New Possibilities with Old Technique : a Feasibility Study of Absorption Cooling in Örebro District Cooling Network

NEW POSSIBILITIES WITH OLD TECHNIQUE

– a Feasibility Study of Absorption Cooling in Örebro District Cooling Network

Yvette Jönsson & Erik Magnusson

2007/2008

Division of Energy Systems

Master Thesis

Department of Management and Engineering

E.ON Värme in Örebro produces electricity and delivers heat and cooling to customers in the region. The Åby Plant operates as a combined heat and power (CHP) plant and runs mostly on different biofuels. A new boiler and turbine is projected for the plant and will start operating fully during year 2012. This creates new possibilities for the existing small scale district cooling production. The number of cooling subscribers is today low and the power output is approximately 7.7 MW but has a great potential of growing in the future. Higher electricity prices, due to the deregulated electricity market and growing environmental concerns motivate the use of district cooling. Cooling production at E.ON Värme in Örebro today comes from modified heat pumps with low efficiency and free cooling. The idea is to replace the heat pumps with either new compression cooling machines, absorption cooling machines (ACM) or a mixture of both. This thesis analyzes possible benefits with the use of heat driven cooling i.e. absorption cooling compared with conventional compression cooling.

Excess heat from electricity generation in CHP plants is often a problem during the warm period of the year. Normally most of the heat is distributed to industries and households for heating. However, during the summer, the demand for district heating is low which constrain electricity production. The absorption technique utilizes heat as fuel and increases electricity generation during warm periods. This together with a decrease in electricity consumption has positive effects on the environment since it reduces electricity produced in plants controlling margin production. Those plants are most often coal condense plants with high emissions of fossil CO2.

Most scientists believe that CO2 emissions from human activities are the main cause to the

increasing greenhouse effect. The importance of reducing CO2 emissions is therefore high and

is one of the motives for district cooling based on ACM that replaces small local electricity driven chillers. Since the Åby plant uses mostly biofuels the contribution of fossil CO2 is low.

ACM utilizes heat as fuel, therefore the positive effects related to ACM are fairly obvious when the electricity price and the demand for cooling are high. To analyze and optimize the energy system in Örebro, a model was created in the program MODEST, which is software developed at Linköping Institute of Technology. Optimizations with different cooling demands and electricity prices have been made. The cooling production mix is split up in two scenarios, a visionary scenario where no restrictions are considered and a restricted scenario with restricted ACM capacity. The results have been gathered and analyzed and supports the common statements about absorption cooling.

A simulation of the visionary scenario with unrestricted ACM capacity together with the highest cooling demand (20 MW) and the highest electricity prices (European prices), gave an annual decrease in global CO2 emissions of 9 400 tonnes compared to a scenario with only

compression cooling machines. Furthermore, the system running cost was almost 9 MSEK lower on an annual basis. In the restricted scenario, a pay-off analysis shows that the additional costs due to ACM is covered by the lower system cost in less than 3 years when the electricity prices are as forecasted for 2012-2015. All the simulations where absorption cooling was a part of the energy system gave positive results both from an economical and environmental point of view.

In September 2007, the work with this analysis began and a slow question flow started concerning energy systems, technical aspects about energy production and many other energy matters. Many people have been involved in the task answering our questions, some of those kind people are mentioned below.

We are grateful to Professor Björn Karlsson at the Division of Energy Systems at Linköping Institute of Technology for initiating the contact with Per Alm at E.ON Värme in Örebro. Per has introduced us to the organization of E.ON in an excellent way and has also been successful in keeping our work on the right track and encouraging us during our Friday meetings. Mats Häll and Kemal Smailagic have patiently assisted with their expertise concerning technical aspects during the work. Mats is one of our advisers and has given us feedback and support throughout the work. Kjell Nilsson and Karl-Åke Eliasson have uncurled the confusing terms concerning economics and taxes, which we appreciate. Kjell is also one of our advisers and has been helpful throughout the work. He has also given us an exciting tour at the Åby Plant. We appreciate the time spent by busy employees on answering questions and gathering data for us. Beside work aspects, we have been very well treated by the personnel at E.ON Värme in Örebro, it has been a pleasure sipping coffee with you all! The opponents, Fredrik Borg and Krister Stralström, have given us valuable comments and advise regarding facts and the presentation of our work, which have been helpful. We would also like to thank our supervisor at Linköping Institute of Technology, Louise Trygg, for guidance, encouragement and ideas throughout the work. Kristina Difs and Alemayehu Gebremedhin at the division of Energy Systems at Linköping Institute of Technology have been of great help when working with MODEST.

District cooling is under strong development and many investigations concerning different cooling techniques have been made by other students, companies and scientists. The knowledge gained from these investigations has been applied on the energy system in Örebro after the changes of the plant that will be finished in 2012, which makes this piece of work original. Although this analysis is based on the energy system in Örebro, excess heat is a common problem along with a growing cooling demand, which makes this work applicable on many other energy systems with similar conditions.

Örebro, January 2008

ACM Absorption Cooling Machine CCM Compression Cooling Machine CHP Combined Heat and Power DC District Cooling

DE Delivered Energy

DH District Heating

DL Double Lift

DS Double Step

EEX European Energy Exchange

MODEST Model for Optimization of Dynamic Energy Systems with Time dependent components and boundary conditions

MW Megawatt

MWh Megawatt Hour

NP Nord Pool

SEK Swedish Crowns (currency)

SP Subscribed Power

ST Single Step

TWh Terawatt Hour

1 INTRODUCTION ...1 1.1 Background...1 1.2 Purpose ...2 1.3 Question at Issue...2 1.4 Limitations...2 1.5 Method...3 2 LITERATURE STUDY ...5

