Mijnwater BV Herman Eijdems 14/05/2017 · Mijnwater BV Herman Eijdems 14/05/2017 €heat = total income from heating sales from delivered GJ at system boundaru to end-user; €cool

14/05/2017Mijnwater BV Herman Eijdems

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In the ‘mature market’ energy suppliers operate mainly as commercial companies. Due to efficientoperation, cost saving procurement (of fuels) and competitive prices for end-users they are encouraged torealise profits and maintain an attractive position in the stock market. Their business operation andmonopolist position is controlled by (strict) regulations, by public shareholding and administrative tiesbetween (local/regional) authorities. Besides financial return often other social objectives (like GHG-reduction and affordability of energy) are set. So the business model could be characterised as‘commercially driven within a restrained field of boundary conditions’.In the ‘refurbishment market’ the energy companies originate from social principles and are stronglydominated by governmental interference. The prices of fuels and the prices for end-users consumptionare mainly imposed by the authorities. The provision of heating is part of a broader state policy (alsohousing, food supply, transport) to maintain acceptable living conditions. The management of thebusiness is highly centralized with little interference of market players and/or consumers. The businessoften lacks transparency. This business model could be characterised as ‘governmentally controlled’.In the Western and Southern EU member states (‘the expansion market’) existing DHC-companiesoperate more or less as in the ‘mature market’. From the view of business models the expansion marketopens opportunities for an innovative approach. On the one hand a connection to the DHC-grid is notobligatory, not due to regulation and either by lack of choice. Even if the decision is made to provide a gridin a certain area (like by the Dutch Heat law), equivalence rules are given to avoid a forced connection. Onthe other hand the interaction with the end-consumer is much more important. Starting from theSouthern countries DHC operators provide heating and cooling. Sometimes simultaneous to one customer(heating of the building and cooling of the data centre) or diversified to different customers (acombination of offices, dwellings, shops, industry within one building block or area). Moreover a relevantpart of the income is covered by fixed fees, which stimulate rather a high connection degree than selling ahigh flow of energy. Due to higher insulation levels and utilization of passive solar energy the demand forcooling is growing in the Northern countries. This could also be regarded as if the boundary for thisbusiness model is shifting in Northern direction. In this model customer participation is important in whichthe end-user could act as a prosumer (selling heat while consuming cooling and reverse) as well asfinancer (taking shares in business due to crowd funding and avoided investment in building level, like aprivate gas boiler). The tendency is to reduce regulatory restrictions and to offer an attractive opportunity(tempting the citizen to participate) by offering competitive prices, a high level of transparency,democratic control, unburdening of the client and certainty on future price developments and deliverysecurity. More and more end-consumer are willing to accept (minor) drawbacks in order to supportsocietal benefits, like social patronage, sustainability goals, etc. This business model is highly stimulated byalternative cost calculation models, like Total Cost of Ownership, Life Cycle Costs, Risk calculation andResilience validation.

