HOT|COOL NO. 3/2019 - "Big Markets: China and Poland

NO. 3 /2019

INTERNATIONAL MAGAZINE ON DISTRICT HEATING AND COOLING

BIG MARKETS: CHINA AND POLAND

FOCUS

A decade of District Energy development in the P.R. China

Release the full potential of smart metering

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CONTENTS

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THE COLUMN By Lars Gullev, Managing Director, VEKS

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OPINION POLISH HEATING IS PREPARING TO TAKE A BIG STEP FORWARD By Bogusław Regulski, Vice President of the Board, Chambers of Commerce Polish District Heating

Cli red sus pha Clim reduc sust phasi

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FOCUS BIG BANG OF THE POLISH HEATING SECTOR – ON THE VERGE OF CHANGES By Andrzej Rubczynski, Heating strategy Director in Forum Energii

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FOCUS SOLAR DISTRICT HEATING: TIBETAN COMMUNITIES RELYING ENTIRELY ON HEAT FROM THE SUN By Thomas Karst, CEO, Arcon-Sunmark

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FOCUS A DECADE OF DISTRICT ENERGY DEVELOPMENT IN THE P.R. CHINA By Mikael Jakobsson, Managing Director, NXITY, Executive Director, APUEA, Advisor, EU H2020 MAGNITUDE project

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FOCUS DISTRICT HEATING IN CHINA By Senior Advisor John Tang, Danish Energy Agency

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FOCUS CURRENT AND FUTURE DEVELOPMENT OF THE CHINESE DISTRICT HEATING SECTOR By Oddgeir Gudmundsson, Director, DHS-AP Danfoss and Atli Benonysson Vice President, DHS-A, Danfoss A/S

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A DISTRICT HEATING MARKET MECHANISM MARKETS AS MATURE CONCEPT FOR A MODERN DISTRICT HEATING INFRASTRUCTURE By Peter Lorenzen, Eng., Project leader, Smart Heat Grid Hamburg

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RELEASE THE FULL POTENTIAL OF SMART METERING By Peter Friis Østergaard, Senior Specialist, and Jakob Fester, Consultant, Danish Technological Institute

C re su ph

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DISTRICT HEATING IN THE EU By Paul Voss, Director, Euroheat & Power

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MEMBER COMPANY PROFILE: AALBORG CSP A/S

Front page: In Tibet, China large-scale solar district heating systems are supplying remote communities with CO2-free heating.

HOT|COOL is published four times a year by:

DBDH Stæhr Johansens Vej 38 DK2000 Frederiksberg Phone +45 8893 9150

Editor-in-Chief: Lars Gullev, VEKS

Total circulation: 8,000 copies in 60 countries

Layout: DBDH / AGENCY.071

Coordinating Editor: Kathrine Windahl, DBDH

info@dbdh.dk www.dbdh.dk

ISSN 0904 9681

Prepress and printing: Kailow Graphic A/S

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By Lars Gullev, Managing Director, VEKS

Climate chang eduction of CO2 em ustainable biom hasing out of fossil f ction of CO2 emissions, tainable biomass, ing out of fossil fuels imate changes, duction of CO2 emissions, stainable biomass, asing out of fossil fuels mate changes, Climate changes, reduction of CO2 emissions, sustainable biomass, phasing out of fossil fu ls Clim te changes, reduction of CO2 emissions, sustainable biomass, phasing out of fossil fuels, such as coal, oil and natural gas, have all become concepts that no politician or energy company today can ignore. The popular focus has simply become too significant. A wave runs through many countries: we must reduce the number of annual flights; we need to drive less by car; we need to eat less meat, as the production of meat requires more energy than the production of vegetable foods; we have to recycle more etc. This is all well and good - however, in many cases the starting point has not been aligned when discussing what needs to be done. In other countries, such as China, natural gas, electricity, geothermal heat, biomass, solar, industrial surplus heat, ultra- low emission coal (CHP), and nuclear power are defined as resources for “clean heating”. This definition says nothing about the emission of CO2 from the individual elements - for example, the production of electricity can be based on condensation operation with an efficiency of less than 40% based on coal as fuel. With such a rather broad definition, it is difficult to compare cross-border statistical material and to enter into debates about the energy systems of the future, as the framework conditions are very different from country to country. Just as we are challenged by electricity as “clean heating” in China, we have a general challenge in many countries regarding the use of biomass. If the biomass is obtained by deforestation without equivalent new planting in parallel, the overall climate account is not in balance. In many countries, including Denmark, natural gas is considered an equivalent alternative to district heating when determining the future heat supply. But this is not correct! Today, a very large part of district heating in Denmark is based on sustainable biomass - i.e. green district heating - while natural gas remains a fossil fuel. In other words: a "black fuel". It therefore makes no sense to compare "green district heating" with "black natural gas" when we have decided to phase out fossil fuels in the long run. It is crucial that the authorities (in Denmark, the Danish Energy Agency) – demand in their conditions for the future heat supply that "green district heating" is compared to "green gas". Such a comparison will quickly lead to a closer assessment of the potential for green gas - and where this gas should come from. It is therefore imperative that a common definition of sustainable biomass is established. In addition, it is crucial that biomass customers make the demand to all biomass suppliers that the biomass - both solid and liquid - must meet international, recognized criteria for sustainability. Otherwise, the energy sector will lose the credibility that is a prerequisite for gaining the public's acceptance of a green transition, of which a major part for the next 10-15 years will be based on phasing out natural gas, oil and coal in favour of sustainable biomass. J O U R N A L N 0 . 3 / 2 0 1 9 www.dbdh.dk

