Step 1 (Heat planning, where possible areas for district ...€¦ · If 75% of the heat demand is...

Key steps in organising a new district heating project

SmartReFlex WP3 Capacity Building for Stakeholders Bologna 19 April 2016Capacity Building on organisational & financial issues Per Alex Sørensen / Morten Hofmeister

Step 1(Heat planning, where possible areas for

district heating are identified)

Step 2Preliminary contact to customers

(A working group as soon as possible)

Stop or go?



Step 3

Business planBasis for decision making for investor (and for municipality and consumers)

Stop or go?



Step 4Get customers connected

General informationInvitation to consumer information meeting

signing of preliminary contracts

Stop or go?



Step 5

• Call for tender and final budget Stop or go?

• Final contracts• Organisation of the DH company• Monitoring and payment of heat supply



Go!



Implementation of new DH in Bornholm, Denmark



• Size: 588 km2 (5th largest island in DK)

• Population: 40,700 inhabitants

• Distance to Zealand: 135 km (Distance to Sweden: 37 km)

About Bornholm



• Heat planning according to Danish legislation

• Establishment of Bornholms Forsyning

• Strategic Energy Planning

• Project proposals

• Implementation

The steps to new district heating



• Was established in 2008 as a non-profit Ltd 100% owned by the region municipality.

• Takes care of waste water for 17.000 households and 5.500 septic tanks

• Provides drinking water for 11.000 households and

• Provides district heating for cities and villages



Business plan for investor

• Description of possible heating solutions (district heat and reference with individual heating with different fuels)

• Choice of district heating solution and description of access to fuel • Where to place the district heating plant• How to organise and finance the district heating• Economical consequences for reference and project (Net Present Value,

Internal Rate of Return, yearly costs for consumers). Sensibility analyses.• Environmental consequences (emissions to soil, water and air)• Time schedule• Discussion on possible barriers for realisation of the project• Draft customers contract• Draft Statute for members



Business plan for the municipality

• Economical consequences for the municipality as an “island”

• Consequences for employment in the municipality• Environmental consequences (emissions)• Consequences for the municipal planning (effect on

environmental protected landscape, effect on neighbours to the production plant)

• Social economy



Business plan for the customer

• Price for heat from district heating and sensitivity calculations

• Installation costs and financing possibilities• Description of the house installation• Maintenance the customer have to take care of• Maintenance the utility takes care of• Pollution in and around the house• Statutes including description of obligations and

possibilities to change to individual heating again



Example of projectproposal:

Gudhjem Bornholm



Headlines

1. Introduction2. Responsible for the project proposal (in this case

Bornholms Varme, a municipal owned utility)3. Conclusion and summary4. Relation to the heat plan for Bornholm and other

planning issues (how to supply, heat sources, conflicts with local plans and municipality plan, conflicts with other legislation)

5. Definition of supply area (map)



5.1 Heat consumption

Number of consumers: 358Heated area, domestic houses: 43,908 m2

Heated area, business: 10,918 m2

Heat consumption: 7,757 MWhMax effect: 4.4 MWCapacity used for dimensioning: 2.8 MW



Duration curve

7.



5.2 Investment: Pipelines in Gudhjem (7.5 DKK = 1 €)

3 million EUR



5.2 Investment: Transmission pipelines and conversion

5,6 million EUR



5.2 Investment: 75% of the heat consumption is connected

Pipes 2,300,000 €Additional costs, rock 1,330,000 €Connection pipes and conversion 1,470,000 €Transmission pipe 470,000 €Total 5,570,000 €

Consumer payment 460,000 €Total after consumer payment 5,110,000 €



5.3 Capacity and security of supply

Dimensioning connection capacity: 7 kW/100 m2

Cooling of DH water at max capacity: 40 oCBiomass boiler capacity 100 % of max capacity

Gudhjem will be supplied from a straw fired plant in Østerlars. Heat production price: 27 €/MWhStraw price 73.8 €/ton or 18 €/MWh



6. Time schedule

May 2012: Bornholms Forsyning sends projectproposal to the municipality

August 2012: First political approval (T&E)October 2012: Final political approvalOctober 2012: Call for tender if 60-65% of heat demand

has accepted to joinNovember 2012: Start of implementationNovember 2013: End of implementation



7. Area abstention, easements and negotiations with land owners. No problems in this case since all pipes are in public roads