2.1 E.ON Värme Örebro...5

2.2 Combined Heat and Power – CHP ...9

2.3 District Cooling ...9

2.4 Cooling Techniques ...11

2.5 Electricity Market and Margin Production ...19

2.6 Environmental Issues...22

2.7 Laws and Means of Control...24

3 METHOD ...28

3.1 Gathering of Facts ...28

3.2 Gathering of Data ...28

3.3 Working with MODEST ...29

3.4 Scenarios Modelled ...29

3.5 Margin Electricity & System Perspective ...30

3.6 Contact with ACM Manufacturers ...30

3.7 Sensitivity Analysis ...30

3.8 Limitations...31

3.9 Pay-off Analysis of Restricted Scenario...31

3.10 Method Criticism...31

4 MODEST MODELLING...32

4.1 MODEST and CPLEX ...32

4.2 Model of Örebro Energy System...33

4.3 Parameters Varied in Input ...35

4.4 Fuel Price ...40

5 RESULTS ...44

5.1 Suggested Cooling Mix (with ACM) ...44

5.2 Comparison – Results with and without ACM...45

5.3 Fuel Mix ...48

5.4 Gathering of Results ...49

5.5 Results and Pay-off with E.ON Prognosis...50

6 SENSITIVITY ANALYSIS ...54

6.1 SWOT Analysis ...54

6.2 Insecurity Factors ...57

7 CONCLUSIONS ...60

7.1 Answer to Purpose...60

7.2 Conclusions about Question at Issues ...60

7.3 Other conclusions ...62

7.4 Conclusions about MODEST ...63

8 DISCUSSION...64

8.1 Future Customers...64

8.2 Margin Production ...64

8.3 ACM Compared with CCM ...64

9 FUTURE STUDIES...68

9.1 Accumulator Tanks...68

9.2 ACM Operating Time...69

9.3 Industrial Symbiosis ...69

9.4 Using Natural Water instead of Cooling Towers ...69

10 BIBLIOGRAPHY...70

10.1 Internet Sources ...70

10.2 Printed Sources ...73

10.3 Personal Contacts ...75

1

Introduction

This chapter gives an introduction to the issue of this thesis. The background describes why the issue is interesting to investigate followed by the main purpose of the analysis. Further on in this section a brief explanation of the limitations made and the methods used are given.

1.1

Background

When seen from a global perspective, the cooling demand is at present larger than the heating demand. Modern commercial and residential buildings are well-insulated and waste heat from human activities, use of computers and other electrical equipment sometimes causes discomfort. To solve the problem, cooling needs to be added to the buildings. However, cooling to prevent discomfort is not the only kind of cooling needed; there is also a demand for cooling in many industrial processes. Energy companies have realized that cooling can be a profitable market, especially when combined with their present energy system. Besides district heating, subscribers are in a few years expected to have a demand for cooling. If energy companies only delivers heating, customers who have an upcoming demand for cooling might choose other solutions such as local climate devices that can deliver both heating and cooling. This might yield loss of subscribers for energy companies like E.ON. Another developing force is the deregulation of the European electricity market, which was completed in 2004. When the deregulation process is fully developed the prices of electricity will probably be at the same level for all countries involved. Therefore electricity prices in Sweden will rise and close in on prices on the continent, which will cause a reduction of electricity use for heating and cooling. E.ON Värme in Örebro produces electricity, district heating and district cooling and is highly involved in this development.

A common way of producing chilled water for pipeline distribution, i.e. district cooling, is by using compression cooling machines and free cooling. A problem with the compression operation is the relatively large electricity consumption. Since electricity prices most likely will rise in Sweden during the next few years, it will be essential for producers and users to replace electricity consuming techniques, which increases the demand for other techniques. Therefore absorption cooling has attracted attention since the use of electricity is many times lower per produced MWh compared with the techniques mentioned above.

The absorption technique is a good option since it uses heat as fuel instead of electricity, which makes it beneficial to combine with combined heat and power plants, i.e. CHP plants. The reason is that an absorption machine utilizes waste heat from a CHP plant, which is a by-product from electricity generation. This is beneficial especially during warm periods when excess heat is a problem to the power companies, since absorption cooling machines makes it possible to generate electricity at a higher level. During times with high electricity prices, it can be profitable to run a CHP as a conventional power plant, which means to remove heat in cooling towers. However, that is never a good option from a resource asset point of view since the utilization of the fuel is lower. If a low electricity price together with a small removal for excess heat in CHP plants, electricity generation needs to be reduced to keep the business profitable. This might not be necessary if an absorption cooling machine is introduced in the system.

Most scientists agree on the climate changes, that increasing temperatures are caused by human activities by releasing greenhouse gases into the atmosphere. CO2 is a greenhouse gas,

which controls temperature on earth by absorbing and reflecting radiation from the sun. A certain amount of greenhouse gases in the atmosphere is necessary for life, as we know it. However, human activities contribute to levels far beyond of what is normal. This disturbs the heat balance and causes an increase of the average temperature on earth. A higher average temperature means rougher weather; floods, growing deserts, animal species obliterated etcetera. Therefore CO2 emissions have to be reduced.

When running biofuelled CHP plants the net output of global CO2 emissions from fossil fuel

plants is reduced. The CO2 reduction comes from replacing capacity in coal condense plants

that are used to control the margin electricity production today. When one additional MWh of electricity is produced in e.g. the Åby Plant in Örebro, one MWh in a coal condense plant in e.g. Germany will not have to be produced, if the energy market is fully deregulated and free from obstacles. That means less CO2 from fossil fuels will be released into the atmosphere.

1.2

Purpose

The purpose is to determine what environmental (in terms of CO2 emissions) and economical

effects absorption cooling has compared to compression cooling in the Örebro energy system.

1.3

Question at Issue

The purpose is divided into four sub-questions.

- What type of cooling technique is most profitable from an economic point of view? - Does ACM cause changes in CO2 emissions?

- Does a higher cooling demand affect electricity production and consumption when ACM is included in the system?

- Do changes in electricity price affect the conditions for ACM and CCM?

1.4

Limitations

Cooling, heating and electricity production are closely related, therefore it is hard to separate them completely when analyzing a commercial energy system as E.ON Värme in Örebro, which produces all three types of energies. Cooling production is at focus, however the effects on electricity production due to absorption cooling is also an important issue.

Three different ways of producing chilled water is taken into account, even if other techniques might exist or be under development.

Limitations and assumptions made during modelling are described in section 4.2.1 Model – Design and Limitations.

1.5

Method

A brief explanation of the methods used during this project is given in this section. To better understand the choice of methods and what results they have led to, the methods are presented throughout the thesis and in chapter 3.

A deep study of the energy system in Örebro region has been made. A program called MODEST is a good tool for studying energy systems, since it is a program for optimization of local and national energy systems, and has been used also during this work. An old model of the energy system in the Örebro region was available at the start, but several changes have been made to complete the model for this analysis.

To get enough knowledge about the subject, a literature study has been done. The study involved both internal and external literature. The internal literature involves E.ON’s own drawings, prognoses, earlier projects, project plans etcetera and when explaining how different kinds of cooling techniques, laws, regulations etcetera works, external literature has been useful.

To make sure the right track is kept during the work, continuous discussions with supervisors and personnel at E.ON and Linköping University has been held.

2

Literature Study

The literature study is important to solve the mission, since a deep knowledge and solid up to date facts are crucial to convince readers of the author’s analysis and conclusions. This section presents a concise part of the literature that has been studied to complete the analysis. First, a short description about E.ON Värme in Örebro is given followed by an explanation about the combined heat and power process, how district cooling works and the different techniques for cooling production that are of interest in this thesis. A description about margin electricity production is then followed by some facts about environmental issues and different means of control to regulate energy conversion. Readers already familiar with this can leave this section out and directly move on to the next chapter, Method.

2.1

E.ON Värme Örebro

In this section a brief explanation about the company E.ON Värme in Örebro is given. The energy system in the Örebro region is also explained. All fact has been collected internally at E.ON Värme in Örebro from competent employees and written material.

