Dynamic heat merit order analysis of electrolyser waste heat in district heating systems

Renewable electricity generation and green hydrogen production are a growing industry where water electrolysis generates significant amounts of waste heat. Recovering and selling this heat to district heating networks can add a cost-effective and low-carbon alternative to the existing generation units. This research evaluates the operational, economic, and environmental benefits of waste heat integration into district heating networks under varying market conditions and different levels of district heating system complexity. A simulation-based dispatch model is developed in Python to calculate hourly marginal costs and establish a dynamic heat merit order. The model is applied to two Swedish case studies, a small-scale system, Rottne, and a more flexible and elaborate one, including thermal energy storage, Enköping. The results show that electrolyser waste heat is highly competitive in both cases, and it occupies the lowest position of the heat merit order for most of the examined period. In 2024, waste heat could have operated for 96.5% of the time in Rottne, representing 76.2% of total annual heat generation despite providing only 25% of the installed capacity. While in Enköping, it operated 94.2% of the year, generating over 25% of the total heat produced while only representing 5% of the total capacity. The findings also uncover an important trade-off between waste heat integration and storage utilisation. Even though it is highly beneficial for the district heating operator to include storage both economically and environmentally, the profit of the waste heat provider decreases when thermal energy storage is present in the system. The thermal energy storage in Enköping reduced the annual variable system costs from the district heating operator’s perspective by 132,130 EUR, but it simultaneously lowered the profit of waste heat by 128,408 EUR. This study demonstrates the value and competitiveness of electrolyser waste heat through the heat merit order and indicates that waste heat is a competitive heat source within district heating. However, its economic value strongly depends on electricity prices, the presence and operational logistics of thermal energy storage, and the structure of the surrounding district heating network.