Geothermics, Vol. 19, No. 4, pp. 359-365, 1990. Printed in Great Britain.

0375-6505/90 $3.00 + 0.00 Pergamon Press plc

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DESCRIPTION AND ECONOMICS OF "HITAVEITA AKRANES OG B O R G A R F J A R D A R " IN ICELAND

ROBERT HARRISON,* INGOLFUR HROLFSSONt and JON-STEINAR GUDMUNDSSON$

* Sunderland Polytechnic, Langham Tower, Ryhope Rd., Sunderland SR2 7EE, U.K., t Hitaveita Akranes og Borgarfjardar, Iceland and S National Energy Authority, Reykjavik, Iceland (now at the

University of Trondheim, Norwegian Institute of Technology, Division of Petroleum Engineering, 7034 Trondheim, Norway)

(Received May 1989; accepted for publication April 1990)

Abstract--The geothermal district heating service--hitaveita--for the town of Akranes and the Borgarf- jrrdur region in western Iceland is supplied mainly by large natural hot springs which produce 180 Is - l of fluid at a temperature of 96°C. The fluids are transmitted to the heat load a distance of 62 km through the world's longest geothermal pipeline. Despite the high investment costs of the scheme and the recent low levels of oil prices, which have produced financial problems for operators, the scheme remains economically viable as a public service investment.

INTRODUCTION

The word "hitaveita" means geothermal district heating service in Icelandic. It refers to district heating of residential, commercial and industrial buildings and is the chief use of geothermal energy in Iceland. The first hitaveita dates back to 1930 in the capital city of Reykjavik. There are now 29 public hitaveitur (plural) in Iceland, one of which is "Hitaveita Akranes og Borgarfjardar" established in 1979.

In 1986, the installed thermal capacity of the 29 hitaveitur in Iceland was 494 MW and the thermal energy sold 3586 GWh, serving a population of 187,400 people. See Thorhallsson (1988) and Gudmundsson and Palmason (1987) for details.

The geothermal resources of Iceland are conventionally divided into low-temperature and high-temperature fields. The high-temperature fields are within the active volcanic zones while the low-temperature fields are on both flanks of these zones. The two main low-temperature regions are in the south and west of Iceland, on the periphery of the active zones of rifting and volcanism. Other low-temperature areas are widely distributed. Hitaveita Akranes og Borgarf- jardar is connected to the Reykholt and Baer thermal systems. These systems form part of the Borgarfj6rdur thermal region (Georgsson et al., 1984), which is an important geothermal resource in the west of Iceland.

HISTORY OF THE DEVELOPMENT

Initial proposals were for a hitaveita to serve the town of Borgarnes using the Baer thermal area. A number of wells were drilled at Baer in the 1970s. One of these, which was drilled in 1977, produced 20 Is - t of water in artesian flow. The temperature was 93°C. Pre-feasibility studies, carried out as part of a reassessment in 1977, showed that the most economic scheme of development would be for an extended system incorporating the larger but more remote town of Akranes. This would be supplied mainly by the hot springs at Deildartunga in the Reykholt thermal system, with the wells at Baer playing only a minor role.

359

360 R. ttarrison, I. Hr(d/~sw(m am/J.-S. (;udmundss(m

Hitaveita Akranes og Borgarl jardar was formed in 1979 by the main groups o1 uscr~, lhc shareholdings are as follows:

Akranes Communi ty 72.8% Borganes Communi ty 17.7% Hvanneyri Agricultural College 4.1% Andakill Communi ty 5.4%

Construction of the scheme began in 1980 when the town of Borgarnes was connected to the wells at Baer. In 1981 the pipeline from the wells to the spring was laid and also the sections connecting with the town of Akranes. The distribution networks within the towns were built during the same period that the main pipelines were being laid. House connections were made very quickly and efficiently; for instance, half of the houses in Akranes were connected in three weeks.

T H E S C H E M E

The current form of the scheme is shown in Fig. 1. The springs at Deildartunga supply 180 Is- at 96°C and the wells at Baer can produce 20 Is- 1 in artesian flow, This gives a combined capacity of 200 Is- i. By drilling some additional wells and pumping them the capacity could be increased to 300 Is- ~, but currently the scheme is using only 140 Is- 1. All of this is being taken from the springs. The wells and their pumps are being maintained in service but are only used if for some reason the supply from the springs is interrupted and flows cannot be maintained by the storage tanks. The collection system at the springs is very simple. An arrangement of low walls guides the boiling water into the collecting pipes. These conduct the fluid to a nearby pumping station

Deildarttmga

Baer / 11 km 0250mm ~r / 0400mm

0 300 mm I ,,~ Hvanneyri

Borg y.M / 0450mm

J ~ '-' Storage tank 0 150 mm J'/ 2500 rn 3

32 km 0 400 mm

0 lOkm i J

Fig. 1. Geothermal district heating service for Akranes and Borgarfj6rdur region.

Description and Economics of "Hitaveita Akranes og Borgarfjardar" in Iceland 361

• . ~ / Grass Cover

. 1 5 Earth and Gravel

/ Asbestos tEN /,t~ Volcanic Gravel Pipe 400 rnm - ~ ' ~ ~= "

0 75 and 450 mm ,,x;~ . ~,r,.