2.1.1 History

In June 1955 a decision on establishment of a combined heat and power plant was taken in Örebro. The first step was Åby district heating central, which was finished in the late 1950’s. In 1960 the main pipe for district heating from Åby to the central part of Örebro was completed. Åby district-heating central was later converted into a combined heat and power plant and was finished in 1964. The Åby Plant was owned by municipal Örebro energi until 1997, when it was sold to E.ON (at the time Sydkraft). [Örebro city archive, 2006]

Figure 1: Åby CHP plant. Source: E.ON Intranet, 2007.

At the turn of year 1999/2000 the small towns of Hallsberg and Kumla was connected to the Örebro network, via the so-called HÖK pipeline. The HÖK pipeline is bi-directional which means that water can flow in both directions. [E.ON, 2007a]

In 2003 an exhaust gas condenser was installed and connected to steam boiler 5. The purpose was to increase the efficiency and to reduce emissions of carbon dioxide and to utilize fuel resources more efficient. Åby combined heat and power plant in Örebro is one of E.ON’s four cooling producers in Sweden [E.ON, 2007a]. In 2002 the first district cooling delivery was carried out in Örebro. [Bergljung, 2007]

Today, the Åby Plant is one of Sweden’s largest biofuel-fired power plants and during peak season a truckload of biofuel is burnt in 20-30 minutes in steam boiler 5. The plant is often recognised by Bengt Lindström’s art work on an old oil reservoir and on the plant’s western wall, which can be seen in Figure 1. [E.ON, 2007a]

Energy amounts distributed during 2006 to the customers were 1 246.3 GWh heat, 11.4 GWh cooling and 317.4 GWh electricity. [E.ON Annual Environment Report, 2006]

2.1.2 Energy System in the Örebro Region

The E.ON plant in Örebro is a co generating plant, which means simultaneous production of electric power and heat. A cogeneration plant is usually referred to as a CHP plant, combined heat and power plant [Cogen Europe, 2007]. There is also production of cooling at the plant in Örebro. Since the cooling today is generated by modified heat pumps driven by electricity, the system does not qualify as a trigenerating plant. Trigeneration means simultaneous production of electrical power, heat and cooling [TriGeMed, 2007]. E.ON Värme in Örebro delivers electricity to the Nordic market place for electricity, Nord Pool, district heating to commercial and residential buildings and district cooling to a few commercial customers in the surroundings. [Häll, 2007]

District Heating (DH)

The Åby Plant contains ten boilers of three different kinds; five steam boilers, three electrical boilers and two hot water boilers. 95 % of the fuels used at the plant are biofuels, containing pellet, peat and wood. The remainder 5 % is oil. There is also a recently installed exhaust gas condenser, which extracts heat from the exhaust gases and transfers it into the district heating system. [E.ON, 2007a]

In addition to the boilers, accumulator tanks serve as spare capacity for district heating. The accumulator tanks are fairly small and have a capacity of up to one hour of peak load demand. Two easily operated heat pumps are also included in the district heating network and generate heat from purificated wastewater. The heat pumps operate to control sudden changes of the heating demand (even though they are primarily used to produce chilled water for the DC-network). Water for the heat pumps is pumped through a pipeline from the waste water purification plant in Skebäck and is utilized as a heat source. As a back up and top load system, boilers and accumulators are situated in the small towns of Hallsberg and Kumla. The boilers are all oil fired and are rarely used. [Häll, 2007]

The district-heating network delivers heat to more than 30 000 users in the region of the HÖK-network. The volume of the current network is about 35 000 m3 and the length is approximately 350 km. SAKAB is a refuse incineration plant about 20 km south of the Åby Plant and contributes to the district heating network. SAKAB disposes different types of toxic waste and waste from households and industries. During summer, heat from SAKAB constitutes coverage of the base heat load in the HÖK-network. If there is a heat surplus, heat can be cooled into the air with a waste heat cooler at the Åby Plant. The small towns of Hallsberg and Kumla are also connected to the HÖK-network [Alm, 2007] & [Häll, 2007]. An illustration of the DC and DH network in Örebro can be seen in Appendix 1.

District Cooling (DC)

District cooling is partly produced with modified heat pumps, which are the same machines that are used for heating of the DH water. Purificated wastewater from Skebäck is the energy carrier and distributed in the DC network after passing the heat pumps. Free cooling covers the remaining part of the DC production. Water from the nearby river Svartån is used from November to March when the outside temperature is below 8°C. The outgoing temperature of the distributed cold water is approximately 6°C. [Alm, 2007] & [Häll, 2007]

In November 2007 three customers subscribed cooling from the DC network in Örebro. The customers are Mondi, which manufactures packaging with barrier coating, the University hospital and the Department of County Council (Landstingskansliet). The property owner Asplunds has recently contracted a subscription for cooling but there have not been any deliverances yet [Alm, 2007]. Conventum is an exhibition hall under construction situated in the central part of Örebro is and will probably become a customer in a near future. Other potential customers are the department stores in Aspholmen and shops and offices in downtown Örebro [Bergman, 2007]. A consultant from ÅF has done a market survey ‘Investigation about DC in Örebro’ (2007) about potential DC customers in the city centre. A map over potential customers in the city centre can be seen in Appendix 2.

Today, the subscribed power of cooling is about 7.7 MW, an amount that has a great potential of growing [Smailagic, 2007]. In Table 1 and Table 2, current and future demand is gathered, with data originating from discussions with Bergman (2007) and the report by ÅF ‘Investigation about DC in Örebro’. SP and DE are abbreviations of ‘Subscribed Power’ and ‘Delivered Energy’. If customers in the city centre, Aspholmen and Örebro University are connected to the DC network, the subscribed power might be as high as 26 MW in a foreseeable future, with delivery of approximately 30 GWh cooling on an annual basis. However, according to Häll (2007) the maximum DC output is 20 MW due to piping capacity at the Åby Plant.

Table 1: Overview of current DC customers.

Customer 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 SP [MW] 1.8 1.8 1.8 1.8 1.8 1.8 Mondi DC [GWh] 2.8 2.8 3.5 3.6 3.6 3.6 3.6 3.6 3.6 3.6 SP [MW] 5.5 5.5 5.5 6 6.5 7 University Hospital DC [GWh] 7.7 7 6.9 7.1 7.8 7.8 7.8 8.5 9.2 9.9 SP [MW] 0.35 0.35 0.35 0.35 0.35 0.35 County Council DC [GWh] 0.06 0.09 0.07 0.04 0.05 0.05 0.05 0.05 0.05 0.05 SP [MW] 7.7 7.7 7.7 8.2 8.7 9.2 Total DC [GWh] 10.6 9.9 10.5 10.7 11.5 11.5 11.5 12.2 12.9 13.6

Table 2: Overview of potential DC customers.

