Next generation CHP in competitive heat and power marketsCOGEN Europe Annual Conference, Brussels, May 19th 2015
Jouni Haikarainen, Vice President, Finland and Baltic countries
Heat, Electricity Sales and Solutions Division
2
Heating and CHP operations in 2014
Note: Fortum’s total power generation 73 TWh and total heat production 35 TWh in 2014
European heat production 8 TWh (Heat production capacity 3,900 MW)
Peat 3%
Oil 1%
Waste 3%Natural gas 29%
Biomass 25%
Heat pumps, electricity 1%
Coal 38%
CHP plants accounted for
28% of total power generation and 90% of total heat production
Chelyabinsk
Tobolsk
Tyumen
Stockholm**Tartu
JelgavaKlaipeda
Pärnu
Joensuu
Järvenpää
Bytom Częstochowa Świebodzice
Zabrze
PlockWroclaw
Argayash
CHP plant locations todayDistrict heat supply/networksw/o own production
ST. Petersburg**Espoo
Total heat sales, TWh 35 Finland
Baltic countries
Poland
Great Britain (sold in 2014)
Russia
3.2
1.2
3.4
1.5
26.0In jointly owned companies, heat sales, TWh**
Fortum Värme in Sweden
TGC-1 in Russia 8
28
Heat markets for district heating and CHP in Baltic Rim
3
Heat solutions of residential customers(data 2013)
DH production mix by source (data 2013)
Sources: Euroheat & Power, 2015
• DH market share 40%...65%
• RES and heat pumps share to increase
• Renewables mainly wood sources
• Resource-efficient DH production sources• Sweden over ~80%• Finland and Baltics ~30%• Poland ~15%
• Industrial surplus heat utilized in Nordics and Poland
• Fossil fuels 85% in Poland
4
Recent bio- and waste-CHP investments in several countries
Stockholm
JelgavaKlaipeda
Joensuu
Järvenpää
Espoo
Częstochowa
JärvenpääBio-CHP
Bristaco-owned
waste-CHP
Värtanco-owned bio-CHP (ongoing)
JelgavaBio-CHP
KlaipedaWaste-CHP
CzestochowaCoal/bio-CHP
Espoosewage water
heat pump
Espooheat recovery from hospital
(ongoing)
Joensuu Pyrolysis oil production in
CHP plant
Naantalico-owned bio-CHP (ongoing)
Espoogeothermal
heat (ongoing)
ZabrzeCoal/waste-CHP
(ongoing)
5
Heat markets should be driven by customers and competition
Existing and new customers (building owners)
District heating system
Individual gas
boilers
Individual heat
pumps
Individual solar
thermal
Electrical heating
o Free choice by end-customers enhances engagement and trust on heat providers
o Fair competition between alter-natives calls for affordability
o Equal competition rules that replace uneven regulatory treatment between alternatives
o New technologies more likely to emerge and to be utilized
o Drives for best resource and system efficiency
Heat markets
Increased heat system flexibility required
DH price competitiveness with main alternatives
6
Espoo Joensuu Keski-Uusimaa Stockholm0
10
20
30
40
50
60
70
80
90
100
DH 2015 Ground heat pump 2015
€/MWh
• Low electricity prices and interest rates are driving ground heat pump competitiveness.
• Ground heat pumps are competitive with DH with current low power price in the Nordics.
• Gas boilers are serious competitors to DH i.e. in the Baltic countries.
• Air heat pumps have also become more efficient and less expensive and might reduce substantially the base load heat demand.
• Total heating cost (CAPEX, variable and fixed OPEX)
• High fossil fuel taxation of DH production in Finland and Sweden
• Challenging for gas based CHP but biomass CHP remains competitive
Finland: Large city(gas/coal/other)
Finland: Mid-sized city(biofuels)
Finland: Mid-sized city(biofuels/gas)
Sweden: Large city(bio/waste/coal/
geothermal)
7
CHP competing with other heat sources
The single DH system operator to set up voluntary economic and technical conditions to promote lowest cost and sustainable heat sources for the benefit of end-customers, system and society.
Competitive high-efficient renewable CHP in heat markets
8
How to secure competitive heat
from CHP?
Competitive heat from CHP against
alternative heat sources
Economic and optimized base load
capacity in heat production mix
Energy recovery from non-recyclable
waste
CHP+ (cooling, pyrolysis) ETS as steering
mechanism, no additional emission
tax burden
Using sustainable biomass and other
renewable fuels
Maximize electricity to save primary
energy
Competitive DH against
alternatives to end-customers
Heat price competitiveness
Fuel flexibility
Energy efficiency
Equal taxationTechnology
Electricity market developments to encourage CHP
9
Towards internal markets
• Larger markets enforce competition, more stable and competitive prices and a better service level for customers
• Investment in transmission infrastructure to improve market efficiency and security of supply
• Positive regional developments as a stepping stone towards a common European markets
• Full integration of the retail and wholesale electricity markets
Energy-only market development
• Energy-only markets as preferred market model• Remove regulated energy prices both from heat and electricity• Clarification of EU level principles and criteria for the use of capacity
mechanisms, including rules for cross-border participation• Proper integration of renewable energy
Key takeaways
10
• Heat markets are driven by customers and competition
• Free choice of heating alternatives for end-customers
• CHP needs to be competitive source in heat supply to DH networks
• Renewable, next generation CHP to enhance competitiveness
• Integrated and energy-only electricity markets to encourage high-efficient CHP as relatively small scale, renewable electricity production
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