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FOCUS BIG MARKETS: CHINA & POLAND

OPINION

By Bogusław Regulski, Vice President of the Board, Chambers of Commerce, Polish District Heating

In many European countries, among others due to geo- graphical location, heat is essential for the quality of everyday life. Therefore, it is a very important element of social policy. What is more, it is also a necessary component of energy and climate policy. That is why everything that happens in this area at the European level, directly influences the decision-making processes in every EU country. This is also the case in Poland. For many years, the role of heating in European regulations was underestimated and marginalized. That is not the case anymore! Taking into consideration the directions of European climate and energy policy, transformation in heating is necessary. Energy efficiency and reduction of CO2 emissions become the driving force for actions, including a significant increase in the share of heat from renewable energy sources and other zero-emission technologies. Polish district heating (DH) has a difficult starting point, first of all, because of the fuel structure. It is not a secret that the majority of heat production in Poland is based on coal. According to various sources, its share in recent years has exceeded 75 %. This fact hurts us a lot, especially in the context of the CO2 emission reduction policy. For consolation, we have quite a large (reaching almost 60 %) share of heat generated for heating systems in cogeneration technology. However, when compared to the challenges for heating coming from the latest EU regulations (reducing CO2 emissions, increasing the share of heat from renewable sources, increasing energy efficiency), we also face the need for a deep transformation of the entire heat-related area, bearing in mind our own national goal - eliminating the so-called “smog" resulting from the fairly widespread use of low-quality coal.

The supply of DH from heating systems in Poland covers over 42 % of all households. Although it is not as high as for instance in Denmark, it is still significant for shaping future solutions in this respect. Because of this fact, district heating is very likely to have the most important place in this process. We set ourselves specific goals: obtaining by heating systems the requirement of an "effective heating system", which will lead to an increase in the use of heat from renewable sources and the development of cogeneration technologies in heat generation processes, as well as the widest possible use of heat from heating systems for household needs. Nevertheless, looking from a wider perspective, heat suppliers from heating networks in every country, where this type of heat supply is important, are facing, or will face in the near future, the dilemma of profitability of their business. I point out this problem especially because of the important changes in the energy efficiency of buildings and the possible zero- emission, environmentally friendly technologies providing thermal comfort on an individual scale. It is enough to mention the development of the use of heat pumps using renewable electricity. Meeting the expectations of new heat markets is a challenge for system heat suppliers in all EU countries.

For further information please contact: Boguslaw Regulski, b.regulski@igcp.pl

E N E R G Y A N D E N V I R O N M E N T

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FOCUS BIG MARKETS: CHINA & POLAND

By Andrzej Rubczynski, Heating Strategy Director, Forum Energii

Polish heating has been on the threshold of great changes. The years of maintaining the technological and fuel status quo are slowly becoming a thing of the past. Fundamental factors such as the need to protect the environment and climate, the deteriorating fuel balance of the country and technological progress will force modernization investments on an unprecedented scale in the next decade. The transformation of the Polish heating sector is necessary if we want to ensure thermal comfort at reasonable costs and in an environmentally friendly manner.

POLISH HEATING First of all, let us define what we mean by "Polish heating". It is a sector consisting of three basic groups: • buildings heated individually, • small district heating (DH) systems without cogeneration (CHP) supplied from coal-fired boilers, • large district heating (DH) systems with a dominant share of coal-based cogeneration (CHP) units. For the sake of clarity, it should be added that there is still a fourth group of industrial heat plants, but they operate in a different (business) reality, so they are not the issue of this article. Heating is responsible for 1/3 of the total final energy consumption in Poland. It is one of the most important energy sectors. Out of 6.1 million buildings, about 650 thousand are buildings supplied from DH systems. The remaining buildings are heated by individual sources. Figure 1 shows the structure of fuels in the area of individually heated buildings and DH systems.