Örebro

University Aspholmen City Area 1 City Area 2 City Area 3 Total

SP [MW] 2 5 6.9 1.6 1.3 16.8

DC [GWh] 2.4 5 6.9 1.6 1.3 17.2

In suburban Marieberg a shopping mall and a large number of department stores are situated. At the time of writing (January 2008) a cooling central with compression chillers is being built to provide the centre with district cooling. According to a consultant from ÅF, it would be too expensive to connect Marieberg to the DC network in Örebro due to the low demand, the distance to the plant and other technical difficulties [Investigation Marieberg, 2006]. Therefore, Marieberg will not be considered in this analysis.

Electricity

There are three electricity generators at the Åby Plant (G1, G2 and G3), which are all running on steam from steam boilers ÅP1-ÅP5. Figure 2 is a log of electricity production during 2006 in the largest of the generators, G3 (106 MW), which is connected to steam boiler 4 and 5. As can be seen in the chart, electricity production has seasonal variations. During springtime, the electricity production decreases and is down for more than three months during summer.

Figure 2: Electricity production in G3 during 2006. Source: E.ON Intranet, 2007.

Due to time dependent limitations for licenses of electricity certificates, ÅP5 will in 2011 expire as a certificate-receiving boiler [Häll, 2007]. In order to keep receiving certificates E.ON has decided to invest in a new boiler, ÅP 6, which will be fuelled by mixed waste material. In relation to the new boiler, it is also necessary with a new turbine, G4, in order to fulfil the requirements for assignment of certificates [Alm, 2007].

2.2

Combined Heat and Power – CHP

A combined heat and power plant generates electrical power and heat simultaneously, also known as cogeneration [Sustainability Northwest, 2007]. Many different fuels can be used, such as oil, coal, peat, natural gas, wood and other biofuels. Combined heat and power, CHP, is a more efficient way of using natural resources as fuel. A CHP plant utilizes the waste heat gathered from electricity production as district heating whereas in a condense plant the waste heat is cooled in cooling towers or in water accumulations [Swedish Energy, 2007a]. A condense plant, which produce marginal electricity, has a similar thermal process and has the same combustion technique as a CHP. In a CHP plant ~90 % of the input energy is utilized while ~10 % are thermal losses. A condense plant only utilizes ~40 % of the input energy. Only six percent of the electricity generated in Sweden comes from CHP plants like the Åby Plant [Swedish District Heating Association, 2007a]. A simple illustration of a CHP is given in Figure 3.

Figure 3: Principle sketch of a CHP plant. Source: Modified from Olsen, Frank A, 2007. One condition for running a CHP plant is enough removal of the heat. If heat removal from the cooling process after the turbine is insufficient, it will affect the electricity production and the generated power will go down. The most common heat sink is a district heating system, which delivers heat to households, industries and commercial buildings in the plant’s surroundings. [Sustainability Northwest, 2007]

When the outside temperature is high, waste heat in a CHP plant is most often a problem. Heat driven cooling can increase the heat removal in a CHP plant during summer when the demand for cooling is high and the demand for heating is low. Hence, this is an opportunity for electricity producers to keep electricity generation in CHP plants on a higher level, even during warm periods. That makes the combination of CHP and heat driven cooling machines especially beneficial. [Swedish District Heating Association, 2007b]

2.3

District Cooling

The first commercial district cooling network was put into operation in Hartford, USA, in 1961. In Europe, France was the first country to introduce DC in 1967. 25 years later, in 1992, the first DC production in Sweden was initiated in the city of Västerås. Many district heating producers had invested in heat pumps with high capacity during the 80’s and saw the possibility of increasing energy efficiency if also utilizing the cold side of the heat pumps. [Swedish District Heating Association, 2007c]

Today, in a global perspective, more energy is spent on producing cooling than heating. This has made the development around DC to grow rapidly [Swedish District Heating Association, 2007d]. The decision on liquidation of the most common cooling mediums e.g. different types of Freon (which decomposes the ozone layer) has contributed to the rapid development. Also, more heat generation in offices and a higher demand for indoor comfort has affected the development. Figure 4 shows a clear increase of delivered district cooling in Sweden during 1993-2005. The statistics is based only on commercial district cooling where customer and supplier are different companies [Energy situation, 2006].

Figure 4: Produced district cooling in Sweden during 1993-2005. Source: Energy situation 2006.

District cooling follows the same principle as district heating. Water is cooled centrally and distributed via pipelines. The temperature on the outgoing water (from the cooling central) is ~6°C, and the incoming return water is ~16°C. DC is produced in about 30 energy systems in Sweden and almost every producer has plans for expansion. With a central production of cooling the opportunities to utilize energy in an efficient way improves than if many small machines are used to produce cooling. There are different ways to produce cooling, the most common techniques are mentioned below (and are considered in this thesis)

- compression cooling - absorption cooling - free cooling

A mixture of different techniques is often combined to provide the best solution with respect to local conditions. [Swedish District Heating Association, 2007d]

District cooling is mainly used for air conditioning in offices and shops, but is also used in industrial processes. DC systems are often smaller than DH systems, and are generally concentrated to city centres. However, DC is normally produced by DH companies and the two systems are often integrated with each other. [Energy situation 2003a]

2.4

Cooling Techniques

Below, the three different cooling techniques considered in this thesis are explained. 2.4.1 Compression Cooling

The second law of thermodynamics states that thermal energy flows in the direction where the quantity and quality of energy is decreasing. In other words, heat cannot spontaneously flow from a low temperature to a warmer location. For example, if a pot of boiling water is placed in a room with room temperature, the water emits energy to the room and eventually cools down to the surrounding temperature. The opposite, that the water absorbs all the energy in a normally tempered room and starts boiling, never occurs. [Turner et al, 2001]

However, there are many applications where a given volume is supposed to be heated, or cooled, despite the surrounding temperature. Examples of this are residential houses, which need heating in the winter or an office with computers, which needs cooling in the summer. In order to reverse the heat flow, i.e. to move heat from a cold to a warm section, the heat pump technique is needed. A compression cooling machine is actually a heat pump but instead of utilizing the warm side (the condenser) the cold side (the evaporator) is utilized. [Turner et al, 2001]

The most common working cycle for refrigerators, air conditioning systems and heat pumps is the vapour-compression refrigeration cycle. According to Turner et al (2001) the different steps in the working cycle are as follows and are illustrated in Figure 5.

- The working medium (refrigerant) enters the compressor as saturated vapour and is compressed isentropically (constant entropy) to superheated vapour. The temperature of the refrigerant rises to well above the surrounding temperature.

- The refrigerant enters the condenser and releases heat to the surroundings. The state of the refrigerant after the condenser is saturated liquid, still with a temperature above the surrounding temperature.

- When passing the expansion valve, the temperature of the refrigerant drops below the temperature of the surroundings due to the pressure drop.

- The refrigerant enters the evaporator as a low-quality saturated mixture and evaporates completely by absorbing heat from the cold reservoir (space to be refrigerated). The refrigerant leaves the evaporator as saturated vapour and re-enters the compressor. The cycle is now completed.

