Integrated Energy Systems
The smart move towards a carbon-free economy
Sector integration is going to be a key instrument in decarbonizing energy systems and reducing CO2-emissions in order to combat climate change.
The key issue in decarbonizing the energy economy is not how much renewable energy can be generated but rather, how it can be integrated into our energy system. The more fossil fuel driven sectors you can hook up to the electricity grid and the more flexible these are in terms of energy use, the better. Heating, cooling, transport, water treatment and industry are all sectors whose demand is flexible enough to fully exploit the potential of renewable energy. Electrification of the biggest energy carriers with the ability to store energy, like district heating or cooling, is a key task in achieving the flexibility and resilience that an energy system primarily built on renewables requires.
What is sector integration?
Joining forces across sectors to fully exploit the potential of renewable energy
The principle of sector integration applies to any system that can deliver energy to, or consume energy from, another sector. There are many examples of industries – or even in retail – that generate heat as a waste product which can then be exploited elsewhere to form a more sustainable energy system and subsequently, a rewarding business case.
Sector integration is particularly relevant when energy production is based on renewables like wind and sun. Sector integration allows for electrification of more sectors and adds needed flexibility as the demand for power doesn’t always follow the weather. When weather conditions facilitate the generation of electricity and the grid is in low demand, energy-consuming sectors who have the ability to store thermal energy in their systems or are flexible about when to use energy, can step in and purchase power at a lower cost. Thermal storage is like a virtual battery. An example could be a district heating system that can use electricity when it is plentiful and cheap to heat up water which is then stored in tanks as well as in the pipe network to be used when electricity is more expensive.
This way, sector integration helps energy systems be able to use and reuse energy more efficiently.
Benefits of sector integration
Contributing to the climate targets and more cost-efficient systems
How can sector integration help fight climate change? The main challenge in the transition to a carbon-free energy economy is that the demand for electricity doesn’t always match the supply. Power is often generated at times when the demand isn’t high enough to fully exploit the capacity of the grid, or vice versa; the demand may be higher at times of lower capacity.
Sector coupling with thermal energy storage that allows for flexible use of power enables the discrepancy in supply and demand to be evened out so the capacity of the grid is fully exploited. And the more sectors that can replace their fossil-fuel power with electricity to support a fossil-free power economy, the better society as a whole is able to meet the CO2-target of the Paris Agreement.
It goes without saying that the energy-consuming sectors that are coupled in a smart energy system will enjoy a more cost-efficient operation, as they will be able to adapt their purchase of power to utilize the lowest possible rates at any given time. Likewise, the power supplier will be able to avoid situations of curtailed capacity and loss of revenue.
Once the principle of sector coupling becomes fully established as the model for building or renewing city infrastructure, industry and transport sectors, the running costs of these smart, integrated systems will come down. This is because of synergies relating to the heating and cooling of buildings, server rooms, freezers in supermarkets, battery charging etc.
The potential is huge. Today, heating and cooling alone accounts for half of the EU's energy consumption and is currently 75% fossil-fuel based. A new report from Aalborg University in Denmark states that decarbonizing the European heating and cooling sector has the potential to reduce total energy system costs by 70 bn EUR per year.
Get our 5 takeaways from the Aalborg University report here, or see the full report:
Report by Aalborg University
Why sector Integration?
Making renewable energy cost-efficient
What can we achieve through sector integration? The main challenge of an electricity economy based on renewable resources is ensuring stable supply. The reason why you sometimes encounter wind turbines idling on a windy day may well be that the demand for electricity doesn’t meet the increased capacity potential. Surplus power can be stored in batteries, but this is an expensive solution that doesn’t contribute to a cost-efficient energy economy. Another option could be to export surplus electricity to other regions, but this is not very cost-efficient either as it requires huge investments in cable infrastructure. The best alternative by far is sector coupling with smart energy systems which creates a flexible demand that doesn’t rely on grid stability and that can provide the necessary peak shavings by being ready to use the power when it is available.
