Combined Heat and Power Plants’ Contribution of Balancing Services - Possibilities and Risks. A Case Study of a Latvian CHP Plant
(2025) MVKM01 20251Department of Energy Sciences
- Abstract
- 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,... (More) - 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. (Less) - Popular Abstract
- Combined Heat and Power: a Future Provider of Balancing Services?
With the increasing share of renewable energy in the power system, Combined Heat and Power is expected to play an important role in the future - not only by supplying district heating to local regions but also in terms of stabilizing the grid network. Increased wind and solar power in the system will increase the need for balancing services, crucial in order to maintain a stable grid frequency. This creates an opportunity for CHP plants to increase its revenue by offering balancing services while simultaneously contributing to a secure operation of the electric power system.
Several factors affect the balance between demand and supply in the power system. Sudden... (More) - Combined Heat and Power: a Future Provider of Balancing Services?
With the increasing share of renewable energy in the power system, Combined Heat and Power is expected to play an important role in the future - not only by supplying district heating to local regions but also in terms of stabilizing the grid network. Increased wind and solar power in the system will increase the need for balancing services, crucial in order to maintain a stable grid frequency. This creates an opportunity for CHP plants to increase its revenue by offering balancing services while simultaneously contributing to a secure operation of the electric power system.
Several factors affect the balance between demand and supply in the power system. Sudden weather changes affect the production from renewable energy sources. For instance, during times of little wind and few hours of sunlight, production from wind and solar is reduced. Inaccuracies in weather forecasts or technical failures in operation units or the grid system may all seriously disrupt the balance in the electricity system. Also geopolitical circumstances have shown to have an impact on energy systems. Fuel prices are often directly related to world politics.
The balancing market is evolving rapidly and the need for balancing services as well. In order to meet these new demands, technologies and new market participants are required. CHP plants have the ability to deliver both heat and electricity depending on the demand. This opens up for the opportunity to deliver electricity in times of lower heat demand, and by that, balancing the electricity system. One balancing service especially suitable for CHP plants to offer given their technical restraints, is mFRR- Manual Frequency Restoration Reserve.
This thesis investigates the possibilities and risks associated with participating in the mFRR market- offering this balancing service. With the thesis conducted at the company Energy Opticon, a case study was enabled of one of their Baltic customers; a Latvian CHP plant. By optimizing different scenarios of the Latvian model in the software Energy Optima 3, it was possible to investigate whether the profit would increase or not by offering mFRR. Is it worth the risk of wear and tear? And how easy is it to start participating in the balancing market?
The results showed an evident profit increase, especially noticeable in the intermediate seasons. With a highest profit increase of 50% for the month of October, together with the market design enabling participants to operate in the mFRR market with great freedom, the study suggests a great opportunity for CHP plants to participate in the market. By using an electric boiler to offer mFRR, not only can the profit increase but also emissions from combustion may be reduced, lowering the fuel costs and mitigating climate change! So, the question remains: to be or not to be in the mFRR market? This thesis concludes that a CHP plant with the right setup can indeed be a part of it. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9200675
- author
- Norin, Klara LU and Jonsson, Wilma LU
- supervisor
-
- Marcus Thern LU
- organization
- course
- MVKM01 20251
- year
- 2025
- type
- H2 - Master's Degree (Two Years)
- subject
- keywords
- combined heat and power, electricity market, balancing services, mFRR, Latvia, Energy Optima 3, production optimization
- report number
- LUTMDN/TMPH-25/5616-SE
- ISSN
- 0282-1990
- language
- English
- id
- 9200675
- date added to LUP
- 2025-06-17 08:37:15
- date last changed
- 2025-06-17 08:37:15
@misc{9200675, abstract = {{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.}}, author = {{Norin, Klara and Jonsson, Wilma}}, issn = {{0282-1990}}, language = {{eng}}, note = {{Student Paper}}, title = {{Combined Heat and Power Plants’ Contribution of Balancing Services - Possibilities and Risks. A Case Study of a Latvian CHP Plant}}, year = {{2025}}, }