This article is part of our special report 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.
District heating – networks of hot water pipes running below the ground – supplies millions of homes in cities across Europe, representing about 10% of heat supply in the EU.
Yet, most of that runs on polluting fossil fuels – chiefly natural gas and coal which currently make up around 30% and 26% of the fuel mix, respectively, according to EU-wide industry figures.
Before the Russian invasion of Ukraine, many eastern EU countries had made plans to switch their district heating systems to fossil gas, which produces about half the global warming emissions of coal when burned in power plants.
That was seen as a cost-effective way of meeting EU climate goals. But with gas prices going through the roof, these assumptions are now being turned upside down.
“The economics of heating with gas have completely changed,” says Jan Rosenow, director of European programmes at the Regulatory Assistance Project (RAP), a non-profit group dedicated to accelerating the transition to clean energy.
According to Rosenow, the reason why European countries have used so much gas and coal in district heating is simple – it’s because they were cheaper to run. However, he says that has changed: coal and gas have become more expensive, while in the meantime, the cost of renewable electricity and heat pumps has come down.
“In Europe, we’ve benefited of fairly low gas prices for a very long period because we got lots of our gas from Russia. And that is that is now completely changed,” he said. “For many years, there was this story that gas would be used as a transition fuel to replace coal in district heating. But I think now there’s a much stronger case to say that’s no longer a viable strategy and that we need to leapfrog to something else”.
Just what this something else will be is not entirely clear yet, with many options available.
Options on the table
One vast untapped resource is waste heat produced by industry and the power sector. According to an EU-funded research project, Europe “could save all of the natural gas currently used for heating buildings” by collecting this waste heat and feeding it through district heat networks.
The big advantage of using waste heat is that it doesn’t require additional power generation capacity to be installed. “This is why we have to focus on reusing waste heat from industrial facilities. This is a huge untapped potential that does not require additional energy supply,” says Birger Lauersen, President of Euroheat & Power, the association representing the district heating sector in Brussels.
The downside is that collecting and distributing waste heat requires building new pipeline infrastructure, which can take years to complete because of administrative complexities or political apathy.
Another increasingly attractive option is large-scale heat pumps. “In Denmark, Finland, and Sweden, we have seen an increasing number of those being used to supply heat for district heating,” Rosenow says. “So there is a shift happening. And where we’re going next is clearly in favour of renewable electricity and heat pumps.”
Biomass is also becoming more competitive compared to gas, even though that can be problematic from a sustainability perspective because it involves felling trees, which play an essential role in cooling down the earth’s climate.
“I’m not a big fan of burning biomass for heat,” Rosenow says. “But clearly, the new geopolitical situation with gas is making biomass a lot more cost-competitive. And I think there’s a risk that we switch off the gas and coal generation and use biomass instead. But the economics are driving us in that direction.”
In Poland, energy groups are looking at all options available to decarbonise district heating.
The challenge for them is huge: nearly six million households in Poland – out of 14 million – are currently supplied by district heating networks, which are running 70% on coal, the most polluting fossil fuel.
With climate change, a top political objective at the EU level, Poland’s priority is first getting rid of coal. “Our aim is to phase out coal in district heating by 2030,” said Wanda Buk, vice-president for regulatory affairs at Polska Grupa Energetyczna (PGE), Poland’s largest electricity company.
“In several our location, we are assessing the possibility of building large-scale heat pumps, and we are expecting huge investments in this area,” Buk said, adding that PGE is also exploring power-to-heat technology and large-scale electric boilers.
Small-scale heat pumps for individual households are also aggressively rolled out. “The heat pump market in Poland grew by about 88% last year,” says Piotr Sprzaczak, director of district heating at the Polish Ministry of Climate and Environment. “So this is something that we want to we want to pursue,” he added, saying more heat pumps were installed in Warsaw last year than in London.
Poland says will be free from Russian gas ‘by the end of the year’
But deploying alternatives to coal will take time, experts warn, saying gas is likely to remain part of the mix for some time.
“I think it will be challenging to replace all the gas at once,” said Andrej Jentsch, programme manager at the IEA DHC, the International Energy Agency’s hub for international district heating research.
“Even ambitious plans require time,” he said at a recent EURACTIV event. “Personally, I would definitely vote for a transition to renewables and to emissions-free sources as quickly as possible. But that can be very expensive for society, so it’s kind of a balancing act,” he argued.
In Poland, efforts to decarbonise heating are also driven by concerns over air pollution, which typically gets worse during the winter season. A clean air programme recently launched by Warsaw encourages households to “switch from hard coal furnaces to boilers, heat pumps and pellet boilers,” Sprzaczak explained during a EURACTIV event held earlier this week.
“The polish people want to breathe clean air. But in order to provide clean air, we also need district heating,” he added, insisting that Warsaw needs “a full palette of solutions” to decarbonise – including gas.
PGE, the largest electricity company in Poland, has asked EU regulators for more leeway to replace coal in district heating systems, warning that new standards put forward in the revised Energy Efficiency Directive (EED) are too strict to allow using gas as a transition fuel.
“Of course, we understand that the war in Ukraine poses a threat because the natural transition fuel for large district heating systems was natural gas,” Sprzaczak said. However, Poland has made tremendous efforts to diversify its suppliers, he added, saying Russian gas will be out of the mix in a matter of months.
“By the end of the year, Poland will be completely free of natural gas from Russia,” Sprzaczak told participants at the EURACTIV event. “But now we need solutions for district heating,” he added, saying gas from Norway and the US needs to remain among the range of options available to Poland.
The case for gas cogeneration
Jentsch agrees that gas can still have a role to play in district heating – but only if it uses high-efficiency cogeneration plants that produce heat and electricity simultaneously. “CHP [combined heat and power] is a technology that can easily help to reduce dependency on gas quickly. So essentially, we use the same fuel, we just do it better,” Jentsch said.
According to him, using high-efficiency CHP instead of electric boilers can cut gas consumption by 50% while freeing up renewable power capacity for other uses. “So essentially, we can halve the gas demand without using renewables that might not yet be deployable at sufficient speed,” he said.
Using gas cogeneration in district heating networks also avoids putting too much extra strain on electricity networks, the industry argues. “We cannot electrify everything,” warned Hans Korteweg of trade association COGEN Europe, explaining that CHP can supply electricity at times of high demand in winter when there is insufficient solar or wind supply.
However, the industry argues that new decarbonisation targets for district heating currently being mooted by the EU are too ambitious and cannot be met. “Some amendments to the energy efficiency directive suggest that CHP should be close to 100% renewable from 2025 onwards – and that’s just not realistic,” Korteweg said.
The European Commission sought to assuage the industry’s concerns. Claudia Canevari, an official at the EU executive’s energy department, told participants at the event that the new standards will only apply to new investments, not to existing gas cogeneration infrastructure.
The Commission’s stance echoes worries from environmentalists like Rosenow, who warn against investing in new gas infrastructure like LNG terminals, saying those are incompatible with the EU’s climate goals.
“In five years’ time, when the war is hopefully long over, that infrastructure is still going to be there,” Rosenow said. “And that I think is a dangerous pathway because it locks us into expensive infrastructure and makes the whole effort more expensive.”
[Edited by Alice Taylor]