In the ‘mature market’ energy suppliers operate mainly as commercial companies. Due to efficientoperation, cost saving procurement (of fuels) and competitive prices for end-users they are encouraged torealise profits and maintain an attractive position in the stock market. Their business operation andmonopolist position is controlled by (strict) regulations, by public shareholding and administrative tiesbetween (local/regional) authorities. Besides financial return often other social objectives (like GHG-reduction and affordability of energy) are set. So the business model could be characterised as‘commercially driven within a restrained field of boundary conditions’.In the ‘refurbishment market’ the energy companies originate from social principles and are stronglydominated by governmental interference. The prices of fuels and the prices for end-users consumptionare mainly imposed by the authorities. The provision of heating is part of a broader state policy (alsohousing, food supply, transport) to maintain acceptable living conditions. The management of thebusiness is highly centralized with little interference of market players and/or consumers. The businessoften lacks transparency. This business model could be characterised as ‘governmentally controlled’.In the Western and Southern EU member states (‘the expansion market’) existing DHC-companiesoperate more or less as in the ‘mature market’. From the view of business models the expansion marketopens opportunities for an innovative approach. On the one hand a connection to the DHC-grid is notobligatory, not due to regulation and either by lack of choice. Even if the decision is made to provide a gridin a certain area (like by the Dutch Heat law), equivalence rules are given to avoid a forced connection. Onthe other hand the interaction with the end-consumer is much more important. Starting from theSouthern countries DHC operators provide heating and cooling. Sometimes simultaneous to one customer(heating of the building and cooling of the data centre) or diversified to different customers (acombination of offices, dwellings, shops, industry within one building block or area). Moreover a relevantpart of the income is covered by fixed fees, which stimulate rather a high connection degree than selling ahigh flow of energy. Due to higher insulation levels and utilization of passive solar energy the demand forcooling is growing in the Northern countries. This could also be regarded as if the boundary for thisbusiness model is shifting in Northern direction. In this model customer participation is important in whichthe end-user could act as a prosumer (selling heat while consuming cooling and reverse) as well asfinancer (taking shares in business due to crowd funding and avoided investment in building level, like aprivate gas boiler). The tendency is to reduce regulatory restrictions and to offer an attractive opportunity(tempting the citizen to participate) by offering competitive prices, a high level of transparency,democratic control, unburdening of the client and certainty on future price developments and deliverysecurity. More and more end-consumer are willing to accept (minor) drawbacks in order to supportsocietal benefits, like social patronage, sustainability goals, etc. This business model is highly stimulated byalternative cost calculation models, like Total Cost of Ownership, Life Cycle Costs, Risk calculation andResilience validation. 6


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The complexity of operation on these strategies and priorities is illustrated by thenext example.If a big heat buffer is available within the system should it be charged due tocover peak loads (delivery security) or due to low prices on energy markets(reduce costs) or due to reduce the consumption of fossil fuels (sustainability)?

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According to the operating strategies as being ‘cell balancing’, ‘peak shaving’ and‘market interaction’ still confusion and interdependencies might occur. Are thesestrategies exploited in order to serve delivery security, in order to reduce cost ofoperation or in order to reduce depletion of fossils and emission of CO2? Alsomutually exchange of priorities is at issue. How will a major reduction of CO2 bevalidated in accepted cost increase?

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Eheat = total delivered energy for heating to end-consumers at contractedsystem boundary as a result of water flow and temperature difference in GJ;Ecool = total delivered energy for cooling to end-consumers at contracted systemboundary as a result of water flow and temperature difference in GJ;Eelec, CHP = total delivered electricity to the electricity grid in GJ;Egas = total amount of gas consumption for central plants and decentralauxiliary boilers for peak loads in GJ;Eoil = total amount of oil consumption for central plants and decentralauxiliary boilers for peak loads in GJ;Ecoal = total amount of coal consumption for central plants and decentralauxiliary boilers for peak loads in GJ;Eelec,in = total amount of electricity from the electricity grid for pumps,control, heat pumps, etc. in GJ;Ebiomass = total energy content of biomass for central plants and decentralauxiliary boilers for peak loads in GJ;Ewaste = total energy input from waste incineration as delivered to the gridand if being part of the business model in GJ;Esurplus = total energy input from industrial surplus waste incineration asdelivered to the grid and if being purchased in GJ.

Eheat = total delivered energy for heating to end-consumers at contractedsystem boundary as a result of water flow and temperature difference in GJ;Ecool = total delivered energy for cooling to end-consumers at contracted systemboundary as a result of water flow and temperature difference in GJ;Eelec, CHP = total delivered electricity to the electricity grid in GJ;Egas = total amount of gas consumption for central plants and decentralauxiliary boilers for peak loads in GJ;Eoil = total amount of oil consumption for central plants and decentralauxiliary boilers for peak loads in GJ;Ecoal = total amount of coal consumption for central plants and decentralauxiliary boilers for peak loads in GJ;Eelec,in = total amount of electricity from the electricity grid for pumps,control, heat pumps, etc. in GJ;Ebiomass = total energy content of biomass for central plants and decentralauxiliary boilers for peak loads in GJ;Ewaste = total energy input from waste incineration as delivered to the gridand if being part of the business model in GJ;Esurplus = total energy input from industrial surplus waste incineration asdelivered to the grid and if being purchased in GJ.

