12th International Symposium on District Heating and Cooling

The <strong>12th</strong> <strong>International</strong> <strong>Symposium</strong> on District Heating and Cooling,September 5 th to September 7 th , 2010, Tallinn, EstoniaBIOENERGY COMBINES IN DISTRICT HEATING SYSTEMS:PROSPECTS FOR A FUTURE GROWTH INDUSTRY?E. Axelsson 1 , A. Sandoff 2 , C. Overland 21 Profu, Gothenburg, Sweden.2 Department of Business Administration, University of Gothenburg, Sweden.ABSTRACTDistrict heating offers opportunities for integration ofbioenergy production (e.g. of biofuel). The aim of thispaper is to assess the environmental benefit and theeconomic value of such integration, in order to evaluatethe prospect for bioenergy combines in district heatingsystems. Since the detailed characteristics of thedistrict heating system are crucial for the feasibility forintegration of bioenergy production, the assessment isbased on four real district heating systems. Theenvironmental evaluation shows that the decrease ingreen house gas emissions from a combine are inproportion to the increase in output of CO 2 neutralenergy products. However, the CO 2 reduction per usedquantity of biomass is higher in conventional combinedheat and power production as long as marginalelectricity is related to high CO 2 emissions. Also theeconomic evaluation show ambiguous results: twocases had negative net present value even for lowdiscount rates, while the two other cases showed to bemore economically robust. In addition to this, a moredetailed analysis of the industrial conditions for theintegration shows a need for achieving a fit regardingseveral operational, strategic and economiccircumstances for this type of business ventures. Twoimportant conclusions that can be drawn from this isthat: 1) not all district heating systems are suitable forbioenergy combines 2) there are many barriers for awide spread adoption of bioenergy combines.INTRODUCTIONDistrict heating is a technology that receives increasinginterest as it has great potentials in several ways. Oneunique characteristic of the district heating technologyis the use of low temperature energy flows for largescale energy distribution. In contrast to other energytransformation technologies (e.g. condensing power ordistributed gas heating), district heating can interactwith energy flows that otherwise do not have anyalternative use (e.g. industrial residual heat). Althoughthis is one of the competitive advantages of thetechnology and a fundamental platform for its businessmodel, this can further enhance the scoop of thebusiness: by backward integration it is possible toincrease profitability in other industrial processes withwaste heat as a by-product.143One industrial branch that shows promising prospectsin this respect is bioenergy production, i.e. productionof various kinds of biofuel, biogas and solid biofuel.Integration of bioenergy production to district heatingproduction eventuates in a bioenergy combine were theresidual heat from the bioenergy production can beutilised for district heating. Moreover, the integrationcan, in many cases, offer additional positive synergies,e.g. regarding the use of steam and combustibleby-products.The fact that worldwide bioenergy production as well asthe number of bioenergy products offered is increasingis a result of changing demand, which in turn offersnew business opportunities. However, one of the greatissues with large-scale production of bioenergyproducts is the growing concern over the negativeexternalities (social and environmental aspects as wellas resource efficiency). Since energy production andconsumption shows strong path dependence [1], thereis an urgent need to develop and establish productiontechnologies that help minimize the negativeexternalities. Utilizing the taiga and deciduous forestresources in the Northern hemisphere for this purposesis, arguably, a promising alternative. The majority ofthese natural resources exist in harvested forests,typically found in regions with, or suitable for, districtheating.This paper investigates the prospects of using districtheating production as a base for bioenergy productionand its potential to become a wide spread technology.For this purpose, we use data from four existing districtheating companies to which a bioenergy productionunit is fitted. By acknowledging the complexity of thisintegrative business venture, it is possible to getcredible assessments of the magnitude in energyefficiency, environmental gains and economic profits.Equally important is the possibility to detect potentiallimitations for bioenergy combines to become acomplement to district heating. Finally, conclusions aremade to acquire clues to important restrictions to awide spread adoption.RESEACH DESIGNWe argue that prospects for becoming a future growthindustry are dependent on the environmental benefits,economic attractiveness and fit with existing businesscontext. Hence, these three aspects of joint production