As can be observed, the dominant fuel in the DH system is coal, which reaches the level of 75 %. This is an average value. In small heating systems, the share of coal reaches 90 %, which is, as can be easily assumed, a source of concerns for the management of these companies. The heat from individual gas sources is slowly becoming cheaper than the heat from the DH systems, which may result in disconnection of customers from the network and gradual shrinking of the heating market. In the case of large DH systems in the major Polish cities, the situation looks better. Although coal still dominates, it is used in cogeneration units. Thanks to the high utilisation of the installed capacity (CF=4100 hours/year), the combined heat and power (CHP) plants achieve good profitability and have the capital needed for further modernisation. The share of electricity from CHP in the national energy production is about 16 %, which places Poland well above the EU average (11 %). THREE CORNERSTONES OF CHANGE Why will the Polish district and individual heating system have to be thoroughly modernized? 1. Poor air quality and the impact of heating on the climate The most significant problem is the emission of pollutants generated by 3.5 million houses heated with various qualities of solid fuels. Historical negligence and lack (until recently) of any policy towards this segment of heating producers made our country the European leader in terms of the number of days with exceeded pollution limits. Growing social awareness has forced politicians to take an effective and quick action. The Clean Air Programme adopted by the government in 2018 is designed to eliminate 3 million coal-fired furnaces and replace them with low-emission sources within a decade. It is also assumed that this will result in an 80 % reduction in CO2 emissions by 2029 in the group of individual households.

Figure 1. Structure of energy consumption in individually heated buildings and district heating (DH) in %.

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A natural step should be (and probably will be) to move away from coal in heating. First of all in individual households, and then in DH. It seems that Poland's growing dependence on fuels may soon be a very strong stimulus for the transformation of heating. Figure 2 (orange line) illustrates what the demand for coal in the power and heating sectors may look like if appropriate programs are implemented to modernize the heating sector and improve the energy efficiency of buildings (assuming that the power sector does not change its consumption). 3. Technical progress There is no need to describe this phenomenon to Hot Cool readers. Increasingly efficient RES technologies, intelligent heating systems, ICT technologies for managing energy consumption in buildings and increasing energy efficiency in buildings will make traditional heating sources no longer competitive. This phenomenon is beginning to be noticed in Poland, which results in the implementation of a number of support programmes allowing to increase the use of RES energy in heating. DIRECTIONS FOR CHANGE Currently in Poland (August 2019) there is a discussion on the shape of the energy policy until 2040 and the strategy for heating. The results will probably be announced at the beginning of 2020. Based on the analysis carried out by the Forum Energii, it can be said that the heating transition in the long-term perspective is more cost-effective for the whole society. Initial intensive investment expenditures (CAPEX) bring benefits in terms of decreasing variable costs (OPEX) and lower external costs (Fig. 3) at a later stage.

This is a very ambitious plan and also an opportunity to develop DH systems, which are considered to be one of the best tools to fight against smog. The consequence of climate and environmental threats is legislation that is becoming more rigorous. This is another fundamental driving force for change. The current fuel structure in the heating sector results in higher and higher costs of meeting the requirements of the MCP, IED-BREF and NEC directives. Additionally, the heating sector has to bear an even higher cost of the CO2 emission allowances, which translates into a loss of market competitiveness. Without changing the technological mix and increasing the share of energy from renewable energy sources (RES), many enterprises, especially small ones, may fall into the so-called death spiral. Customers will disconnect themselves from the network looking for alternative, cheaper solutions. Fixed costs will be passed on to fewer and fewer users, which will increase their heat expenditure and encourage them to disconnect from the grid. And that is until the last group of customers cancels the contract for purchase of heat. This is a major challenge for many small heating systems. Nowadays in Poland there are serious analyses and searching for optimal solutions and support mechanisms. 2. National fuel balance The second fundamental reason that will force transition towards a low-carbon economy is the steadily declining hard coal production in Poland due to more and more difficult geological conditions. Many experts predict that over the next decade, production may fall by a further 40 % (vs. 2018). Currently, Poland uses approximately 24 million tonnes of hard coal, both in district and non-district heating systems. This is 7 million tonnes less than the power plants need to produce electricity (sic!). If nothing is done, the level of imbalance between domestic supply and demand of hard coal will increase and so will the imports (Fig. 2).

Figure 2. Hard coal consumption by power and heating sector vs domestic production (million tonnes/year).

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Figure 3. Annual and cumulative cost (2016-2050) of heat supply in Poland (billion EUR).

The article is based on the Forum Energii report "Clean Heat 2030. Strategy for heating" developed with the support of EUKI.

The analysis of the Forum Energii indicates that by 2030 about 100 billion euros should be spent on the heating transition and thermal modernisation of buildings. This is a huge financial effort, certainly unbearable for individual households in such a short period of time. Hopefully, the new financial perspective of the EU and the funds from the ETS (EU Emission Trading System) will generate resources for low-carbon investments in Polish heating. It can certainly be stated that this money will be well spent with great environmental effectiveness, i.e. a significant emission reductions for every EURO invested.

