Sustainable design of district heating systems in the lignite areas of Western Macedonia

Implementation environment

The transformation of the energy mix, which has been particularly intense over the last two decades and is characterised by the increasing share of Renewable Energy Sources (RES), has marked the transition to a new, more sustainable energy production model. It also continues to fuel the need for an increasingly modern and robust regulatory framework capable of supporting the new free energy market. The large-scale penetration of RES, contributed to the creation of new business models and markets and created new challenges that require cross-sectoral and innovative approaches, through the cooperation of actors from different sides combining issues related to politics, economics and engineering. Especially in developed economies, the transition to a regulatory level is constantly in a process of (re)adaptation, guided by technological developments and the new conditions that they impose. 

The role of the free energy market is also catalytic to the fair energy transition, which has now become a clear priority, especially in the European Union where it is guided by the pioneering EU framework of the Green Deal, is supported in various ways by funding mechanisms and launched by short licensing procedures. This impetus favours the development of innovative technologies and business models. The Green Deal, with its ambitious goals but also with the strict time constraints it sets, paves the way for a rapid transition which, however, can only be achieved through coordinated action and cooperation of all stakeholders.

The decarbonisation of the energy system is a complex process that requires multidimensional, detailed and integrated planning as it concerns regulatory, social, economic and technical issues at the same time. Coal (lignite) thermal power plants and natural gas that are targeted as harmful to the environment and seemingly an obstacle to sustainable development are base load units, particularly important for the stability and reliability of the system and their participation cannot be limited without the necessary implementation of specific infrastructure (which include RES, electricity storage systems, hydrogen, etc.). 

Historically, the normal practice for conventional coal / lignite heat plants was to be located near coal mining sites and, in cases where they were near to communities, power systems would be designed to take advantage of the excess heat generated during the energy generation process to heat water [Cogeneration Heat and Power (CHP)], which would be transferred through district heating (DH) networks to the heating systems of the houses in the area. Although it is an optimal practice in terms of energy savings, it includes large-scale district heating networks that require high costs, while the financial models of these investments are designed for life cycles that exceed three or more decades. 

In this context, the forthcoming decommissioning of PPC lignite units –including large CHP lignite plants– should be routed in a way that allows the timely replacement of conventional thermal power with viable and flexible solutions ensuring the continuity of the district heating system in an environmentally friendly manner but also in the interest of local communities.

District heating and green alternatives 

In the context of delignification and in order to search for an optimal and economically viable “going green” solution regarding district heating, LDK Consultants, on behalf of WWF Hellas carried out a study to propose an economically viable alternative scenario of sustainable district heating systems in the area of Western Macedonia, based, in the medium term, exclusively on RES and therefore as alternatives to the suggested conventional proposals of the Just Development Plan for lignite areas. The individual steps of the study included:

1. Exploration of potential of green alternatives for district heating in the lignite areas of Western Macedonia (Kozani, Ptolemaida and Amyntaio) and specifically: biomass, biogas, low-enthalpy geothermal energy, solar thermal energy in combination with heat pumps and thermal energy storage (PTES).
2. A proposal of alternative investment scenarios focusing on the above available sustainable technologies, which cover the projected thermal loads. 
3. Multi-criteria analysis based on socio-economic and techno-economic criteria through the introduction of weighting factors and selection of the optimal combination of alternatives
4. Development of a sustainable roadmap for the gradual decarbonisation of the energy mix for district heating plants in Western Macedonia
5. Policy recommendations aimed at the regulatory support of the sustainable district heating scenario

According to National Just Transition Development Plan, the uninterrupted operation of district heating in lignite areas will be ensured by the connection of Amyntaio, Ptolemaida and Kozani, with a single network of hot water pipes that will allow the creation of a thermal hub, which will consist of:

• the modified unit of Ptolemaida 5 (power 140 MWth)
• new SITHYA unit in Kardia (power 60 MWth)
• electric boiler (power 80MWh).

The aforementioned (interconnection of area systems, total installed thermal power of 380 MWth and estimated thermal energy production of about 500 GWhth per year) were the baseline scenario in the study, according to which the needs for thermal power were assessed and the sizing of the proposed green alternatives was performed accordingly. In addition to the baseline scenario, since the modified unit of Ptolemaida 5 as well as the electric boiler unit are under construction at this time, it was assumed that the former will participate as an auxiliary in the base load, while the latter will be put into operation in cases of peak heat load demand. It is worth noting that cumulatively in the Kozani, Ptolemaida and Amyntaio DH systems, the installed thermal power today is approximately 350 MWth. It is estimated that investments in energy saving interventions will lead to a reduction in total heat demand, in the medium term, in combination with the subsidised program “Saving at Home” which will provide increased funding for lignite areas, compared to other areas.

