Preparing your district heating system for sector coupling
As the pressure on district heating systems to phase out fuel-based sources grows, the role of electricity will increase dramatically. In this article, we dive into two best practices district heating leaders are implementing to prepare for an electricity-dominated future.
Most district heating systems have traditionally been linked to the electricity market in two ways:
Combined heat and power plants (CHPs) that produce both heat and electricity.
Electric-powered hydraulic pumps that allow heat to be distributed from the source to the user.
As the pressure to phase out existing energy sources grows on district heating systems, the role of electricity will grow dramatically, along with the increasing volume of heating systems relying on electricity.
In this article, we dive into two best practices district heating leaders are implementing to prepare for an electricity-dominated future.
Electricity in district heating: key use cases
Electricity has become an increasingly important component of the heating system in terms of generation, distribution, and consumption:
Generation and distribution:
Heat production assets sometimes require electricity, for instance, when companies operate a heat pump or e-boiler.
Heating networks that operate at lower temperatures require higher pumping capacity and, as a result, more electricity resources.
Large district heating companies need decentralised heat sources to ensure adequate temperature, matching the requirements on the consumption side.
The graph below presents the volatility in prices over a few days for different countries. While sector coupling enables opportunities, price patterns are unpredictable.Imbalance purchase price for electricity in Nordics
At the same time, electricity generation increasingly relies on renewable, intermittent energy resources such as solar and wind power. This causes high fluctuations in power markets - making it important for leaders to be aware when they buy and sell electricity in specific markets.
District heating providers run the risk of higher costs if they need to buy electricity to produce heat. This is why they need to prepare for sector coupling, avoiding the risk of lowering profitability and using this opportunity for sector coupling.
How can district heating leaders prepare for an electricity-dominated future?
Best practice 1: Prepare for a more electric future with minimal risk and maximal benefit
Our Market Research Report revealed that the majority of district heating leaders in the Nordics are investing in solutions that increase flexibility:
Physical assets such as large accumulators, buildings, and networks - they play an important role in increasing network flexibility when used as a reserve to meet demand during periods of high electricity prices.
Implementation of digital tools - integrating various energy sources with electricity-based solutions can be challenging, and digital tools can help in the design, simulation, and operation of such systems. Examples include weather forecasts, live customer demand forecasts, and electricity price analyses.
District heating companies that invest in digitalisation enjoy the following benefits and capabilities:
Forecasting the weather and customer demand for optimal load schedules.
Forecasting electricity prices to respond to price fluctuations.
Simulation of network changes or maintenance events with actual network data to prepare operations.
Due to the volatility of power markets, these technologies enable providers to precisely assess both the current and future health of the network. This allows for making data-driven decisions about when to charge and discharge accumulators and using the network as a buffer to reduce peak demand by anticipating future changes.
How Oulun Energia’s multi-energy virtual power plant consumes and produces electricity
The Finnish district heating provider Oulun Energia is currently working on a multi-energy virtual power plant.
Kimmo Alatulkkila, Director of Heating and Cooling at Oulun Energia: “Currently, we are developing a multi-energy virtual power plant. This means that in our heating system, we can ‘virtually' produce and actually consume electricity, and also store energy in our 190,000 m3 accumulator. We have been able to leverage this flexibility and deliver heat at the lowest levels in Finland. This flexibility will continue to be a crucial factor going forward.
Even more so, I believe the district heating system plays an important role in balancing the city's energy system. You could even see the whole district heating system as a part of a virtual power plant.”
Best practice 2: Break the silos and organise around a single integrated system
Heat production and distribution are increasingly connected to non-fuel temperature-dependent heat sources deployed throughout the heating system. This implies that a close collaboration between production and distribution could be highly beneficial to district heating companies.
As the volume of renewable energy sources used increases, the European energy market faces new issues related to the unique features of such energy sources: intermittency and daily ramping.
However, short-term markets allow for greater flexibility in dealing with the daily ramping impacts of renewable energy generation, providing a mechanism for stabilising. This calls for greater flexibility and collaboration across departments.
How Viborg Varme is transforming into an electrified system with green sourcesViborg Varme has the ambition to drastically change its production setup in the coming 12-18 months
Viborg Varme is the outcome of a merger between heat generation and distribution companies. In the recently organised system, these departments interact more frequently, and grid developments combine the needs of both to generate the lowest possible heat price for the user.
Tom Diget, Distribution Lead at Viborg Varme: “In our transformed system, we must incorporate the interaction between the production and distribution of the system to realise the lowest heat price for the consumer.”
In light of Viborg Varme’s decarbonisation and modernisation plans, a strong collaboration between the departments is a must-have for future-proofing the production setup during the next 12-18 months. Currently entirely reliant on gas, the provider plans to convert its production setup to a nearly entirely electrified system within the next 18 months.
To replace the 60 MW CHP, Viborg Varme will install three heat pumps, an e-boiler, and a large accumulator to provide flexibility. Gas will only be used to handle unexpected demand peaks in the new system.
In the long run, district heating companies will shape the future of energy systems. Their investments in digital tools and integration can help balance the energy grid by producing, using, and storing electricity while efficiently responding to price swings in the electricity market.
Are you curious to learn how industry experts are planning for other known certainties, such as the increasing fuel risks or complexity of heating systems?
Read our Market Research Report for practical advice backed up by real-life case studies based on interviews with 17 Nordic district heating leaders.
We also presented the findings during the webinar ''Accelerating the heating transformation'' where Bjork Paamand Olsen from E.ON Denmark, Tom Diget from Viborg Varme, and Timo Aaltonen from Helen shared their insights.