Drainage Trench c~ . /_~"

Fig. 2. Cross-section of the asbestos transmission pipeline.

that pumps the water up to the highest point in the pipeline at Kroppsmuli a few kilometers away.

The main pipeline is 400/450 mm in diameter and runs for 62 km from the springs at Deildartunga to the storage tank at Akranes. It is the longest geothermal transmission pipeline in the world. The distribution network covers a distance of 120 km. The majority of the transmission pipeline is made of asbestos concrete. This is a cheap material that has good thermal properties for this type of application. However , it is rather fragile and the pipe suffers from frequent breaks. Insulated steel sections are used where the pipeline crosses streams and also for the spur that crosses the fjord to Borgarnes.

No foundations as such were laid under the asbestos pipe. The ground was simply levelled and a layer of volcanic ash laid as a bedding material. The pipeline was laid directly on the ash and the exposed surface was covered by rockwool. About 75% of the surface is insulated in this way (see Fig. 2). A trench was dug alongside the pipeline and the excavated earth was used to cover the rockwool. The pipeline is now a grassy mound and the parallel trench serves as a drainage channel.

The system includes two storage tanks to maintain supplies to Akranes and Borgarnes when breaks in the pipeline occur. The tank at Borgarnes has a capacity of 2500 m 3 and that at Akranes has a capacity of 2000 m 3. These give the maintenance crews several hours in which to repair breaks.

The inlet temperature at Deildartunga is 96°C, and the temperature falls along the pipe as shown in Fig. 3. The temperature drops are a function of the flow rate, with low flows giving high temperature drops. This effect determines the main pipeline flow rate, which is maintained at at least 120 ls -~ in order to obtain a supply temperature of about 77°C for the users in Akranes. Any redundant flow is allowed to spill from the end of the pipe. This seems to be a wasteful approach but, because the springs are producing at 180 ls -1, water is always spilling at the springs at the present levels of demand and the only cost of passing redundant flow through the pipeline is the pumping that is required at the inlet to the pipe. During periods of heavy rain the pipe cover and the insulation become saturated with water and the supply temperatures fall. Figure 3 shows an example of this behaviour. During these conditions additional flow is passed through the pipe in order to accelerate the process of drying the insulation and the earth cover. The temperatures at Akranes are maintained reasonably constant over the heating season (see Fig. 3).

362 R. ttarri,son, 1. Hro!f~son and,l.-S. Gudmundssotl

(a) temperature drop along the transmission pipeline

0

0 Q .

E 0 p-

Deildartunga Hvanneyri Borgarnes Akranes

90

80

70

14th November 1984

- i " _ ~ e a t h e r

- 28th November 1984 heavy rain and wind

:

I i : I [ I i 10 20 30 40 50 60

Distance from the springs (km)

¢) 131.

E

t.I ~,#

(b) temperature variations over the year at Akranes

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Fig. 3. Fluid temperatures.

The distribution systems in the towns are buried insulated steel pipes. The water supplied is used directly by the users in their space heating systems and as domestic hot water. The return water is discharged to the house drains.

The main heat loads are as follows:

Akranes (population 5400) has about 1300 users and all but about 150 houses are connected. The flow taken is about 85 Is -1. The peak geothermal power is 14.9 MW.*

Borgarnes (population 1700) has about 500 users. Most of these are dwellings but a local co-operative comprising shops, a dairy and a slaughter house accounts for about 15% of the flow to Borgarnes. The flow taken from the scheme is about 30 Is- t and the peak geothermal power is 6.2 MW.

* Geothermal powers are calculated assuming a return temperature of 35°C.

Description and Economics of "Hitaveita Akranes og Borgarfjardar" in Iceland 363

HvanneyriAgricultural College takes a flow of about 2 Is -~ and the peak geothermal power is about 0.3 MW.

About 60farms are connected by simple spur offtakes from the pipe. The flows to these users are not measured but the combined flow may be about 5 Is -1 and the peak geothermal power is 0.9 MW.

The farms at Baer get about 10 Is- i due to a contract concerning drilling rights.

If it is assumed that the geothermal supply has a load factor of 51% (this is a typical figure for Reykjavik), then the total heat that is delivered annually by the fluid is 105 MWh. Before the geothermal scheme was developed, the annual fuel consumption of the users for heating was 12,500 tonnes of oil and about 2 GWh of electricity. This is consistent with the current estimates of geothermal heat supply. There is some evidence that users were not experiencing adequate levels of comfort before the scheme was implemented, and it might have been expected that the heat delivered by the geothermal fluid would have been significantly greater than that from the fuels in the conventional fuel-fired system.

O P E R A T I O N A L E X P E R I E N C E WITH T H E SYSTEM

The costs of operating the system are dominated by fixed capital and maintenance charges and the variable element, which depends upon the flow, is very small. The hitaveita company has adopted a pricing policy whereby users are charged a water rate that is determined by the maximum flow level that their space heating system can draw from the network. Thus this is a fixed charge that does not depend upon the volume consumed. Users are not charged for the domestic hot water they use, which amounts to between 7 and 8% of total consumption. The maximum flow limits on the user's supply are set by the hitaveita company, based upon what each individual user is prepared to buy. Users have tended to make cautious decisions in this regard.