Full text of the report in English is available here https://forum-energii.eu/en/analizy/czyste-cieplo-2030

For further information please contact: andrzej.rubczynski@forum-energii.eu

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FOCUS BIG MARKETS: CHINA & POLAND

15,000 m3 pit thermal energy storage

By Thomas Karst, CEO, Arcon-Sunmark

Supplying remote communities with a long-term and affordable heating solution, which, as an additional benefit is CO2-free, at the same time, is possible. In the Tibetan towns of Langkazi and Zhongba, the solution has been to invest in a large-scale solar district heating system that will supply the towns with heating year-round for a guaranteed minimum of 25 years. Solar heat technology is one of the most efficient of all the renewable energies. Renewable energy (RE) will, in the future, play an important part in supplying heat for district heating (DH) and for industrial purposes. RE technologies are already part of the energy mix in many towns, and in some instances RE delivers heat as a stand- alone solution. Large-scale solar thermal energy has proven its worth in reliability, longevity, versatility and cost-effectiveness. Langkazi and Zhongba in Tibet, China, are great examples of what solar heat can accomplish. The system in Langkazi was completed in late 2018, and construction in Zhongba has begun in the summer of 2019. The two communities are investing in full-scale DH systems based on solar heating, where the energy from the sun rays are absorbed by hundreds of square meters of flat panel collectors that transform the energy from the sun directly into heat. The Zhongba collector field is 34,650 m2 yielding 21,000 MWh, and Langkazi is 22,000 m2

yielding 16,800 MWh. The two communities now have solar heat covering more than 90 % of the annual demand. Storage facilities of 15,000 m3 enable storage of heat produced during the summer months, so that it can be used during the winter where production is low, but demand is high. FROM ZERO TO SELF-SUFFICIENT Langkazi and Zhongba are situated at an altitude of 4,600 and 4,700 meters respectively, where radiation from the sun is in abundance because of the high altitude and many hours of sunshine throughout the year. In effect, this makes the region perfect for large-scale solar heating systems. The natural energy sources at this height are very limited, and the majority of the energy needed had formerly to be imported in the form of combustible fuels, e.g. coal, oil, gas and wood, to the remote communities, and at a challenging extra cost due to transport in the limited infrastructure across Tibet. Consequently, energy is a scarce and costly resource to come by, and the Chinese authorities have identified solar heat as a favorable way of securing a stable energy supply, increasing the general standard of living and transforming the communities from being reliant on outside conventional energy sources to become self-reliant on a clean renewable energy source – the sun.

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Lankazi – solar field

LIFESPAN OF AT LEAST 25 YEARS For communities that previously had no DH solution and with energy being a scarce resource in general, becoming self- sufficient of heat via the solar DH systems has an immediate positive impact on everyday life. Furthermore, there is also a long-term perspective to the investment. The large-scale solar heating solution that produces the heat for the entire system has a lifespan of at least 25 years – and based on experience from existing solutions the lifespan may very well be longer. During that period, there will be limited maintenance and limited operational costs. Since the vast majority of the lifecycle cost is the initial investment, the annual cost of providing communities with DH is well known in advance and will be fixed for at least 25-year time horizon. Nobody knows what the future brings, but it is probably safe to say that it is a great benefit to know that your operational costs are fixed for the next 25 years. Large-scale solar DH is not environmental charity, it is a sound and clean investment. VERSATILE TECHNOLOGY Basically, large-scale solar heating systems only rely on the radiation from the sun in order to produce energy, and unlike other renewable energy sources, solar thermal energy can practically be stored for later use – as is the case in both Zhongba and Langkazi. This makes the solar heating systems very versatile and means that it can be implemented for a wide range of heating and process purposes. In Northern Europe, large-scale solar heating is primarily used for DH, where it is part of the energy mix together with e.g. biomass or gas. In Denmark, 25 % of the DH plants have invested in solar heating, and in Denmark, you will find the biggest systems in the world. You will also find large-scale solar heating systems for the mining industry in Chile and Mexico and for a leather factory in Vietnam.

What do these locations have in common with each other and Tibet? Not much, besides that the sun is shining, and that is exactly the point. The radiation is much stronger in the Andes and on the Tibetan Plateau than it is in Northern Europe, and the climate in general is very different from place to place. But large-scale solar heating is so versatile that it literally can be implemented everywhere in the world, either as an independent energy source or integrated in an existing energy supply system.

Source: Frauenhofer ISE, PlanEnergi and Chalmers University, submitted by Bärbel Epp, solarthermalword.org

HEAD TO HEAD WITH OTHER RENEWABLES Large-scale solar heating systems are one of the most efficient renewable energy sources currently available. Directly compared with photovoltaic energy – where you produce electricity by harvesting solar radiation – large-scale solar heating is three times as effective. Comparing large-scale solar heating with biomass gives you a difference in output of more than 40 times. Therefore, it is widely expected that large-scale solar heating in the future will play a very important part in supplying the world with clean and reliable energy for district heating and heating for industrial purposes.

