What makes or breaks the future of power2heat

With a higher share of renewables in the Dutch energy mix, the hourly electricity production becomes increasingly weather and season dependent. More and more often the production capacity will exceed the regular demand on an hourly basis, resulting in very low or even negative spot market prices. This could be a cost-effective opportunity for energy intensive industries that need to decarbonize their processes. 

One (obvious) option to utilize this excess electricity is to use it for industrial heating purposes, substituting natural gas. Installations like steam boilers can be adapted for dual-fuel use, automatically making a power-or-gas fuel choice based on actual market prices. However, opposite to residential heat, industry processes need higher temperatures that cannot be reached with electrical heat-pumps (that can have an effective efficiency of up to 500%) but require electrical resistors to turn electricity into heat. The efficiency of a resistor is “only” 100%, making the competitiveness with natural gas a much less easy win. 

Heat-spread 

We would like to introduce the “heat-spread”: the difference between the price of natural gas and the price of power in EUR/MWh on the spot market. When the heat-spread is positive, it will be cheaper to use electricity for heating the boilers. When the heat-spread is negative, it is cheaper to use gas. The Dutch market price for gas on the TTF was very low this summer, with prices around 10 EUR/MWh. The ’normal’ prices in recent years were typically in a range of 20 EUR/MWh. This means that the spot market price should currently be below 10 EUR/MWh (or historically below 20 EUR/MWh) for power to compete with natural gas in industrial heating processes.

Extreme low APX price (occurrences 2018-2019)

In the last 18 months the power prices on the APX spot market have shown a few occurrences below 10 EUR/MWh. On average only one hour per month. With a typical installation cost of 10.000 – 50.000 EUR/MW, there is no business case yet for installing resistors. But it is expected there will be much more renewable power capacity connected in the next 10 years. Based on a projection with 20GW solar and 10GW wind power in the Netherlands we calculated a spot market price scenario for 2030.

This scenario shows up to 2,000 hours per year with very low power prices, on average over 160 hours per month. The main occurrence of these low prices is in the early summer months and December. Theoretically this could reduce the natural gas consumption with almost 25% in industrial heating processes. Assuming an average heat-spread of 10 EUR/MWh, this will save up to 20,000 EUR per MW installed electrical resistor capacity in energy costs. This is not only an attractive business case, since its net payback time will be two and a half years, but could also reduce the CO2 emissions with almost 25% annually.

But, the power consumption in most heat intensive industries is nowadays relatively small compared with their consumption of natural gas. The power consumption covers mainly fluid pumps and other baseload applications, so the introduction of large power-to-heat applications (utilized for only 2,000 hours per year) will seriously impact the maximum peak power demand of an industrial plant.

This is an issue, as industrial consumers in the Netherlands pay a monthly fee for their highest peak demand (or “kWmax”) to the grid operator. This monthly fee is based on the highest average peak of the month as measured in a 15 minutes interval. The price differs per grid operator and depends on the connection voltage level but has an average value of about 2 EUR/kW-max per month. Not taking into account, but most certainly having a re-enforcing effect on the conclusion, is the fact that the highest peak in any month triggers a backward effectuated price increase to the new peak level (on average about 16 EUR/kW per year).

Time to act 

So, what parameters can and/or should change to make power-to-heat for industry succeed?

• Further growth of renewable energy in the Netherlands, at least tripling the current capacity. This is an autonomous trend, expected to happen in the next 10 years.
• The costs of natural gas shall rise, increasing the heat-spread (specifically the costs of carbon emission, which at a carbon price of only 25 EUR/Ton already adds 5 EUR/MWh). This is an international or at least European defined parameter, which is difficult to influence.
• Adapting the kWmax fee mechanism of the used peak grid connection capacity. This parameter has a high impact and requires ‘only’ a change of market agreements.