Comparison of statistics of external temperature durations with the fluctuations in user flows over the year shows that while winter peak demands are significant, the fluctuations in the user flows do not seem to reflect these. This suggests that, because users have chosen low maximum flow settings, they are uncomfortably restricting their heating levels at peak times. Alternatively there is some evidence that users are running their electrical ovens to provide supplementary heating during peak demand periods. Whatever the explanation, the result is that water sales have not reached expected levels and this has had a detrimental effect on the financial and economic performance of the scheme.

Breaks in the asbestos pipe occur 20-30 times each year. These breaks are detected automatically and repair crews quickly reinstate supplies. The asbestos pipe has otherwise performed satisfactorily and there is no evidence of health hazards. The use of the material is now banned in Iceland.

CONCLUSIONS-- -THE ECONOMICS OF T H E SCHEME

The costs and earnings of the scheme are shown in Table 1. These figures have been adjusted to 1987 levels so that inflation can be taken out of the calculations. In assessing the economics of the scheme it is important to make a distinction between the economics of the scheme as a whole, which includes the users, and the financial position of the hitaveita company. The economics of the scheme as a whole are determined by:

- - the initial capital costs;

364 R. Harrisopz. l. Hro!fs'son and J.-S. Gudmundssotz

Table 1. Hitaveita Akranes og Borgarfjardar economic data (1987) in Iceland Kronur x 1(1 ~

Geothermal Oil and scheme electric heating

1. Capital costs 121(~ I)

2. Annual running costs (a) maintenance 25 ~.5 (b) fuels:

oil - - 124 electricity - - 3

- - the earnings measured in terms of the avoided fuel and other running costs of the initial fuel-fired system;

- - the running costs of the geothermal system.

The financial position of the hitaveita is de te rmined by:

- - its opera t ing cos t s - -main ly , in this case, interest payments ; - - its earnings f rom hot water sales (see Table 2).

Depend ing upon the price charged for the hot water , it is quite possible for the scheme as a whole to be viable but for the hitaveita c om pa ny to be in financial difficulties or vice versa.

If it is assumed that the supplementa ry heating is small, then the economics of the scheme, a l though marginal , are basically sound. Assuming a 5% discount rate and a 25 year lifetime the economic indices are as follows:

- - the net present value is positive and is in the region of 170 × 106 I K R (1987), i.e. about 77,000 I K R or 2000 SUS per dwelling;

- - the internal rate of return is positive and in the region of 6 .5%. This is an acceptable return for a public service investment and compares reasonably well with French geothermal schemes in the Paris Basin (see Lemale and Pivin, 1986).

If oil prices rise significantly, over and above inflation, during the medium term, the economics of the scheme could be greatly enhanced. Also, the scheme has significant capacity to increase heat supplies at little addit ional cost. Thus, as demands for heat g row in these communi t ies the economics of the scheme will improve.

If the users are buying electricity for supplementa ry heating then this would have a serious detr imental effect on the scheme. The issue of water sales and supplementary heating is also very impor tan t for the financial position of the hitaveita. The company is in a negative cash flow situation and is consol idat ing the losses in the debt. Thus indebtedness is increasing with time. The problem lies with the operat ive price levels and the cautious att i tude adop ted by the users to water purchases. Some earnings may be foregone, and those earnings that are being accrued are being divided between the users and the c om pany in a d ispropor t ionate way. This is not a

Table 2. Hitaveita Akranes og Borgarfjardar financial data (1987) in Iceland Kronur x 106/yr

Annual costs Debt interest payments - 112 x 1() ~' Running costs = 25 x 1(I ~' IKR

Annual earnings (revenue) Hot water sales = 125 x 106 IKR

Description and Economics of "Hitaveita Akranes og Borgarfjardar" in Iceland 365

financially stable a r rangement , and has been recognized as such. Recent ly , the state has taken over 220 x 106 I K R of the total debt . It will thus be possible to lower the prices and increase water consumpt ion , which has been held down by high prices.

The communi t ies served by the scheme have also fo rmed a new company with the aim of consol idat ing the five existing distr ibutors into a single c o m p a n y with firm financial basis. This will, however , take some years to accomplish, if it is possible at all.

R E F E R E N C E S Georgsson, L. S., Johannesson, H., Gunnlaugsson, E. and Haraldsson, G. I. (1984) Geothermal exploration of the

Reykholt Thermal System in Borgarfjordur, West Iceland. Jokul134, 105-116. Gudmundsson, J. S. and Palmason, G. (1987) The geothermal industry in Iceland. Geothermics 16, 567-573. Lemale, J. and Pivin, M. (1986) La Filiere Geothermique. Premier Bilan--Evaluation Technico--Economique De La

Geothermique Basse Energie en France. Agence Francaise Pour la Maitrise de l'Energie. Thorhallsson, S. (1988) Experience in developing and utilizing geothermal resources in Iceland. Geothermics 17,205-

223.