PHOTO: Claus Peuckert Photography

Transcription

1 ANNUAL REPORT 2014

2 Avedøre CHP Plant turns green The year s photos were taken at Avedøre CHP Plant, Denmark s largest power stations. From the autumn of 2016, Avedøre CHP Plant will produce heat 100% based on wood pellets and straw instead of coal and gas. Read more about the green conversion in case 3 Logistics for the advanced and in case 4 Green heat ahead. PHOTO: Claus Peuckert Photography

3 CONTENTS PREFACE Too expensive to save money 5 BACKGROUND Information about the company 6 MANAGEMENT S REVIEW Key figures 8 Contracts 9 Expectations for CASES Vision 12 Visions put into practice four cases 13 An industrious cooperation 14 VEKS gives ground 17 Logistics for the advanced 19 Green heat ahead 22 ACCOUNTS 25 Management Statement 26 The independent auditor s report 27 Accounting policies 28 Statement of accounts 32 Income statement 33 Balance sheet as at 31 December 34 Statement of changes in equity 36 Cash flow statement 37 Notes 38 ORGANISATION Officials committee 44 User Council 44 VEKS organisation, at the beginning of

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5 Preface Too expensive to save money An approach which is too thrifty may have tiresome consequences for the development of district heating. Also outside Denmark s borders where people have finally become aware of how SMART district heating is... The green conversion has already left a profound trace. In VEKS environmental declaration, the CO 2 content in the district heating is now reduced to 50% since the year This has been possible thanks to a stable political framework carried on at a local level. In Vestegnen (Western Copenhagen), VEKS Board of Directors made a very visionary decision back in 2010, viz. to deliver CO 2 neutral district heating to their customers from And how has VEKS managed to get this far so fast? The first four steps We took the first small step in 2012 when we acquired DONG Energy s biomass-fired (wood chips) CHP plant in Køge. Within a few years, the CHP plant in Køge will deliver well over 10% of the total heat to VEKS customers. At the same time, the plant will produce three times as much green electricity than VEKS consumes. Thus, VEKS will become a net exporter of green electricity for the electricity grid. The other step was taken in 2014 where unit 2 of the Avedøre CHP Plant was rebuilt to deliver 100% bio-massbased district heating (wood pellets and straw). The third step though a modest one we took the same year when entering into an agreement in principle with Solrød Biogas A/S. The agreement implies that VEKS shall take biogas for one gas engine at VEKS district heating plant in Solrød. The heat will cover 1% of the heat requirement with VEKS customers and the electricity produced is delivered into the electricity grid. The fourth and most recent, however, not the last step on the green conversion path has been taken. DONG and VEKS have just signed an agreement partly on converting unit 1 of the Avedøre CHP Plant for bio-mass and partly to extend the life of the plant until The fruit of the conversion is that the plant will deliver 100% biomass-based district heating by the end of Now we only need to change oil and natural gas at peak and reserve load stations within VEKS supply area to biofuel. Today, the production covers approx. 1-2% of the total heat production for VEKS customers, however, the share may increase concurrently with the fact that district heating is extended all over the Vestegnen. Moreover, the waste which is based on oil (plastic) must be sorted out at the waste incineration plants. VEKS does not have any direct influence on the last-mentioned matter. However, is it possible to go further with the green conversion and growth? Strengthened or hindered growth The district heating companies must be managed more efficient and economise the sector needs to be adjusted, states the Danish Folketing.. The current non-profit model can be changed to a model with revenue frames where the owners of the district heating companies may earn money on delivering district heating. The purpose was to establish growth. In a district heating company, fuel and purchase of heat constitute 80-90% of the total expenses. Therefore, savings could in reality be obtained in connection with administration and maintenance. If reductions in maintenance is realised, at least two problems arouse: The problem is only put off. You may also save money by not seeing your dentist... or by avoiding sending your car to a service check... How about taking a glance at the electricity sector which is already subjected to an earnings frame-work? The back-pay for maintenance is assessed to amount to DKK four billion. When you save money on maintenance, the demand for manpower and components is reduced. A weak home market reduces the possibilities of an increased export. In the EU, district heating has finally obtained a central position and is an integrated part of the SMART CITY concept which they take steps to implement all over Europe. If the domestic market is undermined, the development of the district heating technology is inhibited. It is not SMART. A new decision process VEKS constantly works on realising the political climate and energy goals, however, it requires close interaction with the Danish Folketing. The current political desires to introduce earnings frames in the district heating sector may harm the reliability of supply, inhibit the extension of district heating at home and abroad and reduce the export possibilities. Are the number of unintended negative effects for Danish workplaces and exports really what we want? Steen Christiansen Chairman ANNUAL REPORT