The energy balance and the efficiency for the compression cooling machine is as follows C H Q Q W • • − = W Q COP_cooling C • = • Q= heat flow [kJ/s] W = electrical input [kW] [Turner et al, 2001]

The corresponding Temperature-Entropy (T-s) diagram is given in Figure 6 and reflects the heat and power flows concerning the cycle. The diagram also depicts the two pressure levels, phigh and plow, which are the working pressures for the cycle. [Nortwestern University, 2007]

Figure 6: Temperature-Entropy (T-s) diagram for a vapour-compression refrigeration cycle. Source: Modified from Northwestern University, 2007.

There are many different heat pump applications. They usually differ from each other in terms of heat source and heat sink. The most common heat source is the outside air [Energy Right, 2007]. As well as air source, there are also ground source and water source heat pumps. The sink can be almost anything that needs heating. If the heat pump is adjusted for cooling instead of heating, the source and the sink simply switch names. [Turner et al, 2001]

2.4.2 Absorption Cooling

The absorption cooling technique is an old technology; the first copyright was taken in the 19th century, but has now been considered in many energy systems. The absorption cooling machine produces cooling with heat (and a very small amount of electricity) as fuel. In an energy system based on CHP, the efficiency of the system decreases during hot periods when the excess heat is hard to utilize. Periods when the cooling demand is at its peak coincide with the periods with largest excess of heat. When introducing the absorption technique into energy systems based on CHP the fuel utilization of the whole system increases since the absorption technique uses waste heat as fuel. [Swedish District Heating Association, 2007g] The most common absorption cycle is illustrated in Figure 7 and is called single step machine, ST. The ST works in two different pressure levels, low pressure in the absorber and

evaporator and high pressure in the generator and condenser [Swedish District Heating Association, 2007e]. The absorption process utilizes, as the heat pump, a low-pressure refrigerant but is more complex than the heat pump cycle. The main difference is that the absorber and the generator replace the compressor in the heat pump and that the absorption system utilizes two different fluids, one absorbent and one refrigerant. Lithium bromide is common as absorbent, and water as refrigerant. The absorbent and refrigerant is separated and reunited during one cycle. [Swedish District Heating Association, 2007f]

Figure 7: Schematic illustration of absorption cooling technique. Source: Modified from Swedish District Heating Association, 2007f.

- Heat is the driving energy for the absorption cooling process and is added in the generator. By adding heat, the refrigerant vaporizes and separates from the absorbent. Thus, the generator serves as a heat exchanger, which transfers heat from e.g. a district heating system or steam from a production process to the refrigerant absorber mixture. - The absorbent passes a heat exchanger on its way to the absorber and emits heat to the

mixed working solution. The purpose is to minimize additional heat in the absorber (and preheat the mixed solution). A typical absorber temperature is 35-40°C which is higher than the temperature in the evaporator. Absorption heat is released because of the temperature difference between evaporator and absorber, and has to be cooled. The maximum temperature lift between absorber and evaporator depends on the crystallisation limit. If a higher lift is desired, a double lift (DL) machine is required. - In the absorber, the refrigerant from the evaporator absorbs at low pressure into the

absorbent. When the refrigerant is fully absorbed, the mixed solution is pumped into the generator via a heat exchanger. The absorbent and the refrigerant are now reunited and the cycle is completed.

absorber condenser generator evaporator Q Q Q Q • • • • + = +

[Swedish District Heating Association, 2007f]

The energy efficiency possible to achieve is highly important when choosing an ACM. When calculating the energy efficiency the formula below can be used. This relation is also called Coefficient of Performance, COP. [Swedish District Heating Association, 2007f]

pump generator evaporator cooling W Q Q COP + = _• • • Q= heat flow [kJ/s] W = electrical input [kW]

Conventional ACM requires a high temperature, 120˚C for a ST machine and 170˚C for a double step machine, DS. These machines can achieve a COP of 0.7 and 1.2 respectively and are most appropriate to apply in connection with a production process with access to high tempered waste heat such as after gas turbines or in connection with process steam. A downside with the conventional machines is that the vaporization process in the generator is almost an isothermal process, which means that the cooling of the driving energy is low. This implicates that the return temperature from the generator is higher than desired [Swedish District Heating Association, 2007f]. The difference between DS and ST is that the DS works in three different pressure levels and a high pressure generator and a high pressure condenser is added which is illustrated in Figure 8. Below the figure an explanation of the process is given. For the ST machine the diagram looks the same, except that the high pressure condenser and generator are not included.

Figure 8: Schematic picture of the Double Step machine in a pressure (log) – temperature diagram. Source: Modified from Swedish District Heating Association, 2007e.

Driving heat is added in the high pressure generator while heat is removed in the low pressure condenser and in the absorber. Clear water (refrigerant) is in the evaporator and the condensers and the grey arrows represent water vapour. The circuit between the absorber and the generators is a mixture of refrigerant and absorbent. Two heat exchangers operate in that circuit and transfer heat in the direction of the arrows. Heat from the high pressure condenser is reused in the low pressure generator; therefore more heat can be absorbed in the evaporator with the same amount of incoming heat. That is why the COP can reach 1.2 in a DS machine. The construction of a double step machine is more complicated than a single step since more heat exchangers and pumps are necessary. However, if a cooling tower is needed as heat sink, the installed cooling tower capacity per cooling effect in a double step is less than in a single step. This aspect can make the total cost of the DS machine comparable with the total cost for a ST machine. [Swedish District Heating Association, 2007e]

Other Variations of ACM

Important aspects when considering absorption cooling technique is the temperature of the driving heat and what Coefficient of Performance (COP) that can be achieved. Available machines have driving temperatures of 70-150°C with a COP of 0.4-1.2. Different technical modifications can increase the performance of the absorption cooling system. Below, some modifications are listed.

- Changing the working couple, i.e. change the refrigerant and absorber. Water/Lithium Bromide is the most common working couple but it can be replaced by Water/Ammoniac, which normally requires a higher driving temperature.

- Variations of the technical design of Water/Lithium Bromide machines. One variant is the double lift system and another is the double lift with semi effect (discussed later in this section).

- The heat exchangers in the absorber and generator is quite significant and if optimized they can improve the utilization of the temperature.

