1. Daniel Møller Sneum Dartmouth College 19 April 2018
District energy in North-eastern universities – greener and more flexible
Daniel Møller Sneum
Dartmouth College
19 April 2018

2. Agenda PART I What is district energy? PART II
Student consultants: DTU looks at Dartmouth
PART III
Why district energy and flexibility?
Preliminary findings
Next steps

3. PART I
What is district energy?

4. Q: What is district energy?
TECHNOLOGY ONLY SEEN IN
COMMUNIST COUNTRIES +
HIPPIES IN
NORTHERN EUROPE
Illustration:

5. A: An American invention
By Birdsill Holly in NY
Illustration:

6. A: (cont.) Efficient way to heat and cool buildings
Warm or cold water/steam in pipes
From a multitude of heat sources
Transmitted to consumers
Image: Danfoss.

7. Heating and cooling in EU: 50%
Nor’easters  Oil
D-day
Sustainability/emissions/energy targets for each university

8. Heat delivery (2014) and deployment
S. Werner, International review of district heating and cooling, Energy. 137 (2017) 617–631. doi: /j.energy

9. PART II
Student consultants: DTU looks at Dartmouth

10. Course: Feasibility studies of energy projects
Autumn 2017
11 groups - 70 students
Feasibility study: carbon neutral supply
Technology
Environment
Economy
Financing
Ownership
Regulation
Elizabeth Wilson + Rosi Kerr Dartmouth: invaluable!
OUCH!-zone
Zones of learning-comfort

11. Results Technology Count Biomass CHP 9 Heat pump 2 PV 8
NPV [2017-MUSD]
Technology
Financing 22
Biomass CHP Geothermal heat pump
Dartmouth
-316
Biomass CHP PV Electric boiler
100% debt
-107
Biomass CHP PV Thermal storage
-250
Biomass CHP PV
PV: - 30% Dartmouth - 30% tax equity investor - 40% debt
CHP biomass: - 40% Dartmouth - 60% debt
-222
Biomass CHP Solar thermal
Tax equity investor
-261
44% tax equity investor 16% Dartmouth 40 % debt
-322
Biomass and waste CHP Oil boiler
Dartmouth 91% Tax equity investor 9%
-226
Biomass CHP PV Solar thermal
70% Dartmouth and tax equity investor 30% debt
-213
50% tax equity investor 30% debt 20% Dartmouth
-252
Biomass CHP PV Biomass boiler Hydropower transmission
Tax equity investor Debt Angel investor
-104
PV Heat pump
PV: 44% tax equity investor 20% Dartmouth 36% debt
Heat Pump: 15% tax equity investor 20% Dartmouth 65% debt
Technology
Count
Biomass CHP 9
Heat pump 2 PV 8
Electric boiler 1
Thermal storage
Solar thermal
Biomass and waste CHP
Oil boiler
Biomass boiler
Hydropower transmission

12. Conclusions from students
Consider thermal storage + bioCHP + PV
Balance RE credits + local actions (keep oil?)
Project finance – tax equity investor makes sense for solar PV; not thermal side
Local carbon price
Hydro behind the meter
Slightly more experienced consultants. Challenge assumptions

13. PART III Why district energy and flexibility? Preliminary findings
Next steps

14. Methodology Define analytic framework Apply analytic framework
Planning
Financing
Construction
Operation
Apply analytic framework
US universities

15. THEORY: How can DE integrate renewables/operate on market?
Figure:

16. PRACTICE: DE can integrate renewables/operate on market
Figure:

17. PRACTICE: How can DE integrate renewables?
Figures: and

18. District energy in the North-east
10 universities – 100+ years DE
5 experts
2 ISO/RTO
+ a few more

19. Planning Utilities a hurdle Hot water instead of steam
needs new tariff scheme
Hot water instead of steam
scary
All universities have carbon/energy targets
unclear how to reach them
Hesitance to thermal storages (footprint)
ft2 (~100 m2) – is that a lot?
Becoming a utility is not attractive (wires + sales = utility)
mitigating by owners associations/coops/license limits
Limited understanding within organisation
individual school-structure can be challenging in decision-making
higher management

20. Financing Financing as energy efficiency RGGI: Price on carbon
rating agencies begin to understand this.
tax exempt bonds (heat side) + ”green banks” (Delaware, CT, VT)
RGGI: Price on carbon
Access to finance
some are rich (balance sheet)
others considering alternatives (ESCO/alumni)
standard structures would help (like for PV)

