POLICY December 1992
District heating companies, therefore, have to accept that there will be a relatively long pay back period. Typically, planning periods of 15-20 years have to be reckoned with when the price of heat is set as an average for the entire period. This means that the initial low revenue yield is compensated for by loans, thereby transforming the long-term economic advantages for the district heating companies into an immediate benefit for the consumer. However, it should be stressed that district heating systems have a lifetime, typically about 50 years, which is much longer than the pay back period for the investment. This means that the economic and financial situation improves considerably after the initial build up phase. In addition, in order to provide the lowest possible starting price for the consumer, thus guaranteeing the competitiveness of district heating vis-a-vis other 1203
C H P series - C H P development in D e n m a r k
supply systems, special arrangements are often made concerning heat purchase from CHP generating units, Generally, for the first 10-15 years the heat consumers pay only the marginal costs of heat extraction thus indemnifying the electricity consumers. In other words for a certain grace period the total benefit of combined production is allocated to the heat consumers compared with the best alternative heat supply option. The reason for this approach is that there is really no benefit to be shared until the investment in the transportation systems are paid back. Electricity prices will not be affected by the heat production in the period agreed upon and after the grace period the benefit of the combined production compared with the best alternative heat supply option is shared, mostly fifty-fifty, with the result that both the electricity price and the heat price are reduced in the long term. Main competing alternative to district heating As regards the competitiveness of collective supply systems there is a condition within Danish legislation that has to be mentioned: through the nationwide heating plan introduced according to the 1979 Heat Supply Act, certain geographical areas were what might be called 'reserved'. Within these areas individual district heating companies were allowed to gain a monopoly as regards heat supply, ie competition is not allowed to come from other collective supply companies including the natural gas cornpanies, At the same time, the tariff principle also states that each individual district heating company must, to confirm its status as a collective supply company, be economically autonomous. This means that the price of heat must only cover the costs connected to the generation and transportation of heat, and that the company - even though it may be under intermunicipal control - must still be able to be considered as a consumer-owned company. In this way no extra profit can be accumulated by the company. In terms of sales of heat the business decisions of the various transmission companies have to be compared to that of wholesale companies. That means that the price policy that underlies the actual selling price to the individual consumers, eg the heat price paid by the consumer, is a concern which is attended to by the individual partner municipalities. Environmental benefits Factors other than the actual price of heat may, however, also play a vital role when comparing the competitiveness of district heating with that of other 1204
supply options. Among these the concern for environmental protection can be mentioned, not least when looking at the energy deliberations that are currently being made. It is quite clear that the reduction of emissions will be the focus of attention in the years ahead. According to the Energy 2000 action plan mentioned previously, CO2 emissions are expected to see a 20% reduction over the next 15 years, and within the same period SO2 emissions are expected to drop some 60%, and NO by approximately 50%. It seems obvious that it is more feasible to control emissions from a few large plants than from thousands of household boilers spread over a city. Also, if less energy is consumed through combined generation of heat and power and utilization of waste heat in a district heating network, the emissions per delivered unit of heat are reduced. Increasing political demands for environmentally acceptable disposal of waste products such as garbage, chemicals, straw etc, has, moreover, given the district heating option a new dimension, as energy from almost any combustible material can be exploited. Additionally it has to be mentioned that the Danish government seems to be prepared to take more decisive and extensive steps than seen before in order to fulfill the objectives of the new energy plan, thus ensuring the extension of collective heat supplies. A statute has recently been made which requires the connection to collective networks existing buildings over a certain size. This decision is a most unusual step in the history of Danish heat supply. It has been estimated that the emission of CO2 will be reduced by approximately 50% of present levels (equal to 750 000 tonnes), and the emission of SO2 some 35%, when the CTR network has been fully extended by the year 2002. (A considerable improvement of the air quality in the area has already been obtained.) At the same time the computed oil substitution effect will be some 450 000 tonnes of oil, and the equivalent of net energy saving of some 290 000 tonnes of oil. In economic terms, this will save the Danes approximately 500 million DKK (equal to US$ 77 milllion) per year. Previous situation Changes in heat supply through the establishment of new collective supply systems and consumer connections, requires a relatively long time. Not all results of the planning have come through yet, although significant results have been achieved already. ENERGY POLICY December 1992
CHP series 125
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CHP development in Denmark
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Figure 4. Sources of energy for room-heating in Denmark.
