4. Heat Supply
4.1 National Heat Consumption
As mentioned earlier, heat is a major component of the national energy mix. It has been necessary to treat it differently to electricity in terms of the development of cost supply curves. While costs for heat plant can be assessed, these costs are a function of size. A rough assessment can be made of future heat plant size say in the forestry industry. However, heat plant size across the breadth of New Zealand industry is to a large extent unknown. Consequently, cost supply curves cannot be derived (although a partial curve looking at the forestry industry with supply from woody biomass is provided in the chapter on woody biomass (Appendix A and Appendix B, Chapter 4)).
Instead the following discussion emphasises that there are some attractive renewable options for heat. In Appendix E, the value of heat from fossil fuel sources is derived. This is used as the basis for comparison with renewable energy options.
Figure 4 shows the component of heat within the national energy resource use of 600PJ of consumer energy (based on the Energy Data File July 2001). Approximately 24% of the energy use is for heating, while a significant portion of electrical use is directed to heating also (about 30% of this electrical use is directed to domestic space/hot water heating). In total, heating demand is greater than electrical (non-heating) demand, so the ability to displace either electrical or non-renewable-sourced heating with heating from a renewable source will have significant national benefit.
Figure 4: Components of Final Consumer Energy Use (Year 2000)
Nationally, understanding of heating requirements and characteristics is limited. At a domestic level, BRANZ has been undertaking considerable research on home energy usage. Commercial and industrial data have not been co-ordinated (though data may be held in confidential databases). For these larger users, heat is sourced from a range of boiler sizes or from cogeneration/combined heat and power.
Without detailed knowledge on boiler sizes and their load factors across all industries, it is not possible to develop the costs and ratios between the potential sizes for a reasonable cost supply curve for heat applications. Each application will be site specific. However, potential benefits from uptake can be indicated by approximate aggregated cost curves.
4.2 Opportunity for Renewable Displacement of Fossil Fuels for Heat
Table 1 listed renewable resources that could supply process heat needs. The major potential suppliers are geothermal and woody biomass. These are compared again in Table 9. For comparison, the total consumer energy for heating purposes was approximately 150PJ in the year 2000.
Table 9: Available Resources in Terms of Primary Energy for Process Heat Supplies (PJ/year)17
| Resource | 2012 | 2025 |
|---|
| High | Medium | Low | High | Medium | Low |
|---|
| Geothermal18 | 83 | 160 | 710 | 196 | 319 | 710 |
| Woody Biomass19,20 | 6 | 21 | 73 | 12 | 28 | 91 |
Supply of heat to a locality is more difficult than supply of electricity. As a rule, loads must be attracted to the energy source. Geothermal energy is available in the Central North Island and Northland, with minor heating potential elsewhere. The scale of geothermal energy available for direct heat is vast compared to most existing heat requirements. Heat loads must be within a limited radius of the resource and preferentially be located immediately adjacent. In the list of renewable energy sources given in Table 1, only woody biomass stands out as a widespread resource that could be transported to the load source. There may be opportunity to convert other biomass sources via biogas to a liquid fuel for transportation to a range of uses, but these resources are limited.
Note that the potential of this widespread wood fuel has now been recognised and new businesses are evolving as suppliers of a controlled woody biomass fuel in a commercial manner.
For the analysis in this report, most woody biomass resources have been directed to electricity generating stations (to enable a comparison with other renewable resources in terms of the electricity cost supply curves). In the short term, the unit cost of biomass electricity is not attractive, except in niche opportunities, and the real opportunity for use of woody biomass is as a fuel for process heat supply.
It should also be noted that not all heat is equal in the industrial market, with some processes being more sensitive to variations in supply quality and reliability than others. One big difference between geothermal, biomass and gas is that it is easier to build control systems (and the software interface) for a gas-fired system.
Heat costs for fossil fuelled heat plant have been derived in Appendix E. This currently has an upper bound of around $14/GJ for plant fired by gas at remote ends of the gas transmission system. This data is shown in Figure 5.
There is a significant difference between South Island and North Island coal-fired heat. This could make displacement of South Island coal by renewables more difficult, especially given that woody biomass is the only alternative.
Significantly, a large premium (possibly 50% more) can be paid for gas-fired heat versus coal-fired heat. Reasons for this may include:
- Lower initial capital investment for gas
- Higher WACC/lower payback period actually required by businesses
- Convenience of gas with respect to supply and handling
- Less land is required for stores, fuel handling and for heat plant itself
- Clean nature of gas supply
- Perceived environmental benefits of gas over coal in terms of triple bottom line reporting (especially on the international scene).
Note that a unit cost for heat plant of $25/GJ equates to a unit cost of 9c/kWh.
Figure 5: Heating Options from Renewable Resources (85% Load Factor, 10% WACC), 2012/2025)
Figure 5 compares the delivered cost of energy (from the heat plant) for woody biomass and geothermal energy with the range of costs for heat from fossil fuelled plants.
From this figure the following conclusions can be drawn:
- Woody biomass is a more direct competitor to coal rather than gas. Heat from process residues should be competitive with North Island coal, and in parts of the South Island.
- Where suitably located, geothermal energy may be able to displace some coal and a baseload portion of gas if delivered in a hassle-free manner to the consumer.
- A full greenfield geothermal development dedicated to heat supply could be justified if of large scale with high load factor (and would be further helped by availability of existing wells).
- A process industry attracted to co-site by a geothermal power station could secure a very attractive heat price.
- Biomass heat plant reliant solely on forest material (if not supplemented by process residue) will be marginal or not competitive.
- Any increase in the effective gas or coal price (whether due to the need for alternative sources or due to special charges) will raise the target price range for heat and could begin to draw in a wider range of renewable heat alternatives.
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