The Impact of Heat Load on the Business Case of MT DH Systems

Abstract

To evolve into a carbon-free society, the built environment needs to move to sustainable, natural gasfree heating by 2030. The PBL Netherlands Environmental Assessment Agency (PBL) has defined five strategies for sustainable heating. One of these strategies is to switch to medium-temperature district heating (MT DH) systems to heat buildings. Because DH systems take a long time to develop, there are uncertainties associated with the amount of heat that will be sold. The unknown influence of competing sustainable heat strategies, make these uncertainties bigger. This leads to the following research question: ‘How does a change in heat load for DH systems due to competing heat strategies influence the business case of new MT DH systems for DH companies in the Netherlands?’ To answer this research question, an area in Delft, consisting of six neighbourhoods was chosen to analyse. For this area, using the business case template developed by TNO and commissioned by the ECW (expertise centrum warmte), the business case for the DH system was calculated under positive assumptions and energy demands. The resulting business case in the subject neighbourhood was positive. Next, scenarios were developed based on competing sustainability strategies, to evaluate the effect these strategies and behaviour have on the business case. These strategies were competing sustainable heating technologies and shell-improvements. Competing sustainable heating technologies affect the participation rate of the DH system, while shell-improvements affect the heat demand per connection. From this, five scenarios arose (excluding the reference scenario). Each scenario had a different combination of participation rates and insulation. The effect of these scenarios was evaluated from the national cost perspective and from the DH company perspective. The results showed that the business case is strongly affected by the DH system heat load. When assumptions about participation rate and insulation levels worsened, the projected NPV and IRR declined. In every scenario, the IRR is positive and the investments are recuperated. However, only the reference scenario and the two least negative scenarios resulted in a positive business case. Higher insulation levels alone did not result in a negative business case for the DH company, but does strongly influences the national costs per avoided CO2. An uncertainty analysis showed that the price for which heat is purchased and sold are the two most influential parameters for the business case. From this thesis, it can be concluded that competing sustainable heating strategies have a significant influence on the heat load and the business case of DH systems. There are scenarios where a DH system is still the strategy with the lowest national cost but is not a good investment for DH companies. Further research must point out whether or not it is efficient for the government to subsidise DH systems in these cases