ii4 : Micro-CHP business is more profitable in Germany than in France and in the UK, while the added value of aggregation is higher in the UK

Context

The German context for the profitability of µCHP aggregation is compared to other Member States (UK and France) with country-specific assumptions, notably assumptions regarding prices and regulations such as subsidies for µCHP-units and investments grants for example.

 

Challenges

Is the µCHP aggregation business model more efficient in France, in the United Kingdom (UK)
or in Germany?

Results

Calculations have been made for two different cases (basic operation and aggregation mode), each for a single-family house and a multi-family dwelling. A value for aggregation is calculated by comparing both cases and the impacts on CO2 are extracted.

In the heat-driven cases, µCHP-units are more profitable in Germany than in the UK and in France

Due to the high remuneration and support from the KWKModG, combined with the relatively high electricity prices and thus high opportunity costs for avoided purchase, Germany seems to be the “best” country even for a normal, heat-driven configuration. Besides, the gas prices for the gas burnt in the boiler and the CHP-unit and the spread between those prices and the gas-electricity price have an impact on the comparison of the different countries.
Compared to the German case, the UK seems to be the second best option and close to profitability, followed by France where the market structure (e.g.: electricity and gas prices) is less favourable for the implementation of CHP units, even though there is a feed-in tariff, albeit rather low.
The main difference, besides the retail prices, is the existence of investment cost subsidies such as the Enhanced Capital Allowances (ECA: www.eca.gov.uk) in the UK and the “Impulse Program” included in the KWKModG in Germany.

The added value of aggregation is highest in UK, followed by France and Germany

As stated in ii3, the existing German feed-in tariff (reference case where surplus electricity is sold to the grid, remunerated only by the CHP-law) does not privilege flexibility. Hence the value for aggregation is highest in the UK, at least for the MFH (multi family house).
On the one hand, this is due to the extremely flexible support scheme (electricity sold at wholesale market plus an incentive, comparable to the Market Integration scenario of ii3 but with an investment grant).
On the other hand, the highest source of revenue is the opportunity cost for avoided purchase. Both sources can be exploited in both SFH (single family house) and MFH cases, but due to a better heat-to-power ratio of the unit installed in the MFH in conjunction with the MFH-specific demand profile, the income in these cases is considerably higher than in the SFH cases.
In the MFH cases, covering the heat demand, combined with the storage, leads to an overproduction of electricity, which can be used to cover the electricity demand and market the electricity. In the SFH cases, the constraint of covering the heat demand, combined with the heat storage, does not lead to electricity production that is sufficient to cover all demand so that the opportunity costs for avoided purchase are significantly lower. All in all, this leads to considerably higher income through aggregation in the MFH-cases and less income for the SFH-cases. (This can be seen in figure 1)France and Germany follow the UK. The aggregation value of the different countries is compared in the graph in Figure 8.
(The aggregation value is displayed in Figure 2)

Figure 1: Comparison of the aggregation profitability in the UK cases

Globally, the flexible operation mode combining the operation of µCHP-units and the value for aggregation is more profitable in Germany than in the UK and in France

Due to the high remuneration and support from the KWKModG and the relatively high electricity prices and thus high opportunity costs for avoided purchase, Germany is seen as the “best” country. Furthermore, the spread between the gas price for the gas burnt in the boiler and in the CHP-unit has an impact on the comparison of the different countries.
The UK seems to be the second best option, followed by France, where electricity and gas prices do not favour the implementation of CHP units, even if a (rather low) feed-in tariff exists. The main difference besides the retail prices is the existence of investment cost subsidies such as the ECA in the UK and the “Impulse Program” in Germany.
In these cases, the different wholesale market prices and the flexibility of the remuneration scheme (feed-in or flexible scheme) affect the amount of electricity that is sold to the market by using flexibility and the remuneration for this electricity.

Figure 2: Comparison of the values of aggregation
in different countries

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