Economic evaluation of capacity expansion decisions in district heating systems

The objective of this thesis is to analyze economic trade-offs associated with delaying the construction of district heating pipelines between thermal-electricity power plants and urban areas through the use of temporary heat sources. A computer model is developed and tested for determining optimum connection times of the power plants by minimizing system life-cycle costs.

Two types of heat sources, fuel cells and heat-only boilers, are considered as the temporary and peak heat sources in the district heating system.

An analysis of an idealized city model of 54,000 population indicates that fuel cells are not applicable as peak heat sources. Results also indicate that the optimum connection year of base-load plants is five years with fuel cells as temporary heat sources and three years with conventional boilers. Savings in life-cycle cost due to delaying the connection of base-load plants, compared to the base case of an immediate connection, are 3.1% with fuel cells and 1.8% with heat-only boilers. These savings correspond to 13.4% and 7.4% of required base-load investment cost with fuel cells and heat-only boilers, respectively. The life-cycle cost of the system is found to be moderately sensitive to changes in optimum connection year. The optimum connection year is found to be highly sensitive to the rate of increase in the price of the input fuel for temporary heat sources and the sell-back price of electricity in the case of fuel cells.

The comparison between fuel cells and heat-only boilers indicates that fuel cells are more economical than heat-only boilers as temporary heat sources if the electricity produced by them can be sold at a price of 50% or more of the busbar cost of electricity.