Contracts for low-grade infrastructure and ambient heat sources. Low-grade infrastructure heat sources from wastewater treatment plants, data centre, electric transformers, mines, subways, gas compressors, freshwater systems, etc. and some ambient sources like for example canals, pumping sources and geothermal sources are all categorized by having low temperatures not possible to use directly in district heating systems. Heat pumps are needed, and often, the best solution is for the district heating network owner to invest in and establish the heat collection and production equipment. Investments and operation costs are often high, and “room for negotiating” a price for utilising the heat source is typically non-existent. However, the heat source owner will then not be financially interested in utilisation and developing the heat source. Sometimes, goodwill and the possibility of marketing the green solution can be of value to the heat source owner, and the DH company can support that. Anyway, the best way forward is often to offer the owner economic compensation through a (small) annual or monthly fee for using the source independent of the heat taken. The payment can also be rent for land or the right to use the heat source. A symbolic payment per MWh may also be relevant, which can be essential for keeping the heat source owner interested in maintaining the relationship. In conclusion, setting the price for different heat sources is very much like setting the price for any other long-term service or product a company needs. Here, the quality (temperature), cost of connecting, saving in other processes, the required investment profiles, expectation to payback time, the quantity, time of delivery, etc, are all components that need to be understood and negotiated. External factors like supporting the local community with low-cost heat or a green profile for the heat owner can also influence the negotiations.
If the waste heat is expected to be delivered to a heat network with more heat sources, there is a risk that some of the other heat suppliers can provide a price lower than the heat price offered. Then, the heat network can no longer purchase the volume of heat agreed upon. This can be solved by making a “Take-or-pay” contract, which will ensure that the agreed minimum heat delivery will be purchased, as the heat network company will have to pay anyway when not enough heat is used. Another approach is to let the district heating network company pay all the waste heat suppliers’ investment costs up-front or by separating capacity payment from energy payment. The supplier’s investment risk is removed, and heat sold is simply a revenue stream. This solution further gives flexibility and is generally better for the district heating network, which can always choose the cheapest heat source. Contracts with CHP plants, waste-to-energy plants, and cooling. To establish the marginal heat delivery prices in a Combined Heat and Power (CHP) plant producing both heat and power at the same time, it is either necessary to determine the extra use of fuel for producing the same amount of electricity in CHP mode compared to power alone mode (extraction plants) or agree on a fair cost-sharing (backpressure plants). For waste incineration CHP (WtE CHP) plants, finding a marginal fuel price based on fuel consumption is impossible. This price will be negative due to a negative fuel price (the WtE plant gets paid for taking the waste). The solution is to share costs between the waste and heat side and include the income from selling electricity in the cost-sharing. In most cases, heat from cooling processes is regarded as waste heat, and the marginal heat price can then be calculated according to the general “negotiating heat price” principles. But in some cases, cooling is established in a way that makes it possible for the cooling equipment (a heat pump) both to deliver cooling to a needed cooling temperature and heat to a needed district heating forward temperature. In this case, the combined cooling and heat process may need to share the costs.
For further information please contact: John Tang Jensen, jtjensen10@gmail.com
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