[Swedish District Heating Association, 2007f]

Water/Ammoniac as working couple – This is a common alternative to machines using Water/LiBr as working couple. This process normally requires a higher driving temperature, normally 140°C. The Water/Ammoniac cycle has the same working principle as the Water/LiBr cycle but requires a higher pressure and a larger temperature difference. The largest difference compared to the Water/LiBr machine is that the difference in steam pressure between water and ammoniac is small, which means that the desorption process of the generator produce a mixture of water and ammoniac steam. To completely separate the water and ammoniac, the mixture passes a so called rectifying column, otherwise COP is strongly reduced. There are no (or few) standard machines of this kind on the market [Swedish District Heating Association, 2007f]. These machines are normally not used in large systems, since they have a limited COP and a complex construction. COP for these kinds of machines is about 0.5. Ammoniac/Water machines can deliver cooling below 0°C. Disadvantages with this design are more complicated constructions with separation of ammoniac and water and also, the not desirable threat of ammoniac leakage. [Swedish District Heating Association, 2007e]

Double lift with internal heat exchanger – The double lift (DL) machine also works in three different pressure levels and has one flow circuit of the absorbent. Double lift means raising the temperature twice, which is similar to a serial connection of cooling machines (from a thermo dynamical point of view). The difference between incoming and outgoing heat becomes lower. This requires a larger heat exchanger area, which makes the investment higher. [Swedish District Heating Association, 2007e] This machine contains more components than the single step machine, which also affects the price. It has a low COP, only 0.4 (because of the double temperature lift). [Swedish District Heating Association, 2007f] The working principle of this machine is illustrated in Figure 9. Driving heat is added in the high pressure generator while heat is removed in the condenser and the high pressure absorber.

Figure 9: Principle of the double lift with internal heat exchanger. Source: Modified from Swedish District Heating Association, 2007f.

Double lift without internal exchanger – This application works in three different steps but has two absorbent circuits with different concentration. Driving heat is added (and extrusion of steam occurs) in two different places; in the generator and in the desorber (which has the same function as the generator). When cooled twice, the heated water leaves the cycle with a lower temperature, at about 50°C. Absorbtion occur in both the absorber and in the resorber. Comparing to the above-mentioned machine, there are less components. Still, the COP is not higher than 0.4. Double lift means lowering the driving temperature, but that contributes to a lower COP as well [Swedish District Heating Association, 2007f]. The working principle of this machine is illustrated in Figure 10.

Figure 10: Principle of the double lift without internal heat exchanger. Source: Modified from Swedish District Heating Association, 2007f.

Single step with double lift – This machine combines the advantages with the ST technique and the DL. The working principle is illustrated in Figure 11. The process contains two different circuits of absorbents with different concentration and can achieve a large decrease of temperature of the heating medium. The two circuits are between the absorber and the two generators and between the resorber and desorber. Heat added in the two generators separate the steam from the absorbent. Steam from the high pressure generator flows directly to the condenser while steam from the medium pressure generator passes the resorber on its way to the desorber where it is concentrated and steam from the desorber flows to the condenser. Driving heat can be added to the machine at three positions, in the desorber and in the two generators. Therefore the cooling of the driving heat is large in this machine. Excess heat has to be cooled from three different places; the condenser, the resorber and the absorber. The COP is in between a DL and a ST, between 0.4-0.8, depending on how the steam between the medium pressure generator and the resorber is utilized. This machine contains several components, and is therefore expensive [Swedish District Heating Association, 2007f].

Figure 11: Principle of the single step machine with double lift. Source: Modified from Swedish District Heating Association, 2007f.

Low Temperature Driven ACM

A common fuel for the absorption cooling machine is hot water from a DH network. Instead of building DC networks with centrally produced cooling, the ACM can be placed near the cooling demand in connection with the DH network and produce cooling, which is distributed by a local (smaller) DC network. The downside of this is that the temperature of the DH water is at its lowest during summer when the cooling demand is at its peak. Therefore, an ACM requiring a low driving temperature is necessary. The single step machine is the most common absorption cooling machine used in district heating systems. [Swedish District Heating Association, 2007f]

If there is access to low tempered cooling water for the absorber and the condenser the semi step ACM can be used. This machine has Water/LiBr as working couple and requires a low driving temperature, about 70-90°C. The working principle is the same as for a double lift without internal heat exchanger, as can be seen in Figure 10. [Swedish District Heating Association, 2007e]

According to Staf (2007), a low driving temperature requires large heat exchanger areas, i.e. a low driving temperature demands a machine that is above the required capacity. This increases both the size and price of the machine.

Hybrids

Better devices can be accomplished by combining different ACM performances, so called hybrids. A usual hybrid process is the absorption compression cycle because of the similarities of the two processes. The compression of low pressure steam from the evaporator is a good alternative because steam with higher pressure enters the absorber and absorbs at a higher pressure and therefore extracts heat with a higher temperature. The temperature lift can be increased if in addition using a compressor and an even higher COP can be achieved. More electricity needs to run the compressor, but it is important to see it from a system point of view. If not a higher temperature lift is achieved, more power would be required to move heat to the heat sink, i.e. cooling towers. That amount might be higher than the amount it takes to run the compressor. [Swedish District Heating Association, 2007e]

2.4.3 Free Cooling

Free cooling means utilization of natural cold storages like water, air and snow. One application is illustrated in Figure 12 where water from a local lake is pumped around in a closed system. The incoming water needs to have a temperature of about 4°C. It absorbs heat in a heat exchanger and is afterwards flushed back to its origin, now with a higher temperature than before. In some regions, e.g. in the north part of Sweden, snow is used as a cooling source. [Swedish District Heating Association, 2007h]

2.5

Electricity Market and Margin Production

It is important to understand the relation between electricity production and consumption and the related CO2 emissions. In this part an explanation of the electricity market is given

followed by the margin production theory. 2.5.1 Electricity Market

Sweden is a part of the Nordic electricity trading market, Nord Pool, where all the Nordic countries except Iceland participate. This is a result of the deregulation of the Swedish (1996) and European (2004) markets, which have the aim of a fully developed market in the EU countries [Swedish Energy, 2007c]. The decision of deregulation was taken to improve competitiveness between energy companies, make the market more efficient and ensure welfare for the citizens [Trygg, 2006]. EU has also stated a number of directives to control the deregulation e.g. show consideration for environmental issues and to run the electricity system as optimized as possible without risking the electricity supply. [Franzén, 2004]

One effect of the deregulation is that electricity has become merchandise as any other goods traded on a market, which means that the price is set by the rules of supply and demand [Franzén, 2004]. Nord Pool is the market place where producers, distributors, energy companies and other actors meet in order to trade electrical energy. More than 60 % of the electricity consumed in the Nordic countries is sold at Nord Pool, which by the end of 2006 was amounted to almost 250 TWh. [Nord Pool, 2007b]

The price calculation for electricity is based on offers and bids from suppliers and buyers but it also depends on geographical factors [Swedish Energy, 2007d]. There are physical obstructers, so called bottlenecks, which mean that the power transfer capacity is limited between countries. This creates small geographical submarkets with different price levels. Sceptics to the perspective of a European electricity market consider bottlenecks to be an insurmountable obstacle and claims that the transfer capacities between the countries are and will be too low for a fully functional market. However, the rules for deregulation do not allow any bottlenecks, which mean that the transfer capacity most probably will be expanded in the future. [Franzén, 2004]

Deregulation implies that the consumer can, free of choice, subscribe electrical power from any distributor. This encourages competition and will eventually even out price differences between the national markets and converge to a common price in the entire European Union [Franzén, 2004]. Since prices in many of the EU countries are twice as high as in Sweden, distributors will take the opportunity to sell electricity to buyers offering a higher price. Those buyers will initially be foreign actors from other EU countries. This will increase the demand for electricity produced in Sweden and will therefore increase the price for the Swedish consumers [Trygg, 2006]. The scenario is illustrated by Figure 13, which shows the presumed development of the Swedish and European electricity price.

