CHP is firmly embedded in the Republic of Korea, mainly due to its role alongside the country’s extensive district heating systems. The country now has ambitious plans for the expansion of both technologies and is working on district cooling technologies too, writes David Hayes following a recent visit.
Headquarters building of the Korea District Heating Company
Government plans call for the number of district heating users to increase by one third over the next four years as part of wider efforts to increase clean energy consumption at a time of rising energy costs, without slowing down economic growth.
The government’s target will also help boost the use of renewable energy in South Korea, as all district heating companies building new CHP units are required to build renewable energy projects whether or not they are connected to those district heating projects.
South Korea’s district heating market has expanded steadily during the past decade, due to the increase in the number of nuclear families living in high rise apartments, and government support for CHP through its planning policy and tax incentives. The population of 49 million consists of 14.4 million households, of which 1.87 million households, or 13% of the total, use district heating.
Government plans call for another 670,000 households to use district heating by 2013 to meet stricter environmental targets. The number of households using district heating will grow by 36%, with almost one in six households planned to use district heating by the end of the current CHP development phase.
The government’s plan is to extend district heating to 2.54 million households, so it is a big increase in three years,’ commented Chul Jong Yoo, senior manager of Korea District Heating Corporation’s (KDHC) global business team, ‘Most of the new users will live in the Seoul-Incheon area as the climate is colder there and the population density is high.’
Growing energy demand
South Korea’s rapid development as a major economic and industrial power has resulted in a surge in energy demand.
As the country lacks any significant indigenous energy resources of its own, South Korea relies on imports for 96.6% of its energy needs. According to Korea Energy Economic Institute (KEEI), primary energy demand will grow at an annual rate of 2.7% until 2020, while electricity demand growth is projected at 2.5% per year over the same period. Industry accounts for almost half of electricity demand, while residential use represents a further 24%. With industrial use of electricity expected to grow more slowly in future, the residential and commercial sectors are expected to account for most new electricity demand, with CHP district heating having a potentially important role to play.
South Korea’s electricity industry is dominated by coal fired generation and nuclear energy which, according to KEEI, together accounted for more than 70% of the total 403 TWh generated in 2008.
|The 43 MWe Suwon CHP plant started up in December 1997|
Liquefied natural gas (LNG) accounts for a further 20% of power generation while CHP accounts for 8%, most of which is based on district heating applications. The government plans to increase the share of nuclear power in the country’s energy mix and wants to increase the share of LNG for heating and electricity generation, including LNG use in CHP plants.
Korea District Heating Corporation
One district heating supplier looking to expand its operations in future is state-run Korea District Heating Corporation (KDHC), which recently completed a successful listing on Seoul Stock Exchange as part of efforts to raise funds for future expansion.
KDHC is South Korea’s and the world’s largest district heating company, supplying 1.1 million households, which represent 59% of all households using district heating. Various other private companies and municipal agencies supply the other 770,000 households with district heating.
Headquartered in Seoul and employing 1130 staff, KDHC reported annual revenues of US$1.2 billion from assets worth $2.6 billion in 2009 and a net income of $132 million for the year. The company sells over 11.6 million TWh a year, of which about 90% is used by households.
In January 2010 KDHC raised $125 million through listing 25% of its stock. The newly raised finance is being used to build four new CHP facilities that range from 99 MW to 515 MW installed capacity and to extend district heating services into new areas in and around the capital, Seoul.
The government remains KDHC’s largest shareholder following the listing, owning a 34.5% stake, while state-owned Korea Electric Power Company (KEPCO) holds 19.6% and government-owned Korea Energy Management Corporation (KEMCO) 10.5%. The other shareholder is Seoul metropolitan government, which owns a 10.4% interest.
‘We are expanding our business into many areas so we need money to invest,’ Yoo explained, ‘Competition for the district heating market is increasing. We are a public company but private companies are trying to enter this business. District heating is growing quickly as it is cheaper than installing gas fired boilers. Households are the main market at present.’
With government support, KDHC has pioneered the district heating industry in South Korea and today supplies more than one million customers.
According to KDHC, the company supplies 62% of South Korea’s district heating market, followed by GS Power with a 15% share. Other suppliers include Seoul City government, five city gas utilities, local municipal companies, private companies and public companies.
Steam from CHP plants
KDHC was established in 1985 to supply district heating in Seoul. However, due to the company’s initial small size, the government decided that KEPCO – at that time the monopoly integrated power generation, transmission and distribution utility – should operate CHP plants and sell steam to KDHC.
Times have changed, and Yoo observed: ‘Now we have enough money to build our own CHP plant projects. We completed our first CHP power plant in 1997, a 44 MW unit in Daegu city. Today we still buy steam from KEPCO and operate our own CHP facilities as well. We have investigated the feasibility of buying the CHP units from KEPCO but the units are too big, as each one is 900 MW or more, while our biggest CHP unit at present is 525 MW. KEPCO’s units are too big for us to buy.’
CHP plants totalling 2907 MW installed capacity supply KDHC with steam. KEPCO supplies steam from two CHP plants totaling 2188 MW in capacity located at Bundang, in the southern outskirts of Seoul, and Goyang, in the northern outskirts of Seoul.
