The <str<strong>on</strong>g>12th</str<strong>on</strong>g> <str<strong>on</strong>g>Internati<strong>on</strong>al</str<strong>on</strong>g> <str<strong>on</strong>g>Symposium</str<strong>on</strong>g> <strong>on</strong> <strong>District</strong> <strong>Heating</strong> <strong>and</strong> <strong>Cooling</strong>,September 5 th to September 7 th , 2010, Tallinn, Est<strong>on</strong>iainfrastructure. Only relying <strong>on</strong> local dem<strong>and</strong> for biogasis c<strong>on</strong>sidered too challenging at present time.Yearly Cash Flows (M€)100Existing producti<strong>on</strong> <strong>and</strong> system c<strong>on</strong>figurati<strong>on</strong>Investments in bioenergy combines are seldom greenfield but, as we have shown earlier, have to be adaptedto suit existing heat volumes, dem<strong>and</strong> curves, systemc<strong>on</strong>figurati<strong>on</strong>s <strong>and</strong> also producti<strong>on</strong> site layout. In <strong>on</strong>e ofthe systems, the producti<strong>on</strong> site was too small to housethe large amounts of biomass necessary for achievingan ec<strong>on</strong>omic profitable size of an ethanol operati<strong>on</strong>.80604020In-paymentsFree cash flowOut-paymentsBiofuelBiogasPelletsBiomassIndustrial waste heatElectricityElectricity certificateDominant business c<strong>on</strong>diti<strong>on</strong>sThe results of the study show that two business areashave an evident influence <strong>on</strong> the type of bioenergycombine investments the companies carry out: 1) thestrategic framing of the district heating company <strong>and</strong> 2)the risk that these investments innate. C<strong>on</strong>cerning thefirst, many of the municipally owners use the utilities toenhance <strong>and</strong> to some extent even realize theenvir<strong>on</strong>mental visi<strong>on</strong>s that are formed <strong>and</strong> expressed<strong>on</strong> the political level. Examples of these found am<strong>on</strong>gthe companies represented in this study include;phasing out fossil fuels, use of local waste resources<strong>and</strong> visi<strong>on</strong>s of a fossil free cities based around locallyproduced bioenergy fuels. When present, strategicframing has a visible effect <strong>on</strong> limiting the number ofavailable alternatives for integrates producti<strong>on</strong>.As stated, the sec<strong>on</strong>d area that has an significantinfluence <strong>on</strong> the type of bioenergy combine that thesecompanies c<strong>on</strong>sider is the risk that these investmentsinnate. Due to the municipal ownership, thesecompanies are inherently dependent <strong>on</strong> stablebusiness c<strong>on</strong>diti<strong>on</strong>s. The ability to absorb negativeresults is str<strong>on</strong>gly limited. The added business risk ofbioenergy producti<strong>on</strong> must, if needed, be able to beabsorbed by cash flows from existing operati<strong>on</strong>s or astr<strong>on</strong>g capital base. In principle, this can be d<strong>on</strong>e in twoways, either by keeping the investment relatively small,or by <strong>on</strong>ly accepting business propositi<strong>on</strong>s with cashflows that can be made relatively stable.In Fig. 8, the operati<strong>on</strong>al risk of the investment can tosome extent be visualized by the size of the marginalcash flows of the different investments. The investmentin system 4 st<strong>and</strong>s out not <strong>on</strong>ly because it is the largest<strong>on</strong>e but also because its in-payment comes from <strong>on</strong>esource <strong>on</strong>ly. If the price correlati<strong>on</strong> with biomass ishigh, this might not be a large problem. However, it isinteresting to note the relatively small positive cash