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€heat = total income from heating sales from delivered GJ at systemboundaru to end-user;€cool = total income from cooling sales from delivered GJ at system boundaru toend-user;€elec, CHP = total income from delivered electricity to the electricity grid;€fixed fees = total income from fixed price agreements with end-consumers;€gas = total expenditure on gas purchase for central plants and decentralauxiliary boilers for peak loads;€oil = total expenditure on oil purchase for central plants and decentralauxiliary boilers for peak loads;€coal = total expenditure on coal purchase for central plants and decentralauxiliary boilers for peak loads;€elec,in = total expenditure on electricity purchase from the electricity gridfor pumps, control, heat pumps, etc.;€biomass = total expenditure on biomass purchase for central plants anddecentral auxiliary boilers for peak loads;€waste = total expenditure on waste energy if purchased from incinerationplant due to contracted price per GJ;€surplus = total expenditure on industrial surplus energy if purchased due tocontracted price per GJ.

€heat = total income from heating sales from delivered GJ at systemboundaru to end-user;€cool = total income from cooling sales from delivered GJ at system boundaru toend-user;€elec, CHP = total income from delivered electricity to the electricity grid;€fixed fees = total income from fixed price agreements with end-consumers;€gas = total expenditure on gas purchase for central plants and decentralauxiliary boilers for peak loads;€oil = total expenditure on oil purchase for central plants and decentralauxiliary boilers for peak loads;€coal = total expenditure on coal purchase for central plants and decentralauxiliary boilers for peak loads;€elec,in = total expenditure on electricity purchase from the electricity gridfor pumps, control, heat pumps, etc.;€biomass = total expenditure on biomass purchase for central plants anddecentral auxiliary boilers for peak loads;€waste = total expenditure on waste energy if purchased from incinerationplant due to contracted price per GJ;€surplus = total expenditure on industrial surplus energy if purchased due tocontracted price per GJ.

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CO2,ref= total carbon dioxide emission for reference situation of allconnected buildings in kton/a;CO2,cons= total summed carbon dioxide emission for operation the DHC gridin kton/a;Afunc = total summed floor area per building function for all connected buildingsin m2;CO2,budget,func = total allowed carbon dioxide budget per m2 floor area ofconnected buildings as function of the building age and national requirements inkton/m2 .a;CO2,gas = total carbon dioxide emission of gas consumption in kton/a;CO2,oil = total carbon dioxide emission of oil consumption in kton/a;CO2,coal = total carbon dioxide emission of coal consumption in kton/a;CO2,elec,in = total carbon dioxide emission of auxiliary electricity consumption inkton/a;CO2,biomass = total carbon dioxide emission of biomass consumption in kton/a;CO2,waste = total carbon dioxide emission of waste heat consumption in kton/a.

CO2,ref= total carbon dioxide emission for reference situation of allconnected buildings in kton/a;CO2,cons= total summed carbon dioxide emission for operation the DHC gridin kton/a;Afunc = total summed floor area per building function for all connected buildingsin m2;CO2,budget,func = total allowed carbon dioxide budget per m2 floor area ofconnected buildings as function of the building age and national requirements inkton/m2 .a;CO2,gas = total carbon dioxide emission of gas consumption in kton/a;CO2,oil = total carbon dioxide emission of oil consumption in kton/a;CO2,coal = total carbon dioxide emission of coal consumption in kton/a;CO2,elec,in = total carbon dioxide emission of auxiliary electricity consumption inkton/a;CO2,biomass = total carbon dioxide emission of biomass consumption in kton/a;CO2,waste = total carbon dioxide emission of waste heat consumption in kton/a.

