The project’s objective is to assess whether flexible bio-based power generation can be an effective and profitable technology option for balancing power system with large amounts of weather dependent production (wind and sun). It includes an analysis which estimates the potential income levels that can be gained by different types of bio-based power plants from selling electricity products and determines if the extra cost of having a combined heat and power (CHP) plant instead of having a heat only (HO) plant is worth investing.

The project's subgoals, how they have been addressed and some follow-up directions are presented below:

Subgoal 1: Increased knowledge about revenues that can be gained by different technology solutions from selling electricity in different markets, e.g., day-ahead and balancing markets (also called manual frequency restoration reserve market – mFRR market).A model has been developed to estimate the profits that can be made by district heating owners on day-ahead and balancing (mFRR) markets. The model has been applied in two case studies using historical price data for 2019: one using Borås Energi och Miljö’s (BEM) district heating system and one using Vattenfall’s system in Nyköping. In both cases, the results show an increase in profits when participating in balancing markets. This increase is, however, very small compared to the profits made by only participating in day-ahead markets (less than 0.1% increase in overall profits).

Subgoal 2: Increased knowledge about investment and operating costs (CAPEX/OPEX) of different bio-based technologies, both HO and CHP plants. A literature survey was done to identify comprehensive sources of costs. Two reports were identified as relevant sources: [1] and [2]. The first one dates from 2014 and the second one from 2019. They provide a wide-ranging collection of investment and operation and maintenance costs for units of different sizes and types.

Subgoal 3: Increased knowledge about the market conditions needed to justify the extra cost of building a bio-based CHP plant instead of a bio-based HO plant. Two investment case studies have been performed using BEM’s system to compare investment in CHP and HO units. The previous model has been used to evaluate the profits from participating in the day-ahead electricity market for three representative years: 2019, 2030 and 2040. Price conditions for 2030 and 2040 were obtained from Svenska kraftnät’s long-term market analysis [3]. The investment and O&M costs of the new units were obtained from [1] and [2]. The first investment study investigates an investment in new units for redundancy purposes (to ensure sufficient production capacity in case the largest unit is unexpectedly out of operation). The investment results show that profits from selling heat and electricity are not enough to cover the investment and O&M costs. The economic losses are smaller when going for the HO option. The second investment study investigates an investment in base-load units (units meant to run most of the time). In this case, both CHP and HO plants are profitable but the HO plant achieve a higher profitability.

Subgoal 4: Increased knowledge about the financial risks and uncertainties in such an investment.This was achieved through discussing the results with the industry partners and identifying aspects that could be further investigated in a follow-up project. The lifetime of new investment is around 25 years. Many sources of uncertainties enter the evaluation of the financial indicators. Among these, the most relevant ones that could be further investigated are: assumptions on the underlying heat demand (colder and warmer years), assumptions on future electricity prices, assumptions on the price for green certificates and purpose of an investment (an investment for redundancy purposes may not recover its costs but is still needed – how to value redundancy?). Many other input parameters to the investment studies - such as O&M costs, fuel prices and discount rate - may also play a role in the results. A thorough sensitivity analysis would shed more light on the magnitude of each one and could be included in a follow-up project.