21. Construction

22. Operation
Maturity of wholesale markets important – actors must know how it’s working
aggregators are by now pretty sophisticated
ISO: Minimum bid size 0.1 MW
Economic dispatch AND environmental dispatch?
some are looking at it – some are buying RECs and PPAs
Demand-side
steam AND electric chillers are common

23. Operation (cont.) Grid ”too green” – no incentive to be flexible
now, is it really?
Prices too low – no incentive to be flexible
interesting/worrying
Keeping humans in the loop is important for
security (reasonable)
believing humans are better (manual override - hmmm)

24. Other findings Every plant is the best
except it’s not…
myopic views can lead to sub-optimisation
knowledge-sharing is HUGELY important!
Almost no heat systems are integrated with the surroundings
excellent way to waste money and energy
Local opposition ”Don’t cut down the trees for biomass!”
Technical limitations – limited
avoid cycling
new relays needed for exporting to grid (safety)
To some degree the standard hesitance to change
Similar to Denmark and everywhere else

25. Next steps In-depth processing of interviews
7 states’ regulation and policy
Write paper
Write more papers
Write thesis
Get PhD

26. Daniel Møller Sneum
PhD Fellow, visiting scholar at Dartmouth College US
111 Fairchild
Arthur L. Irving Institute for Energy and Society
Dartmouth College
03755 Hanover, NH
+1 (603)
DENMARK
Systems Analysis Division
Technical University of Denmark
DTU Management Engineering
Produktionstorvet
Building 426, room 033A
2800  Lyngby DK
linkedin.com/in/danielmollersneum
Publications

27. District energy in Denmark
5.7 million inhabitants (3.6 with district heating)
31% of final energy consumption RE-based
54% of electricity RE-based*
60% of district heating waste and RE-based*
>400 district energy ‘microgrids’
* Yes, biomass included. Let’s save that discussion
Map: Danish Energy Agency. Regulation and planning of district heating in Denmark. Copenhagen: 2015.

28. District heating deployment in the Nordic countries
Graph: Sneum DM, Sandberg E, Rosenlund Soysal E, Skytte K, Olsen OJ. Smart regulatory framework conditions for smart energy systems? Incentives for flexible district heating in the Nordic countries (unpublished primo 2017)

29. District heating share of heat supply in 2014
FI 46%
NO 8%
SE 50%
DK 51%

30. EXTRA: Where is DH in traditional flex definition?
Demand-side integration
(P2H)
Dispatchable generation
(CHP)
Storage
(Heat storage)
Grid infrastructure
System persp; not single-technology persp.
As defined in IEA. The power of transformation. Paris: IEA; doi: /BF

31. EXTRA: Why capacity tariffs can be bad for flexibility
Capacity charge: EUR/MW/month
Example: 10 MW electric boiler, which pays to dispatch when electricity spot price
is 7 EUR/MWh
EUR x 10 MW = EUR
Completely infeasible to operate!
10 MW x 3 hours = 30 MWh
For comparison
EUR/30 MWh = EUR/MWh
Standard house 18 MWh/year = EUR/year

32. Results: CHP + electric boiler depends on subsidies
No subsidies = high LCOH & vice versa

33. Storage costs are low for DH
ELECTRIC
Batteries closing in on pumped hydro; not on heat storages
THERMAL
Same order of magnitude
Graphs:
Lund H, Østergaard PA, Connolly D, Ridjan I, Mathiesen BV, Hvelplund F, et al. Energy storage and smart energy systems. Int J Sustain Energy Plan Manag 2016;11:3–14. doi: /ijsepm
BNEF:

34. Comparing apples and oranges makes sense in some cases?
Storages are part of the ENERGY system – not just the ELECTRICITY system
Images by Abhijit Tembhekar from Mumbai, India - Nikon D80 Apple, CC BY 2.0,
and
Graph: Lund H, Østergaard PA, Connolly D, Ridjan I, Mathiesen BV, Hvelplund F, et al. Energy storage and smart energy systems. Int J Sustain Energy Plan Manag 2016;11:3–14. doi: /ijsepm

