Combined Heat and Power Plants’ Contribution of Balancing Services - Possibilities and Risks. A Case Study of a Latvian CHP Plant

Sammanfattning

With the increasing share of renewable energy sources in the energy system, an increased demand for stabilizing the grid frequency has grown, suggesting a future need for balancing services, such as manual Frequency Restoration Reserve (mFRR). A promising actor able to offer such balancing service is combined heat and power (CHP) plants due to their dispatchable power capabilities. This thesis aimed at investigating the possibilities for CHP plants to participate in the mFRR market in terms of profitability, market conditions and risks. Additional benefits were also examined. The study was conducted based on a literature review and a case study of a Latvian CHP plant. The software Energy Optima 3, provided by the company Energy Opticon, was used to optimize the production of the CHP plant. Three different scenarios were optimized: the first scenario represents the current state of operation with a steam turbine and several peak load units. The second scenario consists of the addition of an electric boiler as this is expected to be installed in the near future. Finally, the last scenario includes the created mFRR model with a steam turbine and an electric boiler. The scenarios were analyzed and compared in order to assess the profitability of participating in the mFRR market. The literature review included a market analysis and a compilation of various sources to provide a comprehensive overview of the potential risks associated with such participation. The optimization results showed an increased profit when participating in the mFRR balancing market with a highest increase of 50 \% for the month of October. Further, the mFRR scenario demonstrated additional benefits, including a reduction in fossil emissions from combustion of nearly 14 \% compared to the current operation of the Latvian CHP plant. Market conditions were found favourable for actors that meet the technical requirements. Economic incentives for the delivery of mFRR exist, partly due to periods of high prices. The conclusion of this thesis is that CHP plants demonstrate substantial potential to participate in the mFRR market, provided that the technical requirements for delivering the standard mFRR product are met. Balancing market participation is expected to result in both increased economic profitability and positive environmental outcomes.