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Based on local situation and the operational business model the networkoperators first have to determine the bandwith for each performance indicator.Secondly they may weigh the influence of each performance indicator on theiroverall performance. At last they may give priorities to the different strategies.The framework controller should provide management information on theseparameters in order to monitor and decide on operating strategies. If the desiredperformance is detected the control strategies might be automated by filling inweigh factors and priorities.

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Mature market In the mature market the financial performance is dominant as commercialoperation and shareholder value of the network company prevails. The environmentalperformance might also be important in order to improve image and to fulfil sustainabilityambitions. The energetic performance, which gets more important with limited source capacity,is less dominant. This market gets triggered by win-win situations for environmentalimprovement at financial equilibrium or minor financial improvement. As long term LCC and TCOcalculations gain trust, shareholders an financers are more and more prepared to invest in greentechnologies.Refurbishment market In the refurbishment market affordability of energy is in general themain driver. Due to reserved climate ambitions and a surplus in fossil sources the bandwidth forenvironmental and energetic performance is quite large. However faced with internationalpressure to contribute to environmental targets and a relatively strong influence of thegovernments on building activities and financing these markets might make quick moves toimprove their grids. As an example China is showing fast progress in green energy developmentsdue to a rather simple political governance mechanism and limited barriers from regulations.Expansion market The expansion market is less financially dominated. In order to establish awell performing infrastructure on environmental aspect with little spatial burden anddemocratic governance the public preparedness is growing to accept limited profits or even payslightly more to establish a sustainable and secure infrastructure for the long term. As theseparts of the EU are running out of raw materials the dependency on foreign import is alsogaining weight. These markets are also triggered by supporting local economies and localemployment and have positive attitude to innovation as an export opportunity for greentechnologies.

Mature market In the mature market the financial performance is dominant as commercialoperation and shareholder value of the network company prevails. The environmentalperformance might also be important in order to improve image and to fulfil sustainabilityambitions. The energetic performance, which gets more important with limited source capacity,is less dominant. This market gets triggered by win-win situations for environmentalimprovement at financial equilibrium or minor financial improvement. As long term LCC and TCOcalculations gain trust, shareholders an financers are more and more prepared to invest in greentechnologies.Refurbishment market In the refurbishment market affordability of energy is in general themain driver. Due to reserved climate ambitions and a surplus in fossil sources the bandwidth forenvironmental and energetic performance is quite large. However faced with internationalpressure to contribute to environmental targets and a relatively strong influence of thegovernments on building activities and financing these markets might make quick moves toimprove their grids. As an example China is showing fast progress in green energy developmentsdue to a rather simple political governance mechanism and limited barriers from regulations.Expansion market The expansion market is less financially dominated. In order to establish awell performing infrastructure on environmental aspect with little spatial burden anddemocratic governance the public preparedness is growing to accept limited profits or even payslightly more to establish a sustainable and secure infrastructure for the long term. As theseparts of the EU are running out of raw materials the dependency on foreign import is alsogaining weight. These markets are also triggered by supporting local economies and localemployment and have positive attitude to innovation as an export opportunity for greentechnologies.

