HomeMy WebLinkAbout1242 - Seward Heat Pump1242 Seward Heat Pump
Proposer: City of Seward, Alaska
Benefit/Cost Ratio: Applicant (reported): 1.48
Applicant (calculated in AEA spreadsheet): 3.17
AEA Recommended: 2.28
Project Description:
The City of Seward is requesting funding for the design and construction of a ground source heat
pump district heating system to displace 96% of the heating oil usage of four existing city owned
buildings and with capacity to heat one future planned building. The system will be installed near
the shore so that the heat pump can take advantage of the warm subsurface ocean water that
inundates the alluvial gravel. The heat pump is estimated to have an annual COP of 2.9
because of this relatively high temperature source and will displace an estimated 18,570 gallons
of fuel oil per year.
Total project cost:
Application / AEA: $850,000
Funding Requested:
Application: $725,000
Contribution to Lower the Cost of Energy:
The current system uses oil-fired boilers to provide heat and domestic hot water for 60,300
square feet of public building floor area, using an estimated 19,350 gallons of fuel oil annually.
Converting to this very efficient ground source heat pump is estimated to displace 96% of this
fuel oil usage. Due to the efficiency of the heat pump system (290% equivalent annual efficiency
level) and the differing fuel prices, the ground source heat pump is estimated to deliver heat to
the buildings for approximately 66% less than the current cost1, resulting in annual fuel cost
savings of approximately $56,750 when the price of carbon has been factored in.
Assumptions modified:
Fuel Savings
The fuel savings were modified to exclude the estimated requirements of the proposed shower
building, as according to the application, “The project currently has favorable consideration of the
City Council”, which suggests that it has not been approved yet. Additionally, costs for the heat
pump unit to be installed at the shower house were not included in the application and thus the
benefits should not be either.
1 This economic analysis uses the utility electricity generation cost in place of the electric cost paid by the building. If the costs directly to the building owners are used, this results in a reduction of 36% of the cost of delivering heat to the building.
Electricity Prices
The electricity prices were modified to be the marginal cost of additional electricity production of
the Southern railbelt, as found in the Avoided Cost Rate Projections section of the Railbelt Price
Worksheet. These electricity rates were chosen with the assumption that any additional costs
charged by the utility above the marginal cost go towards reducing the costs to all ratepayers.
The rate also assumes 10% transmission and distribution losses to get the power to the buildings
in Seward.
Fuel Oil Prices
The fuel escalation factor from the Diesel Fuel Prices sheet for Fairbanks was calculated and
applied to Seward's current fuel price of $3.02. The price of carbon was then added to this
escalated annual fuel cost.
Boiler Replacement Costs
This project is using a 50 year life cycle cost analysis period. This was chosen because the
majority of the costs are in the loop field which the DOE estimates has a 50 year life. The
applicant included costs for replacing the heat pumps at 25 years. We have added in
replacement costs for the boilers to the base case, as boilers generally have an expected useful
life of approximately 20 years. These boiler replacement costs were estimated using the
applicant’s reported costs for their most recent boiler replacement with added design and project
management fees. The cost per BTU/hour of boiler capacity was calculated and then linearly
extrapolated to estimate the cost of the larger boilers to be replaced in the future.
Concerns:
N/A
Possible Enhancements:
N/A
Long-term Sustainability:
This project substitutes electricity for oil through the use of a very efficient subsurface seawater-
fed ground source heat pump, reducing fuel costs to the city by approximately 36%. While the
fuel source for the electricity is currently primarily natural gas, converting to efficient electric heat
pumps allows for flexibility in the mix of fuels being used to produce heat, rather than the current
system which is inextricably tied to fuel oil. The project also reduces risk for the City of Seward,
moving away from price-volatile fuel oil to relatively price stable electricity.
Potential public benefits:
If this project is successful, it could lead to expansion of the system to include additional
buildings and create an effective district heating system. Successfully implemented, this
approach could serve as a model for other communities with low grade energy sources that
could be cost-effectively tapped for heating purposes