This section aims at determining the specific cost of production at which ORC technologies become competitive with respect to alternative power producing technologies. The incentive scenario in European countries and supporting case studies are presented to investigate whether it is economical to invest in ORC in different fields of application.
2.1. European Incentives Scenario
The incentives for the ORC market fall under two main categories. On tone side, ORC power plants based on renewable energy sources (such as biomass, biogas, solar thermal or geothermal) may benefit from incentives and subsidies to promote the transition towards an increased share of renewable energy in the overall energy mix. On the other side, ORC power plants based on waste heat sources receive incentives under energy efficiency programs. The former is regulated by guidelines and recommendations as described in Directive 2009/28/EC of the European Parliament and of the Council. The latter is regulated by Directive 2012/27/EU of the European Parliament and of the Council, which promotes energy efficiency.
The European Union is devoted to complying with the Kyoto Protocol in order to control the energy consumption, to increase the share of renewable energy and to improve energy efficiency.
According to the 2009/28/EC directive, it is favourable to support the demonstration and commercialization phase of decentralized renewable energy production due to multiple benefits occurring with such an investment. The European Council set a binding target of 20% final energy consumption from renewable sources by 2020. To this end, each of the Member States is required to develop national action plans (for example, the National Renewable Energy Action Plan, the National Energy Efficiency Action Plan) tailored to their own resources.
The European incentive scheme [26
] provides the following incentive systems:
A Feed-in Tariff (FiT) is an energy supply policy to encourage the spreading of renewable energy technologies. FiT ensures a pre-defined sale agreement for the electricity produced and fed to the grid for a defined contract period (typically 10–25 years), which compensates for the extra costs incurred in regards to investments in renewable technologies. FiTs are independent of market price and ensure a revenue stream to those who install power plants based on the production of energy from renewable sources. The financial support provided is differentiated by technology type, project size and country. For instance, incentives for biogas and biomass are granted based on several factors (e.g., quality, composition, installed capacity). Figure 3
provides the spectrum of FiTs for different European countries for the year 2016 [27
shows bars that represent the range of incentives provided by different European countries for those who install plants based on technologies eligible for FiTs. Taller bars refer to those countries that provide incentives sorted by renewable technology adopted and plant size. Smaller bars refer to those countries in which the incentives are not differentiated. Notice that the taller bars correspond to the European countries in which the support from FiTs is higher. As can be observed from Figure 3
, some countries present more complex subsidies plans (e.g., Germany and Italy) than others (e.g., UK and Poland). The overall amount dedicated to feed-in tariff schemes is recalculated annually.
Premium tariffs offer a premium on top of the market price to those who produce electricity from renewable sources. As opposed to FiT, which guarantee a predictable return on investment regardless of fluctuations in electricity prices, premium tariffs are still susceptible to price variation and consequently stimulate the production of electricity when demand and consequently price is highest.
Green certificates are issued to eligible renewable energy producers based on the energy produced and supplied to the grid. Such energy is sold to the grid at a price that is the sum of the green certificate value and of the current price of the electricity. Energy suppliers are obliged to include a specific amount of renewable electricity (quotas) in their portfolio. By purchasing green certificates from renewable energy generators, they can fulfill this requirement.
Investment incentives include subsidies, as well as low-interest, long-term loans paid up front for renewable projects. Table 1
reports the investment incentives awarded by different European countries [28
Auctions represent an alternative to FiTs. New power plants that are based on renewable technologies (e.g., biomass, solar, geothermal, etc.) can benefit from FiTs. Existing power plants can receive subsidies via auctions. Operators simultaneously submit sealed bids to obtain subsidies for a certain allocated capacity. The lowest bidder wins, ensuring an extra reward, which sums up with the price at which the grid pays its electricity. This way, the most cost-effective projects are awarded.
] is a support scheme for which the generated electricity is fed back to the grid and offsets the consumption. In the case of excess production, there is no reimbursement, but it might be carried forward to the next billing period.
shows the cost of electricity and the price at which the owner of a power plant can sell the electricity generated to the grid in absence of incentives in the year 2016 in several European countries [25
The benefits of installing ORC technology can be two-fold. There is the option for those factories that consume electricity to produce it through an ORC plant as opposed to buying it from the grid at its market price. Alternatively, there exists the opportunity to install an ORC plant with the objective to obtain an income from selling the electricity produced back to the grid. In the former case, the investor can calculate the return on investment based on the savings on the energy bill plus the incentives from feed-in tariffs (if any). In the latter case, the investor covers his/her expenses through the earnings of selling the energy and the subsidies resulting in a reduced investment cost (see Table 1
The ORC technology attractiveness depends on the Payback Period (PBP) offered to the end user. In this study, it has been assumed that a three-year PBP guarantees the diffusion of a technology.
