Economic Viability of Combined Heat and Power District Heating Networks in the United Kingdom:a comparative approach
|The economic, social and environmental benefits of Combined Heat and Power (CHP) over less efficient alternatives are well established. Effective implementation of CHP can increase the overall energy efficiency of large power stations by as much as 40%, curbing CO2 emissions, minimising fossil fuel consumption, enhancing energy security and improving social well-being through access to more affordable heating. In the United Kingdom (UK), some 50% of final energy demand is used for space or water heating, and the domestic sector alone consumes over half of this heat demand. Yet total CHP capacity in the UK contributes less than 6% to electricity demand compared with over 50% in Denmark.
There are several examples of operational CHP District Heating (CHP-DH) networks in the UK. Six such schemes were identified to be used as case studies in a comparative analysis, these include: Aberdeen, Barkantine, Woking, Southampton, Nottingham and Sheffield. All schemes use an Energy Service Company (ESCO) for the delivery of heat and power.
It will be shown that the economic viability of CHP-DH networks can be separated into three distinct categories, namely: optimisation of engineering and design principles; organisational and regulatory frameworks; and financing and economic factors. Barriers and opportunities in each of these areas are identified, as well as recommendations for how policy levers, market instruments and system design principles can be used to guarantee the effective implementation and economic viability of CHP-DH networks.
In the long term it was found that District Heating can compete effectively with other energy supply and distribution technologies such as electricity and gas. However, in the short to medium term it is shown that economic risk is the most significant barrier for the realisation of CHP-DH. Under the present economic and regulatory paradigm the revenue from electricity rather then heat is the most important factor impacting economic viability. Moreover, engineering and design solutions such as the use of accumulators, absorption chillers and system balancing techniques all impact the profitability of a scheme.
Finally, it will be shown that CHP-DH can make a significant contribution to the UK’s long term targets to reduce CO2 emissions, increase energy security, promote competitive energy markets, and reduce fuel-poverty. However, the infrastructure required for District Heating networks remains prohibitive; the implementation of government policies in this area is complicated and inefficient, and substantial collaboration between industry and the public sector is still required for the successful implementation of CHP-DH networks.