Spatially explicit techno-economic optimisation modelling of UK heating futures A thesis submitted in fulfilment of the requirements for the Degree of Doctor of Philosophy UCL Energy Institute University College London Date: 3rd April 2013 Candidate: Francis Li Supervisors: Robert Lowe, Mark Barrett I, Francis Li, confirm that the work presented in this thesis is my own. Where information has been derived from other sources, I confirm that this has been indicated in the thesis. Francis Li, 3rd April 2013 2 For Eugenia 3 Abstract This thesis describes the use of a spatially explicit model to investigate the economies of scale associated with district heating technologies and consequently, their future technical potential when compared against individual building heating. Existing energy system models used for informing UK technology policy do not employ high enough spatial resolutions to map district heating potential at the individual settlement level. At the same time, the major precedent studies on UK district heating potential have not explored future scenarios out to 2050 and have a number of relevant low-carbon heat supply technologies absent from their analyses. This has resulted in cognitive dissonance in UK energy policy whereby district heating is often simultaneously acknowledged as both highly desirable in the near term but ultimately lacking any long term future. The Settlement Energy Demand System Optimiser (SEDSO) builds on key techno-economic studies from the last decade to further investigate this policy challenge. SEDSO can be distinguished from other models used for investigating UK heat decarbonisation by employing a unique combination of extensive spatial detail, technical modelling which captures key cost-related nonlinearities, and a least-cost constrained optimisation approach to technology selection. The study yields a number of original contributions to knowledge that are relevant for policymakers. Results described in the thesis suggest that the marginal economics of UK district heating schemes are significantly improved when compared against individual heat pumps rather than gas boilers. This is relevant because under current policy direction individual heat pumps are likely to be the major counterfactual option to district heating post-2030. Results also illustrate how assumptions about technology availability can drive large shifts in optima, and that utility-scale electric heat pumps could be a key enabling technology for district heating to supply a large fraction of UK heat demand in a post-gas heating future. 4 Table of Contents Abstract ........................................................................................................................ 4 Table of Contents ......................................................................................................... 5 List of Figures ............................................................................................................. 12 List of Tables .............................................................................................................. 17 Acknowledgements.................................................................................................... 19 Chapter 1 - Introduction ............................................................................................. 20 1.0 Chapter 1 Summary ........................................................................................ 21 2.0 Research Context ............................................................................................ 21 2.1 Global Energy Context ........................................................................................... 21 2.2 UK Energy Context ............................................................................................... 24 3.0 Technological Approaches to Decarbonisation ............................................... 26 3.1 Energy Efficiency ................................................................................................... 27 3.2 Individual Electric Heating ..................................................................................... 27 3.3 District Heating Networks ..................................................................................... 28 3.4 Individual Gas Heating .......................................................................................... 29 3.5 Major Uncertainties .............................................................................................. 29 4.0 Research Goals ............................................................................................... 32 Chapter 2 – Model Structure ...................................................................................... 38 1.0 Chapter 2 Summary ........................................................................................ 39 2.0 Philosophy of Modelling ................................................................................. 39 2.1 Use of Models ....................................................................................................... 39 2.2 Drawing Inferences from Complex Models ........................................................... 40 3.0 Limitations of Existing Practice ...................................................................... 41 4.0 SEDSO – Conceptual Architecture .................................................................. 44 4.1 Methodological Heritage ...................................................................................... 44 4.2 Operation Modes for SEDSO ................................................................................ 46 4.3 Sectors Modelled in SEDSO ................................................................................... 47 4.4 Space in SEDSO ..................................................................................................... 47 5 4.5 Time in SEDSO ..................................................................................................... 49 4.6 Technology Representation in SEDSO ................................................................... 51 4.7 Costs in SEDSO ..................................................................................................... 54 4.7.1 The Levelised Cost of Energy (LCOE) ................................................................ 54 4.7.2 Costs for Building End-User Equipment ............................................................ 56 4.7.3 Costs for Local Distribution Infrastructure ......................................................... 57 4.7.4 Costs for District Heat and Electricity Generation .............................................. 57 4.8 Energy Consumption in SEDSO ............................................................................ 59 4.9 Peak Power Demand in SEDSO .............................................................................61 4.10 Conversion Efficiency in SEDSO ........................................................................... 63 5.0 SEDSO – Data Inputs ...................................................................................... 63 5.1 Baseline Consumption .......................................................................................... 65 5.1.1 Domestic Consumption .................................................................................... 65 5.1.2 Commercial Consumption ................................................................................ 66 5.1.3 Industrial Consumption...................................................................................... 67 5.2 Growth Projections ................................................................................................ 67 5.3 Energy Efficiency Measures .................................................................................. 69 5.4 Load Factors for Peak Power ................................................................................. 71 5.5 Technology Performance and Unit Costs ............................................................... 72 5.5.1 Building End-User Equipment ............................................................................ 72 5.5.2 Local Distribution Infrastructure ........................................................................ 74 5.5.3 District Heat and Electricity Generation Plant .................................................... 76 5.6 Fuel Costs .............................................................................................................. 79 5.7 Carbon Content of Fuel ......................................................................................... 80 Chapter 3 – Research Question 1 ................................................................................ 81 1.0 Chapter 3 Summary ........................................................................................ 82 2.0 Research Question 1 ....................................................................................... 83 3.0 Literature Review............................................................................................ 83 4.0 Approach for Addressing Research Question 1 ............................................... 85 4.1 Spatial Representation and Visualisation .............................................................. 86 4.2 Sensitivity Analysis ............................................................................................... 86 4.3 Monte Carlo Simulation Method ...........................................................................