Modelling of impacts of CO2 auctions on the district heating sector

Abstract

This doctoral thesis is describing major aspects of district heating technology and its position within energy sector in the context of the Czech Republic and EU as well and the most important district heating features. According to acknowledged European methodology, district heating networks delivering heat from CHP process could be regarded as one of the most efficient solution for covering heat needs. The core of the thesis is devoted to description and modelling the factors influencing the heat market, legislation factors could be seen as most important with potential to severely influence the market conditions. Optimization model of differential NPV was chosen as optimal solution for comparing the development in business-as-usual situation and under the new requirements and each relevant legislation effect is transformed into risk factor influencing future heat prices. Model outcomes are formulated in the two legislation and three CO2 price scenarios and confirm non-symmetrical effects on the heat market participants arising from the size of installations. There are various approaches how this distortion could be addressed. Among possible solutions indirect carbon tax based tool was identified as the most appropriate way how to remedy distortions on the heat market towards inclusion of CO2 costs into price of fuels for installations outside EU ETS. This solution could be easily realized by using existing legislation tools and application of possible remedial tool on the heat market is described. Results of these analyses support the idea of necessity to introduce this type of tool as soon as possible in order to avoid undue competition distortions on the heat market in the Czech Republic.