Integrated energy systems enable interaction between the energy-consuming and the energy supplying sectors and minimize the total cost of the energy system. Industry, transport and buildings are all energy-consuming sectors which can partake in a smart energy system that involves active usage of flexible energy storage in, for example, thermal storage for district heating and cooling.
Why does sector integration remain underutilized?
As a society dependent on de-carbonizing the energy economy, we have to take a system approach and accelerate the integration of energy-consuming sectors with the energy supplying sector. This requires a regulatory framework to support the creation of decentralized energy systems which will encourage smart system integration able to combine energy storage in heating and cooling systems with flexible use of waste heat and heat pumps.
Today’s policy frameworks do not support interaction between different sectors or reflect the new technologies that help facilitate integrated energy systems. Thermal networks should be encouraged by allowing flexible energy prices and removing tax on waste heat. We need to ensure that electricity prices reflect the energy mix to encourage the uptake of renewables – e.g. through CO2 pricing – and that power price signals reward energy storage and other flexibility services.
Who can contribute to sector integration?
What is the link between sector integration and district heating?
Heating or cooling our living and workspaces via district heating and cooling rather than individual systems is a major opportunity for exploiting society’s energy resources to the full. Integrating electricity in district heating and cooling with large-scale heat pumps can solve two challenges at once: The challenge of decarbonizing the heating supply, and the challenge of taking up growing shares of fluctuating electricity capacity into our energy system while avoiding unnecessarily high costs for infrastructure and storage. The keyword here is storage. Individual heat pumps cannot store power and may even contribute to a higher demand pressure on electricity grid without delivering the necessary flexibility.
Does sector integration make the energy system more flexible?
Modern district energy systems are designed as flexible thermal infrastructures where different energy sources can be “plugged in” as they become available. If electricity is the best option, the system will use that. If hot or cold wastewater from a different sector is readily available, the system will switch to that. Whatever the source of the hot or cold water, it is then distributed to buildings via a pipe network for immediate use or stored for later use.
A district energy system then has two ways of delivering flexibility to the energy system: by providing storage and by enabling switching between different energy sources – which can be anything from large-scale heat pumps and waste heat to solar or geothermal energy.
Integrating waste energy and moving to a more circular energy system
Today, a lot of heat is wasted because it is simply vented into the atmosphere. The demand for heating is primarily met by systems based on high quality energy in the form of gas, oil or electricity. There are various historical, logistical and financial reasons for this, but with today’s knowledge and technology, it may be described as an overkill approach. Instead, we need to create a more efficient energy system with a low-exergy approach that utilizes low-value heat sources and allows for uptake of waste heat generated as a by-product of industrial and commercial processes.
Generally, water facilities account for 30–50% of a municipal’s use of electricity which makes them the largest consumer of electricity in a local government’s economy. This is going to change. Rather than just being a consumer of electricity, wastewater facilities can actually produce both electricity, surplus heat and biogas, all depending on how the energy can be best utilized locally.
A couple of opportunities are at hand for water facilities to play a role in sector coupling. One is to reuse surplus heat from the treated wastewater using a heat pump to boost the temperature to levels that can be used in district heating systems. Another is the combination of green hydrogen and surplus CO2 from the biogas production – itself an example of sector integration – which can be used to produce renewable methane.
Explore how Danfoss approaches solving these challenges
Supermarkets are a cool companion in an integrated energy system
Supermarkets account for a relatively large share of society’s total electricity consumption. In Germany, 1-2% of all electricity use can be assigned to supermarket refrigeration.
Most supermarkets are energy managed by a central unit connected to multiple cold counters to control their temperature levels. Instead of letting the hot air resulting from cooling processes go wasted, it could instead be used to heat the supermarket itself or – if coupled with the heating sector – serve as an energy supplier for the local district heating network.
Because of the amount of food stored in freezers and refrigerators, supermarkets also have the potential to serve as a virtual battery and contribute to grid stability. Ice or cold-water storage facilities connected to the supermarket could provide an alternative to using power from the grid in the supermarket’s cooling system during peak hours.