Figure 13: Probable scenario for electricity prices in Sweden. Source: Trygg 2006.

Traditionally, Swedish electricity prices have been 2-3 times lower than prices in other European countries. This has resulted in a wide electricity use in Sweden, also for non-electricity specific processes such as domestic heating [Franzén, 2004]. With an non-electricity use per capita, which is more than twice as high as in many of the EU countries, Swedish industry will have to struggle to keep competitiveness with other international companies [Karlsson, 2004a]. The electricity use per capita can be seen in Diagram 1 and shows how the Nordic countries in general uses more electricity per capita than countries on the continent.

Diagram 1: Electricity use per capita in some European countries. Source: NationMaster, 2007.

Low electricity prices in Sweden depend on the production system, which is based on supply systems with low production costs. Hydropower and nuclear power constitute the foundation of the Swedish production system and implies low running costs. In countries like Denmark and Germany electricity production is based on coal condense plants with high operating costs, which explains higher electricity prices [Trygg, 2004]. Figure 14 shows electricity prices for the industry on 1st July 2006 in the EU countries.

Figure 14: Electricity prices for industrial users in EU on 1st July 2006. Source: EuroStat 2007.

2.5.2 Margin Electricity Production

Margin electricity production means that the most expensive and polluting supply system produces the ‘last’ unit of electricity. According to the margin production hypothesis, every unit of used or saved electricity is considered to be produced on the margin. The power supply curve consists of the existing electricity production technologies, ordered in terms of margin cost [SEA, 2007d]. Figure 15 shows a Merit Order Curve (power supply curve) for the Nordic countries and it can be seen that the demand is in the area of fossil condensation power, which therefore constitute the margin capacity.

Figure 15: A merit order curve that displays margin costs for the supply systems. Source: Vattenfall, 2007.

Emissions of CO2 are global and do not only affect the immediate surroundings from where it

is released. According to the hypothesis of margin production, electricity used and produced on the margin causes emissions of CO2 in a direct relation to the technology controlling the

margin, which is assumed to be coal condense plants. In such a plant 1 MWh of electrical power produced, implies emission of nearly 1 tonne of CO2. An increased production based

on biofuels or other non fossil fuels replaces electricity production in coal condense plants, hence fossil CO2 emissions are reduced. For example, if 1 MWh electricity is produced using

wood or pellet in a CHP plant in Sweden, 1 MWh from a coal condense plant in Denmark will not be produced. The effect will be 1 tonne less fossil CO2 released into the atmosphere.

[Franzén, 2004]

On an annual basis, different technologies can supply margin production. However, coal condense plants is taken into use every week over the year meaning that margin production mainly is supplied by coal condense, mostly from Denmark. From a long-term point of view, coal condense plants might be replaced with high efficient natural gas fired condense plants. [Sköldberg et al, 2006]

2.6

Environmental Issues

When writing the book ‘Silent Spring’ in 1962, the biologist Rachel Carson initiated the debate around environmental issues. The book is about a city that is usually overflowed by birds singing during springtime, but one spring the birdsong has died out. At first, people made fun of the warnings and statements made in the book. Soon people realized that she was right in many ways, which led to conferences and meetings around the world with environmental problems as the main topic. Environmental issues are now often spoken about and that is a basic condition when taking action against the many environmental issues the world is facing. [Ammenberg, 2004]

2.6.1 The Greenhouse Effect and Global Warming

Greenhouse gases exist naturally in the atmosphere and, together with water vapour, CO2 is

the most common. The gases form a layer around the earth where radiation from the sun (and earth) is repelled, absorbed or let through. This process, illustrated in Figure 16, keeps the earth’s mean temperature at approximately 15°C and is called the greenhouse effect. If no greenhouse effect existed, the earth’s mean temperature would be approximately minus 18°C, which makes the greenhouse effect crucial for life on earth. [Swedish EPA, 2007a]

Global warming is a consequence of an increased greenhouse effect. When the gas layer becomes thicker, the balance between incoming and outgoing radiation is disturbed and the mean temperature rises, i.e. global warming. Carbon dioxide (CO2) has the

highest increase in the atmosphere. Figure 17 shows the CO2 emissions counted as coal from different

parts of the world. CO2 emissions are closely related

to human lifestyle, where the use of oil, coal, gas and other fossil fuels are common. Humans therefore contribute to global warming. Global warming can be prevented by new technology, efficient energy use and cooperation between governments, companies and individuals. [Swedish EPA, 2007a]

Figure 16: Illustration of the greenhouse effect. Source: SSNC, 2007.

Figure 17: CO2 emissions from different parts of the world, showing millions of tons per year

counted as coal. Source: Swedish EPA, 2007d. 2.6.2 Future Scenarios

In Europe, major changes in climate are expected, such as rising temperature, melting glaciers, natural catastrophes, changes in precipitation and dying art species. In a global perspective, small temperature changes often lead to costs but sometimes also benefits like temporarily improved agricultural conditions. However, in many areas even the smallest changes convey a large cost. If the temperature rises with 2-3°C, compared to the late 20th century, severe negative effects are predicted in all regions of the world and costs will exceed profits in both a regional and global perspective. [Swedish EPA, 2007b]

The climate change will also affect the energy demand, i.e. the demand will decrease during winter and increase during summer. This makes reserve power supply more important during heat waves that will become more common. [Swedish EPA, 2007c]

2.6.3 Actions taken

The climate is a global issue and therefore the work to prevent climate changes has to stretch over nation borders. The United Nations Framework Convention on Climate Change, UNFCCC, is the world’s central arena for climate issues. The framework was initiated in 1994 and contains goals and directions for how to reduce emissions. The framework contains 189 members and every member is responsible for reducing emissions in parallel with its own capacity. In 1997 a meeting was held in Kyoto, involving the members of the UNFCCC, and the outcome was the Kyoto Protocol. 84 countries signed the protocol and therefore undertook a reduction of their emissions of green house gases with 5 % during 2008-2012 compared to the levels in 1990. Different countries have different solutions to solve the problem; e.g. the European countries have set an emission roof, which resulted in the CO2 emission trading

system. However, not all countries accepted the protocol, Australia and the United States together stand for 30 % of the global emissions, but have not ratified the protocol. [Government Office, 2007]

