Presentation Flexible Heatpumps

ENCORE meeting: 17-12-2020 Mark Kremer

Central question:

Can Smurfit Kappi shorten the Payback Period of an investment in a Heatpump by operating it in a flexible manner?

Flexible operations on imbalance market

Benefiting from fluctuations in electricity market prices by ramping the asset up- and down (increasing and decreasing the electricity consumption).

Imbalance prices are very volatile, with prices below -100 and above 200 €/MWh on a daily basis.

It is possible to benefit from these fluctiations, if you have flexibility

• Storage options
• Hybrid installations (e.g. with gas-powered assets)

In this case we are looking at a hybrid set-up of a Steamboiler and a Heatpump

Simulations & mathematical modelling

• To answer the central question, we have build a simulation model
• The model simulates the operations of a hybrid set-up of a Heatpump and a Steamboiler over the timespan of 1 years (on a 1 minute basis)
• The goal of the model is to minimize the operating costs, in order to reach the shortest Payback Period
• We are taking into account all major investment and operating costs, including:
  • Asset CAPEX
  • Commodity costs for gas and electricity
  • Energy taxes
  • Grid transport costs
  • SDE++ subsidies
  • Maintenance costs
  • CO2 allowances
• The output of the model is a Payback Period for an investment in an heatpump, in different scenario's

Casestudies

5 main scenario's

1. Steamboiler only (baseline, baseload)
2. Heatpump only (stand-alone, baseload, without SDE++)
3. Heatpump + SDE
4. Heatpump + SDE + Steam boiler (hybrid set-up) on Imbalance market
5. Heatpump + SDE + Steam boiler (hybrid set-up) on aFRR (secondary reserve market)

Besides that, we modelled 11 sensitivities:

• Heatpump CAPEX
• Gas & CO2 prices
• Electricity prices & volatility
• Energy taxes
• Bidding strategies
• Source temperatures (affecting COP)
• Sink temperatures (affecting COP)
• Time period (2018, 2019, 2020)

Smurfit Kappa case

The model is based on the context of Smurfit Kappa (paper factory)

• Currently a Steamboiler is providing the 20-30 MW of average heat demand for drying processes
• We add a 31 MW heatpump (to make sure it can cover entire demand)
• The steam demand must be fulfilled at all times, by either the heatpump or the gasboiler
• The heatpump and steam boiler can both respond very quickly (within minutes) within a flexible range (30%-100% for heatpump)

• Source temperatures of around 65 degrees C
• Sink temperatures of 125-170 degrees C
• Average Temperature lift of about 85 degrees C

Heat pump

COP roughly between 4 and 1.5, depending on load, Tsource and Tsink

$x \mapsto \text{-1.4530909090909092} - \text{1.1650909090909092}\,x$

Optimisation

• At each moment in time, we calculate the cheapest option to produce the required heat.
• Taking into account the COP fluctuations, due to changing Tsource and Tsink
• Taking into account fluctuating market prices (electricity, gas, CO2)
• We are predicting real-time electricity prices using our forecasting models

Some example days:

Steamboiler only is following demand pattern

Similar pattern for heatpump only case

Hybrid set-up is responding to price fluctuactions, steam boiler taking over at high prices

Business case

CAPEX of around 6 M€ (200.000 €/MW), which need to be earned back by savings in operating costs

• Savings in EBITDA compared to the baseline are about 1.5 mln € without subsidy, and up to 4.5 mln € including subsidy
• The optimisation on aFRR allows for a 30-40% improvement in EBITDA

Resulting in a Payback Period of 5.4 years without subsidy, and 1.8 years with subsidy

The added value of the optimisation is limited (in absolute terms), which is explained by the high COP of the heatpump

• The heatpump is filling in 95-98 % of the demand.
• Because of its high COP, it is almost always cheaper to run than the steam boiler
• Switch price is on average around 90€/MWh (excluding subsidies)

Sensitivities

If CAPEX is 200%, subsidy is needed to keep a good Payback Time

Subsidies are protecting the business case againsts low CO2 prices

• The businesscase is quite sensitive to Tsource and Tsink differences, because they directly impact the COP
• The Smurtfit Kappa case, with a temperature lifte of about 85 degrees C on average, looks favorable.
• When the temperature lift is higher, the COP will decrease and the business case will degrade

Conclusions

• The business case for a Heat Pump seems favourable
• Flexible operation, using aFRR, can improve the operational results by 30-40%
• However, this only results in a marginal improvement of the business case
• SDE++ has a very favourable effect on the business case, but is not critical
• The business case is notably sensitive to the temperature lift required, and is therefore strongly dependent on the specific use case.