This chapter presented the principles of CHP production on a back-pressure and an extrac-tion plant. Furthermore, the operaextrac-tional principles for an EB and HP were outlined. Heat costs for these production units were derived and the significant impact of taxes and fees illustrated. The Nordic electricity market was outlined together with the ancillary services, which are bought to secure grid stability. Finally, the district heating system of Greater Copenhagen was presented and the procedures for heat dispatch outlined. This allows for an assessment of the operational possibilities a HP and EB have if integrated in a CHP system.
Moreover, it allows for an analysis of the framework on which an operational strategy can be developed. This will be the subject of the following chapter.
Chapter 3
Operational framework and strategy
This chapter constitutes the foundation for the subsequent modelling and analysis chapters.
The previous chapter outlined and described the heat and power markets including the relevant actors. Combined heat and power production was described as well as the working principle of HPs and EBs. With this as the basis, this chapter analyzes and sets up a framework for integrating a HP and EB in the Copenhagen district heating network and Nordic power market. The most essential issues to be discussed include the physical and organizational location of the HP and EB, as well as operational considerations concerning the relevant markets. Addressing these issues properly, allows for an assessment of the operational strategy, based on which, an appropriate modelling set-up can be defined.
3.1 Organizational location and information access
If an EB and HP are to be introduced into the system several possibilities exist for the organizational location within the district heating system in Greater Copenhagen. Both operational as well as political issues affected by the organizational location should be considered before making this decision.
The heat dispatch in Greater Copenhagen, described in Section 2.4, is based on defined pro-cedures intended to provide an optimal heat dispatch and to ensure a degree of competition between the two suppliers. An EB and HP will therefore have to obey the principles set-up in this agreement and enter the market in a way that is satisfactory for all parties. As a consequence, detailed production information from both suppliers cannot be assumed to be accessible simultaneously.
Three distinctive organizational locations are identified for the system in Greater Copen-hagen:
1. Stand alone: Owned by third-party 2. Owned by Varmelast.dk
3. Owned by supplier: DONG Energy or HOFOR Kraftvarme 25
These options have been selected after discussing the possibilities with both Varmelast.dk and HOFOR, and are believed to constitute realistic options. The political as well as operational consequences for each of these options are assessed in the following paragraphs and summarized in Table 3.1.
In the first option the EB and HP operate as individual units. In this way the units are competing equally against CHP units from HOFOR Kraftvarme and DONG Energy. In relation to the level of information available, this will be limited to the day-ahead electricity price forecasts and the daily heat demand forecast for the upcoming day. Thus, the operation will have to be based on forecasts with large margins, to lower the risk of uneconomical situations, as no rescheduling is possible. Furthermore, the HP and EB will not be able to produce if the power price, unexpectedly, becomes very low and no heat dispatch is given based on the forecasts for the electricity price.
The second option is to let Varmelast.dk operate the EB and HP, and profit to be divided between the involved parts (DONG Energy, HOFOR Kraftvarme, HOFOR, VEKS and CTR). This allows for the dispatch to be decided knowing the bids from the other suppliers.
However, such a set-up is politically complex and the production companies might not accept this construction due to the risk of loosing profit. However, Varmelast.dk do not have full access to supplier information and hence the flexibility of the HP and EB will not be fully explored in this option.
Finally, in the third option the HP and EB are a part of a bigger system including addi-tional ways of producing heat, such as CHP plants. This portfolio of production options allows for a better optimization of the overall operation. Knowing information concerning other production units, the heat and power bidding can take place on an aggregated level with more flexibility to reschedule internally in the event of unexpected electricity prices.
Furthermore, access to storage is usually available in connection to large CHP units which provide additional flexibility. This will result in cheaper bids to Varmelast.dk and thus more heat dispatch.
Following, it seems most beneficial to opt for the third option and let the HP and EB be part of a CHP system, owned by one supplier. This will not lead to any political conflicts and allows for the flexibility of the HP and EB to be fully utilized.
Organizational
No information, no flexibility and high uncertainty
Varmelast.dk
Complex as it might favor the HP and EB. Producers might object
Overall production knowledge avail-able. Low flexibility. Back-up func-tionality
Supplier Simple but requires internal integration
Operational information available.
Optimize as part of CHP system.
High flexibility
Table 3.1 – Summary of political and operational consequences of three distinctive organizational locations.