6 Background Information about the company VEKS, Vestegnens Kraftvarmeselskab I/S, is a transmission company supplying heat to 21 local district heating companies at Vestegnen, a suburban area west of Copenhagen. The local district heating companies manage the further distribution to private consumers, business customers and institutions. The heat supplied equals the consumption of app. 150,000 families. Environment and fuel savings VEKS was founded in 1984 with the company s primary mission being to utilize heat from the CHP plants and surplus heat from waste incineration, major industrial enterprises, etc. This is for the benefit of the national and customer economy and the environment. Fuel consumption has been reduced to 1/3 after the establishment of VEKS, when comparing with a situation where heat had to be generated in oilfired boilers at the local district heating companies. This means that CO 2, sulphur and nitrogen emissions have also been reduced considerably. VEKS environmental management system has been approved under the EMAS directive and standards. VEKS district heating system A total of 135 km of double pipes have been laid with nine pumping stations and 48 heat exchange stations transmitting heat to the local district heating systems. The majority of the heat is supplied to VEKS from Avedøre CHP Plant and the other CHP plants in Copenhagen and from the waste incineration plants KARA/NOVEREN and Vestforbrænding. The transmission system is controlled, adjusted and monitored from a 24-hour manned operations centre located in VEKS headquarters in Albertslund. Supply security is high in the area, with 26 local boiler stations being used as reserves and for peak load during particularly cold spells. In recent years VEKS has expanded its business area from being strictly a transmission company to also include distribution as well as production activities. The distribution activities focus on building and operating Køge District Heating and Tranegilde District Heating. Moreover, the company owns and operates Køge CHP Plant which partly produces steam for Junckers Industrier A/S and partly district heating for VEKS transmission systems which again distributes to local distribution companies, including Køge District Heating. In the beginning of 2015 a new transmission pipeline to Køge will be connected to VEKS existing transmission system. This means that the production capacity of Køge CHP Plant can be fully utilised. In addition, VEKS sells electricity to the electricity network from Køge CHP Plant. Finances and organisation VEKS is a joint municipal partnership which is run as a nonprofit company, in accordance with the legislation in force. In April 2015 VEKS had 69 employees - divided between the main office at Roskildevej in Albertslund and Køge CHP station. 12 municipalities at Vestegnen with a total of 430,000 inhabitants are jointly and severally liable to VEKS. The 12 municipal partners include: Albertslund, Brøndby, Glostrup, Greve, Hvidovre, Høje-Taastrup, Ishøj, Køge, Roskilde, Rødovre, Solrød and Vallensbæk. Applicable law As mentioned earlier, VEKS includes a collaborative entity of 12 municipalities and must therefore adhere to Section 60 of the Danish Act on Local Government. This means stricter terms for taken up loans than those applicable both to consumer and sole municipal owned heat supply companies. As a collaborative heat supply company, VEKS must follow the regulations provided in the Heat Supply Act when carrying out its business, including the pricing of heating tariffs. This means that VEKS is run according to a non-profit principle, under which the company s pricing of heat must allow for income and expenses to balance over a number of years. Auditors BDO Statsautoriseret revisionsaktieselskab, Ownership of municipal partners Vallensbæk 1.42% Solrød 2.31% Rødovre 5.78% Albertslund 13.21% Roskilde 18.05% Køge 6.63% Ishøj 3.82% Høje-Taastrup 14.01% Brøndby 10.14% Glostrup 5.69% Greve 5.78% Hvidovre 13.16% 6 ANNUAL REPORT 2014

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8 Management Review Key figures The company s development over the past five years can be described as follows: Key figures (DKK million) Net turnover 1,089 1,159 1, Operating profit or loss Financial income and expenses, net Net profit or loss for the year Equity, at the end of the period Assets, total 1, Number of employees Average interest rate in % Net profit for the year totalling DKK 21 million. The equity constitutes DKK 122 million as at 31 December At the beginning of the year, it was expected that the district heating production at Køge CHP Plant was to be connected to VEKS joint transmission system in autumn 2014 whereupon the production capacity at Køge CHP Plant could be fully utilised. Due to delays in the establishment of the pipeline between Køge and Greve, the connection was delayed. This entails that the production capacity at Køge CHP Plant is only used to a very limited degree for district heating production, locally in Køge. During the first half of 2014, all district heating companies at Vestegnen have paid DKK /GJ in variable prices and during the second half DKK 95.55/GJ. The average variable pool price for 2014 constitutes DKK /GJ. The realised average fixed price was DKK 16.29/GJ. Heating tariffs paid by the customer 1,800 DKK/MWh 1,600 1,400 1,200 1, COOP Tjørnelyparkens Varmecentral Greve Fjernvarme Brøndby Fjernvarme a.m.b.a. Hvidovre Fjernvarmeselskab a.m.b.a. Mosede Bypark Mosede Fjernvarmeværk Albertslund Forsyning Average price, distribution Roskilde Forsyning Ishøj Varmeværk Vallensbæk Fjernvarme Nord Vallensbæk Fjernvarme Syd Svogerslev Fjernvarme a.m.b.a Høje Taastrup Fjernvarme a.m.b.a Rødovre Kommunale Fjernvarmeforsyning Tranegilde Fjernvarme Køge Fjernvarme Glostrup Forsyning Solrød Fjernvarme a.m.b.a Oil, individual Natural gas, individual The heating prices paid by the district heating customers at Vestegnen can generally compete with individual heating with natural gas or oil for a standard home. Assumption: The prices pursuant to price statistics of the Danish Energy Regulatory Authority reported by the local companies December The average heating price is based on calculations made by the Danish District Heating Association for a standard home of 130m 2 with an annual consumption of 18.1 MWh. There is no guarantee that all companies supply the type of standard home mentioned. The price is exclusive of connection fees. The supply point between district heating company and customer may vary from company to company. The price of heating with oil or natural gas is provided by the Danish District Heating Association. The prices are inclusive of VAT. 8 ANNUAL REPORT 2014