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As strategies for cell balancing will reduce the total amount of energy supply and reducecapacities of infrastructure. This strategy has win-win opportunities for the financialperformance, environmental performance and for delivery security. Two-directional buildingconnections and building plants and local storage facilities support the deployment of theseresources. The return on investments is relatively low. Increased cooling demand,implementation of smart customer interaction and lowering grid temperatures facilitateimproved opportunities for cell- and cluster balancing. For spatial planning strategies could beencouraged to combine different building functions within one area, such as planning datacentres close to dwellings, etc. From a strategic alignment of synergistic demand and supportprofiles high energy savings can be achieved in the urban area. The exchange potential, ifsupported by adequate storage facilities, may reach a level of 30 to 50 %.Peak shaving also is an important strategy. In the mature market where overcapacity exists incentral production plants the choice between different deployable source fuels may give a win-win situation for financial an environmental performance. This might be an important stimulatorto invest in framework control and as such open opportunities for further and insights andimprovements in the infrastructure. Especially if the STORM controller gets a broader marketintroduction comparing performance of different net configurations and addition of greentechnologies might trigger less performing operators to invest in improvement of their systems.In the refurbishment market peak shaving appears to be less important, unless they plan tomodernize the infrastructure. In the expansion market peak shaving might be a dominantstrategy due to the potential to establish more connections on limited (green) sources and inorder to reduce investments in relatively expensive green technology. From the Heerleninfrastructure we learn that capacity of pipes, plants and heat pumps can be reduced to 30-40%and as such giving a major reduction in investment costs. These strategies are game changerswhich can make or break the business.The last priority in strategies is market interaction. Due to the growing share of intermittingsources, like solar and wind energy, fast fluctuations appear in available green energy on theelectricity grid. Due to thermal storage of thermal grids the price fluctuations on the stockmarket can be used to improve the financial performance of the system. This strategy can beexploited as far as other priorities are not in danger. Besides quick wins this strategy also can beexploited to gain a business case on innovative expansions. For instance a large subsoil buffermanufacturer (Ecovat) has a selling argument by calculating a return on investment of 7 years ofactual process fluctuations can be exploited.

As strategies for cell balancing will reduce the total amount of energy supply and reducecapacities of infrastructure. This strategy has win-win opportunities for the financialperformance, environmental performance and for delivery security. Two-directional buildingconnections and building plants and local storage facilities support the deployment of theseresources. The return on investments is relatively low. Increased cooling demand,implementation of smart customer interaction and lowering grid temperatures facilitateimproved opportunities for cell- and cluster balancing. For spatial planning strategies could beencouraged to combine different building functions within one area, such as planning datacentres close to dwellings, etc. From a strategic alignment of synergistic demand and supportprofiles high energy savings can be achieved in the urban area. The exchange potential, ifsupported by adequate storage facilities, may reach a level of 30 to 50 %.Peak shaving also is an important strategy. In the mature market where overcapacity exists incentral production plants the choice between different deployable source fuels may give a win-win situation for financial an environmental performance. This might be an important stimulatorto invest in framework control and as such open opportunities for further and insights andimprovements in the infrastructure. Especially if the STORM controller gets a broader marketintroduction comparing performance of different net configurations and addition of greentechnologies might trigger less performing operators to invest in improvement of their systems.In the refurbishment market peak shaving appears to be less important, unless they plan tomodernize the infrastructure. In the expansion market peak shaving might be a dominantstrategy due to the potential to establish more connections on limited (green) sources and inorder to reduce investments in relatively expensive green technology. From the Heerleninfrastructure we learn that capacity of pipes, plants and heat pumps can be reduced to 30-40%and as such giving a major reduction in investment costs. These strategies are game changerswhich can make or break the business.The last priority in strategies is market interaction. Due to the growing share of intermittingsources, like solar and wind energy, fast fluctuations appear in available green energy on theelectricity grid. Due to thermal storage of thermal grids the price fluctuations on the stockmarket can be used to improve the financial performance of the system. This strategy can beexploited as far as other priorities are not in danger. Besides quick wins this strategy also can beexploited to gain a business case on innovative expansions. For instance a large subsoil buffermanufacturer (Ecovat) has a selling argument by calculating a return on investment of 7 years ofactual process fluctuations can be exploited.

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Mijnwater BV Herman Eijdems 14/05/2017 · Mijnwater BV Herman Eijdems 14/05/2017 €heat = total income from heating sales from delivered GJ at system boundaru to end-user; €cool