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LANGKAZI PROJECT IN BRIEF In December 2018, the solar DH system in Langkazi (Tibet, China) was completed. It has a 22,000 m2 solar collector field and covers more than 90 % of the heat demand in Langkazi. The system also has a 15,000 m3 storage pit in order to store the energy, so it can be used when demanded. As part of the project, a 25,000-meter-long piping infrastructure has been constructed in order to connect 82,000 m2 households to the solar DH system.

ZHONGBA PROJECT IN BRIEF The city of Zhongba (Tibet, China) has a 21,000 MWh solar district heating system under construction which is expected to be finished by the end of the year. As in Langkazi, the project also includes piping network, connection to buildings and installation of radiators. The system has a 34,650 m2 collector field and a 15,000 m3 tank provides storage of the solar energy and enables more than a 90 % coverage of the annual heat demand.

ZHONGBA

LANGKAZI

Altitude: 4.700 meters above sea level

Altitude: 4.600 meters above sea level

34,650 m2 solar collectors

22,000 m2 solar collectors

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15,000 m³ Pit Thermal Energy Storage (PTES)

2,8 MW Oil fired boilers for back-up energy

2 x 1,5 MW electrical boilers for back-up energy

6,1 MW peak heat demand

4,3 MW Peak heat demand

~21,000 MWh Yearly heat consumption (Oct-May)

~16,800 MWh Yearly heat consumption (Oct-May)

90+ pct. solar fraction

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FOCUS BIG MARKETS: CHINA & POLAND

By Mikael Jakobsson, Managing Director, NXITY, Executive Director, APUEA (Asia Pacific Urban Energy Association), Advisor, EU H2020 MAGNITUDE project

The Chinese district energy sector is developing in multiple aspects and new business opportunities emerge. The District Heating market expands into new geographical areas, and while the district heating growth is slowing down, the growth of the district cooling market is increasing. This is the perspectives of a localized consultant. While our focus, ten years ago, was on planning and design of new district heating systems, the main focus today is on modernization (of existing district energy systems), operation optimization and development of Multi-Energy Systems (MES), District Energy 4.0/Smart District Energy schemes and Smart Energy City (SEC) solutions. Ten years ago, there was only one famous private owned district heating (DH) company (utility) in China, namely Shenyang Huitian District Heating company. Today, there are several large private owned DH companies with DH systems in multiple cities. Even state-owned and municipality-owned DH companies are expanding to multiple cities. DISTRICT HEATING DEVELOPMENT The building floor area covered by DH in northern China has almost tripled in the last decade, covering over two-thirds of the total heating area. This represents approximately 800 GW and 5,000 TWh. Partly, as a result of the central governments “go-west” policy, the DH floor area has increased more than 300 % in provinces like Inner Mongolia, Qinghai and Shanxi in the last decade. In Shaanxi, the DH floor area has even increased more than 600 %. This is to be compared with the increase of the DH floor area in i.e. Heilongjiang, Jilin and Liaoning, where the increase is less than 150 %.

Hohhot Low-Carbon District Heating Project, Inner Mongolia Autonomous Region Modern Chinese district heating project of international standard. Quality along the entire project value chain has been prioritized; from planning to operation.

Project owner:

Hohhot Chengfa Heating Co., Ltd.

Implementation period:

2014-2020

Owner’s engineer: Design Institute:

NXITY

North China Design Institute

Project information: i) 30 km DN1400 transmission pipeline for utilization of surplus heat from remote power plant. ii) merging of five DH systems into two pool operated DH

systems; 2.3 GW and 0.9 GW respectively. iii) 116 km new district heating network.

iv) 2 x booster pump stations (7,500 m3/h, 140 mwc). v) emergency sectioning and leak detection system. vi) integration of curtailed wind power for heat production.

DH has also been developed in the central and southern parts of China in the last decade, despite the lack of policies and regulations in this region. From Chongqing in the west, to Shanghai in the east and Hunan in the south, DH has been implemented in many cities. Both district heating and district cooling are often feasible in this region, and therefore Combined Cooling, Heating and Power (CCHP / Tri-generation) and combined District Heating and Cooling Systems (DHCS) are relatively common. Already in 2011, the National Development and Reform Commission (NDRC), Ministry of Housing and Urban-Rural Development (MoHURD),