9 Management Review Contracts DONG Energy The negotiations between DONG Energy and VEKS about the conversion of Avedøre CHP Plant, unit 1, to 100% biomass, and service life extension of the power station unit to 2033 were concluded immediately before New Year. The contract, which will be effective from , is expected to be signed in the first half of The agreement is based on the agreement on converting Avedøre CHP Plant, unit 2, which was entered in As part of the Avedøre 1 agreement, it is ensured that the investments incurred by VEKS upon the conversion and service life extension of the unit is paid immediately. Thereby, VEKS financing is not as expensive as if DONG was to provide the total investments, and the cost of capital is reduced which benefits the heating prices. VEKS risk of presenting an immediate payment is covered through relevant guarantees from DONG. Throughout 2013, VEKS/CTR/HOFOR have negotiated with DONG about the heating companies possible purchase of DONG s HGS share (Hovedstadens Geotermiske Samarbejde) where DONG held an ownership interest of 46%. In November, the parties agreed on the terms for the heating companies takeover of DONG s share of HGS. Retrospectively from 1 January 2014, VEKS/CTR/HOFOR have therefore appeared as the partners behind HGS with a share of 1/3 each. In 2014, VEKS/CTR/HOFOR have, moreover, worked on developing a basis for decision in connection with the potential establishment of the next geothermal plant in Copenhagen. The work is expected to be ready by the end of Vestforbrænding No new agreements were made with Vestforbrænding in KARA/NOVEREN Already in 2010, VEKS and KARA/NOVEREN started the negotiations regarding a new heating agreement based on the fact that KARA/NOVEREN started using a new CHP unit boiler 6 in June The new boiler started operating commercially on 1 January 2014 and the agreement was signed in the first half of At the same time, the parties have agreed that they would try to find a model which could ensure a stable forward-looking pricing of the heat supplies before the end of Junckers Industrier VEKS has two agreements with Junckers Industrier. One of the agreements is about delivering process steam and the purchase of wood chips, sawdust and sanding dust for the period of 1 May 2012 to the end of The other agreement concerns the mutual purchase of services such as expert advice, the handling of foreign wood chips, a share in a fire engine and the production of processed water. The individual services of the last mentioned agreement can be terminated at six months notice by the end of a calendar year. Since 1 May 2012, two supplements to the agreements have been made. Supplement 1 is about VEKS takeover of a Junckers line from Køge CHP Plant to Køge Pumpe- og Vekslerstation. Supplement 2 is about the future recognition of the operating loss of Køge CHP Plant on steam supply to Junckers in the period of 1 May 2012 to 30 June It has been agreed that another three supplements to the supply agreement should be prepared. Primarily, they relate to Junckers supply of wood chips. ANNUAL REPORT

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11 Management Review Expectations for 2015 In 2014, VEKS/CTR/HOFOR have worked on developing a basis for decision in connection with the potential establishment of the next geothermal plant in Copenhagen. At present, the economy of a plant of this type is not favourable in the Greater Copenhagen area. Therefore, the companies are analysing the required changes of capital expenditure, changes in the tax and/or subsidy regime in 2015 for the total economy of a new geothermal plant to be acceptable compared to the alternative heat production in the Greater Copenhagen area. Since 2011, Solrød Municipality and VEKS have considered the possibilities of utilising biogas from a future biogas plant in Solrød in a small CHP plant where the surplus heat may be sold to VEKS. Solrød Biogas A/S owns the biogas plant and the gas engine is owned by VEKS. The plant will be up and running in the second half of 2015 and the surplus heat from the plant will represent approx. 1% of the total heat production for VEKS. The negotiations between DONG and VEKS regarding the reconstruction of Avedøre CHP Plant s unit 1 for biomass and the service life extension of the unit to 2033 are expected to be signed in spring The unit will produce 100% biomass-based district heating from 1 January The new transmission pipes from Køge to Greve were expected to be commissioned in The commissioning was delayed and therefore Køge CHP Plant will not deliver biomassbased, low-cost district heating in VEKS transmission system until spring In the small industrial area of Ishøj, VEKS manages the conversion of natural gas customers to district heating. When the project is realised in spring 2015, a transfer of the project from VEKS to Ishøj Varmeværk including rights and liabilities. VEKS will set up and run Køge District Heating and Tranegilde District Heating which are expected to be ready in 2022 and 2017 respectively. ANNUAL REPORT

12 VEKS vision VEKS will: Based on Vestegnen be a dynamic district heating company in an ongoing development. This means that we will: Maintain high reliability of supply Reduce expenses for operation and maintenance by optimum utilisation of resources Constantly be competitive Present ourselves as an active and trustworthy business partner Be environmentally conscious Keep our knowledge up to date Create an optimum framework for the development of district heating and thus of VEKS Be a responsible and attractive workplace. This means that we will: Show social responsibility Motivate and involve our employees Ensure a high level of competence with our employees 12 ANNUAL REPORT 2014

