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A Study Into the Recovery of Heat from Power Generation in Scotland

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A Study Into the Recovery of Heat from Power Generation in Scotland A study into the recovery of heat from power generation in Scotland Report to the Scottish Government A study into the recovery of heat from power generation in Scotland Title A study into the recovery of heat from power generation in Scotland Customer The Scottish Government Customer reference Confidentiality, Copyright Scottish Government. copyright and reproduction File reference ED56538 Reference number ED56538- Final Report Issue 1 AEA Group Colin McNaught AEA, Glengarnock Technology Centre Caledonian Road Lochshore Business Park Glengarnock KA14 3DD t: 0870 190 6191 f: 0870 190 5151 e. [email protected] AEA is a business name of AEA Technology plc AEA is certificated to ISO9001 and ISO14001 Author Name Colin McNaught, Evan Williams, Jeremy Stambaugh, Ben Kiff Approved by Name Mahmoud Abu-ebid Signature Date 5 September 2011 AEA A study into the recovery of heat from power generation in Scotland Executive Summary Overview This research project commissioned by the Scottish Government and delivered by AEA, develops an analysis of the financial and technical potential for recovering heat from large scale power stations in Scotland to provide heating through local district heat networks. The study examines the potential for recovery of heat from four sites used for large scale fossil fuel power generation: • Longannet; • Cockenzie; • Hunterston; and • Peterhead. This study then examines the policies that could help make heat recovery a financially viable option. Heat Supply and Demand The study considers how four new power stations at each of these sites could provide heat to anchor heat loads within an initial catchment area of 30 km around each site. The types of load considered include: • Hospitals; • Schools; • Swimming pools; • Industrial sites; and • New development sites. Heat loads were mapped and then a screening tool was used to identify which loads would be financially viable for connection for heat supply. With a short list of potential heat loads an outline of the heat network was developed. Financial Model A financial model was developed to assess the costs, benefits and CO2 emissions associated with the recovery of heat. This model used IRR as the main measure of investment returns setting a 9% rate as the target. The following table shows results for each site under two of the scenarios: 75% and 50% of heat load capture. Scenario Final heat load Timescale IRR Code % of potential of build up % years % P3 75% 15 2.08% Peterhead P4 50% 15 0.68% AEA A study into the recovery of heat from power generation in Scotland H3 75% 15 3.63% Hunterston H4 50% 15 2.17% C3 75% 15 2.31% Cockenzie C4 50% 15 1.80% L3 75% 15 2.80% Longannet L4 50% 15 1.63% Planning The study included a questionnaire which was sent to planners to search out details of how heat supply and demand were dealt with in current plans. This showed that many planning authorities were developing policies that encourage co-location of heat supply and demand. However these policies have yet to be implemented. The impact of these policies can only be assessed once implemented and tested against real planning applications. These policies are a step forward from current practice; however they do not stretch as far as planning law in Denmark. So while these new policies are likely to have a positive effect, it is unlikely that they will create a transformation in the supply of heat. Detailed Conclusions Technical The technical assessment shows that it is possible to develop extensive networks for all four sites, with a range of configurations. The network for Peterhead would only serve very local customers, as the area beyond Peterhead is very rural with limited potential for heat supply. The network for Cockenzie is much bigger, extending well into Edinburgh as this area is urban with many potential heat consumers. The technical assessment shows that it is possible to recover significant amounts of heat from future power stations that have CCS fitted. This is a key issue because CCS uses a significant amount of heat. CCGT stations are more at risk of this – AEA A study into the recovery of heat from power generation in Scotland because the heat is extracted from the steam turbine. Hence CCGT sites that could serve an extensive network of heat consumers are most sensitive to this issue. In Scotland this is most evident for the Cockenzie site. Financial The analysis uses a number of different assumptions on the %age of sites captured as heat customers and the timescale to build up the heat network and heat sales. Some key results are: • If all 100% of loads (existing and future buildings) connect within 15 years none of these projects would be financially viable (9% IRR). This is not a surprising outcome – if the returns were attractive projects would be under development. • The funding gap to make projects viable is significant – from £12 million to £92 million. • If a more accelerated connection rate is assumed the IRR improves significantly and the funding gaps reduce. This scenario is currently unrealistic for Scotland – but is close to the situation in Denmark where heat planning laws require existing and new buildings to connect to the heat supplier's network. The sensitivity tests show that revenue incentives would be an expensive and impractical route to support schemes. However accelerating the connection of heat loads offers a route towards more cost effective schemes. Planning The review of current and future planning policy concludes that: • Many of current planning policies support heat and co-location of heat supply and demand. • NFP2 and SPP are recent documents, and the strategic and local development plans are not yet in place, so it is too early to be fully certain of the impact of these policies. • It is likely that there will be some progress, as developers and planners use the new policies. • However, the policies were not drafted to deliver a rapid transformation in the uptake of heat recovery and district heating in Scotland. So these new policies are not expected to create a market for district heating as found in countries like Denmark. Assuming that these conclusions are correct, and that there is a policy requirement to deliver much great uptake of heat recovery and district heating, this suggests that: • In the short term opportunities for heat recovery and district heating may be missed, as co-location cannot be delivered retrospectively. • If a transformation in the uptake of heat recovery and district heating is required, further changes in planning policy will be required to accelerate uptake. • This may require more prescriptive policies, so a review of international planning policies would provide valuable insight into the policy options that have been used and how they could be relevant to the Scottish context. Policy Options AEA A study into the recovery of heat from power generation in Scotland The model was used to test a selection of policy ideas. The analysis shows that: • Most policy ideas have a modest impact on the IRR, none of the policies and their assumed impacts led to an increase of IRR to 9%. • The two policy ideas which had the highest impact co-locate heat supply and heat demand. These results demonstrate that planning policies are likely to be the most effective way to encourage heat recovery and district heating. Overall Conclusions This study shows that it is technically possible to recovery significant amounts of heat from the four large power station sites. However the financial returns are far from attractive for investors. Direct financial support from the public sector for these investments would need to be very significant to have any impact on IRR and would be very difficult to justify, due to the source of the heat (fossil power stations) and the State Aid requirements. A range of other policy ideas were tested, these had relatively limited impact on the IRR, but policies that reduced investment costs by co-location of heat supply and demand had the highest impact. Hence there could be the potential to develop planning policies with mandatory requirements for co-location, drawing on international experience to shape these policies to the Scottish contents and opportunity. Broader Recommendations The study also includes a number of broader recommendations, recognising that there is a wider range of opportunities for district heating in Scotland beyond heat recovery from the four power station sites, these recommendations cover: • Investigation of the wider potential for district heating in Scotland. • Comparison of district heating with the competing options for low carbon heat. • A review of international best practice in policies for district heating. • The potential for a Heat Planning Law in Scotland. • Heat Mapping. • District heating Code of Practice. • Examining the role of regulation in the expansion of district heating. • How EU Energy Efficiency Action Plans could support policy development. • Integration of district heating into existing policy and programmes. These recommendations could be taken up by the proposed Expert Commission on District Heating. AEA A study into the recovery of heat from power generation in Scotland Contributors The project team would like to thank individuals and organisations who contributed comments: Bill Lindsay, Team Leader, Local & Community Policy, Fife Council Michael Westwater, Planner, Strategic Policy & Tourism, Fife Council Hugh Muschamp, Lead Officer- Sustainable Development, Fife Council Douglas Evans, Energy Manager, West Lothian Council
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