Improving the competitiveness of district energy

We have made a quantitative impact assessment related to load distribution for Varmelast. The impact assessment is part of the project Load Distribution based on Contract Prices. The aim of the project is improving the competitiveness of district heating.

Varmelast handles load dispatching of heat production in the greater Copenhagen area. Varmelast is organized as a cooperation between the three largest municipally owned heating companies in the Copenhagen metropolitan area: CTR, VEKS, and HOFOR.

Varmelast has published the EML report on Varmelast.dk.

One fundamental way of improving the competitiveness of district heating is to reform the load distribution system to ensure the lowest possible heating prices. Our analysis focused on the pricing of load distribution, comparing the advantages of different pricing systems.

Comparing load distribution systems

We based the assessment on the model TIMES-Varmelast. TIMES-Varmelast is an optimization model we built and tailored based on the internationally recognized TIMES modelling framework.

In the model, a load distribution system based on the contract prices is tested and compared with the existing system load distribution system based on minimizing the total costs of running the plants (e.g., fuel costs and revenue from the sale of electricity which are not part of the heating contract).

The analysis examines the total variable heat payment in 2030 under the two load distribution systems. The purpose was to contribute to understanding how changes in load distribution, and design of future contracts can affect the future heat price and production. Likewise, we also wished to gain insights into how electricity price assumptions and fuel price assumptions can affect future heat prices and production.

The TIMES-Varmelast model

The TIMES-Varmelast model is solved on an hourly level (8760 hours). We equipped it with a detailed representation of the greater Copenhagen district heating area. The model features 98 regions representing relevant district heating supply, transmission, and demand areas.

TIMES-Varmelast was developed from scratch within a few weeks by EML. The successful result has demonstrated the strength and flexibility of the TIMES modelling framework. Furthermore, we confirmed our ability to apply the TIMES framework quickly to any complex energy system case.

Key takeaways

Adopting the format of price-based contracts for load distribution results in substantial reductions in the costs and lower prices of district heating compared to cost-based load distribution.
Operating the format of price-based contracts for load distribution results in using the cheapest production plant at any given time.
Using the format of price-based contracts for load distribution results in considerable change in the district heating production. The impact includes decreased production from thermal plants while production from heat pumps and electric boilers increases.
The format of price-based contracts for load distribution is more robust to changes in electricity prices.

Modelling

We used the TIMES modelling framework to build the TIMES-Varmelast model for load distribution with different pricing systems, hourly time resolution, and detailed representation of the Greater Copenhagen district heating area.

Scenarios

We developed scenarios comparing price-based contracts for load distribution to the existing load distribution system (based on total costs) and ran sensitivity analyses.