Role of power-to-heat and thermal energy storage in decarbonization of district heating

The sector integration of the heat and electricity sectors promotes the flexibility of the energy system. This, together with the already almost carbon dioxide-free electricity supply in Finland, facilitates the environmental transition to a carbon-neutral heating system. In this study, pathways to decarbonize the district heating system in Åland (an autonomous region of Finland) are explored. Especially, the roles of different power-to-heat technologies, e.g., heat pumps and direct electric heating, and thermal energy storage are investigated in the decarbonization of the district heating system. The focus is on studying the impact of varying prices in electricity markets on the operation of climate-neutral district heating systems. For this, three scenarios were modeled over the five years of 2018–2022 with varying demand and electricity market prices by using the modeling software PLEXOS. The study showed that electricity prices, but also reserve market prices, have a very significant impact on the operation cost and profit of a district heating system. Overall, electrification has the strong potential to reduce emissions cost-effectively in a district heating system, but it also makes the system vulnerable to electricity price volatility. It can be concluded that thermal energy storage and reserve market participation are crucial for protecting against cost increases and reducing investment risk.