Different possible commercial scenarios are analysed to provide an overview of the convenience for ORC companies to run businesses in this sector, assuming that the production cost lies on the trend line presented in Figure 1
. For the sake of simplicity, it has been assumed that the ORC plant is produced and sold from an ORC company directly to an end user (i.e., an industrial company, an engine operator, etc.). The revenue that an ORC company can achieve has been evaluated, considering a three-year PBP for the end user. As a worst case scenario, the absence of investment incentives has been considered. Specifically, three different business cases are investigated:
Case 1: An industrial company invests in the installation of an ORC system to produce the electrical energy demand of its factory. The ORC plant is coupled to process waste heat. The investment is paid back from the savings on the energy bill since the electricity is not purchased any more at the market price from the grid.
Case 2: A stationary engine operator installs an ORC unit to generate additional power by recovering the thermal energy in the exhaust gasses to sell it to the grid at the actual market price. In this case, the income depends on the price at which the grid purchases the energy produced by the ORC plant (see Figure 4
Case 3: An ORC plant is installed to produce electrical energy from a renewable energy source, such as biomass, solar or geothermal energy. Such a plant is eligible for the feed-in tariff.
Notice that Cases 1 and 2 refer to the ORC technology applied to waste heat recovery systems, which is not considered as a renewable energy. In this circumstance, incentives are not provided. Case 3, instead, takes advantage of the incentives for the production of electricity from a renewable source.
Italy, Germany, the United Kingdom and France have been investigated in this work. However, the reasoning can be easily extended to different countries. As concerns case 3, an average value for the feed in tariffs has been considered for each country analysed among those presented in Figure 3
. Specifically, 20 €ct/kWh, 17 €ct/kWh, 7.92 €ct/kWh and 9.745 €ct/kWh have been selected respectively for Italy, Germany, the United Kingdom and France. In addition, the United Kingdom provides an extra 5.78 €ct/kWh benefit to the end users who export energy to the grid, which has been included in the calculations. The ORC plant has been assumed to operate 85% of the time, which corresponds to 7446 h/year. The operation and maintenance (O&M) costs have been considered equal to 3 €ct/kW. The time value of the money and the opportunity cost have been evaluated applying a 4% discount rate [30
]. Furthermore, a 2% inflation rate has been considered. Therefore, the calculated nominal discount rate is 6.08%. Lemmens [6
], in his cost analysis for a 375-kW ORC system, considers that the integration costs are 11% of the total cost of the plant. The impact of the installation costs decreases with the size of the plant. It must be noted that the integration costs have not been included in this study, primarily because they depend highly on the plant and heat source whereat the ORC will be coupled. ORC companies are aiming at creating semi-independent ORC systems for low power outputs, effectively minimizing installation costs. A high level of commercial maturity for small-scale ORC systems is likely to come from applications that require low customization and enable high volume sales. Such applications include waste heat recovery from ICEs and gas turbines, where integration costs are likely to be lower. Instead, typical large-scale ORC systems have been applied to applications that require high levels of customization such as geothermal and industrial wasted heat, where integration costs are inevitably considerably higher. For the aforementioned reasons, although such costs for commercial systems can be as high as 10%, installation costs are not considered in the current analysis.
It has been considered that the ORC companies install the plant at the specific cost identified in Figure 1
and that they sell it at a price that guarantees a payback period of three years to the end user. Therefore, the revenue for the ORC companies is calculated as the difference between the price at which they sell the ORC plant to the end user and the cost of production determined using the data in Figure 1
a–d reports the results of the analysis.