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National Energy Agency (NEA) and Ministry of Finance (MoF) published the “Guiding opinions on the deployment of gas- fired distributed energy”, which accelerated the deployment of Co- and Tri-generation (gas CHP and CCHP) projects in China and implementation of subsidy schemes. In recent years, after subsidy schemes for gas CHP and CCHP projects have been removed (not renewed or never enforced), the implementation of these distributed energy projects has declined in many places across China. Despite this development, DH has become recognized as an important energy infrastructure to achieve low-carbon economies across China. As an example, NXITY was recently engaged to develop Smart Energy City (SEC) projects for Xiangtan municipality (the home town of Chairman Mao) in Hunan province. On its own initiative, Xiangtan municipality has already issued a citywide heat plan and are implementing local policies. This is a trend in several cities across central and southern China. DISTRICT COOLING DEVELOPMENT Energy consumption for building space cooling has tripled in China during the last decade. Today, this represents an annual electricity consumption of over 400 TWh. During a market study for the Asian Development Bank in 2016, we identified district cooling (DC) projects corresponding to a cooling supply of more than 4 GW or 6 TWh. This equals to approximately twice the DC supply in Europe, and just below the DC supply in Japan. However, this is a very conservative figure as many DC projects are defined as centralized cooling/air-conditioning systems which are not included in this figure. The development of DC suffers frommultiple misperceptions in China. DC is often defined as city-wide or district-wide cooling systems – similar to DH. DC is also often deemed inefficient due to the irregular and limited utilization by end-users cooling supply for i.e. hospitals, airports, CBD (central business district) areas, hotel clusters or even industry clusters (which are most feasible for DC), are often defined as centralized cooling/ air-conditioning (instead of more appropriate “distributed DC”, “small-scale DC” or simply “DC”). The term centralized cooling/air-conditioning is also used for an individual building with centralized cooling production, which makes it difficult to identify and extract statistics on DC. In the last decade, many DC projects have unfortunately failed in China. Professional gaps along the entire project value chain has resulted in over-dimensioned, poorly implemented and bad managed systems. In many cases, projects have been fully implemented despite slow load ramp-up, resulting in systems with low efficiency or even systems unable to operate properly. This has resulted in a wide-spread skepticism for DC in China. However, despite the challenges for DC in China, there are successfully implemented DC projects as well. Most of these projects are part of gas CCHP/Tri-generation schemes.

Qingdao HTDZ CCGT CCHP project Tri-generation/CCHP project with cooling supply for a data center and industries in Qingdao high-tech development zone.

Project owner:

Qingdao Kaiyuan Group

Implementation period:

2015-2018

Owner’s Engineer: Design institute:

NXITY

Energynet

Project information: i) Implementation of; - 86 MWel CCGT CCHP.

- 40 MWcool (DC network and substations). - 111 MWheat (DH network and substations). - 11 MWsteam (Steam network and substations). ii) Cooling supply to local Data Center (200 TWhcool/a). iii) Steam supply for local industries. iv) DH supply for comfort heating in the industry zone. WHAT IS THE FUTURE OF DISTRICT ENERGY IN CHINA? District energy will ultimately play a different role in an electrified and digitalized energy sector. Utilization of low- grade industrial excess heat, distribution of low-temperature heat from solar and geothermal sources, integration of RE- driven compressor heat-pumps and production & consumption flexibility (storage) for MES, are likely to become main features of DH systems in the future. We believe DH - and DC - systems to a great extent will be represented by relatively small-scale distributed systems, integrated with electricity grids and gas infrastructure. DC can furthermore play an important role in reducing the GHG-emissions by efficiency gains due to scale advantages and as a not-in-kind solution for HFC (refrigerant) phase-out. Even though the transition towards “smart” integrated district energy systems has begun, 2nd generation DH systems (with supply temperatures in the range of 100-130 C) will still be developed in China in the coming decades. There is still lack of cross-sectoral planning, regulations and policies for a rapid transition of the district energy sector. However, the market is huge so there will still be plenty of opportunities to develop technical and financially feasible modern district energy schemes.

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governments struggling to develop sustainable and livable cities, the challenge for many international companies in the District Energy sector is to navigate and find ways to support cities and turn opportunities into sustainable business. Some have succeeded, some have failed. Some are trying, and some are not. It is important to understand the complexity of a cross- sectoral business as district energy where there are multiple stakeholders playing different roles.

The average DH growth in northern China is slowing down, while the development in central and southern China is increasing. We expect the annual growth of building floor area covered by DH to be between 4-6 % for the coming ten years. The annual DC growth is expected to be above 15 % for the coming ten years. Companies such as ABB, Danfoss and COWI stressed already a decade ago the important role of cities and local governments to develop modern district energy schemes in China. With a continuous urbanization across the Asia Pacific and local

For further information please contact: Mikael Jakobsson, mikael.jakobsson@nxity.com

PRE-INSULATED PIPES FOR DISTRICT ENERGY SOLUTIONS

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isoplus Piping Systems is a leading manufacturer within pre-insulated piping systems with low heat loss for district heating and cooling. Low heat loss guarantees low running costs throughout the entire service life of your pipe network. The environment also benefits from reduced CO 2 emissions. Innovation and quality are keys in both our products and the service we provide, which spans from project optimiza- tion, pipe drawings and plans for leak detection to the training of joint fitters and supervisors. With 9 factories we provide the widest range of products and components in the industry; and for more than 30 years. Our steel and flexible pipe systems are delivered in accordance with the norms and demands of the industry and we have considerable expertise in meeting interna- tional as well as national standards.