The possible “green” solutions were examined at the level of a preliminary study in terms of technical feasibility and economic viability. In each case, the constraints, obstacles, possibilities and prospects were analysed in order to optimally combine them. More specifically,

• For biomass and biogas, the problem of the limited supply chain of fuel material from agricultural activity of the wider area is identified as important, which greatly limits the prospects for immediate utilisation of the technically available potential. On the contrary, this solution has proven to be an important opportunity for economic recovery of local communities through the creation of new jobs in multiple new business activities and models.
• For the rest of the technologies, the restrictions mainly concern spatial issues as the geothermal as well as the thermal solar systems should occupy a very large area to cover the required thermal energy needs. It is worth noting that one of the largest solar thermal district heating systems in Europe is located in Silkeborg, Denmark, occupies 160,000 sqm and produces about 80 GWth per year. For both of these technologies their combination with heat pumps was deemed necessary as production flexibility was required, which could not have been achieved otherwise.
• In the case of solar panels, the corresponding seasonal storage tank (PTES) was also taken into account. The significant increase in the needs of the district heating system in electricity, as a result of the introduction of heat pumps, is speculated that it could remain an environmentally green solution, assuming that it will be served by RES systems. 

According to the study, for a realistic scenario of decarbonisation of the district heating system, the development rate of the biomass supply chain, mainly from agricultural activity, plays a decisive role –given the results of various studies on the available capacity in the wider area– as this solution is able to constitute the main and most reliable source of thermal energy, covering most of the base load. 

Based on the above, during the multi-criteria analysis carried out in order to highlight the optimal scenario-mixture of the aforementioned RES technologies, the following factors were taken into account (with different levels on importance):

• Levelised cost of energy (LCOE): Critical parameter for evaluating sustainable scenarios in terms of final permitted energy pricing levels
• Internal Rate of Return (IRR):Indicator for evaluating the profitability of each sustainable scenario 
• Flexibility level: A technical parameter that characterises the degree of ability of each unit of the proposed sustainable scenario to respond to the sharp changes in system demand. It is determined by the rate of change of the energy production level
• Implementation Risk: Indicator related to inherent risks of biomass and geothermal technologies. The increasing dependence of the district heating system on biomass increases the levels of risk, due to the current early state of agricultural residues supply chain as well as their unregulated prices. The danger of low-enthalpy geothermal energy lies in the difficulties and complexities in terms of technical feasibility. 
• Jobs Created: Critical socio-economic parameter. Each scenario is further evaluated based on the jobs it creates and most importantly in the long run (during the operating phase).

The multi-criteria analysis was performed on the basis of two alternative scenarios in relation to the particular importance of the last two of the above parameters, with differentiated weighting factors on a case-by-case basis, namely:

• the first one, evaluating as the most important parameter the maximisation of job creation (Scenario 1) and
• the second one, the reduction of the implementation risk (Scenario 2).

According to the results of the study, the difference between the two scenarios is small. Scenario 2, minimal risk, it ensures jobs created at almost the same level, although the weighting factor of this parameter is lower. 

The choice of the optimal solution among the selected cases was made based on the environmental performance and more specifically with the carbon emissions of the life cycle of each scenario. The Sustainable Scenario that is finally preferred is that of the minimum implementation risk which is based mainly on biomass with supplementary use of solar thermal and low-enthalpy geothermal energy, it costs about 120 million Euros and corresponds to the following mixture: 

• Biomass Boilers: 95MWth 
• Low-enthalpy geothermal energy with Heat Pumps: 15MWth 
• Solar thermal energy with heat pumps and seasonal storage (PTES): 150MWth

In the case of biomass in particular, it is advisable to gradually integrate it into the system (30 MW every two / three years), along with the development of the supply chain so that the final power (95 MW) is available in the medium term (2030).

Funding options

The analysis showed that the economic sustainability of green alternatives, despite the high capital cost, is possible, but it should be noted that the overall benefits taking into account socio-economic factors and especially new jobs –which for the proposed solution re estimated at around 4,000 (construction and operation phases)– are particularly important. 

In any case, funding in the form of grants or through other support systems is recommended to reduce the potential risk. A relevant state aid program aimed at financially supporting investments in district heating systems based on RES was recently approved in Romania in accordance with the European Commission rules on EU state aid. The main objective of this 150 million Euros project will be to support the construction or upgrade of district heating systems, in line with the objectives of the Green Deal. The European Green Deal investment plan allows Member States to use additional flexibility in the maximum amount of support that can be provided for district heating production. The planned support will be in the form of direct grants financed by the EU Structural Funds managed by Romania. It is therefore appropriate to investigate the utilisation of similar financial instruments in the case of district heating systems in Greece.

Reforms - Recommendations

• Immediate priority for green district heating investments in lignite areas as a medium-term option in the context of the redevelopment of the Just Transition Development Plan 
• Search for financing mechanisms for relevant green district heating investments through EU Structural Funds or other sources 
• Development of a sustainable spatial planning policy regarding the proposed technologies (with possible provision for facilities within the lignite areas in the context of land restoration) but also regarding the biomass supply chain 
• Review and update the standards for the proposed RES-DH technologies to ensure the implementation of best practices
• Reforms in order to enhance biomass production and disposal. In particular:

Introduction of incentives to encourage agroforestry through the promotion of social economy organisations (cooperatives, SCE, etc.) for the rapid development of the biomass fuel supply chain 

- The establishment of a framework for the pricing of biomass products and the protection of suppliers 

-Sustainable forest management and sustainable use of biomass by SRC.

The complete delignification of the system is now visible as it accelerates perhaps faster than predicted. Natural gas is expected to contribute as a transitional fuel, but in any case and in relation to district heating, the choice of solutions with increased participation of RES should be seriously considered, configured and launched as the most compatible with the general decarbonisation of the energy mix strategy.