13 Visions put into practice Cases Four cases that show the breadth of VEKS many functions and development areas Again this year, we want to portray four examples of very different everyday tasks. Common to the four cases are that they are practical, future-oriented and relate to the vision of VEKS. Case 1 Case 2 Case 3 Case 4 The case An industrious cooperation is about a rather untraditional, new servicing agreement at Avedøre CHP Plant. Here, the three strategies maintain high reliability of supply, reduce expenses for operation and maintenance by optimum utilisation of resources and keep our knowledge up to date and present ourselves as an active and trustworthy business partner are touched. What are the implications to VEKS when the new railway Copenhagen-Ringsted moves hasty through the country? The case VEKS gives ground demonstrates several strategies: Maintain high reliability of supply, present ourselves as an active and trustworthy business partner and create an optimum framework for the development of district heating and thus of VEKS. Logistics for the advanced is about the challenges relating to the fact that Avedøre CHP Plant will soon be converted into biomass. This case is an example of maintaining high reliability of supply, constantly being competitive and being environmentally conscious. The case Green heat ahead reflects the fact that people at Vestegnen (Western Copenhagen) are already working at many levels and fronts on achieving the political environmental and climate objectives. Here, the strategies to be environmentally conscious and create an optimum framework for the development of district heating and thus of VEKS are covered. ANNUAL REPORT

14 case 1 An industrious cooperation Untraditional maintenance agreement with the heating companies and DONG Energy Despite the fact that Avedøre CHP Plant is owned by DONG Energy, VEKS and CTR also have a share in the big plant. The two heating companies have paid for the pumping station, parts of the Scada system and all installations which are necessary to the district heating production in the plant and two thirds of the heat accumulators. DONG owns the last third as the accumulation of heat may help optimising DONG s power production. In general, Varmelast.dk handles Maintenance In general, the maintenance is a popular focus area when it comes to savings because you can see it immediately on the bottom line. However, VEKS philosophy has always been that it may be expensive to be economic. In the worst-case scenario, savings may result in a breakdown involving considerable extra costs. VEKS maintenance philosophy could be summed up to three conditions: Nobody must get hurt. The reliability of supply must be close to 100% with downtime incidences of max. 24 hours (which we have always lived up to). The values the asset must be ensured in the best possible way. the operation of the heat accumulators by optimising the overall production of both district heating as well as electricity. General maintenance Usually, VEKS is responsible for planning and performing the maintenance of their own system. However, all components related to the heat production in the Avedøre CHP are maintained by the employees of DONG that owns all technical installations, land and buildings. More specifically, DONG s maintenance work covers the general and preventive maintenance, e.g. the ten big district heat pumping installations which pump the district heating water into the system (see the box: Replacement of flaps ). The general agreement on heat purchase in the Avedøre CHP Plant implies that VEKS and CTR pay the maintenance expenditures which may be related directly to the heat production. Besides the essential Thereby, the heating companies cover the fixed and variable costs to the general maintenance which comes naturally with a plant of an earlier date. In addition, the heating companies will do whatever they can to avoid damage and repairs as this involves an expensive heat production on local peak load boilers, especially during the winter. Therefore, the heating companies often place heavier demands on preventive maintenance than required by the agreements. But who is to start this kind of extra work? And who is going to pay for it? Replacement of flaps A concrete example of a realised sales project is the replacement of flaps in ten counter valves. The flaps in counter valves are found in the valve immediately after the large pumps at the pumping station of Avedøre CHP Plant. The problem was that the flaps in the counter valves could get stuck which resulted in an unstable pumping performance. When the pumps are not running constantly, the operation of district heating, the power consumption get unnecessarily high and the risk of surge in the system increases. This project was not relevant to the power production and therefore obvious to a heating financed servicing project, a sales project. DONG prepared project proposals, timetables and everything that relates to realising the renovation of the counter valves. As the project went along, the heating companies were invited to participate to the extent of their abilities and interest. It is moreover large units. The valve alone weighs almost a tonne. Besides replacing the large iron flaps in the valves, the activation method was changed. Before, the flap in the counter valve was opened by the water flow of the pump. Now, the counter valve is controlled so that it no longer offers resistance in the water flow. It means savings in the electricity consumption and a higher pump capability service. 14 ANNUAL REPORT 2014