As expected, the revenue for the ORC companies is greater in those countries where the price of the electricity and the incentives are higher. Figure 5
highlights the minimum plant size at which an income is guaranteed to the ORC company, in case it succeeds in producing the system at the specific cost identified by the trend line of Figure 1
. Each case will now be analysed independently: in Case 1, the revenue obtained by the ORC company is calculated considering an initial investment cost, based on the data depicted in Figure 1
. Assuming that the ORC plant operates 7446 h/year and that the end-user saves an amount of money that depends on the cost of the electricity in the country of interest (see Figure 4
), the revenue is calculated as the difference between the actualized savings in the energy bill in the first three years of operation of the plant and the initial investment cost. For example, in Italy, Germany and the United Kingdom, an ORC company would benefit from producing ORC plants with a power output above 10 kW (see Figure 5
a–c), while in France, an ORC company would make no profit for the installation of ORC plants of power output below 100 kW (see Figure 5
d). In fact, the cost of electricity in France is lower with respect to that of the other countries under investigation (see Figure 4
), which leads to lower savings on the energy bill.
Case 2 considers the installation of an ORC plant to produce electricity from the exhaust gas of a stationary engine. It has been assumed that the electricity produced is sold back to the grid at the price indicated in Figure 4
. Considering that the ORC plant operates 7446 h/year during the three-year pay-back period, the revenue for the ORC company is calculated as the difference between the actualized income generated by selling the electricity produced to the grid and the initial investment cost. None of the analysed countries allow the ORC companies to obtain a revenue from the investment scheme as described in Case 2, when the power output of the ORC is below 200 kW (see Figure 5
a–d). It can be concluded that the current scheme of incentives needs to be improved to push ORC companies to invest in the recovery of wasted heat for the production of energy to sell to the grid. For example, the revenue from selling the electricity to the grid could be augmented with respect to the current values, shown in Figure 4
Case 3 investigates the installation of ORC systems coupled to renewable energy sources. When an ORC system is used to exploit the energy produced from a renewable source, the end-user benefits from the FiTs. Therefore, it is possible to calculate the revenue for the ORC company as the difference between the income obtained in the first three years and the initial investment cost. As illustrated in Figure 5
a–d, the installation of ORC systems for applications that make them eligible for FiTs results in the highest revenue for the ORC companies, among the options analysed. In Italy and Germany, where the cost of electricity is high (see Figure 4
), the installation of ORC systems guarantees the company an income when the power output is above 5 kW. In the United Kingdom, it is convenient to install an ORC, under the incentive scheme of FiTs, if the power production of the plant is above 20 kW. Finally, in France, the option is not cost effective for a power production below 100 kW.
2.2. ORC Market Analysis
reported the relative advantage of investing in ORC technology depending on location and pay-back scheme. Section 2.2
reports the companies currently involved in the design and commercialization of ORC systems for the production of power in the small-scale range, i.e., below 100 kW.
shows a list of existing ORC companies in the small-scale range. It has to be noted that all companies to the authors’ knowledge have been included; however, it can be expected that this list may not be all-inclusive.
To date, companies that develop ORC plants in the MW range, such as Turboden, Ormat and Enertime, have not been trying to expand their business towards the small-scale market. This constitutes an additional proof that scaling down this technology is not straight forward.
reveals that companies are trying to gain competitive advantage designing ad hoc expanders. In fact, the expander design together with the working fluid selection represent the main unsolved problems in this field. Most of the companies, active in the market, opted for a turbo expander. However, it can be noticed that volumetric expanders are preferred when the power output reaches values as low as 30 kW. Moreover, the temperature of the heat source varies over a wide range depending on which market sector companies are trying to reach. Generally, most of the low temperature heat sources (i.e., below 300 °C) refer to geothermal or solar applications and low temperature wasted heat (e.g., in the engine cooling). High temperature heat sources (i.e., above 300 °C) are typical of waste heat recovery from high-grade sources and biomass applications.
Despite of the relatively large number of companies outlined in Table 2
, most of them are still developing prototypes. The reason being that the specific cost depicted in Figure 1
represents a difficult target to reach.
Scientists are putting much effort into the development of new methods to improve the performance of small-scale ORCs. The research in the ORC field is not recent. In 1964, Tabor and Bronicki [31
] published a work in which they investigated suitable working fluids for small vapour turbines. In 1984, Angelino et al. [32
] presented a review of the Italian activity in the research field of ORC. Section 3
and Section 4
outline the methods proposed in the literature for the selection of the optimal working fluid and expander. The analysis that follows does not aim at being conclusive, nor at presenting original results. The purpose of Section 3
and Section 4
is to provide the reader with the state of the art of the ORC technology in small-scale applications.