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IX.c Commercial heating and cooling costs

Costs Summary

The cost of supplying business and public buildings with hot water, heating and cooling.

Scope

The service sector incorporates commercial and public sector buildings. Heat for the industrial sector, both industrial processes and a small amount for space heating, is included within XI.a Industrial processes Costs. Heat used for cooking and catering is included within: X.b Commercial lighting, appliances, and catering Costs

Technologies costed in this sector

Costs excluded: The cost of demand reduction for heating and cooling. They will be captured as a reduction in cost due to less heating and cooling systems being required, however the cost of achieving these reductions is not captured. It is likely this will be achieved through a combination of behaviour and technology but we have not been able to identify the key technologies and therefore costs.

Costs Methodology

Methodology Used

Defining trajectories

Users, through their combined choice of heating electrification and fuel direction, define the share of hot water and space heating demand serviced by heating systems in 2050. To get to this result in 2050, we have assumed a decreasing/increasing linear share met by heating systems from the period 2015 to 2050. The number of heaters in non-domestic buildings is assumed to be proportional to the space heating and hot water demand serviced. For example if 50% of demand is serviced by heat pumps, we have assumed 50% of non-domestic buildings will have heat pumps installed.

Costs are defined in terms of TWh

Estimating the non-domestic building stock combined with an average boiler size proved to be too difficult and uncertain, therefore we have estimated capital costs in terms of TWh of heating and cooling demand serviced. For investment and operating costs, this was estimated by multiplying the cost (usually given per KW installed) by load factor (typical annual average output) then uprate to give a cost per TWh (annual) of meeting commercial heating demand. The cost per TWh is split into investment and non-fuel operating costs, without assumptions on capital financing[1], therefore this does not represent a levelised cost directly comparable to the NERA-AEA analysis.

Accounting for peak heating demand

To account for variation in heating demand we have used the contribution to peak demand assumption for heating technologies used in Markal, which is 0.5. Therefore, we have multiplied all costs of heating technologies by 2 to account for peak load, essentially assuming that installed heating capacity is built to cope with spikes in demand roughly equal to double average annual demand. This ratio also seems to be true when comparing monthly non-domestic load profiles with the annual average.

Investment costs include replacing stock as well as buying low carbon stock

Investment costs capture all new heating systems resulting from the trajectory and through natural replacement. All heaters and cooling systems are replaced after 20 years giving 25% scrappage every 5 years. Heating systems in each 5 year block are defined by the trajectory choice chosen by the user. The costs are the new heating systems needed between period t+1 (e.g. 2020) and period t (e.g. 2015) given a quarter of all technologies in period t are scrapped. Fixed operating costs are the cost of those heating systems used in the particular time period. Please note electricity, fossil fuel and biofuel costs are accounted for elsewhere in the Calculator.

Methodology issues and uncertainties

  • Non-domestic building stock
  • Ratio between average annual demand and installed capacity

Technical assumptions

Heating system Hot water efficiency Space Heating efficiency Electricity supplied to grid
Gas boiler (old) 76% 76% -
Gas boiler (new) 91% 91% -
Resisitive heating 100% 100% -
Oil-fired boiler 97% 97% -
Solid-fuel boiler 87% 87% -
Stirling engine microCHP 63% 63% 23%
Fuel-cell microCHP 45% 45% 45%
Air-source heat pump 200% 300% -
Ground-source heat pump 300% 400% -
Geothermal 85% 85% -
Community scale gas CHP 38% 38% 38%
Community scale solid-fuel CHP 57% 57% 17%

Note: Conversion losses are equal to 100% - hot water efficiency (or space heating efficiency) - electricity supplied to grid

  • All boilers have a lifetime of 20 years

Questions to stakeholders

  • Is the ratio between average annual demand and peak demand reasonable? Would this vary significantly between different types of heating systems without assuming significant behaviour change?
  • Could you identify the key technologies and costs to reduce space heating, hot water and cooling demand in commercial and public sector buildings?

FAQs

Why are the costs more/less than the levelised costs from the NERA-AEA analysis?

The cost per TWh is split into investment and non-fuel operating costs, without assumptions on capital financing[2], therefore this does not represent a levelised cost directly comparable to the NERA-AEA analysis.

 
  1. We do add financing costs at the end but also record investment costs as cash flow, to allow comparisons between the two methodologies
  2. We do add financing costs at the end but also record investment costs as cash flow, to allow comparisons between the two methodologies