IDEAS home Printed from https://ideas.repec.org/a/eee/energy/v278y2023ipas0360544223012732.html
   My bibliography  Save this article

Financial risk assessment of a district cooling system

Author

Listed:
  • Martínez-Ruiz, Yessenia
  • Manotas-Duque, Diego Fernando
  • Ramírez-Malule, Howard

Abstract

District cooling systems (DCS) and district heating systems (DHS) are presented as environmentally friendly options to replace traditional alternatives. The economic assessment of these technologies has been widely addressed by deterministic approaches using classical methods. However, risks arising from project uncertainties must be carefully addressed. In this study, a financial risk assessment is carried out to evaluate the economic viability of implementing a DCS in a residential complex. Based on a case study in Colombia, the methodology adopted is twofold. First, the cooling tariff that satisfies the profit rate required by investors is calculated. Second, a cost comparison between the traditional cooling system (TCS) and the DCS is carried out from the point of view of the end-users. Financial analysis shows a mean cooling tariff of 50,59 COP/kWh and 55,56 COP/kWh for apartments and common areas, respectively. In the riskiest conditions, savings from the implementation of a DCS can reach up to 61% and 57% of the costs borne by end-users, compared to the traditional alternatives of refrigeration. Results obtained from this study can open up new research and investments in these centralized technologies in Latin American countries, where cooling needs are fully satisfied using TCS.