Another climate conference was held in Bali in December 2007. The Bali conference was one step towards an agreement of a new contract on climate protection as a follow up to the Kyoto Protocol. The agreement replacing the Kyoto Protocol is expected to be set in Copenhagen in 2009. According to the climate delegation of the European Parliament it is absolutely necessary that China and the United States are involved in the new agreement. It is important

to find a solution that involves all industrialized countries and that gives better opportunities for emerging countries to participate, says Alejo Vidal-Quadras (leader of the European Parliament’s 20 delegates in Bali). [European Parliament, 2007]

2.6.4 Future Issues to Focus on

Some environmental effects have already occurred and unfortunately, there is probably more to come since emissions already made will affect the climate for a long time. This forces the human being to adapt its way of living in terms of new policies, behavioural adaptations and technical development [Swedish EPA, 2007b]. Governmental support such as financial contributions, standardization etcetera is important to achieve efficiency in technological development and introduction of new techniques. There is a lack of knowledge around how to limit the climate change, especially in developing countries. Therefore, more research would decrease insecurity around climate issues and make the decision making easier. [Swedish EPA, 2007e]

The main concern about the future environmental issues for politicians and actors is how to secure the energy supply and at the same time manage to reduce CO2 emissions. Therefore the

European Union most likely will lay effort on these questions in the following years. [Swedish EPA, 2007c]

2.7

Laws and Means of Control

There are different ways of controlling energy supply. In this part a few of the most important means of control are mentioned.

2.7.1 Emission Trading

Emission trading is one of the ways to prevent and take action against environmental problems and a cost efficient way to fulfil the agreements of the Kyoto Protocol. On the basis of environmental quality standards, the authorities decide a maximum amount of a certain kind of pollution that can be accepted in a certain geographical area, a so called emission bubble. The total acceptable amount in a specific region is divided between polluting companies, which can use their emissions, sell them or purchase additional from another company. In the European Union there are restrictions about what amount of CO2 a specific

branch is allowed to emit. The standards, which can be found in the Swedish environmental legislation (Miljöbalken), are forensic directions about quality of land, water, air and nature in specific areas or for the whole country. [Ammenberg, 2004]

Emission trading in the European Union started in January 2005 and is the first large trading system involving greenhouse gases, concerning approximately 12 000 companies. The system provides a possibility to make cost efficient changes for a region. The purpose is to carry out changes in regions (or in companies) that generate a large decrease of environmental impact for a low cost. [Swedish EPA, 2007f]

Companies involved by the European Union emission trading system are those, which have a permission to emit carbon dioxide. The companies have obligations like measuring and controlling their emissions, submit an emission report every year etcetera [Swedish EPA, 2007g]. The distribution between companies depends on the companies’ pollutions in previous years and on prognoses for the coming years [Swedish EPA, 2007h]. In other words, high polluting companies gets many emission trading units while environmentally ‘friendly’ companies get fewer units. This is a system that does not favour companies that already have put effort and money on lowering their emissions. [Karlsson, 2006]

Emission trading comes in periods, and the European commission decides which countries that shall decrease its emissions from one period to another. Sweden’s quota will be decreased during the next period, which is between 2008 and 2012. [Swedish EPA, 2007h] Energy companies in Sweden will not receive any emission trading units as from 2008, which will affect the energy prices [Eliasson, 2007].

2.7.2 The Electricity Certificate System

To promote electricity production using renewable energy sources, the Swedish government introduced the electricity certificate system on 1st May 2003. The system is statutory and was initialized as a part of Sweden’s long-term energy policy for a cleaner energy production and as a tool to decrease emissions of greenhouse gases. Renewable energy sources receiving electricity certificate are

- wind power - some hydro power - some biofuels - solar energy - geothermal energy

- peat as fuel in CHP plants [SEA, 2007a]

In 2016, 17 TWh more electricity should be produced by renewable energy sources compared to 2002. So far the system has managed to increase electricity production with renewable energy sources with 5 TWh. [Swedish Energy, 2007b]

Every producer of electricity generated from a renewable energy source is entitled to participate in the electricity certificate system. For every produced MWh of electricity, the producer receives one certificate from the Swedish Energy Agency (SEA), a governmental public authority. Based on how much electricity a supplier sells to the customers, the supplier is obliged to buy a certain amount of certificates from the producer; this is called the quota obligation and varies from every year. For example, if the quota obligation is 15 % and the supplier sells 100 MWh of electricity, the supplier is forced to buy 15 electricity certificates from the producer. [SEA, 2007b]

Every year the suppliers declare their sales to the SEA, which calculate the correlating number of certificates. The supplier of electricity then submits the number of certificates to SEA and a cancellation of them is made. Every year, this procedure starts over and the suppliers have to buy new certificates from the producers. The system is based on the fact that there is a market with buyers and suppliers. The demand is created with the varying quota obligation and the cancellation of certificates. The trade with certificates creates a possibility for renewable energy sources to compete with cheaper electricity generation with fossil fuels as energy source. [SEA, 2007b]

High intense consumers of electricity, such as industries and corporations, are excluded from the certificate system. The exception applies to electricity used in manufacturing processes. The definition of electricity intensity is when a corporation uses more than 40 MWh per each million SEK of the sales value of goods and products. The reason of this exception is to ensure competitiveness compared with foreign actors on the market and to prevent the electricity cost from being a trading obstruction for these companies. [SEA, 2007b]

In Figure 18 the forecasted renewable electricity production is seen together with the quota obligation for the whole system period, which continues until year 2030. At the end of December 2006, 260 new plants with renewable energy sources (mostly wind power plants) had been built [SEA, 2007a].

Figure 18: Quota obligations and forecasted new renewable electricity production. Source: SEA, 2007b.

2.7.3 Taxes and Fees

Both taxes and fees makes goods and services more expensive with the main difference that taxes is a public income for the government while fees help financing special activities connected to specific environmental problems [Ammenberg, 2004]. Taxes are important tools for the government to encourage energy effectiveness and to control emissions of polluting gases. Taxes concerning fuels in CHP and thermal plant production are energy, carbon dioxide, nitrogenous oxide (actually a fee) and sulphur tax. Electricity consumed is imposed with energy tax [ÅF, 2007]. Current tax legislation for CHP (explained below) was approved by the EU commission in June 2003 and became valid on 1st January 2004. The decision differentiated taxes concerning heat and electricity production [SEA, 2007e]. The general taxation rules for CHP and heat plants are gathered in Table 3.

Table 3: General tax rules for Heat plants and CHP plants.

CHP

Heat

plant _{Heat Electricity}

Energy 100 % 0 % 0 %

CO2 100 % 21 % 0 %

Sulphur 100 % 100 % 100 %

Energy Tax

In a CHP plant, both heat and electricity production is relieved from energy tax, which is paid only by the consumer. The energy tax for used electricity is at the time of writing (December 2007) 265 SEK/MWh [Eliasson, 2007]. Fuels used in CHP production are allocated proportional on heat and electricity. Only plants having an electricity efficiency of at least 5 % are relieved from energy tax. If the electricity efficiency is below 5 % other rules are