Designing the Heat Merit Order to determine the value of industrial waste heat for district heating systems

Abstract Using industrial waste heat increases primary energy efficiency and may reduce costs. District heating networks are a promising sink as temperatures are relatively low. Usually only the end-use prices are public; but these include network infrastructure costs, maintenance costs etc. The value of a certain kWh fed in, i.e. the current marginal cost curve for the generation of heat, are not transparent. However, current marginal generation costs are decisive for the use of waste heat as the accumulated producer surplus determines the profitability of investment. To make marginal generation costs transparent, a “Heat Merit Order” is constructed. Based on conversion factors, fuel prices, network tariffs, etc. the maximum remuneration payed by the district heating operator at a certain point of time is made calculable. For a case study, the applicability to estimate maximum investment costs is proven. In conclusion, the Heat Merit Order makes local heat generation prices transparent and allows to calculate the profitability of integrating waste heat, other heat sources and storages; it enables companies to estimate the value of waste heat and if investments are profitable. Finally, the Heat Merit Order avoids information asymmetries and thus generally supports the efficiency and penetration of district heating.