The Dutch Municipality of Zaanstad is working on an extensive district heating system. The goal is to build a system that is open to both suppliers and customers of heat, and that is profitable for all parties involved. Project coordinator Henry Staal has a lot of experience in this field. “It is quite a difficult task to get a district heating network realized, “ he states. “The initial investment in this type of network is in general very big, amounting to millions of euros. An investment like that has a long life span, not 5 years, but at least 30 years. And you hope to earn back the initial investment in 10 to 15 years.”
Long term agreements
The goal of the project is to connect 10.000 households, about one in seven houses in the city, to a district heating network fuelled by excess heat from local industries. This would reduce the emission of greenhouse gasses like CO2 by about 10 kiloton, a great leap in the realization of the climate goals of the Municipality. But Henry knows that this goal has to be reached step by step.
“It is not easy to find companies that have residual heat available, and are willing to sign a delivery contract for 10-15 years. We are very happy that a lot of companies and institutions in Zaanstad are prepared to commit themselves for that longer period (also on the demand side!). But many others at the moment do not want to go beyond a contract for five years, because of the current economic climate. We cannot base a business case on that.
This is why we have decided to build the district heating network piece by piece, connecting already existing institutions and apartment buildings first. This way, we do not have to build long pipelines to reach a large group of customers. This focus on existing buildings relieves us of a lot of worries – like the risk that building projects get delayed and are realized years later than planned. We predict that we can realize the necessary profitability with the first part of the network, and then we will start looking what we can do next.”
Technique is no obstacle
“Heating networks in fact employ quite simple techniques. The real obstacles we encounter are more of the contractual type. We need to cooperate with all stakeholders involved in a way that builds trust, resulting in a trusted relationship that enables our partners to sign long term contracts. An open way of communicating and a willingness to cooperate are essential. Even then, there will remain small problems to tackle, like the fact that some industrial sources shut down the factory for a number of days every year, for maintenance and repairs. It means they cannot supply heat for several days, for example around Christmas…..
What I like a lot about a heating network is that, once it has been built, renewable sources can be connected. The amount of solar panels installed in the Netherlands has about doubled in the last year. Everybody is very enthusiast about PV-panels, but the energy they produce does not fit our consumption patterns very well. Even in the Netherlands we are rapidly approaching the situation that at certain moments the electricity spot price will become negative, that you can get paid for using excess electricity. We can use that excess power to produce heat: for example by powering heat pumps, that upgrade residual heat with a low temperature to heat with a usable temperature. That way, the heating networks can profit from the unbalance in the durable power system. Even at the current rates for electricity we can reach a very reasonable price for the heat, but when the electricity rates get negative, it is a real windfall…..”
Public party builds the network
“The Dutch public utility Alliander, administrator of the natural gas and power networks in our region, participates in our projects. The company wants to take a responsibility for heating networks too, even though she is legally not allowed to combine the ownership of the network to the delivery of heat to end consumers. Another party has to be found to deliver the heat, for example an energy company.
I once witnessed a tender procedure. A municipality tendered the delivery of heat for a newly built housing development. One energy company produced an offer. The municipality said: we want to know what the rate of return is that you plan to realize in this project. It turned out to be 9 percent annually, for a period of 30 years. But the company added: this offer is valuable only for a few months, since our company has been taken over by a foreign electricity firm. And the new owner has raised the requirements: our rate of return has to go up to 11,5 percent annually.
This is why it has become so difficult to get heating networks realized in the Netherlands – most energy providers have been taken over by foreign groups, the required return has gone up. A public party like Alliander can accept a lower return. “
Open heating network
“What we want to realize with our partners in Zaanstad is an open network, available to any party at clear conditions. Alliander will construct the network, an energy company will contract a number of parties to deliver or to use heat. Once the network is functioning, any other party can decide to join. For example by building a small biomass unit, that can use the network to deliver heat to the neighborhood. Who abides by the rules can use the network.
The system has to be open towards the customers too. Many people say district heating is too expensive for the consumers. In Zaanstad we concentrate on existing buildings and apartment blocks. The tenants know what they pay for their heating at the moment. The district heating network has to offer a lower price, or nobody will join. In the end, customers are interested in nothing but the price they have to pay.”
“When I talk about the district heating in Zaanstad, it is always about meeting the demands and preconditions of the stakeholders involved. Unfortunately we see that climate goals and carbon reduction are often minor factors in the decision making process about project proposals. The crucial point is to make the switch towards economic goals and feasibility. You cannot realize this type of projects, when there is no economic driver. Therefore it is helpful that government subsidies are available for projects like our district heating network.
In a community like Zaanstad, you cannot win the hearts of the people just with green stories, even though most people endorse the climate goals. The heating network has to bring economic profits too. We are not doing this just for charity. “