Economical evaluation of an Italian district heating system: the results of a case study

Purpose: Recently, district heating systems are becoming more and more important in the heat market, since they can significantly reduce the environmental impact of the heat production process by deploying green and renewable energy sources like biomasses. The present work analyses the feasibility and profitability of deploying a biomass-based district heating system in a small mountain village, producing heat for the main public buildings and most of the private houses. The scope of this work is to quantify the savings the biomass district heat system will bring compared to the traditional energy source, represented by natural gas. As a result, the cost of fuel (biomass) making the investment profitable for the municipality in a scenario in which the plant is owned by an Energy Service Company (E.S.Co.) is determined. Design/methodology/approach: A feasibility study is performed on a district heating plant located in Tuscany, in order to build an economic assessment of the investment. In the proposed scenario, the plant is built and managed by an E.S.Co. and produces heat for the main public buildings of the village plus some condominiums. The cash flows related to the investment have been computed and analyzed, considering the trade of the white certificates arising from the heating system, the biomass costs and the end-user heat tariff in use by the utility. In the energy market, the price of energy produced by renewable sources is linked to the standard price of the traditional source, represented by natural gas, which is subjected to market fluctuations. The result of the study is the identification of the breakeven point for the price of the biomass fuel which generates a profitable investment, i.e. makes the biomass usage cheaper and greener than natural gas combustion. Originality/value: This study is addressed to companies interested in making investments in the field of green energies, such as E.S.Co. companies, presenting them a cost analysis related to the deployment of a district heat network. Also, municipal administrators can take advantage of the results of the present work, in order to introduce a green technology in the territory, thus preserving environment and reducing costs.