Old district heating systems ‘at risk of bankruptcy’

District heating in Serbia

District heating systems have not been modernised in many EU member states, although they currently provide over 60% of heat and hot water in Nordic and Eastern European countries.

District heating systems are the most economical way to provide heating, steam and hot water to urban areas with high population density, according to the Danish District Heating Association, a trade group.

Using heat produced during electricity generation or from factories, the technology makes a significant contribution to the efficiency of the overall energy sector, the group argues. District heating systems can also use renewable energy sources such as straw, wood chips, municipal refuse and biogas.

The European Commission has recognised the benefits of district heating, saying they have significant potential for saving primary energy.

The recently adopted Energy Efficiency Directive asks member states to provide a cost-benefit analysis of the technology's potential, as well as evaluate the savings that could be made with cogeneration and cooling networks. This assessment should be ready by the end of 2015.

Refurbish to save the network

When it comes to district heating networks, the potential lies in the refurbishment of old, damaged systems, said Marc Delaye of Dalkia, a French company that specialises in energy-efficient solutions for electricity companies, industry and buildings.

“If not modernised in the next few years, these heating networks could face bankruptcy," Delaye said. “If you want to impose district heating in the countries where you already have the network, the priority is to save them”.

In countries like Romania and Bulgaria, existing district heating networks are at risk, Delaye said. If nothing is done, the networks could collapse in some places, he warned.

The phenomenon is not restricted to these two countries. District heating networks are popular in Northern, Central and Eastern Europe.

In Denmark, 1.5 million households out of a total of around 2.6 million are warmed with district heating systems, the Danish District Heating Association says. Some 60% of the Danish population is connected to the system, making it the main source of heating and hot water in the region.

In Romania, centralised stations cover heating demand in approximately 45 localities. In Poland, around 80% of the urban population use heat distributed by district networks.

The heating systems used in most former communist countries are now old and damaged. They are also inefficient, as the amount of heat that was provided was more important than the impact its production had on the environment.

Some refurbishment has taken place. Germany’s KfW Entwicklungsbank has provided funding to rehabilitate district heating systems in Serbia since 2001. The funds have enabled the heating companies to repair their pipe networks, purchase more efficient boilers or replace those running on coal or heavy oil, which often generate heat very inefficiently.

But repairs have been insignificant compared to the volume that would have been necessary, according to a study by Japan's Overseas Environmental Co-operation Centre (OECC).

The study showed that over 50% of the generated heat is lost during transportation because the insulation of the pipes, which carry it underground or above ground to consumers, has deteriorated over time. In some areas in Romania, more than 32% of the district heating equipment is over 30 years old, whereas 50% of the infrastructure is between 20 and 30 years of age, the OECC study shows.

Liquidity needed

The European Commission said in its blueprint for an integrated European energy network that modernising district heating systems should be a priority where justified by local conditions.

But refurbishing old, damaged networks is expensive, requiring in some cases tens of millions of euros and all district heating companies surveyed by the OECC in Romania and Poland cited financial constraints as the main obstacle to improving the network.

Refurbishment also tends to push consumer bills up and prompt them to switch to cheaper but more polluting fuels. However, Delaye says this could be prevented with the help of EU's existing and new funding options, such as the Cohesion Policy, but also the Energy Efficiency Fund and the Innovative Financial Instruments.

“There is a need in the market for liquidity, there is a need in the market for equity to finance these sorts of projects and to make sure they emerge, they come out,” Delaye said.

District heating networks were commonplace in former East bloc countries where urban populations were densely concentrated in high-rise housing developments. In Poland, around 80% of the urban population is covered by district heating networks.

District heating is also popular in Nordic countries. Some 60% of the Danish population is connected to the system, making it the main source of heating and hot water in the region.

However, the heating networks in most Eastern European states are now old and damaged and need basic maintenance and refurbishment.

  • By 2016: Member states expected to present to the European Commission the results of their cost-benefit analysis on the implementation of high-efficiency district heating and cooling networks and cogeneration.

EU official documents:

Business and Industry:

Subscribe to our newsletters