15 case 1 A couple of years ago, the business partners decided to introduce a new arrangement called sales projects. They were called sales project because DONG is selling extra maintenance projects to the heating companies. Formally speaking, the sales projects or the extra maintenance, which they are also called, form a new operating agreement which was signed by the parties in the autumn of You get what you pay for This new challenge makes it possible for DONG and the heating companies to assess the condition of the various components together. Due to the risk of breakdown in the middle of a cold period, the heat supply wants to replace dubious components prior to the heating season. It could for instance be an old valve which may last another season. Another example could be that the bearings on an engine show signs of wear but repairs could still wait a while. In these situations, the heat supply wants to be on the safe side and thus get an assessment and price on the repairs needed before breakdown or repairs. To avoid breakdown at the most inconvenient time, e.g. between Christmas and New Year... Another important matter which is discussed between the heating companies and DONG is how many and which components should be carried in stock. The maintenance projects in the Avedøre CHP Plant differ from VEKS own projects because the heating companies order and finance projects (VEKS owns the projects) together with DONG and DONG is responsible for the project management, control and realisation. And it works! Naturally, the heating companies track the projects closely to ensure that the timetable and budget are observed. Confidence and experience are the keywords behind a successful cooperation. And confidence in required costs only. The agreement between DONG and the heating companies is neutral when it comes to finances as DONG has to earn its money on power and heat production and not on handling the maintenance of VEKS and CTR stations. The maintenance projects are tied up on required costs only. Therefore, the heating companies get what they pay for. Profitable cooperation The heating companies and DONG meet every three months to discuss the latest incidents, operating status, planned large projects and future reviews in the Avedøre CHP Plant. Reviews of a power station block typically take place during the summer period and rarely on both blocks at the same time. By virtue of these meetings, VEKS and CTR coordinate the large projects in the Avedøre CHP Plant with the heating companies own maintenance assignments. Planning is DONG s keyword however also when it comes to VEKS own maintenance projects not least due to the many components which are not standard components. Often, the delivery time on elements and parts is several months, even years. The new model with sales projects has worked satisfactorily and naturally also builds on the fact that the parties have cooperated on optimising the power and heat production. At the same time, the heating companies and DONG have developed a number of efficient routines through the years which, among other things, have resulted in qualified maintenance plans and project work. The basic control devices in the valve was replaced. The old spring device has now been replaced with a motor-operated counter valve which is installed directly on the valve. Thanks to the new control, the pump no longer has to use energy to open the counter valve. The result: Considerable electricity savings and improved pump efficiency. DONG s realisation of the pump project went as planned and on time. In total, it amounted to approx. DKK 4.5 million. The bill was shared between VEKS and CTR with 61% and 39% respectively which should be considered in relation to the heating effect which the companies have at their disposal in the Avedøre CHP Plant. ANNUAL REPORT

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17 case 2 VEKS gives ground When the new railway Copenhagen- Ringsted moves forward through the landscape, VEKS gives room on time In recent years, VEKS world has been affected by a great amount of construction work in particular a new railroad through the landscape has left traces. Holes have been dug, pipes have been moved, a bridge has been built, new buildings have been erected and much more. In 2010, the Danish Folketing adopted two large projects which are to make the Greater Copenhagen infrastructure more flexible: a widening of the motorway between Greve (south) and Køge and the construction of a whole new railway. Today, the work has long left the drawing table and the railway and motorway have already left its marks. At first, VEKS felt safe with their listed pipes which were in preserved areas. However, some of these preserved areas are now construction sites for both the railway and motorway. VEKS gives room To VEKS the construction of the new railway in Hvidovre has resulted in a large reorganisation of the transmission pipes and a rub-off on two buildings which was in the routing of the railway. Later on, it turned out to be one instead of two building. One of the buildings, the one on Allingvej Afgrening, survived, but only just. Test diggings showed that they only had to adjust the layout of the railway line a fraction and the railway would only touch the building underground. And thus, Allingvej Afgrening made it. If this exact heat exchanger station would have had to go, it would have cost VEKS an amount in the double-digit million range as the building was built pursuant to the so-called guest principle. This means that VEKS would have had to incur all expenses if the central turns out to be in the way of those you visit as a guest. But VEKS was unhurt. However, this was not the case with the other building, Hvidovre Hospital Afgrening, which was not be saved due to the The new railway Copenhagen-Ringsted In 2013, the first sod was cut to the new double-railed, electrified railway between Copenhagen and Ringsted via Køge. The railway is constructed to stand speeds of up to 250 km/h for passenger trains and is the first railway in Denmark which may serve high-speed trains. The new railway is one of the largest construction projects in Denmark in recent years and is expected to be finished in The developer is Banedanmark. new railroad. The underground building was not within the guest principle because VEKS owned the land. Therefore, Bane danmark had to finance the reconstruction of a whole new VEKS centre: An underground station which distributes the heat to Hvidovre Hospital, Hvidovre Midt & Nord and CTR. No customers were affected Besides establishing the new building for the supply of the hospital, an original pipe connection under the motorway had to be changed. The current pipes were lying in casings under the Holbæk motorway but would collide with the new railway lines. So big and complex a construction project is not built overnight and all business partners have to show consideration, take precautions and meet. Once every three months, the steering group meet, not only to discuss the progression of the construction work but also to go through finances. Things take time. Take VEKS negotiations with Banedanmark and Danish Transport Authority which started in Not until 2014, the district heating water flowed to the customers among others through a new pipe bridge. None of the customers experienced any stop as the old system was not closed down until the new system was ready. As soon as VEKS was off the ground, Banedanmark continued its construction work with the new railway. Fibre or steel When you are to cross an electrified railway, it always requires a thorough risk assessment. The first analysis of the railway crossing to Hvidovre Hospital had focus on drilling a way under the railway and motorway. However, test prospect wells showed that this would involve many obstacles because large amounts of lime and high groundwater. The alternative turned out to be a bridge. First, VEKS worked with a traditional steel pipe bridge across the railway. However, steel was eliminated as it would be too complicated to comply with the requirements of Banedanmark of having all pipes electrically isolated on both sides of the line. They also had to change the signal and control systems due to the risk of a flashover between the overhead lines of the railway and a steel pipe bridge. In brief, it turned out that the steel solution would be very complicated and expensive. Special bridge Instead, VEKS decided to have the pipe bridge made of glass fibres which has almost the same strength as steel. This solution is unusual as glass fibres are approximately ten times as expensive as steel. However, with the many circumstances involved in Hvidovre it ended up being the most cost-effective solution. The span of the bridge is 15 metres and it has a heavy district heating pre-pipe in each glass fibre carrier pipe painted in VEKS traditional blue colour. ANNUAL REPORT