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isoplus Piping Systems Korsholm Alle 20 DK-5500 Middelfart Tel.: +45 64 41 61 09 Email: iso@isoplus.dk

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1200 MW CHP coal plant with cooling fans to the left on picture – currently supplying heat for the new town area in Tongchuan, but it has the capacity to supply much more.

FOCUS BIG MARKETS: CHINA & POLAND

By Senior Advisor John Tang, Danish Energy Agency (Beijing)

China is and will continue to be the world’s largest market for district heating solutions and new technologies. The district heating market in China is expected to grow 2 to 3 times in size in the coming 30 years and supply heat for 400 to 600 million people. The Danish Energy Agency (DEA) is part of this development and has made a demonstration project in the Chinese city, Tongchuan. The project focuses on the use of a District Heating Assessment Tool (DHAT) made for heat planning, which is widely used in other bilateral partnership programs managed by the DEA and The Ministry of Foreign Affairs. If the results from the Danish demonstration project can be implemented in other urban areas in China with a similar heat demand, the proven CO2-saving potential would be between 326 and 652 million ton CO2 annually, solely from converting individual heating to district heating – equal to between 8 and 17 times the Danish annual CO2- emission in 2018. District heating (DH) has been present in China for more than 30 years in large urban areas. Statistics show that the DH supply was approximately 1.2 billion MWh in 2016, covering more than 8.4 billion m2 heated floor area. Depending on size and energy consumption per household, it can be estimated that approximately 80 million households or more than 200 million

people in China are supplied by DH in 2016. The figures are comprehensive but show that only 27 % of the estimated heat demand in China is supplied by DH. The expansion of DH has been fast and concentrated in the Northern areas with cold winters. The question is: Will it continue? Can it be predicted how large the DH sector will be? Will new public objectives, development and technologies change the picture and the possibilities for suppliers? This article will try to answer these questions. WILL DISTRICT HEATING CONTINUE TO EXPAND IN CHINA? Yes, DH will expand heavily during the next 10 to 20 years, but changes have to be implemented in the same time to ensure further expansion. Presently, around half of the population in China is living in rural areas and it is expected that the urbanization will continue but at a lower rate compared to the past. This creates a demand for new urban buildings, and in areas with DH, these will be connected to the system, and DH will thereby be expanded. The standard of living in China is improving and the living area per person will increase in urban areas just like in other countries. This will also make the DH sector grow in China.

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The project in Tongchuan shows an annual CO2-saving potential of 38,823 ton per million m2 floor area. If the same result can be obtained in similar urban areas, along with the 2 to 3 times increase in the DH market, this transition can lead to between 326 and 650 million ton saved CO2. This assumes that an additional area of 8.4 or 16.8 billion m2 floor area is converted from individual fossil coal (41 %) and natural gas (59 %) boilers with low efficiency. In Tongchuan, the DH sources of excess heat from the industry, waste-water treatment plants and CHP plants are all regarded as fossil free. In comparison, the total Danish CO2-emission in 2018 was 38.1 million tons CO2 meaning that the expected increase of the Chinese DH system equals savings of 8 to 17 times the Danish 2018 CO2- emission annually. It is noted that this is only CO2-emissions and not total emissions as gases like methane and nitrous oxide (N2O) are excluded in the DHAT calculations due to insufficient data.

Natural gas, electricity, geothermal heat, biomass, solar energy, industrial waste heat, ultra-low emission coal (CHP) and nuclear energy are in China defined as sources for clean heating. The share of clean heating was 34 % in North China in 2016 according to the government and it is expected to reach 50 % in 2019 and 70 % in 2021 which will replace 150 million tons of coal. For biomass alone, it is expected that the heated area will increase by 2.1 billion m2 heated floor area. These impressive plans mean that 28 large urban areas in the North are expected to be converted to DH in just a few years and will increase DH in China dramatically. The specific urban areas are currently without DH but will receive financial support from the Chinese government to promote the transition. The plan does not include development of DH systems in any other urban areas without DH. Individual coal boilers and DH coal boilers have been the cause of a large share of the pollution in China. Therefore, the government has asked the provinces to replace these with natural gas boilers or with heat from combined heat and power plants (CHP). The problem is that natural gas for boilers is relatively expensive and not affordable for many customers. The simultaneous increase of renewable solar Photo Voltaic systems (PV) and wind turbines are causing less heat production at CHP plants. This decrease in available traditional DH source creates a need for new approaches to DH. New clean heat sources, energy conservation, energy planning, new technologies, incentives for flexibility (power market) and structural changes (e.g. metering and changed billing) are needed; and China has not yet found a way to get this done without central planning and subsidies to selected projects. Without a new approach, the continued expansion of DH in the long rung will not be viable. Since 2012, the Danish Climate Envelope, through the Ministry of Energy, Utilities and Climate, has financed energy and climate related programs in several countries including China for supporting the green transition. The partnership program is implemented through an integrated government- to-government cooperation approach, designed to provide mainly technical assistance in a peer-to-peer manner. As a part of this, the DEA, in cooperation with the Chinese National Development ReformCommission (NDRC) andNational Energy Conservation Center (NECC), has made a demonstration project in Tongchuan, North of Xi’an in the Shaanxi province. DEA has demonstrated that the use of DHAT introduces new opportunities for heat planning in China. DHAT is widely used in other bilateral partnership programs managed by the DEA and the Ministry of Foreign Affairs. The project in Tongchuan focuses on implementing DH systems in the city to replace individual solutions and shows the potential for establishing clean, renewable DH systems with a pay-back of 5 to 8 years. Investors hesitate and demand a 3 to 5 years pay-back, which makes it difficult to execute these beneficial projects. The project, though, highlights a large potential for implementing DH even in urban areas without available CHP capacity.

