Flexibility for the Design of a Residential Heat Pump System Kevin Ferrigno Application Portfolio for ESD.71 Fall 2009 December 8, 2009 Fall 2009 ESD.71, Engineering System Analyis for Design Professor: Richard DeNeufville TA: Michel‐Alexandre CardinKevin Ferrigno Residential Heat Pump System 2 Complete AP December 8, 2009 Contents Executive Summary.......................................................................................................................................3 Chapter 1: System Description and Motivation........................................................................................... 3 1‐1 Design Variables..................................................................................................................................4 System Model ........................................................................................................................................... 4 Incorporating Flexible Design ...................................................................................................................5 Chapter 2: Uncertainties...............................................................................................................................5 2.1 Uncertainties....................................................................................................................................... 5 2.1.1 Uncertainty in Energy (Electricity) Prices..................................................................................... 6 2.1.2 Uncertainty in Technology Developments...................................................................................9 Chapter 3: System Models ..........................................................................................................................11 3.1 Fixed System Model .......................................................................................................................... 11 3.2 Flexible System Model ......................................................................................................................11 3.3 Example............................................................................................................................................. 12 3.4 Model of System Performance .........................................................................................................12 3.4.1 Heat Pump Modeling .................................................................................................................12 3.4.2 Weather Models ........................................................................................................................12 3.4.3 Building Models ......................................................................................................................... 13 3.4.4 Operating Cost Models .............................................................................................................. 13 Chapter 4: Decision Tree Analysis............................................................................................................... 13 Chapter 5: Lattice Analysis.......................................................................................................................... 17 Chapter 6: Conclusion.................................................................................................................................23 Kevin Ferrigno Residential Heat Pump System 3 Complete AP December 8, 2009 Executive Summary This paper examines the value of flexibility in home heat pump systems. A number of flexible design options are identified including upgrading to ground source technology, improving component efficiency, providing switching of fuel types, and system improvements by increasing the number of heating and cooling zones. Several possible uncertainties affecting the operation of the system are identified against which a flexible design might provide value. These include energy prices, technology improvement, government policy, and future weather conditions. The flexibility easily incorporate future efficiency improvements at a cost lower than system replacement is chosen for more detailed analysis against the uncertainty of future prices for electricity. Analysis is done using a 2 stage decision analysis where the possibility to install an inflexible or flexible system is the stage 1 decision, and the ability to upgrade the flexible system is the stage 2 decision. Uncertainties in electricity prices are considered and evaluated after each decision. A lattice analysis was also performed considering 6 price periods of 3 years each for future electricity prices with options to upgrade the flexible system starting in the 2nd 3 year period with declining upgrade costs in each subsequent period. Both analyses predict that the value of the flexible system is in protecting against significant increased costs in the case of high future electricity prices. The benefits of the flexible system are significant in a relatively small number of cases. The option to choose a fixed or flexible system are considered in terms of several common decision making criteria including maximizing Expected Net Present Value, maximizing Value at Risk, and minimizing ini tial capital expenditure. The flexible system is determined to be a better choice in terms of Expected Net Present Value and Value at Risk, while the fixed system is a better choice in terms of initial capital expenditure. The results of the analysis lead to a conclusion that a more thorough evaluation of the flexibility concept presented are valuable. Chapter 1: System Description and Motivation The system considered in the Application Portfolio is a home heating and cooling system. This system will include the heating and cooling equipment as well as any equipment required to distribute or capture heat from within the building. The recent concerns over energy security have led to increased research and development efforts in home energy efficiency. One of the main consumers of energy is the home’s heating and cooling system. These systems have lifetimes between 10 and 20 years. Systems installed today may not be able to take advantage of improvements that become commercially available over the next several years. In addition, energy prices fluctuate, and the relative costs of different fuels change over time. Today’s cost effective heating and