When the natural gas costs jump to 30 EUR/MWh, the heat-spread can double with a positive impact on the business case. But most important is a shift to a more dynamic fee structure of the grid connection capacity. Time to act for regulators and law makers. One might think of special tariffs for dual-fuel installations, or fee-free periods in times of abundant grid capacity. Such tariff changes can make or break the future of power-to-heat in the industry, which in itself is a tremendous opportunity in decarbonizing our energy system.

Interested to discuss this topic?

Please contact Michiel Dorresteijn (Principal Consultant) via +31 6 117 169 27 or mail: michiel.dorresteijn@energy21.com [/vc_column_text][/vc_column][/vc_row]

This is how local an energy community can be

LEF, based in Hoog Dalem, is all about making the power grid smarter. In this pilot project, an energy community – formed by a group of approximately 15 homeowners – generates its own electricity. The purpose is self-consumption or to mutually exchange this electricity within the community and settle the price immediately. When self-production falls short, energy can be bought from the grid through the use of flexibility or ancillary (grid) services. 

LEF not only stands for Local, Energy and Flexibility, but is also the Dutch word for courage: the act of taking a bold decision to participate in this project and to contribute to innovations in the energy market. 

The essence of the project 

A group of homeowners are generating their own electricity for self-consumption or to be mutually exchanged within the community, settling the price immediately through the application of blockchain technology. While stimulating smart usage of the self-generated energy, there’s also the option to buy or sell the energy on the market when this is more financially beneficial. Combining sensors in the local power grid with data exchanges and allowing them to interact with smart home systems means that smart devices (like thermostats, washing machines and dishwashers) can be intelligently managed. The energy generated is therefore immediately exchanged or stored in the battery storage system. The surplus of energy can be traded on the national energy market. A win-win: the community becomes predominantly self-sufficient and the power grid is greatly relieved. 

For now and for later 

In this project, the residents work together with technology pioneer ABB, energy expert Energy21, software company iLeco and distribution system operator Stedin. Together, they’ll find the answers to questions such as: 

• What is the most efficient way for the local energy market to function while providing benefits for the residents as well as the grid administrator? 
• How can we accomplish the mutual exchange of energy and data? 
• How can we optimally align energy supply and demand? 
• Can LEF be applied country-wide? 
• Is the Layered Energy System, the core philosophy on which LEF is based, a good way to locally exchange energy? 

Based in Hoog Dalem, LEF offers insights and practical tools. In addition, major adjustments to the power grid can be prevented with LEF’s help. That way, we keep our power supply reliable as well as affordable – for this generation and the next.  Read the press release here (in Dutch):

Would you like to know more about the Layered Energy System or LEF?

Please contact Michiel Dorresteijn (Principal Consultant)
via +31 6 117 169 27 or mail michiel.dorresteijn@energy21.com [/vc_column_text][/vc_column][/vc_row]

USEF (Universal Smart Energy Framework) Foundation launched a serious game to increase understanding of the new market dynamics and facilitate a broader dialogue. The interactive documentary covers three major dilemmas for setting up an effective energy market:

1. 1. Flexibility versus grid reinforcement
   2. The admission of one or more aggregators
   3. The degree of regulation of the market

What decisions would you make for a future proof energy market?

START THE GAME

In The Challenge Engineering 2018, our colleague Alex Trijselaar, Product Manager, presented Energy21’s industrial solution as the best innovative solution to fight climate change.

After an exciting selection procedure, Alex was nominated as one of the final three to present the best solution for the climate case originated by KIVI. He presented Energy21’s industrial solution that focuses on digitalizing the energy processes of larger industrial sites.

Alex commented: “It was an honor to present our solution in the finals to a professional jury and an audience with Marjan van Loon representing Shell to create more awareness around this topic. This is an often overlooked solution, while some parties started implementation as early as 2015 and the results are very promising.”

Diederik Samsom, one of the jury members, said: “For sure the best contributor to CO₂ reduction if you will work with the big twelve in Dutch industry.”

