Abstract
This study investigates the advantages of investing in plants for cogeneration, i.e., Combined Heat and Power (CHP), in case the heat is utilized for district heating. A focus is set on Swedish municipalities. The demand for heat is visualized in terms of load curves and duration diagrams. A standard diagram is chosen in order to analyze the dimensioning of a CHP plant. Two main alternative dimensions are analyzed in depth, namely to operate a plant with full capacity during eight months or alternatively during six months of the year. For each alternative, a CHP plant is compared to a heat water plant (a “boiler”) and a biological fuel is compared to the one of natural gas. Then, further expansions are analyzed in a parametric way. The outcome is that it is efficient to choose the dimension so large that it will only be operating at full scale during three months of the year. It is also shown that CHP plant based on biological fuel is profitable and outstanding. These theoretical findings are then illustrated by data taken from 10 large Swedish municipalities – Göteborg, Helsingborg, Linköping, Lund, Malmö, Norrköping, Stockholm, Uppsala, Västerås, and Örebro. However, even if cogeneration is an energy efficient way to supply electricity and heat in these municipalities, there are constraints to invest. Examples are contracted deliveries of heat from outside, existing old plants, average cost pricing, and uncertainties in terms of future taxation principles.
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Notes
- 1.
“Sweden has been successful in developing district heating. However, inside this sector only 4.7 TWh electricity is produced by cogeneration. At the same time, 4.2 TWh electricity is used for heating purposes. Consequently, only 0.5 TWh electricity remains to meet the demand for electricity outside the district heating sector.” (Kommunförbundet et al. 2002, p. 6).
- 2.
D = Germany, DK = Denmark, F = France, S = Sweden, and SF = Finland.
- 3.
Observe that in Denmark of 2003 CHP stood for a much higher share of the total electricity produced than in Sweden. A reason may be that in Sweden a substantial part of the electricity is produced by hydro power and nuclear power, while Denmark had to look for other electricity sources.
- 4.
In addition to these taxes on the production and the use of energy, a customer has to pay the general value-added tax (VAT). However, the value-added tax will have no influence when comparing different investment alternatives.
- 5.
VOC = Volatile Organic Compounds.
- 6.
It will be assumed that the investment costs for any plant will occur at the beginning of year 1 and that the annual costs and revenues from its operation will be charged at the end of each of the 20 years of operation.
- 7.
It is assumed that the Swedish systems of energy taxation and regulation will prevent such an overcapacity in the seventh and eighth month to be used for an unilateral production of electricity (see the note above on a 100% tax reduction).
- 8.
It is evident that cogeneration may be profitable for smaller municipalities as well. However, this paper will not focus on finding a break-even point for cogeneration.
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Acknowledgements
Thanks go to the following persons, who have given me assistance in writing this report:
Margaret Armstrong, Ecole des Mines, Paris
Mats Bärring, E.On Värme Sverige AB, Malmö
Bengt-Göran Dalman, Göteborg Energi AB, Göteborg
Erik Dotzauer, AB Fortum Värme, Stockholm
Anders Eriksson, Mälarenergi AB, Västerås
Alain Galli, Ecole des Mines, Paris
Ingvar Karlsson, Tekniska Verken AB, Linköping
Tom Kerr, International Energy Agency, Paris
David Knutsson, Göteborg Energi AB, Göteborg
Christer Olsson, Öresundkraft Produktion AB, Helsingborg
Stefan Persson, Vattenfall AB Värme, Uppsala
Nils-Ove Rasmusson, Eslöv Lund Kraftvärmeverk AB, Lund
Sigrid Sjöstrand, University of Lund, Lund
Ulrik Snygg, Öresundkraft Produktion AB, Helsingborg
Ulrik Stridbaek, International Energy Agency, Paris
Peter Svahn, University of Gothenburg, Göteborg
Sven Werner, Halmstad University, Halmstad
Ove Åsman, AB Fortum Värme, Stockholm
as well as to two anonymous referees.
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Bergendahl, G. (2010). Investment in Combined Heat and Power: CHP. In: Bjørndal, E., Bjørndal, M., Pardalos, P., Rönnqvist, M. (eds) Energy, Natural Resources and Environmental Economics. Energy Systems. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-12067-1_15
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DOI: https://doi.org/10.1007/978-3-642-12067-1_15
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