Large-scale heat pumps as a lever for municipal heat planning

Large-scale heat pumps as a lever for municipal heat planning
October 19, 2023 |

Heat pumps are a central component in the shift towards sustainable heating. Due to economies of scale, large-scale heat pumps supplying several residential buildings in settlements or neighborhoods prove to be an efficient decarbonization option.

The heat transition requires precise coordination of individual investment decisions and central infrastructure planning. Electricity-based heat pumps for individual or multiple buildings and hydrogen heating systems, for example, can be considered as fulfillment options for the heat transition. Efficient long-term planning of the heating infrastructure also depends on expectations about the development of the hydrogen price. This is due, on the one hand, to the future use of hydrogen in electricity generation and, on the other hand, to the fundamental possibility of using hydrogen directly for heating and hot water in the building sector.

In the analysis “Zieltechnologien der Wärmewende – Wegweiser für eine zukunftsgerichtete Infrastrukturplanung “, the Institute of Energy Economics at the University of Cologne (EWI) examines the economic target picture of a climate-neutral heat supply, i.e., a completed “heat turnaround”. For this purpose, a techno-economic analysis is carried out for two exemplary street sections in the Cologne urban area. The target technologies identified do not constitute direct recommendations for action by households but set guidelines for strategic decisions by municipalities. The analysis was funded by the “Förderinitiative Wärmewende” of the Gesellschaft zur Förderung des Energiewirtschaftlichen Instituts an der Universität zu Köln e.V.

Large-scale heat pumps could be more economical than decentralized heating solutions

Building new infrastructure, e.g., heat grids, requires careful, long-term planning. Based on a comparison of the levelized cost of heat (LCOH) of the various technology options, it is possible to estimate the maximum costs of these new infrastructures, which are still unknown today, before an alternative would be more economical. The EWI refers to these as the maximum additional unknown cost (MAUC) and compared them with empirical values of existing infrastructures, such as gas or heating networks.

The analysis shows that for areas with urban development, large-scale heat pumps and, depending on the assumptions, hydrogen heating systems can be the economical technologies. Large-scale heat pumps have economies of scale and thus cost advantages compared to decentralized heat pumps for individual residential buildings. In the sample areas studied by the EWI team, decentralized heat pumps would therefore only be economical if heat grid costs were significantly higher in the future compared to historical values.

Strategic alignment of the heating infrastructure

“Our calculations show that, depending on the cost development of hydrogen as an energy carrier, large-scale heat pumps could be the most economical option for heat supply in urban and suburban areas in the long term,” says Philipp Artur Kienscherf, Senior Research Consultant at the EWI, who prepared the analysis together with Nicole Niesler and Michael Moritz. The EWI analysis shows that this can be the case even for low energy efficiency standards.

Figure 1: Annual performance factors in dependence on the supply temperature. Retrofitted buildings have the option of being heated with a reduced flow temperature, which makes pumps more efficient. Source: EWI

“In the sample areas considered, hydrogen heating systems could only become economically viable if hydrogen were available in sufficiently large quantities for the building sector at prices around EUR 100/MWh or below,” says Kienscherf. In addition, the LCOH of hydrogen heating systems are linked to a much greater extent to the uncertain development of the hydrogen price than those of heat pumps.

Knowledge of potential target technologies for the heat transition and their relevant influencing factors enables a strategic orientation of the heating infrastructure. The focus should be equally on cost efficiency and risk assessment. The MAUC can provide orientation points for this challenge. In the analysis, target technologies are considered from the perspective of a static, future-oriented infrastructure operation. Individual decisions as well as regulatory framework conditions, such as the tenant-landlord dilemma or the time frame of municipal heat planning as well as the duration of transformation processes are not taken into account.

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