Read opinions By Jürgen Fischer, President of Danfoss Climate Solutions, or explore our cases about how supermarkets can be turned into heat suppliers:
Industrial facilities could feed entire cities with free heating
Heavy industry, such as the metal or chemical industries, represent the biggest potential for sector integration with waste heat. Studies show that between 300 TWh and 800 TWh of industrial waste heat could be recovered per year in the EU. Combined with district heating, this would make a considerable contribution to the warming and cooling needs of cities throughout Europe, saving billions of EUR in investments in green energy producing facilities.
Turning data center power consumption into a resource
Data center sustainability is an important issue as the number of data centers is growing and currently account for around 1% of the world’s energy consumption. Most of the power is converted into heat in IT equipment and servers which therefore require cooling that generates a lot of heat as a ‘waste product’. To be precise, the electricity consumed converts almost completely to heat (97%), making data centers clear-cut candidates for sector integration with district heating services or other heating facilities in the area.
Energy efficient buildings and demand response
Increasing the energy efficiency of buildings brings down their total use of energy and contributes to unloading the grid. Smart buildings with interactive demand-side management/demand response for the optimization of heat consumption in the building make it possible to shift part of the energy consumption from peak to off-peak hours.
Smart buildings can also use the building itself and its equipment as energy storage where the buildings’ structure and/or thermal mass can be used to store heat over several hours. A 2014 EU report, Building Heat Demand, estimates that up to 40% energy savings can be gained by moving towards demand driven heating systems.
Digitalization is a key enabler of sector integration
Digitalization is the mastermind behind a more energy efficient, resilient and sustainable energy system that minimizes energy waste and reduces costs. Across the entire value chain from sustainable energy carriers, efficient grids to efficient energy use, digital technology ensures optimal energy performance.
In the heating and cooling sector, digital technologies help manage the increasingly complex district energy systems. Integrating a multitude of intermittent renewable energy sources as well as connecting thermal and electricity infrastructures, digital tools decide which energy source to use when and where and make it possible to switch from one source to another in a matter of minutes.
Key to the successful integration of energy sectors and the optimization of the whole chain is the ability to understand and predict demand. By using AI to process collated data, centralized heating can be controlled and optimized according to weather, ventilation and the inhabitants’ living patterns. The benefits of Demand Side Management (DSM) for a district heating system are significant: calculations from hundreds of sites that have implemented this type of intelligent DSM show average savings in peak power of 20%.
Leanheat makes buildings smart | Case
In Europe, 30 percent of all energy consumption goes to heat or cool buildings. Danfoss has the solution to lower energy usage and improve indoor climate by adding a digital element: Leanheat software.
Integrated energy systems FAQ
The principle of sector integration applies to any system that can deliver energy to, or consume energy from, another sector. This could, for example, be integrating the heating sector or the transport sector with the power sector. It is also sometimes referred to as integrated energy systems or sector coupling.
Sector integration allows for flexible use of power and enables the discrepancy in supply and demand of energy to be evened out, so the capacity of the grid is fully exploited. This is particularly important as the share of renewables increases, and more sectors are electrified. Furthermore, sector integration allows energy to be reused in the same way that excess heat used in district energy systems.
Sector integration is going to be a key instrument in decarbonizing energy systems and reducing CO2-emissions in order to combat climate change. The key issue in decarbonizing the energy economy is not how much renewable energy can be generated, but rather how it can be integrated into our energy system. The more fossil fuel driven sectors you can hook up to the electricity grid and the more flexible these are in terms of energy use, the better. Sector integration enables this.
The more fossil fuel driven sectors you can hook up to the electricity grid and the more flexible these are in terms of energy use, the better. Sector integration enables this.
It goes by many names but is, in essence, the same; creating a smart energy system that links energy-consuming sectors to the power grid to optimize the synergy between production of energy and use of energy.