flowavailable from existing operati<strong>on</strong>s in Systems 4, <strong>and</strong>also for System 3. If the company carries through withthe evaluated investment, it will dramatically change itsoperati<strong>on</strong>al risk profile <strong>and</strong> over-all business focus.0-20System 1 System 2 System 3 System 4O&MFig. 8. Marginal cash flows (in-payments/out-payments)for each system in comparis<strong>on</strong> to free cash flow fromexisting operati<strong>on</strong>s in 2007 (shaded bar).The c<strong>on</strong>siderable positive free cash flow of system 2from its existing operati<strong>on</strong>s is explained by thecompany‘s sell of hydropower. Although irrelevant forthe value of this investment, it could functi<strong>on</strong> as ageneral safeguard against negative results, due tounfavourable relati<strong>on</strong> between biofuel <strong>and</strong> biomassprices.The investment in system 1 was not profitableaccording to the valuati<strong>on</strong> earlier. Despite this, it isworth pointing out that the risk of this investmentshould be low since it uses its own products as input. Ittoo has, relatively speaking, a str<strong>on</strong>g free cash flowfrom its current operati<strong>on</strong> that will decrease the risk ofending up in the red.CONCLUSIONSThe results of the bioenergy combine analyses showthat there are indicati<strong>on</strong>s for both envir<strong>on</strong>mental gains<strong>and</strong> added ec<strong>on</strong>omic value of such investments.However, these benefits seem to be limited by severaloperati<strong>on</strong>al, envir<strong>on</strong>mental <strong>and</strong> ec<strong>on</strong>omiccircumstances present in these systems. First, theseinvestments are dependent <strong>on</strong> the need for makingmajor changes in current producti<strong>on</strong> layout, typicallythe need for new or altered producti<strong>on</strong> plants. Thislimits the available window of opportunity. There arealso several limitati<strong>on</strong>s related to operati<strong>on</strong>alcharacteristics, availability of input resources <strong>and</strong>suitable product markets. A closer investigati<strong>on</strong> ofexisting governance situati<strong>on</strong> also shows that theseinvestments often are made to fit owner strategiesregarding envir<strong>on</strong>mental goals of the local energysystem. Finally, the municipally ownership typicallylimits the risk appetite which also limits availableinvestments. The doubtful short term envir<strong>on</strong>mentalbenefit is a more general objecti<strong>on</strong> based <strong>on</strong> thevaluati<strong>on</strong> of the current marginal power producti<strong>on</strong>.151
The <str<strong>on</strong>g>12th</str<strong>on</strong>g> <str<strong>on</strong>g>Internati<strong>on</strong>al</str<strong>on</strong>g> <str<strong>on</strong>g>Symposium</str<strong>on</strong>g> <strong>on</strong> <strong>District</strong> <strong>Heating</strong> <strong>and</strong> <strong>Cooling</strong>,September 5 th to September 7 th , 2010, Tallinn, Est<strong>on</strong>iaNever the less, it will hamper the potential for widespreadadopti<strong>on</strong> of bioenergy combines.These circumstances lead us to c<strong>on</strong>clude that not allbiofuel producti<strong>on</strong> technologies are suitable for alldistrict heating system. Our ec<strong>on</strong>omic analyses alsoindicate that not all district heating systems are suitablefor bioenergy combine producti<strong>on</strong>. In fact the barriersare so many that it is reas<strong>on</strong>able to assume they willeffectively reduce the number of systems adopting thisoperati<strong>on</strong>al design in the near future.ACKNOWLEDGEMENTSThe main funding for this project is provided byFjärrsyn, which is a