8. Negotiations with other supply companies. Could be suppliers of electricity or gas.

9. Economical consequences for the customer



Calculation for a standard house: 120 m2 and 14 MWh/year net heat consumption

Oil boiler:Operation and maintenance 225 €/yearOil 1,180 €/1000 liter

District heat:Fixed tariff 285 €/yearArea tariff 2.55 €/m2

Heat price 64 €/MWh



Calculation for a standard house

Oil boiler (Average yearly efficiency 75%, 10 kWh/liter oil):Operation and maintenance: 225 €/yearOil: 1400 liter/0.75 x 1.18 €/liter 2,203 €/yearTotal excl VAT 2,428 €/yearTotal incl VAT 3,035 €/year

District heating:Fixed tariff 285 €/yearArea tariff 120 m2 x 2.55 €/m2 306 €/yearHeat 14 MWh x 64 €/MWh 896 €/yearTotal excl. VAT 1,487 €/yearTotal incl. VAT 1,859 €/year



10. Energy and environmentIf 75% of the heat demand is connected:• Reduction in oil consumption 727 tons/year• Reduction in CO2 emission 1,937 tons/year

11. Net Present Value for savings for consumers and utility for a 20 years period if 75 or 90% is connected (mio.€)

75% 90%If consumers use oil 6.3 8.3If consumers use Heat pump 3.1 4.6If consumers use wood pellets 4.7 7.4For the utility 0.54 1.3



Break even for connection is app. 65%



Sensitivity calculations for consumers

The following calculations have been made for the consumer economy:

40 % lower oil prices compared to individual oil40 % lower electricity prices compared to individual heat pumps100 % higher straw prices compared to individual oil100 % higher straw prices compared to individual heat pumps

In all cases the result is, that district heat is cheapest



12. Socio economy

Social economy is calculated according standard rules decided by the Danish Energy Agency. Taxes are not included and environmental benefits included in the calculation. The Net Present Value for different ways of heating for a 20 years period for Gudhjem is if 75 or 90% are connected (mio. €):

75% 90%Individual oil 10.2 12.2District heat 8.6 9.7Heat pumps 9.1 10.7Wood pellets 9.5 11.4CO2 reduction/year for district heating compared to oil is 1,937tons and 2,325 tons for 75 and 90% connected.



13. Island economy

In calculation of the “Island economy” is the flow of money outof the island calculated for alternative solutions for heating. The result is again NPV over a 20 years period for 75 and 90%of the consumers connected (mio. €).

75% 90%Individual oil 8.7 10.5District heat 2.8 3.1Heat pumps 7.0 8.5Wood pellets 7.7 9.3Compared to oil, district heat creates 55 and 69 extra personsIn work in one year for 75 and 90% connected.



Example of connectioncampaign:

Gudhjem Bornholm



1. The utility calculate customer prices for district heating depending on % connected to the total heat demand (done in the project proposal)

2. A local working group is established including representatives from local associations, business and the utility. In principle all house owners in the new area shall know at least one person they trust in the working group.

3. The working group has to be well educated in the business plan.



4. An information leaflet and a preliminary connectionagreement is distributed to all building owners. The leafletinclude • informations about the needed connection%,• invitation to information meeting, • the economy for the building owner with district

heating, oil heating and electrical heating, • arguments for district heating and • a map of the area, where new district heating is offered to

the house owners. • A hot line where questions can be asked and answered



Leaflet



Information in the preliminary connection agreement:• Signing means, that regulations for connection to district heating are

accepted• The value of energy savings belong to the utility• This agreement will be dropped if the project is not realised because of

few connections• Connection including connection pipe, a standard district heating

substation with hot water tank and shunt regulation, heat meter with leakage alert, removal of oil boiler and oil tank cost 2,200 € (50% of the normal price) for house owners who has signed the agreement before pipework has passed the house

• For electrical heated houses the price is 0The preliminary connection agreement can be delivered to members of the working group.



Preliminary connection agreement



5. Interviews with the working group and information in local medias6. Public information meeting with presentation of the project and

information about connection conditions. The arguments for district heating are:

• The house installation in a DH system is a compact heating unit easy to regulate. Saves m2 in the house

• Nearly no maintenance is needed• There is no smoke and no noise from the installation (in contrast to

oil boilers, wood boilers and heat pumps)• Heat production is CO2 neutral and creates local work places• The costs are lower than for heat production from oil boilers and

individual heat pumps• Service for the house installation and leakage alert is included in the

heat price



7. When the connection % is reached the preliminary connection agreements are changed to contracts, and implementation can start.

8. If it is a new consumer owned district heating company a general assemblance is arranged to formally establish the company

9. During implementation house owners are contacted before the pipe work has passed the house to give them a last chance to get 50% off the price



Resources needed

• Staff to coordination of all the activities• Staff to participate in meetings• Staff to inform about the project (hotline) and take care of

contracts• Information letters to all building owners• Advertisements and information in local media

Step 1 (Heat planning, where possible areas for district ...€¦ · If 75% of the heat demand is...

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