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, Estoniaand N 2 O (the CO 2 emission are assumed to be neutralfrom a climate perspective), while hydrolysis andfermentation is not assumed to raise these emissions.Hence, the net lifecycle emission of biomass differsbetween 14-17 kg CO 2 eq./MWh fuel.ElectricityIn all district heating systems, the electricity productiondecreases as a consequence of introducing thecombine (see Description of the cases). Any change inelectricity production is assumed to be compensated bychanges in marginal electricity production. Forinstance, if the electricity production decreases by 85GWh/year, it is assumed that other producers willincrease their production by 85 GWh/year. To assessthe environmental impact of this, the decrease has tobe multiplied with a emission factor for marginalelectricity.There are many opinions regarding the emissions ofmarginal electricity. Here we have used a high and alow level, based on dynamic response for electricityproduction with two different developments over a longtime period [5]. By using a high and low figure, theimpact and importance of changes in electricity can beillustrated in a clear way. For the high figure, thereference case in [5] is used where lifecycle emissionsof marginal electricity are about 800 kg/MWh el . Thismarginal electricity is denoted E1 hereon. With morestringent environmental targets the electricityproduction can be carbon lean [5] implying that the longterm lifecycle emissions would be about 260 kg/MWh el ,denoted E2 hereon.BiofuelAs seen in Table I, the evaluated bioenergy combineshave various biofuel products as output. In System 1pyrolysis oil is produced. The pyrolysis oil is assumedto replace fossil fuel oil (but is categorized as an biofuelherein). If lifecycle emissions are regarded according tothe approach in ref. [6] for both pyrolysis oil and fossilfuel oil, the net GHG reduction for replacing fuel oil withpyrolysis oil is 292 kg per MWh of pyrolysis oil exportedfrom the combine. Also the amount of fuel oil useddiffers in the combine case from the reference case inSystem 1 (see Table I). The net life cycle GHG of thisfuel oil is set to 312 kg/MWh.In systems 2 and 3 ethanol is produced, which isassumed to replace gasoline with net GHG reduction of307 kg per MWh of ethanol reaching the market.In System 4, three biofuels are produced: FischerTropsch (FT) diesel, nafta and kerosene. All threeproducts are assumed to replace fossil transportationfuel with the net GHG reduction of 277 kg/MWh. Thepossible leakage of methane from the gasificationprocess is assumed to be negligible.Biogas and pelletsIn the energy combine of System 3, also biogas andpellets are produced. The biogas is assumed to beused as a transportation fuel to replace both petrol anddiesel. The net GHG reduction for replacing fossiltransportation fuel with biogas is set to 207 kg/MWhincluding life cycle emission and gas leakage in theproduction. The pellets are also assumed to replacefossil fuel, in this case oil with a net GHG reduction of286 kg/MWh pellets.Resource efficiencyWith the emission factors in Table II and the energyflows of the reference and combine case in Table I, theenvironmental benefit of the energy combine can beassessed. However, if biomass is assumed to be alimited resource from a sustainability point of view, itmakes sense to evaluate the use of biomass from anefficiency perspective. Hence, the resource efficiency isassessed as the net GHG reduction potential (in kgCO 2 eq.) per used quantity of biomass (in MWh). Bycomparing this key figure for the reference case withthe combine case for each system, the resourceefficiency of the combines can be evaluated.Economic evaluationIn order to analyze whether an investment addsfinancial value we rely on a standard discounted cashflow (DCF) model estimating the net present value(NPV) for each project so that:NPVntCF t1 rt0/ (1)where CF t denotes the net cash flow in year t, r is thefuture weighted cost of capital and n is the number ofyears included in the cost-/benefit analysis. The cashflow at year 0 indicates the initial outlay. Concerning r,the weighted cost of capital (WACC), we do notpredetermine a specific hurdle rate; instead we analyzevalue added for three different levels of discount rates.We do so because any statements on the actualriskiness of the project or an estimation of the WACCfor the companies are outside the reach of this study.As stated before, when estimating cash flows the pointof departure is a reference object. That is, our NPVcalculations only address the differences in cash flowsbetween the reference and the bioenergy combine; thisfor two reasons. First, only the incremental cash flowsare relevant in a DCF analysis. For instance, in thecase of System 3 they already decided that they wouldat least build a combined heat and power (CHP)facility, and the question is if they gain from makingadditional investments in a bioenergy production unit.Second, by focusing on the differences we do not needto consider the cost structure in the reference case, it istreated as a given. Besides simplifying the analysis,146