You can review his introduction here, or review the final pitch on Youtube (in Dutch).

Would you like to hear more?

Contact Thomas Crabtree via thomas.crabtree@energy21.com or +31 6 3085 2747 to discuss your planning challenges. Also, read more about how we can deliver, manage and optimise your energy processes using our software solution EBASE. Or take a deeper dive into other energy optimisation strategies for industrial energy users:

The concept of industrial symbiosis is that various industrial processes benefit from each other’s presence. Key in being able to make waste streams useful is a clever utility planning. Or as we like to state: waste + plan = feedstock.

Industrial symbiosis saves raw materials and energy, minimizes emissions, cuts logistics costs and exploits synergies. The concept can be applied to multiple sites being connected, as well as having dependencies in internal processes.  An interesting example of this concept is the “Verbund” mindset of our client BASF.

Utility planning as a driver for industrial symbiosis

On complex industrial sites the primary production processes and energy & utilities processes are strongly interconnected. Most obviously, the demand for energy and utilities is dependent on the intensity of the production process.

An accurate translation of production planning to energy and utilities demand is therefore key to avoiding excess energy generation. Where excess electricity can be fed into the national grid, excess steam and utilities are often wasted (check this infographic on creating value of excess steam).

There are several ways of improving your energy and utility planning.

Assuming the translation of production plans to energy demand is accurate, the starting point is to create insight in the accuracy of the demand plans of individual plants.
Creating awareness of these numbers will often lead to a natural improvement in accuracy.
Next, ex-post analysis of plan data versus actual demand can indicate structural deviations, which can be accounted for in the planning process.
Finally and when applicable, you can use advanced algorithms to create demand forecasts based on weather data and other relevant parameters.

How your utility planning is affected by heat and waste streams

If your operation contains exothermic processes and/or useful waste streams, utility planning becomes more interesting and complex. You can feed waste heat of exothermic processes back into the steam network, while combusting waste streams in boilers to generate ‘free’ steam.

If production plans fluctuate heavily over time, so will waste streams and energy demand. Key in these situations is to smartly combine all relevant parameters to reach the most optimal planning. One example is to schedule maintenance activities in periods when less waste streams are expected, in an attempt to match a reduced flow of free steam with reduced demand.

We can help you to improve your utility planning!

Contact Thomas Crabtree via thomas.crabtree@energy21.com or +31 6 3085 2747 to discuss your planning challenges. Also, read more about how we can deliver, manage and optimise your energy processes using our software solution EBASE. Or take a deeper dive into other energy optimisation strategies for industrial energy users:

Working on a more sustainable energy future is not only a noble effort in relation to future generations, but can be financially attractive for current business as well. The two infographics below back up this statement with numbers and offer a calculation method that can help you seize the value of your optimisation potential. Both are based on our experiences with our client group of (industrial) energy users.

Towards Industry 4.0

All the projects that we are working on within this group share a strong digitalisation aspect, in which raw sensor data are aggregated to higher-value context information. By making this information available at (near) real time, operators are capable of seizing opportunities that occur either on the market or within their own processes, without jeopardizing security of supply. These are typical first steps towards an Industry 4.0 operation.

Infographic #1: Calculating the value of reducing excess steam

For example, a medium sized plant with 30 ton / hr production could save €369,000 / year from literally disappearing into thin air while decreasing their CO2 footprint. How? Check this infographic!

Download

Infographic #2: Calculating the value of monetizing flex on the imbalance market

For example, by capturing 5 minutes of every high imbalance price PTE in 2017 a medium sized industrial site with 10 MW of flexibility could have created power revenues of €430,000 while supporting stability of the grid. How? Check this infographic!

Download

Interested to hear more?

Call Thomas Crabtree (+31 6 3085 2747) and find out how you are able to calculate the value of your optimisation potential. Or check our dedicated web page for industrial energy optimisation.