EU bets on local planning to boost district heating

District heating requires building a network of underground pipes, a process fraught with political and administrative difficulties. [Zigmunds Dizgalvis / Shutterstock]

This article is part of our special report District heating.

District heating networks are set to receive a boost under draft EU legislation requiring all municipalities above 50,000 inhabitants to map out heating and cooling decarbonisation roadmaps.

District heating networks – hot water pipes running below the ground – supply millions of homes in cities across Europe, representing about 10% of the EU’s heat market.

As Europe seeks to wean itself off coal and gas, switching those networks to renewables is becoming an urgent priority.

“If you look at the trend in investments across Europe, all cities with ambitious energy and climate agendas intend to develop district heating,” said Birger Lauersen, president of Euroheat & Power, an association representing the district heating sector in Brussels.

“And these projects, to a great extent, are based on renewables and waste heat, usually coming from industries or the tertiary sector like data centres,” he told EURACTIV in an interview.

District heating in Europe today runs mostly on fossil fuels, with natural gas and coal currently making up around 30% and 26% of the fuel mix, respectively, according to Euroheat & Power. And switching to clean energy sources is a slow process: by June, the association is expected to put together a roadmap to decarbonise the sector by 2050.

One largely untapped energy source is waste heat from heavy industries like steel plants or petrochemical sites, which could save all of the natural gas currently used for heating buildings in Europe, according to an EU-funded research project.

However, collecting waste heat and bringing it to households requires building a network of underground pipes, a process Lauersen said is fraught with political and administrative difficulties.

“District heating is all about context: you have to mobilise cities, regions, building owners, investors, waste heat producers, and so on,” Lauersen said, explaining that these kinds of projects are more complex to bring over the line than large wind farms.

“For district heating, you have to get the local authorities involved every step of the way to solve issues because you have to dig in the ground to build the infrastructure,” he said, warning also that “the gaps are mainly in the member states, not at the EU level”.

This is something that the European Commission is seeking to address. Under a proposed revision of the Energy Efficiency Directive (EED) tabled last year, all municipalities above 50,000 inhabitants will be requested to prepare local heating and cooling plans.

Those plans will be based on data provided in “a comprehensive heating and cooling assessment” prepared by each EU country as part of their national energy and climate plans submitted to the European Commission every year.

“This is very important because very often what is missing is the knowledge about the situation and about the potential,” said Claudia Canevari, an official working at the Commission’s energy department who spoke at a recent EURACTIV event.

Others agree that national plans will be crucial for EU countries to develop renewable-based heating and cooling systems. “We will need certainly integrated planning at a local level where we focus on the entire energy system,” said Hans Korteweg, managing director of COGEN Europe, a trade association representing the cogeneration industry.

According to Korteweg, national plans should take into account all available resources – whether coming from waste heat, electricity, or gas networks – in order to “maximise renewables across all energy vectors and ensure that those renewables are efficiently used”.

Gas crisis accelerates energy transition in district heating

The war in Ukraine is shifting the economic fundamentals behind the choice of fuel supplying district heating networks, with large-scale heat pumps becoming a more attractive option for energy operators looking to decarbonise.

De-risking investments: it’s not all about money

Regardless of the fuel, getting projects over the line usually takes time because district heating networks have high upfront costs and long payback periods. And money is not the biggest problem.

“Basically, the money is there,” Lauersen said, noting that private equity firms and pensions funds are very keen on district heating projects because of their long-term commitments.

“What’s missing is perhaps not so much the money as the handling of risk, because these are long-term investments,” he added.

Indeed, district heating projects can come in competition with other heating solutions like individual heat pumps, or new wind farm projects, which take less time to complete and tend to receive more attention from policymakers.

“You could put a district heating network in place and suddenly you end up without customers because the gas prices or the electricity prices might be too low,” Lauersen said. “These are part of the risks.”

However, he argued that district heating projects are worth pursuing because they provide a more “systemic, collective approach to heating decarbonisation, versus individual solutions” like heat pumps, which have high upfront costs and can be unaffordable to most households.

Others agree that district heating is a better option when it comes to serving the masses.

In Germany alone, “at least one billion euros of subsidies per year” is needed by 2030 in order to expand the networks, said Andrej Jentsch, programme manager at the IEA DHC, the International Energy Agency’s hub for international district heating research.

“Without district heating and cooling it is very likely that heat supply is going to be much more expensive,” he said at the EURACTIV event.

Jentsch praised the European Commission’s push to decarbonise heating, saying the war in Ukraine gives the EU many reasons to get off coal and gas fast. But he warned against an excessive focus on fast individual heating solutions.

While heat pumps “might be feasible for the more rural areas or suburban ones,” he said that “highly dense cities should also keep their option open to connect to a district heating system”.

According to him, regulatory certainty is paramount to ensure projects are completed on time. “In Germany, we had some issues with legislation going back and forth and thus raising insecurity of investment,” Jentsch said.

“So if we have a legal framework that is guaranteed to last a certain time or at least not make the situation economically worse – that would help a big deal,” he added.

Europe’s booming demand for heat pumps exposes bottlenecks

Sky-high gas prices have sent demand for heat pumps booming across Europe, exposing a range of bottlenecks limiting industry’s ability to deliver, including a shortage of skilled labour, as well as the need to simultaneously insulate buildings to ensure maximum efficiency.

[Edited by Zoran Radosavljevic]

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