CAN IT BE PREDICTED HOW LARGE THE DISTRICT HEATING SECTOR WILL BE? Yes, the expansion of DH can be predicted and is expected to grow 2 to 3 times in size during the next 30 years. It is noted that these predictions could be improved by having access to better statistics based on metered heat consumption. In China, statistics regarding heat demand in buildings are limited. It is only known how much heat is produced and how much floor area is heated with DH. The heat loss is not known and can only be estimated since supplied heat to buildings is not measured. The DH supply price is set by the government as a monthly price per m2 heated area and is the same for everyone independent of the efficiency of the installations. DH is usually only supplied for space heating and not for hot tap water use. The supply season is usually 4 or 5 months, meaning that the system is closed down outside the winter heating season. The CHP plants are still running to produce electricity, but use cooling towers to remove excess heat instead. Example of “partly optimized energy solutions”: Solar collector for hot tap water placed beside cooling pump emitting heat from the same apartment at the same time. The building is supplied by district heating during the winter, but when the sun is not shining, electricity is used for hot water. Picture from Beijing

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WILL NEW OBJECTIVES, DEVELOPMENT AND TECHNOLOGIES CHANGE POSSIBILITIES FOR SUPPLIERS? Yes, new needed legislation ensuring energy conservation and flexibility will change possibilities for suppliers. The expansion of the DH system in China has until now mainly been driven by collecting excess heat from power production and to some extent from waste incineration plants. On the production side, it has been a job for producers to develop and produce suitable CHP products. On the supply side, pipe producers and producers of conventional pumps, valves and exchangers have been very busy. The basic network design has changed little since the beginning and the potential for new technologies are huge. The present and future objectives from the government regarding climate change and having a “Blue sky” will demand new solutions. In areas with heat demand, excess heat from industry will be more important. However, in areas with high annual cooling demand, excess heat will have to be used for producing cooling as well. The plan of using biomass for heating according to the previously mentioned plans for the 28 urban areas shows that a biomass development has started, but if the rest of China should follow this move, it is not sufficient with plans for just the 28 chosen areas. Cheap excess heat and biomass are not enough to achieve the stated climate objectives. The Chinese government will have to rethink the energy sector and establish a formalized heat and cooling planning legislation ensuring efficient, flexible and competitive solutions for residential, public and commercial district energy supply, including industrial heat supply. This will change the focus from planning DH in areas with available excess heat to planning DH and perhaps cooling in urban areas suitable for distributed energy solutions. A power market must be in operation, heat/cooling consumption must be metered and billed according to supply. Then the basic incentives for renewable and efficient energy conversion solutions are in place. 4th generation DH systems, solar heat, geothermal heat, large district heating heat/cooling pumps using low temperature heat sources, small and big biomass solutions, gasification solutions and heat storage will be some of the most important technologies for heating in the future.

Outside the DH sector the heat demand and supply cannot be found in any statistics. This means that predictions for the future size of the DH sector are tenuous and mostly based on present district heated floor area. In Figure 1, eight different prediction models are shown for the future size of the heated area in China.

Figure 1: Predicted heated area in China

The methodologies for predicting the heated area on Figure 1 vary. • The IEA-1 assumes all urban inhabitants have the same m2/ per capita as the provinces, where the highest value is in 2020. • The IEA-2 is the same as IEA-1 but includes expected urbanisation. • IEA-3 is the same as IEA-1, but all provinces are expected to have the same urbanisation as the provinces with the highest value in 2020. • IEA-4 expects the same energy production growth as population growth. • IEA-5 is the same as IEA-4, but here the energy consumption per person per heating days is the same as the province with highest value in 2020. • IEA-6 is the same as IEA-5, but here the urbanisation will peak like province with highest urbanisation. The heated area in Figure 1 does not include the development in heat production and use per square meter. Energy demand per square meter is expected to decrease due to energy conservation and new and more efficient buildings. Metering and billing alone are expected to save 8-14 % of the present produced energy per square meter . One of the first things that the Chinese government must change to reduce the energy consumption is to demand metering and payment according to actual supply. The legislation on this is yet to be decided due to resistance from existing heat suppliers, but it can be solved by introducing appropriate billing systems changing the government’s pricing system.

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