Suggested Citation

  • Martínez-Ruiz, Yessenia & Manotas-Duque, Diego Fernando & Ramírez-Malule, Howard, 2023. "Financial risk assessment of a district cooling system," Energy, Elsevier, vol. 278(PA).
    • Handle: RePEc:eee:energy:v:278:y:2023:i:pa:s0360544223012732
    DOI: 10.1016/j.energy.2023.127879
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0360544223012732
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.energy.2023.127879?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Aquila, Giancarlo & Coelho, Eden de Oliveira Pinto & Bonatto, Benedito Donizeti & Pamplona, Edson de Oliveira & Nakamura, Wilson Toshiro, 2021. "Perspective of uncertainty and risk from the CVaR-LCOE approach: An analysis of the case of PV microgeneration in Minas Gerais, Brazil," Energy, Elsevier, vol. 226(C).
    2. Best, Robert E. & Rezazadeh Kalehbasti, P. & Lepech, Michael D., 2020. "A novel approach to district heating and cooling network design based on life cycle cost optimization," Energy, Elsevier, vol. 194(C).
    3. Stegnar, Gašper & Staničić, D. & Česen, M. & Čižman, J. & Pestotnik, S. & Prestor, J. & Urbančič, A. & Merše, S., 2019. "A framework for assessing the technical and economic potential of shallow geothermal energy in individual and district heating systems: A case study of Slovenia," Energy, Elsevier, vol. 180(C), pages 405-420.
    4. Huang, Junpeng & Fan, Jianhua & Furbo, Simon, 2019. "Feasibility study on solar district heating in China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 108(C), pages 53-64.
    5. Schüppler, Simon & Fleuchaus, Paul & Duchesne, Antoine & Blum, Philipp, 2022. "Cooling supply costs of a university campus," Energy, Elsevier, vol. 249(C).
    6. Jannatabadi, Mohsen & Rahbari, Hamid Reza & Arabkoohsar, Ahmad, 2021. "District cooling systems in Iranian energy matrix, a techno-economic analysis of a reliable solution for a serious challenge," Energy, Elsevier, vol. 214(C).
    7. Inayat, Abrar & Raza, Mohsin, 2019. "District cooling system via renewable energy sources: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 107(C), pages 360-373.
    8. Mäki, Elina & Kannari, Lotta & Hannula, Ilkka & Shemeikka, Jari, 2021. "Decarbonization of a district heating system with a combination of solar heat and bioenergy: A techno-economic case study in the Northern European context," Renewable Energy, Elsevier, vol. 175(C), pages 1174-1199.
    9. Ríos-Ocampo, J.P. & Olaya, Y. & Osorio, A. & Henao, D. & Smith, R. & Arango-Aramburo, S., 2022. "Thermal districts in Colombia: Developing a methodology to estimate the cooling potential demand," Renewable and Sustainable Energy Reviews, Elsevier, vol. 165(C).
    10. Meesenburg, Wiebke & Ommen, Torben & Thorsen, Jan Eric & Elmegaard, Brian, 2020. "Economic feasibility of ultra-low temperature district heating systems in newly built areas supplied by renewable energy," Energy, Elsevier, vol. 191(C).
    11. Fallahnejad, Mostafa & Büchele, Richard & Habiger, Jul & Hasani, Jeton & Hummel, Marcus & Kranzl, Lukas & Mascherbauer, Philipp & Müller, Andreas & Schmidinger, David & Mayr, Bernhard, 2022. "The economic potential of district heating under climate neutrality: The case of Austria," Energy, Elsevier, vol. 259(C).
    12. Zhang, Dan & Li, Biangxiang, 2022. "What can we learn from financial stress indicator?," Finance Research Letters, Elsevier, vol. 50(C).
    13. Yessenia Mart nez-Ruiz & Diego Fernando Manotas-Duque & Howard Ram rez-Malule, 2021. "Evaluation of Investment Projects in Photovoltaic Solar Energy using the DNPV Methodology," International Journal of Energy Economics and Policy, Econjournals, vol. 11(1), pages 180-185.
    14. Vivian, Jacopo & Emmi, Giuseppe & Zarrella, Angelo & Jobard, Xavier & Pietruschka, Dirk & De Carli, Michele, 2018. "Evaluating the cost of heat for end users in ultra low temperature district heating networks with booster heat pumps," Energy, Elsevier, vol. 153(C), pages 788-800.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Golmohamadi, Hessam & Larsen, Kim Guldstrand & Jensen, Peter Gjøl & Hasrat, Imran Riaz, 2022. "Integration of flexibility potentials of district heating systems into electricity markets: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 159(C).
    2. Chicherin, Stanislav, 2020. "Methodology for analyzing operation data for optimum district heating (DH) system design: Ten-year data of Omsk, Russia," Energy, Elsevier, vol. 211(C).
    3. Mengting Jiang & Camilo Rindt & David M. J. Smeulders, 2022. "Optimal Planning of Future District Heating Systems—A Review," Energies, MDPI, vol. 15(19), pages 1-38, September.
    4. Lund, Henrik & Østergaard, Poul Alberg & Nielsen, Tore Bach & Werner, Sven & Thorsen, Jan Eric & Gudmundsson, Oddgeir & Arabkoohsar, Ahmad & Mathiesen, Brian Vad, 2021. "Perspectives on fourth and fifth generation district heating," Energy, Elsevier, vol. 227(C).
    5. Stanislav Chicherin & Vladislav Mašatin & Andres Siirde & Anna Volkova, 2020. "Method for Assessing Heat Loss in A District Heating Network with A Focus on the State of Insulation and Actual Demand for Useful Energy," Energies, MDPI, vol. 13(17), pages 1-15, September.
    6. Guelpa, E. & Capone, M. & Sciacovelli, A. & Vasset, N. & Baviere, R. & Verda, V., 2023. "Reduction of supply temperature in existing district heating: A review of strategies and implementations," Energy, Elsevier, vol. 262(PB).
    7. Zhou, Yuekuan & Zheng, Siqian & Hensen, Jan L.M., 2024. "Machine learning-based digital district heating/cooling with renewable integrations and advanced low-carbon transition," Renewable and Sustainable Energy Reviews, Elsevier, vol. 199(C).
    8. Chicherin, Stanislav & Starikov, Aleksander & Zhuikov, Andrey, 2022. "Justifying network reconstruction when switching to low temperature district heating," Energy, Elsevier, vol. 248(C).
    9. Brunt, Nicholas & Duquette, Jean & O'Brien, William, 2023. "Techno-economic and environmental performance of two state-of-the-art solar-assisted district energy system topologies," Energy, Elsevier, vol. 276(C).
    10. Saleh Abushamah, Hussein Abdulkareem & Skoda, Radek, 2022. "Nuclear energy for district cooling systems – Novel approach and its eco-environmental assessment method," Energy, Elsevier, vol. 250(C).
    11. Zhu, Tingting & Ommen, Torben & Meesenburg, Wiebke & Thorsen, Jan Eric & Elmegaard, Brian, 2021. "Steady state behavior of a booster heat pump for hot water supply in ultra-low temperature district heating network," Energy, Elsevier, vol. 237(C).
    12. Sánchez-García, Luis & Averfalk, Helge & Möllerström, Erik & Persson, Urban, 2023. "Understanding effective width for district heating," Energy, Elsevier, vol. 277(C).
    13. Chicherin, Stanislav & Zhuikov, Andrey & Junussova, Lyazzat, 2022. "The new method for hydraulic calculations of a district heating (DH) network," Energy, Elsevier, vol. 260(C).
    14. Cassina, Lisa & Laloui, Lyesse & Rotta Loria, Alessandro F., 2022. "Thermal interactions among vertical geothermal borehole fields," Renewable Energy, Elsevier, vol. 194(C), pages 1204-1220.
    15. Aleksandra Matuszewska-Janica & Dorota Żebrowska-Suchodolska & Urszula Ala-Karvia & Marta Hozer-Koćmiel, 2021. "Changes in Electricity Production from Renewable Energy Sources in the European Union Countries in 2005–2019," Energies, MDPI, vol. 14(19), pages 1-27, October.
    16. Li, Xiang & Yilmaz, Selin & Patel, Martin K. & Chambers, Jonathan, 2023. "Techno-economic analysis of fifth-generation district heating and cooling combined with seasonal borehole thermal energy storage," Energy, Elsevier, vol. 285(C).
    17. Kılkış, Şiir & Ulpiani, Giulia & Vetters, Nadja, 2024. "Visions for climate neutrality and opportunities for co-learning in European cities," Renewable and Sustainable Energy Reviews, Elsevier, vol. 195(C).
    18. Al Saedi, A.Q. & Sharma, P. & Kabir, C.S., 2021. "A novel cyclical wellbore-fluid circulation strategy for extracting geothermal energy," Energy, Elsevier, vol. 235(C).
    19. De Lorenzi, Andrea & Gambarotta, Agostino & Morini, Mirko & Rossi, Michele & Saletti, Costanza, 2020. "Setup and testing of smart controllers for small-scale district heating networks: An integrated framework," Energy, Elsevier, vol. 205(C).
    20. Gonçalves Rigueira Pinheiro Castro, Pedro Henrique & Filho, Delly Oliveira & Rosa, André Pereira & Navas Gracia, Luis Manuel & Almeida Silva, Thais Cristina, 2024. "Comparison of externalities of biogas and photovoltaic solar energy for energy planning," Energy Policy, Elsevier, vol. 188(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:energy:v:278:y:2023:i:pa:s0360544223012732. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/energy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.