The gross energy consumption for heating purposes has decreased considerably since 1979, surpassing the expectations of the Danish Energy Policy 1976. This drastic fall, approximately 45%, is the result, among other things, of energy savings, utilization of surplus heat, introduction of more efficient energy technologies and changes in consumer behaviour, In addition, the net heat demand distributed according to heating systems shows an important shift from individual oil burners to collective systems, especially district heating. In 1990 district heating covered 44% of the accumulated net heat requirements (compared to 25% in 1972). During the same period natural gas supplies rose from literally nothing to approximately 10% in 1990. As regards to the fuel mix within the heating sector the following changes have been accomplished: • The share of oil in gross energy consumption is now 44% compared with 95% in 1972. • The share of coal has increased from 6% in 1972 to 40% in 1990. • Improved utilization of surplus heat from power stations and industry, CHP, now supplies 54% of the total consumption of district heat-
for room-heating in Denmark and this figure is expected to increase even further to 37% around the year 2000. The goal is to supply 75% of total heating consumption by collective heat supply systems by the turn of the century. CHP is, in this connection, considered to be an important way of reaching this goal.
ing in Denmark. A significant Danish production of renewable energy based on new technologies is well under way and is presently providing some 6% of
The purpose of this Act is, from an economic and environmental point of view, to promote the best possible use of energy for heat and hot water supply to buildings and to reduce the dependence on oil of the energy supply.
total energy requirements. As can be seen from Figure 4, the supply of CHP already meets almost 30% of the total consumption
At the same time it is also expressly stated that 'the adaption of heat supply has to be carried out so as to promote the combined production of heat and pow-
•
ENERGY POLICY December 1992
F U T U R E E N E R G Y PLANNING A N D LEGISLATION While security of supply and efficient use of energy have been major considerations for introducing and extending the collective supply systems in the past, environmental protection has gradually come to the forefront from the mid-1980s and onwards. In 1990 the Danish Ministry of Energy thus published a new energy plan, E N E R G Y 2000, as a response to the Brundtland Commission's report on environment and development, Our Common Future. A few months later this energy plan was followed by a new Heat Supply Act 1990. Here the concern for environmental protection has been included in the very purpose and definition of the Act which says:
1205
C H P series - C H P d e v e l o p m e n t in D e n m a r k
er as much as possible', a statement which refers to a very ambitious programme for a continued expansion of CHP, including small-scale back-pressure power stations based on natural gas and waste, straw, wood and wood-chips, The new Heat Supply Act also states that emission standards have to be applied to the various heat supply plants, concerning the emissions of COe, SO2 and NO.
CONCLUSION Denmark has a long tradition in district heating, with the first plants erected early in this century. Today more than 350 district heating systems operate throughout the country, meeting over 40% of the total heat demand in Denmark. Up to 1973, the year of the first oil crisis, about 95% of Denmark's power production was based on oil, with only 5% from coal. The ratio has now been reversed. This restructuring has been accompanied by greater utilization of surplus heat from CHP plants, waste incineration plants and industries. A considerable expansion of heat transmission and distribution networks has taken place while power stations and CHP plants were carrying out their major fuel source switch. One of the more important developments in the heating picture has been the growth of district heating systems serving almost an entire city or region, Energy conservation and restructuring towards more energy-efficient technology have been
1206
keywords in Danish energy policy in the 1970s and 1980s.This has been reflected especially in domestic heating, where gross energy consumption per square metre has dropped approximately 45% from the early 1970s onwards. This drop is directly related to the massive expansion of CHP capacity, effected in the same period. The CHP share of total district heating has risen steadily- from 29% in 1972 to approximately 55% in 1989. Consequently some 30% of Danish heat requirements are now supplied by combined generation of heat and power. The intention is to increase this share by a further 7% over the next decade 37% of Denmark's total heat requirements being met by CHP. According to the estimates of the 1990 energy planning and legislation, about 80-90% of total heat consumption will be based on collective heat supplies in the year 2020. The planning will subsequently result in an additional substitution of oil in individual oil burners and fuel oil and coal in existing district heating plants with other indigenous sources, thus continuing the objectives of the previous energy plan. The share of oil and coal is thus to be reduced to 37% and 42% respectively (or even more, as the large CHP plants are converted from coal to natural gas supplies), while the share of natural gas will reach at least 12% and renewable energy 9%. At the same time the new energy plan aimed at a 15% reduction of total fuel consumption within the next 15 years - a reduction which has to be compared to the 9% rate of growth which elsewhere is forecasted by the year 2005.
ENERGY POLICY December 1992