research program organized by theSwedish district heating branch agency. Additi<strong>on</strong>alfunding is also received from the project ―Pathways toSustainable Energy Systems‖.We kindly thank the representatives from each districtheating system for a good cooperati<strong>on</strong> <strong>and</strong> forproviding us with technical <strong>and</strong> ec<strong>on</strong>omic data of theirsystems. Without these inputs, the work would nothave been as solid as it is.We also thank Karolina Nilss<strong>on</strong> <strong>and</strong> John J<strong>on</strong>ss<strong>on</strong>(both at Profu) for their valuable c<strong>on</strong>tributi<strong>on</strong> to thework.REFERENCES[1] M. Odenberger, F. Johnss<strong>on</strong>, ―Pathways for theEuropean electricity supply system to 2050‖, Int. J.of Greenhouse Gas C<strong>on</strong>trol, 2010, Vol. 4:2, pp327-340[2] J.Sjödin <strong>and</strong> D. Henning, ―Calculating the marginalcosts of a district-heating utility‖, Applied Energy,2004, Vol. 78:1, pp 1-18.[3] E. Axelss<strong>on</strong>, C. Overl<strong>and</strong>, K. Nilss<strong>on</strong>, <strong>and</strong> A.S<strong>and</strong>off, ‖Bioenergikombinat i fjärrvärmesystem‖,Fjärrsynsrapport 2009:11.[4] T. Br<strong>and</strong>berg, Senior researcher at SEKAB E-technology, Pers<strong>on</strong>al communicati<strong>on</strong>, 2009.[5] H. Sköldberg <strong>and</strong> T. Unger, ‖Effekter av förändradelanvändning/elprodukti<strong>on</strong>‖. Elforsk report (2008).[6] IVL, ―Miljöfaktabok för bränslen‖, IVL Rapport B1334B-2 (2001).[7] Svebio, ―Kraftvärmeutbyggnad 2007-2015‖, Svebiorepport 2008-03-31.[8] H. Hanss<strong>on</strong>, S-E. Larss<strong>on</strong>, O. Nyström, F. Olss<strong>on</strong><strong>and</strong> B. Ridell, ―El från nya anläggningar - 2007‖,Elforsk repport no 07:50 (2007).[9] M. Zakriss<strong>on</strong>, ―Internati<strong>on</strong>ell jämförelse avprodukti<strong>on</strong>skostnader vid pelletstillverkning‖,Master‘s thesis no 29 2002, SLU.[10] A. Hang <strong>and</strong> S. Ilic, ‖En förstudie för bioetanolprodukti<strong>on</strong> i Borås‖, Master‘s thesis at Instituti<strong>on</strong>enIngenjörshögskolan, Högskolan i Borås (2008).[11] M. Lantz, ―Drivmedelsproducentersbetalningsförmåga för energigrödor‖, Miljö- ochenergisystem, LTH (2006).[12] J. Benjaminss<strong>on</strong> <strong>and</strong> A. Dahl, ―Uppgradering avbiogas‖, Presentati<strong>on</strong> at ―Temadag uppgraderingav biogas‖, Göteborg (2008).[13] I. Granberg, Project leader at Jönköping Energi,Pers<strong>on</strong>al commicati<strong>on</strong> (2008).[14] M. Tijmensen, A. Faaij, C. Hamelinck, <strong>and</strong> M. vanHardeveld, ―Explorati<strong>on</strong> of the possibilities forproducti<strong>on</strong> of Fischer Tropsch liquids <strong>and</strong> powervia biomass gasificati<strong>on</strong>‖, Biomass <strong>and</strong> Bioenergy2002, Vol. 23.[15] I. Johanss<strong>on</strong>, S. Larss<strong>on</strong> <strong>and</strong> O. Wennberg,―Torkning av biobränslen med spillvärme‖,Värmeforskrapport 881 (2007).[16] E. S<strong>and</strong>vig, G. Walling, R. Brown, R. Pletka, D.Radlein, <strong>and</strong> W. Johnss<strong>on</strong>, ―Integrated PyrolysisCombined Cycle Biomass Power Systems‖,Repport of Alliant Energy, Iowa, USA (2003).[17] H. Thunman, F. Lind, <strong>and</strong> F. Johnss<strong>on</strong> Delstudieenergikombinat, Elforskrapport, 2008.[18] NREL, Research Advances Cellulosic Ethanol,NREL (2007).[19] P. Sassner, M. Galbe, <strong>and</strong> G. Zacchi, ―Technoec<strong>on</strong>omicevaluati<strong>on</strong> of bioethanol producti<strong>on</strong> fromthree different lignocellolosic materials‖, Biomass<strong>and</strong> bioenergy 2008, Vol 32.152
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