Optimal Technology Choice and Investment Timing: A Stochastic Model of Industrial Cogeneration vs. Heat-Only Production

In this paper we develop an economic model that explains the decision-making problem under uncertainty of an industrial firm that wants to invest in a process technology. More specifically, the decision is between making an irreversible investment in a combined heat-and-power production (cogeneration) system, or to invest in a conventional heat-only generation system (steam boiler) and to purchase all electricity from the grid. In our model we include the main economic and technical variables of the investment decision process. We also account for the risk and uncertainty inherent in volatile energy prices that can greatly affect the valuation of the investment project. The dynamic stochastic model presented allows us to simultaneously determine the optimal technology choice and investment timing. We apply the theoretical model and illustrate our main findings with a numerical example that is based on realistic cost values for industrial oil- or gas-fired cogeneration and heat-only generation in Switzerland. We also briefly discuss expected effects of a CO2 tax on the investment decision.Cogeneration, Irreversible investment, Risk, Uncertainty, Real options

Thermoeconomic cost allocation in simple trigeneration systems including thermal energy storage

The present paper tackles the issue of allocating economic costs in trigeneration systems including thermal energy storage (TES) for buildings of the residential-commercial sector. As energy systems become more and more complex (multiple resources, products and technologies; joint production; TES) the issue of the appropriate way to allocate the cost of the resources consumed arises. This is important because the way in which allocation is made directly affects the prices of the products obtained and, thus, the consumers' behavior. Thermoeconomics has been used to explain the cost formation process in complex energy systems. In this paper, two issues in thermoeconomics that have not been deeply studied are addressed: (i) the joint production of energy services in dynamic energy systems; and (ii) the incorporation of TES. A thermoeconomic analysis of a simple trigeneration system including TES was performed and the hourly unit costs of the internal flows and final products were obtained for a day of the year. The cost allocation proposal considered that the cogenerated products must share the benefits of the joint production. Regarding the TES, the interconnection between charging and discharging periods was explored, allowing the discharged energy flow to be traced back to its production period

Role of polygeneration in sustainable energy system development : Challenges and opportunities from optimization viewpoints

A sustainable energy system can be treated as a development of the distributed generation concept. It meets energy demands locally from renewable energy or/and high-efficiency polygeneration production technologies, and is characterized by energy and cost efficiency, reliability, and environmental-friendliness.Distributed energy systems typically use renewable energy resources to supply all energy demands, such as heat, cooling, and electric power in an integrated way. However, it seems that too much emphasis is placed on power and associated renewable energy-based power technologies for dealing with sustainability issues in public discussion and the research community. Often, equally important thermal energy (heat and cooling) and polygeneration are ignored. Polygeneration is an energy- efficient technology for generating simultaneously heat and power as well as other energy products in a single integrated process. Energy efficiency contributes significantly to CO2 emission reduction. This paper discusses the role of polygeneration in a distributed energy system and the contributions of polygeneration to the development of sustainable energy systems. The paper also stresses that efficient decision support tools for sustainable polygeneration systems are important to achieve sustainability. First, the joint characteristic of a polygeneration plant that defines the dependency between different energy products is reviewed. Then, typical methods for dealing with polygeneration systems are reviewed. The review attempts to highlight the complexity of polygeneration systems and potential of polygeneration systems to adjust output of different energy products. Next, the challenges of sustainable polygeneration energy systems are discussed. Then some practices for operating polygeneration plants are discussed.Peer reviewe

Steam-Electric Cogeneration in Industry: An Economic and Thermodynamic Analysis

The purpose of this thesis is to apply the theoretical frameworks and statistical techniques of economic analysis to an area which has been viewed primarily from a technical, engineering perspective: the simultaneous generation of steam and electricity by industry firms. It improves upon previous studies in two ways. First, it makes an empirical assessment of the importance of market forces in industrial cogeneration decisions. Second, both components of cogeneration behavior -- investment and utilization -- are examined

Hydrogen and fuel cell technologies for heating: A review

The debate on low-carbon heat in Europe has become focused on a narrow range of technological options and has largely neglected hydrogen and fuel cell technologies, despite these receiving strong support towards commercialisation in Asia. This review examines the potential benefits of these technologies across different markets, particularly the current state of development and performance of fuel cell micro-CHP. Fuel cells offer some important benefits over other low-carbon heating technologies, and steady cost reductions through innovation are bringing fuel cells close to commercialisation in several countries. Moreover, fuel cells offer wider energy system benefits for high-latitude countries with peak electricity demands in winter. Hydrogen is a zero-carbon alternative to natural gas, which could be particularly valuable for those countries with extensive natural gas distribution networks, but many national energy system models examine neither hydrogen nor fuel cells for heating. There is a need to include hydrogen and fuel cell heating technologies in future scenario analyses, and for policymakers to take into account the full value of the potential contribution of hydrogen and fuel cells to low-carbon energy systems

Best practices and informal guidance on how to implement the Comprehensive Assessment at Member State level

This report details a methodology for performing a cost-benefit analysis (CBA) identifying the most resource and cost-efficient solutions to meet heating and cooling demands for a given country or region in accordance with Article 14(3) and taking in account Part 1 of Annex IX of the of the Energy Efficiency Directive (EED) (EC, 2012). The methodology includes guidelines how to: (1) collect data about energy consumption and supply points needed to construct heat maps, (2) how to identify system boundaries, (3) assess the technical potential that can be satisfied by efficient technical solutions, including high efficiency cogeneration, micro-cogeneration and efficient district-heating and cooling. (4) define baseline and alternative scenarios, including quantifying the cost and benefits of both scenarios. This comprises for example the economic value of other effects is estimated, mainly, the changes in socio-economic and environmental factors. Cost-Benefit Analyses integrate all costs and benefits over a long period are integrated in a unique estimate, the Net Present Value, which provides information about the net change of welfare derived from the implementation of the different heating and cooling scenarios. In the end, the cost-benefit analyses shall provide information about which are the most cost-efficient solutions to meet the heating and cooling needs of a country or a region.JRC.F.6-Energy Technology Policy Outloo