18 case 2 Moreover, the re-laying of pipes in Hvidovre was coordinated and carried out as a joint contract together with HOFOR Spildevand which was also pushed away by the new railway. Solution high and low The construction of the new railway has also affected VEKS underground buildings and pipes in other sections. In Ishøj, the line is lead over the motorway on a steel bridge. Their concrete foundations are close to VEKS pipes. Here, VEKS was unhurt as we got a special permission. However, in Vallensbæk the railway would hit the transmission pipes so VEKS had to lay 136 metres of pipes further south. In general, a railway crossing always requires that the heat pipes are lying in protecting pipes. It also requires that the pipe system is supplied with leakage monitoring by way of alarm threads. Usually, the railway crossing will also mean that the owner of the crossing pipes has inspection wells with shut-off valves at each end of the protecting pipes. As VEKS transmission pipes are monitored 24/7, Banedanmark has granted an exemption when it comes to the shut-off valves and has accepted to have only one inspection well. In Solrød, they predicted problems which fortunately turned out to be not as serious as expected at first. In the northern part of the municipality, VEKS was in their way again: The new railway has to run on a bridge, a new motorway bridge is build, another way is lowered, etc. The latter way housed VEKS pipes approx. one metre below the surface of the central reserve of the road. When the same way was to be lowered, VEKS pipes were suddenly exposed... Rather than having the pipes lying exposed on the ground in the central reserve, a small bank was laid on top of VEKS pipes. And thereby, by lowering the pipes one metre a large construction work was avoided. Bump on the road In connection with the widening of the Køge Bugt motorway, VEKS pipes have more or less gone free from the large deroutings. It has, however, been necessary to raise or lower the pipes and make several precautions, e.g. by establishing new inspection wells. The projecting of the new line and the motorway widening is long over and will probably not cause more surprises to VEKS. Other surprises may still turn up when the contractor damages VEKS pipes in the heat of the moment, runs over a distribution board, etc. Divided financing The expenses in connection with VEKS relocation of pipes are divided in different ways. The original building of VEKS (Hvidovre Hospital Afgrening) which had to give way to the new railway was expropriated and thus VEKS property. Therefore, Banedanmark paid for the reconstruction of VEKS new buildings in Hvidovre. One of the new pipe connections in Hvidovre supplies the Copenhagen area alone which is why CTR defrays the main part of the related expenses. All in all, the expenses of VEKS amounts to approx. DKK five million due to the new railway and motorway widening. The fight of the space Many public supply enterprises (e.g. water, district heating, drain) choose to position their pipe systems along public road areas in accordance with the overall infra-structure. Since VEKS system supplies district heating to densely populated areas, VEKS most often chose to position the transmission pipes close to public roads in the construction stage in the period of Very few owners wish to have pipes lead through their land so by selecting roads, a few landowners and garden owners as possible are affected. Moreover, the large motorways neighbouring, wide and untouched areas areas prepared to potential motorway widenings were also a suitable place to position district heating pipes. When the infra-structure changes, the imposed expenses for necessary pipe reorganisations depend on whether the pipe owner has purchased and paid a compensation for the easements of his/ her line or whether the pipes are organised according to the so-called guest principle. In the first situation, the construction authority bears the costs but organises the pipes according to the guest principle, VEKS may accept the expenses themselves when e.g. Banedanmark or the Danish Road Directorate expand. Naturally, there are a number of statutory regulation of easements, provisions for expropriation, digging permissions, when the guest principle applies and what defines the right to the Danish roads and the rest of the infrastructure. Sections 20 and 106 of the Danish Road Traffic Act have in particular long defined who pays what and when but as with any other legislation, orders and amendment are revised currently. Several decisions within the area have changed and diluted the principles of the above-mentioned sections. 18 ANNUAL REPORT 2014