Meanwhile, KDHC owns four operational CHP plants with a combined capacity of 709 MW, while new CHP units totaling 801 MW are being installed.
KDHC’s operational CHP plants include its first CHP facilities. The company’s original units are the 46 MW plus 83 Gcal Daegu plant commissioned in March 1997 that burns Bunker C oil, and the 43 MW plus 71 Gcal Suwon plant fuelled by low sulphur waxy residue that started up in December 1997.
KDHC also operates the 61 MW plus 105 Gcal Cheongju plant that was commissioned in October 2000 and burns bunker C oil, and the 512 MW plus 37 Gcal Hwasung plant, which started up in December 2007, becoming the company’s first CHP plant to burn natural gas.
Electricity generated by KDHC’s CHP plants is sold to the Korea Power Exchange electricity market operated by KEPCO, which is the electricity market that all South Korean generators supply their power output to.
Rising heating tariffs
Yoo pointed out that, at one stage, KDHC bought heat from four KEPCO CHP plants. The number later dropped to two when KEPCO decided to sell two gas fired combined cycle CHP plants in Bucheon, near Incheon, and in Anyang, near Suwon, to GS Power in 2000, after the government decided to encourage private investment in district heating.
‘We sold our entire district heating systems supplied from the Bucheon and Anyang CHP plants to GS Power, so they bought KEPCO’s CHP plants and our district heating systems for those two cities,’ said Yoo.
‘The reason we sold off our Bucheon and Anyang district heating systems is that they were stand alone systems and not connected to our main transmission district heating network.’
The government’s trial district heating privatization soon generated widespread complaints after residential heating tariffs rose 35% following the GS Power takeover of Bucheon and Anyang CHP plants and district heating systems.
‘There was a public protest after the heating price rise and so the government gave a subsidy to GS Power to bring down the price,’ Yoo recalled.
‘Today GS Power is still the only district heating supplier in each of those cities. Their tariffs are the same as ours now. All tariffs must be government-approved. Heating tariffs are important and we review our tariffs four times yearly which depend on fuel costs, largely LNG.’
Meanwhile, the backbone of KDHC’s district heating network is a 1435 km heat transmission pipeline system that supplies Seoul, with its population of 10 million people, including residents in the newer Kangnam commercial and residential area south of the Han River, as well as the surrounding Gyeonggi region, also home to around 10 million people.
We have a good pipeline network and we can operate effectively,’ Yoo remarked, ‘We are still expanding our hot water transmission pipeline network. If we get new business we increase our facilities.’
KDHC’s district heating transmission pipeline network has been constructed using mostly 800 mm diameter pipe, along with some larger 1200 mm diameter sections. A range of smaller diameter pipe sizes have been used to construct the district heating distribution network.
The heat transmission pipe consists of a steel carrier pipe surrounded by a polyurethane foam insulation layer that contains heat transmission pipe monitoring wires, protected by a polyethylene jacket pipe.
‘We have enough heating capacity at present as all our CHP systems are connected. But when a new customer wants to change from central heating to use district heating we have to check our capacity first,’ said Yoo.
‘Sometimes we need to increase the capacity of our CHP facility to supply them, but usually we use our transmission network to supply heat to places demand is growing.’
In addition to serving the Seoul-Incheon conurbation through its transmission pipeline, KDHC operates standalone district heating systems serving various other cities in South Korea .
The company owns a 44 MW CHP system in Daegu in the centre of the Korean peninsula that serves 108,000 households, while in the southeast of the Korean peninsula near the city of Busan KDHC serves around 77,000 households connected to two nearby systems. A hot water boiler system in Yangsan serves 46,000 households while a separate hot water boiler system in nearby Gimhae serves 31,000 households.
Elsewhere, the company operates a 61 MW system in Cheongju that currently serves around 10,000 households.
KDHC’s Five-year expansion plan
KDHC’s Five Year Plan calls for the company to increase its customer base to two million households by 2015.
District heating sales worth KRW 2.6 trillion (US$ 2.2 billion) are targeted for 2015, when the company’s assets are expected to be worth KRW 4.5 trillion.
Plans to almost double the number of residential customers are aimed at ensuring continuing district heating sales growth as individual household district heating consumption is unlikely to grow in future.
In spite of the company’s ambitious plans to expand its district heating customer base, KDHC is relying on the government to approve new housing areas to be served by district heating, but not piped city gas distribution as well.
This is because in areas chosen to install piped city gas distribution networks, the district heating system is also built by the city gas company selected to install the piped gas system.
Consequently KDHC can only compete to install a district heating system in an area which is not slated to install a city gas distribution network.
In these areas KDHC competes to be appointed the sole district heating provider against other district heating companies and city gas companies also wanting to install the district heating system.
The expansion of district heating currently depends on government planning policy, and the initiative of individual district heating companies. At present the government, in co-operation with local municipal authorities, designates areas where district heating is to be installed.
KDHC and other district heating companies then compete to be appointed to install and operate the new district heating system in the designated area.
