Health Externalities and Heat savings in Energy System Modelling

Abstract

Energy consumption and production can cause air pollution with global impact, such as CO2, and local/regional air pollutants, such as SO2, NOx and PM2.5, as a result of fuel combustion. Use of fossil fuels leads to global CO2 emissions and causes global warming effects, regardless place or height of pollutant release. Furthermore, combustion of all fuels, including biomass, results in emissions of the local/regionalair pollutants. Impacts on human health are the most significant damage category of the air pollution in Europe today. This PhD study focuses on human health impacts of local/regional air pollution, caused by energy consumption and production. The costs of air pollution damages are usually external for single energy producers and consumers, and are not accounted for in their decision making. However, in energy planning, which includes a socio-economic perspective, air pollution-related external costs can be internalised, for instance, in energy system modelling. External costs of global warming and human health damage can be of comparable magnitude.However, in contrast to global CO2 impacts, air pollution damage to human health depends on a number of factors, related to location of polluting source and height of pollutant release (i.e. the scale of an energy plant). These factors should be reflected in the internalisation of the health-related externalities. This PhD study discusses how location, emission height and other factors have an effect on human health impacts and related costs. It is suggested that a more comprehensive way is used to internalise health-related externalities in energy system modelling. It is proposed that geographical areas of energy plant locations, from which air pollution causes different health impacts and resulting external costs, are identified and included in an energy system optimisation model. The performed analysis of the Danish heat and power sector concludes that accounting for spatial variation of health damage costs in heat and power system optimisation model has an effect on the optimal technology mix and distribution of energy plants among different regions. A more comprehensive representation of health-related externalities results in lower ex-post external health damage costs. Furthermore, not only scale and location, but also type of energy technologies and their use is important. Woodstoves and fireplaces, which have low costs and are popular as secondary heating technologies in Denmark, can cause indoor and outdoor air pollution locally. Hence, consumers can be exposed to their own air pollution, which can cause damage to their health. Such damage costs should be internalised in consumer decision making. The PhD study demonstrates that, when health damage costs are included in the optimisation from house owner’s perspective, use of woodstoves decreases. Air pollution and related external costs of energy consumption and production can be reduced in several ways – by applying end of pipe technologies, switching to cleaner fuels and technologies, more remote location of energy plants and by reducing energy consumption. Considerable technical potential for energy demand reduction exists, particularly in buildings. In countries with cold climate, such as Denmark, energy demand for heating of buildings accounts for a significant share of the total energy consumption. Due to the long lifetime of buildings, they are an important part of the futureenergy systems. However, energy system studies often treat energy consumption and energy savings in buildings exogenously. At the same time heat savings in buildings are usually examined separately from the rest of the energy system. This PhD study contributes to the development in energy system modelling, by including heat saving options – insulation of walls, roofs and floors, replacing of windows and installing ventilation system with heat recovery – in the Danish heat and power sector optimisation model Balmorel. Consequently, in the model, cost effective levels of heat savings can be identified and analysed in the context of the optimal heat and power system. The results of the PhD study indicate that locationof buildings is an important factor for an overall optimal penetration of heat savings. District heating systems have limited geographical scope and different composition of building stock, which is connected to a district heating network. Thus, heat savings potential and cost-effective level of heat savings varies between different district heating systems. The socio-economic heat and power system analysis with Balmorel model shows also that more heat savings are cost-effective in buildings with individual heating technologies. Furthermore, the results of the study indicate that cost-effective heat savings lead only to a small reduction of health related externalities of the optimised future heat and power system. Heating of single-family houses, which are not connected to a district heating system, has been analysed from the private consumer perspective. The results show that more heat savings are beneficial with current heating technology mix,than when consumers invest in the leastcost heating technology in the future. Possible rebound effect has been analysed, andtheoretical increase in heat service demand, after carrying out heat savings, has been calculated. This shows that 85% of implemented heatsavings would lead to reduction in heat consumption.