Cost sensitivity of optimal sector-coupled district heating production systems

Abstract: Goals to reduce carbon emissions and changing electricity prices due to increasing penetrations of wind power generation affect the planning and operation of district heating production systems. Through extensive multivariate sensitivity analysis, this study estimates the robustness of future cost-optimal heat production systems under changing electricity prices, fuel cost and investment cost. Optimal production capacities are installed choosing from a range of well-established production and storage technologies including boilers, combined heat and power (CHP) units, power-to-heat technologies and heat storages. The optimal heat production system is characterized in three different electricity pricing scenarios: Historical, wind power dominated and demand dominated. Coal CHP, large heat pumps and heat storages dominate the optimal system if fossil fuels are allowed. Heat pumps and storages take over if fossil fuels are excluded. The capacity allocation between CHP and heat pumps is highly dependent on cost assumptions in the fossil fuel scenario, but the optimal capacities become much more robust if fossil fuels are not included. System cost becomes less robust in a fossil free scenario. If the electricity pricing is dominated by wind power generation or by the electricity demand, heat pumps become more favorable compared to cogeneration units. The need for heat storage more than doubles, if fossil fuels are not included, as the heating system becomes more closely coupled to the electricity system.