‘Also, in areas where there is no existing district heating system, if two-thirds of the population ask us to supply them, then we can convert their existing central heating systems to district heating,’ said Yoo.
‘We remove their boilers and install a heat exchanger. Many apartment owners are deciding to install district heating.’
New CHP capacity
Meanwhile, KDHC is building four new CHP plants totalling 801 MW plus 763 Gcal that will lift the company’s total capacity to 1,510 MW plus 1,419 Gcal by the end of 2011 when all the projects are completed.
Each of the new CHP units is designed for combined cycle operation and to burn imported LNG.
‘These four new CHP units supply new cities and towns in their area,’ Yoo said, adding that the CHP units enter service before all generating units are installed for full combined cycle operation. ‘These are new greenfield towns with 20 to 25 storey apartment blocks. The government has designated all of them to install district heating.’
Table 1 gives the details of the four proposed plants.
KDHC’s CHP plants are installed with equipment from various suppliers including steam turbines from Doosan Heavy Industries and gas turbines from Mitsubishi, GE and Westinghouse.
The 44 MWe CHP system in Daegu is in the centre of the Korean peninsula
Boilers from Hyundai Heavy Industries, Doosan Heavy Industries and other suppliers have been installed in the various units.
Natural gas accounts for about 75% of KDHC’s fuel requirement, while bunker C oil and low sulphur waxy residue represents most of the remaining fuel use.
Yoo pointed out that most district heating is produced by gas fired units in South Korea due to government regulations that require all power plants that are located within urban areas to use gas – as oil and coal are not permitted to be used within cities to avoid atmospheric pollution.
Towards domestic district cooling
KDHC purchases its gas requirements from Korea Gas Corporation (KOGAS), the country’s leading LNG importer. KOGAS like KDHC was set up by state-owned KEPCO to import LNG for its power stations, and later expand its LNG import market to supply city gas companies that converted from other feedstocks, including naphtha to distribute natural gas.
South Korea’s climate features cold winters and hot summers. Consequently, energy providers are faced with high fuel demand for heating in winter and then high demand for cooling in the summer. A seasonal energy imbalance has grown as a result.
KDHC faces a similar seasonal imbalance in consumer demand for district heating to KOGAS – which experiences high gas demand in winter for heating but then sees gas sales fall in summer when many customers switch to using electricity for air conditioning, as gas-fuelled cooling is not widely used. District cooling is one of the options that KDHC is looking into in a bid to develop its summertime business.
‘We have the same problem. Our summer load is very low compared to the winter load as we do not need heating in summer,’ said Yoo.
‘We have installed absorption chillers for district cooling but this is just for commercial buildings. Now our R&D division is researching how to supply district cooling to apartments using desiccant chillers that extract moisture from the air to remove humidity. We hope to complete this research project in one to two years’ time.’
KDHC currently supplies district cooling to 321 building complexes of various sizes. Most of the commercial buildings supplied are department stores, hospitals and government buildings.
The government is supporting the district cooling project, which is expected to involve installing desiccant chillers in individual apartment blocks. KDHC’s R&D centre is looking at ways of using the company’s existing heat distribution pipes to supply district cooling in apartment buildings due to difficulties expected in installing dedicated distribution pipes for cooling only.
Meanwhile, KDHC also produces a small amount of CHP using renewable energy sources.
‘We have small CHP incinerators using waste at a 13 MW plant in the southern Kangnam area of Seoul,’ said Yoo.
‘Also, we plan to use wood chips for a very small 3 MW CHP plant in Daegu. It’s under construction for completion this November and will start up soon afterwards.’
Renewable energy production is part of KDHC’s social obligation as a district heating supplier. ‘Under the Renewable Portfolio Standard (RPS), the government has stipulated that if we build a CHP facility we must install a renewable power facility somewhere and not necessarily connected to CHP production. So we have to expand our portfolio of renewable energy projects,’ Yoo explained.
‘In 2009 some 13.5% of our electricity production was renewable. Our target is 15% by 2016, which is a lot as we are building four more CHP plants totalling 805 MW.’
Apart from convenience, another reason for the popularity of district heating is that the use of underfloor heating has a long history in South Korea, where originally it was used to heat traditional single storey houses and other buildings. The Korean Ondol system involves the use of wood fires which release their heat into channels under the floor of a building to create underfloor heating. Heat dispersion using the ondol system is uneven, however, with floor areas of the heated building closer to the fire being warmer than floor areas located further away from the heat source.
Modern district heating in South Korea, by contrast, involves running hot water pipes under the floor of each residence which, mainly being in apartment blocks, are made of reinforced concrete. Each room in an apartment fitted with district heating is equipped with a thermostat, while a central heating control system is installed to control the room temperature in each apartment.
‘Individual household use of district heating is not going up as building technology and construction are improving; also, home insulation is better now,’ Yoo noted, ‘The average household in Seoul consumes about 1 gigacalorie per month of district heating in winter, which runs from October to March.’
David Hayes writes on energy matters in Asia.Email: firstname.lastname@example.org
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