19 case 3 Logistics for the advanced More than one million tonnes of wood pellets will pass through the Avedøre CHP Plant before long when both units are fossil-free. And it requires planning The politicians have made it very clear that they want to get rid of fossil fuels. The phased termination is first and foremost driven by a climate and environmental political wish to reduce the emission of CO 2 but a high reliability of supply also plays a role. Under these circumstances, biomass is a usable alternative, in the short run (more information on this in Case 4: Green heat ahead). The year 2035 is the charted goal when it comes to having a -neutral power and heating sector in Denmark. However, the district heating campanies in the Greater Copenhagen area are more ambitious with their goal of CO 2 neutal district heating already in Wood lots of wood However, the Avedøre CHP Plant will be converted into the new green requirements long before VEKS and CTR have already made an agreement with DONG Energy to convert the plant s unit 2 to wood pellets. The agreement on converting unit 1 is expected to be made between VEKS and DONG in spring By the end of 2014, unit 2 was declared CO 2 neutral here, the installation of the last crushing mill was completed. The mill crushes the wood pellets before they are blown into the boiler. Previously, unit 2 was supplied with natural gas, whereas unit 1 is supplied with coal which will be replaced with wood pellets not later than January The conversion takes wood pellets many wood pellets. 7,000 tonnes of wood pellets will pass through the Avedøre CHP Plant every day if both boilers are running at full power when both units are converted to wood pellets before long. However, the two boilers will naturally not be running at full power every day of the year. The units will for instance often not be running in the summer where large planned servicing work is carried out. The waste heat more than covers the district heating requirements in the warm months. A delicate plant When both units in the Avedøre CHP Plant are converted to biomass, the annual consumption will be approx. 1.2 million tonnes of wood pellets. Moreover, unit 2 will use approx. 150,000 tonnes of straw a year. Coal may be kept outdoor irrespective of the weather. Unfortunately, this is not the case with wood pellets. They cannot be wet as they may ignite spontaneously. The wood pellets way from ship to store room and then on to crushing mills and boilers takes place in all tight transport systems, both due to the above-mentioned risk of spontaneous ignition and to avoid giving off dust in the community. For the same reason, the actual unloading of the wood pellets depends on dry weather (which VEKS photographer experienced himself when the photo shooting for this report was postponed due to rainy weather...) The green conversion in the Avedøre CHP Plant is not very noticeable to the public. The coal piles are getting smaller but are replaced with wood pellets under cover, in closed silos and transport systems. As there are capacity limits at the indoor store rooms, the flow of wood pellets is big. Therefore, wood pellet ships call into the port at the Avedøre CHP Plant approx. three times a week. When both boilers are fuelled with wood pellets in a few years, the ships will arrive almost daily. This requires highlevel logistics. Continuous operation Like coal, the wood pellets always arrive at Avedøre Holme by ship. The cargo of the ships calling into the port of Avedøre CHP Plant often weighs from 4,000 to almost 10,000 tonnes of wood pellets. This loading should be compared to the future consumption of both units at a peak performance of 7,000 tonnes. Every day... Over time, the unloading of the barges will be continuous 24/7. With the current equipment, approx. 450 tonnes may be unloaded per hour. Besides the unloading, time is also spent on the ship mooring, opening hatches, registering the wood pellets, etc. The sailing is naturally affected by whether the fairway freezes over. And the need for an optimum production at the plants is considerable bigger during the cold winter periods. A large part of the supplies of wood pellets comes from the Baltic countries, however, the modern ships employed are designated to sail in ice and can stand winter storms. Typically, the ships will sail under convoy to and from the harbours in the freezing cold winter months. During the 20 years Avedøre CHP Plant has existed, frozen fairways have, however, never caused problems with the supply, only minor delays in the very cold winters. In the summer, barges are often used not only in Danish waters but also for long transportation of wood pellets from the harbours in the Baltic countries and Germany. Storage rooms But one thing is the ongoing ship traffic in the harbour of ANNUAL REPORT

20 case 3 Avedøre CHP Plant. Another is the wood pellet storage rooms. The plant has a large and a small silo which contain 65,000 and 15,000 tonnes of wood pellets respectively. When both units are converted to wood pellets before long, these offer stocks for approx days. Previously, DONG has also used long-time storage facilities near Avedøre CHP Plant but they are not in service at the moment. These store rooms may contain 36,000 tonnes of wood pellets, however, it will require a drastic modernisation for them to become serviceable not least to comply with the current requirements to fire and working environment safety. External storage rooms outside the land of Avedøre CHP Plant are rarely used but turned out to be necessary in 2012 in connection with a fire in the small wood pellet silo of Avedøre CHP Plant. The external storage rooms are grain silos which may also be used for wood pellets. They are found in the nearby harbours in Køge and Kalundborg. Even so, the remote storage rooms are an expensive solution as it involves extra reloadings and consequently large amounts of dust before the wood pellets can be moved to Avedøre CHP Plant. Reliability of supply Storage rooms offer a high reliability of supply but so does the possibility of changing fuel. Both units may change to other types of fuel even when they have been converted to wood pellets as the only fuel only. As a reserve, unit 1 will be able to fuel with coal and unit 2 with natural gas or to produce heat with a mix of wood pellets/coal and wood pellets/ natural gas. The conversion to another fuel may be done within an hour. Thus, the reliability of supply is by no means threatened even if both units fuel with wood pellets in a few years. And thereby, words were converted into actual agreements between the heating companies and DONG by which Avedøre CHP Plant will produce CO 2 neutral district heating. Avedøre CHP Plant Avedøre CHP Plant consists of two power station units, Avedøre 1 from 1990 and Avedøre 2 from The total production capacity for the two units of Avedøre CHP Plant totals 793 MW power and 918 MJ/s heating. Avedøre CHP Plant supplies 200,000 households with heat and produces approx. 30% of the electricity consumption in Zealand. Converted into households, this corresponds to the annual electricity consumption of approx. 1,3 million households. Today, Avedøre 1 from 1990 primarily uses coal as fuel and the concurrent production of electricity and heat means that more than 90% of the energy in the fuel is utilised. From 2017, the fuel in unit 1 will exclusively be wood pellets. Avedøre 2 from 2001 is a so-called multi-fuel plant which converted to wood pellets by the end of The power station unit may also use natural gas, oil and straw see case 3 about wood pellets and logistics. The unit can use up to 94% of the energy in the fuel. The unit consists of a steam turbine system, a gas turbine system and a straw-fired biomass system. 20 ANNUAL REPORT 2014