35. Student results 1 Group CAPEX split by technologies [$M]
University NPV [$M]
Ownership structure
Financing structure
SPV NPV
SPV
IRR
Technology mix in MW
University energy cost
Incentives applied
CO2 emissions 1
137 biomass CHP 15 GHP system 22
100% owned by Dartmouth College
Self-financing 2nd option: Bank loan
35 MW Biomass CHP 10MW Geothermal Heat Pump -
Not applicable
1820t/year reduction for heating 3910t/year reduction for power 3
105 biomass CHP
-316
SPV owns PV system, institution owns the rest of the system
Share of debt at investment time - 100% Interest on debt – 4,8% Duration of loan 30 years 8%
Biomass plant: 16 PV Plant: 9,60 Electric Boiler: 11,60
0,33 $/kWh
ITC and Biomass subsidy of 6500 $
89843 tons CO2-eq/year 5
76 biomass CHP 20 solar PV 2.6 Thermal storage
-107
Loan from bank
0 - 30MW / 10MW / 10MW
2.35
ITC SCREC MACRS
4 782 8
18 solar PV 46 biomass CHP
-250
Solar: - 30% Dartmouth - 30% 3rd party - 40% Bank CHP Biomass: - 40% Dartmouth - 60% Bank
-245 m$
N/A
Solar: 10 MWp CHP Biomass: 8 MWel 36 MWth
$/kWh
ITC for solar Accelerated & bonus depreciation
1.75m tonnes (reduction of 21.54% of current emisssions) 9
184 biomass CHP (65.5% CHPthermal, 34.5% Solar thermal 100% CHPelec)
-222
University
- 3rd party (company) for ITC purpose - Bank - Green certificates
CHPthermal : 40 MW CHPelec 15 MW Solar thermal: 38 MW (21%)
LCOE: 136$/MWh
ITC Grants
Avoided CO2 emissions: ton/year

36. Student results 2 Group CAPEX split by technologies [$M]
University NPV
Ownership structure
Financing structure
SPV NPV
SPV
IRR
Technology mix in MW
University energy cost
Incentives applied
CO2 emissions 13
218 biomass CHP 21 solar PV
-261
Joint venture (Tax investor and university)
44% Tax investor 16% Dartmouth College 40 % Debt
CHP: GWh SOLAR:16.8GWh
70 USD/MWh
ITC, Accelerated MACRS Depreciation, Renewable energy credits
1290 kton CO2e (Avoided) 15
199 biomass and waste CHP
-322
Sponsor 91% Tax Investor 9%
Wood pellets and waste 35 Oil plant 5
Investment tax credit 16
228 biomass CHP 1.2 solar PV 4.7 solar thermal
-226
University funds + ITC+ Loan of 30% CAPEX
Biomas CHP: 37.6 MW Solar PV: 1 MW Solar thermal: 7.5 MW
Combination: 0.26 USD/kWh
ITC
Biomass: 8775 t/yr Solar PV: t/yr Solar thermal: t/yr 17
45 biomass CHP 14 solar PV
-213
CHP: university PV: SPV
Tax equity investor: 50% Loan: 30% University: 20%
-3.81 M
University: 4,2% Investor: 8%
CHP: 40 MW PV: 10 MW
PV SPV: 148,60 $/MWh
PV: ITC & Accelerated depreciation
-98% 20
28 biomass CHP
23 biomass boilers
9 solar PV
0.5 hydro transmission
-252
FLIP PARTNERSHIP UNIVERSITY OWNERSHIP
THIRD PARTY COMPANY COLLABORATION ANNUITY LOAN ANGEL INVESTORS M
-3%
BIOMASS CHP: 5 MW(E) BIOMASS BOILER: 32 MW(TH) SOLAR PV: 4.78 MW(EP) HYDRO IMPORTS: 16,965 MWH/YR
ITC , MACRS RENEWABLE ENERGY GRANT
41,699 t/yr 21
81 solar PV 8 heat pump
-104
Private Ownership through an SPV
Two subprojects, one for PV and one for Heat pump. PV: Sponsor Equity=20% Tax Equity = 43.8% Debt Share = 36.2% Heat Pump: Sponsor Equity=20% Tax Equity = 15% Debt Share = 65%
NPV using LCOE: M NPV using $/MWh: 0 M
Nominal Heat Pump: 40 MWTh Nominal PV: 10 MW
LCOE with Dartmouth as owner: 89.5 $/MWh Price of Heat/ Electricity that Dartmouth pays to the SPV: $/MWh
On CAPEX: •Commercial and Industrial Renewable Energy Grants (for PV) •NH Electric Cooperative (for HP) •ITC
0 Emissions with PV+Heat Pump