Economic and Environmental Benefits of CHP-based District Heating Systems in Sweden

Abstract: Future energy systems and thus the climate are affected by many factors, such as energy resources, energy demand, energy policy and the choice of energy technologies. Energy systems of the future are facing three main challenges; the steady growth of global energy demand, the energy resource depletion, as well as the increasing emissions of carbon dioxide (CO2) and other greenhouse gases and their impact on climate change. To meet the mentioned challenges with sustainability in mind, actions that increase energy efficiency and choosing an energy-efficient energy system which is cost efficient will be essential. Combined heat and power (CHP) plants and district heating and cooling could contribute greatly to increased system efficiency by using energy otherwise wasted.The aim of this study is to increase the understanding of how CHP-based district heating and cooling systems using different primary energy sources can contribute to more cost-efficient energy systems, which reduce global CO2 emissions, and to highlight the impact of some important parameters and measures on Swedish municipal district heating systems. An important assumption in this study is the estimation of CO2 emissions from electricity production, which is based on marginal electricity perspectives. In the short term, the marginal electricity is assumed to come from coal-fired condensing power plants while in the long term it consists of electricity produced by natural gas-fired combined cycle condensing power plants. This means that the local electricity production will replace the marginal electricity production. The underlying assumption is an ideal fully deregulated European electricity market where trade barriers are removed and there are no restrictions on transfer capacity.The results show that electricity generation in CHP plants, particularly in higher efficiency combined steam and gas turbine heat and power plants using natural gas, can reduce the global environmental impact of energy usage to a great extent. The results confirm, through the scenarios presented in this study, that waste as a fuel in CHP-based district heating systems is fully utilised since it has the lowest operational costs. The results also show how implementation of a biogas-based CHP plant in a biogas system contributes to an efficient system, as well as lowering both CO2 emissions and system costs. The results show that replacing electricity-driven (e.g. compression) cooling by heat-driven cooling using district heating (e.g. absorption chillers) in a CHP system is a cost-effective and climate friendly technology as electricity consumption is reduced while at the same time the electricity generation will be increased. The results of the study also show that there is potential to expand district heating systems to areas with lower heat density, with both environmental and economic benefits for the district heating companies.The results reveal that the operation of a studied CHP-based district heating system with an imposed emission limit is very sensitive to the way CO2 emissions are accounted, i.e., local CO2 emissions or emissions from marginal electricity production. The results show how the electricity production increases in the marginal case compared with the local one in order to reduce global CO2 emissions. The results also revealed that not only electricity and fuel prices but also policy instruments are important factors in promoting CHP-based district heating and cooling systems. The use of electricity certificates has a large influence for the introduction of biogas-based cogeneration. Another conclusion from the modelling is that present Swedish policy instruments are strong incentives for cogeneration with similar impact as applying external costs.