21 Sustainable wood pellets In December 2014, DONG Energy published a programme with sustainability criteria for suppliers of wood pellets and wood chips. With this programme, DONG complies with the Danish trade agreement of sustainable forestry biomass. DONG s demands of to the suppliers include that the suppliers in the woodland are obliged to: Ongoing re-planting Protection of the ecosystem and biodiversity Protection of hot spot or conservation sites And that social and work related rights, incl. the UN s Declaration of Human Rights are respected Source: Dong Energy Programme for Sustainable Biomass Sourcing, December 2014 ANNUAL REPORT

22 case 4 Green heat ahead Several proposals from Heating Plan Greater Copenhagen 3 are almost a reality at Vestegnen (Western Copenhagen) The announced target from Christiansborg is that all heating supply, and thereby also the district heating supply, must be fossil-free in This forms the background of the socalled Heating Plan Greater Copenhagen 3 (Varmeplan Hovedstaden 3) which is prepared by the heating companies VEKS, CTR and HOFOR. The plan includes scenarios for how the Greater Copenhagen area can be ensured sustainable district heating at acceptable prices. However, before the launching of the new Heating Plan in the autumn of 2014, a number of environmental projects have already seen the light of day. And large-scale investments are made. Small and large steps A lot of environmental measures have already been realised at the CHP plants. Unit 1 of Amager CHP Plant is fuelled with biomass and before 2020, unit 3 was rebuilt to fuel with wood chips. Natural gas is phased out for the benefit of wood pellets in unit 2 of Avedøre CHP Plant and within a few years, the wood pellets also replace the coals in unit 1 of Avedøre CHP Plant more information in case 3. However, they not only work with alternative fuels, types of fuel, store rooms, etc. at the large central plants. By spreading the district heat and replacing the natural gas, resources are saved and the CO 2 emission is reduced. At Vestegnen (Western Copenhagen), the realisation of the many current Focus areas By way of Heating Plan Greater Copenhagen 3 (Varmeplan Hovedstaden 3), the heating companies have undertaken to work currently on the following focus areas: Realise pilot and demonstration projects Low temperatures in the system Sustainable biomass Work on obtaining a CO 2 neutral peak load Develop the geothermal project Study the possibilities of: Heat storage Solar heat 17 municipalities are behind CTR, HOFOR and VEKS. The three heating companies account for approx. 20% of the Danish heat supply. Source: EUDP Energy technological development and demonstration programme EUDP supports the new energy technology which creates growth and workplaces, increases the reliability of supply and contributes to making Denmark independent of fossil energy in Moreover, EUDP finances Denmark s participation in international cooperation and knowledge sharing within energy technologies. Source: Danish Energy Agency: conversions of natural gas customers to district heating will result in a reduction of the CO 2 emission of almost 200,000 tonnes a year. Alternatives Right now, the heating companies are thus dedicated to biomass at the large Greater Copenhagen central power stations but where should the heat come from in 20 or 50 years from now? Heat planning is a long-term practice. If we are to achieve the agreed targets for 2035, it requires action now. Therefore, the sector develops and tests tomorrow s heating technologies in different associations and different dimensions. And therefore, VEKS is involved in several alternative project of developing district heating. Geothermal energy has long been a part of VEKS world thanks to the cooperation in HGS: The Geothermal Cooperation of Greater Copenhagen (Hovedstadens Geotermiske Samarbejde) which also includes CTR and HOFOR the parties behind Heating Plan Greater Copenhagen (Varmeplan Hovedstaden). Unfortunately, it is not profitable to increase the already existing geothermal plant at Amager right now, primarily due to the fact that the heating prices in the Greater Copenhagen area are relatively low. Another focus is that heat pumps in large-scale may probably be combined with the utilisation of the energy in waste water, groundwater and seawater. VEKS is also involved in this technological development also together with the other two heating companies in the Greater Copenhagen area. Another area which may play a role in Vestegnen s future heating system is the possibility of saving hot district heating water in huge heat storage. Perhaps large storage may minimise the peak load production and also help utilising the surplus heat better in the summer e.g. from waste heat plants and businesses. Low-temperature gains ground Low-temperature operation in district heating systems is yet another method of utilising district heating more efficiently 22 ANNUAL REPORT 2014