5. HEAT AND DISTRICT HEATING

DH market development. More research and development in new DH systems and technology can support modernisation of the infrastructure and maintain DH as an important part of Sweden’s energy system.

Supply and demand

Heat sources in buildings

In recent decades, the Swedish heating sector has gone through a large transformation. In the 1970s, fuel oil dominated energy consumption in the residential sector. After the oil crises of 1973 and 1979, Sweden started to use more electric heating, available through the build-out of nuclear power, as well as DH. In the early 1980s, fuel oil still accounted for nearly half of the total heat consumption in buildings, but DH was steadily growing (Figure 5.1). In 2016, DH accounted for nearly 60% of the heat demand in buildings, up from around 50% a decade earlier. DH supplied 90% of the heating in multifamily buildings, 77% of non-residential buildings and 17% of detached oneand two-dwelling houses (Figure 5.2).

Figure 5.1 Energy consumption for heating in buildings by fuel, 1983-2016

0

1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

DH has increased significantly and, together with heat pumps, it has replaced nearly all oil heating in buildings.

* Electric heating includes electric boilers and heat pumps. Note: Energy for space heating and water heating.

Source: SEA (2018), Energy in Sweden, Facts and Figures 2018, www.energimyndigheten.se/statistik/energilaget/?currentTab=1#mainheading.

In 2016, electricity accounted for around one-quarter of the total heat demand, a relatively stable share for the past three decades. However, many houses have replaced electric boilers with heat pumps to increase the efficiency of electric heating. For over a decade, around 100 000 heat pumps have been installed annually (Figure 5.3). Approximately half of these are air-to-air heat pumps that use outdoor air to produce warm air in the building. Ground-source heat pumps account for around one-third of the total. Heat pumps have primarily replaced direct electric heating and oil boilers in detached houses not connected to DH. Electricity (including heat pumps) accounts for nearly half of total heating demand in detached houses (Figure 5.2).

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Solid biomass fuels (wood and pellets) account for 14% of the total heat demand in buildings and one-third of heating in detached houses. The use of such biomass fuels has been relatively stable for decades, with peak demand during the cold winters of 2009 and 2010. Natural gas supplies only a small share of buildings in a few cities, and oil is used only marginally in the remaining fuel oil boilers because it is considerably more expensive than other alternatives. Previously, conversion from fuel oil heating and direct electric heating was supported through specific subsidy schemes (Box 5.1).

Figure 5.2 Energy consumption for heating by fuel and building type, 2016

DH dominates in multifamily buildings, whereas electricity and biofuels are the main heat sources in detached houses.

* Electric heating includes electric boilers and heat pumps. Note: Energy for space heating and water heating.

Source: SEA (2018), Energy in Sweden, Facts and Figures 2018, www.energimyndigheten.se/statistik/energilaget/?currentTab=1#mainheading.

Figure 5.3 Heat pump installations in Sweden, 1982-2017

Heat pump installations increased rapidly in the early 2000s, and they have remained at high levels owing to investment support schemes and low electricity prices.

* Air-air heat pump data are estimated and uncertain.

Source: SKVP (2018), Värmepumpsförsäljning (Heat Pump Sales), https://skvp.se/aktuellt-o- opinion/statistik/varmepumpsforsaljning.

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5. HEAT AND DISTRICT HEATING

Box 5.1 Support schemes for the conversion of oil and electric heating, 2006-10

In 2006, the government introduced two conversion support schemes to increase the use of more efficient, low-carbon heating alternatives. One scheme supported conversion from oil heaters (Act 2005-1256) and the other conversion from direct electric heating (Act 2005-1255). The schemes allowed house owners to apply for investment support of up to 30% of the total cost when converting to DH, ground source heat pumps, or efficient biofuel boilers. Both schemes were supposed to run for five years until the end of 2010, but the oil conversion scheme was closed by 2007 because it had run out of budget owing to the many applications. In evaluations of the schemes, they were considered to have accelerated the conversion from oil and electric heating. However, their economic efficiency was regarded as questionable because many investments took place without the support schemes, but were driven by the high taxes on fuel oil and electricity.

Sources: Boverket (2008) ), Mindre Olja, Bättre Miljö – men till vilket Pris [Less Oil, Better Environment – but at what Price], www.boverket.se/globalassets/publikationer/dokument/2008/mindre_olja_-battre_miljo.pdf; Boverket (2011), Utvärdering av Stödet för Konvertering från Direktverkande Elvärme i Bostadshus [Review of the Support for Conversion from Direct Electric Heating in Houses], www.boverket.se/globalassets/publikationer/dokument/2011/utvardering-av-stodet-for-konvertering-fran- direktverkande-elvarme.pdf.

DH supply

Initially, DH was supplied by oil, but after the oil crises in the 1970s, the fuels shifted to first coal and later to biomass and waste fuels, driven largely by policy decisions. In 1991, the government introduced CO2 taxation as a main policy tool to encourage lowcarbon fuels in energy conversion. The CO2 tax was increased rapidly in 2000-04 and more slowly thereafter (Figure 5.4). Facilities included in the European Union Emissions Trading System were initially exempt from CO2 taxation, but to accelerate a fuel switch and replace the remaining fossil fuels in DH, in 2018 the CO2 tax was expanded to cover those plants also.

In 2016, biomass and waste fuels accounted for around two-thirds of total DH generation (Figure 5.4). The largest share of biofuels and waste was primary solid biofuels (such as wood chips), which accounted for over half of total DH generation in 2016. Sweden has a large wood-processing industry sector, with wood fuels as a by-product, and the forest outtake can increase further (Börjesson, 2016). The use of biofuels in DH has also been supported indirectly through the green electricity certificate system, introduced in 2003, which provides incentives for the co-generation of heat and power from renewable energy sources (Chapter 7).

Municipal waste has become an attractive fuel in DH, especially since 2001, when the landfilling of organic and burnable non-toxic household waste was banned. In 2016, waste accounted for 24% of total DH generation, of which roughly half was renewable waste. Nearly half of the total household waste is incinerated, and the rest is recycled through material recycling or biological treatment (Figure 5.5). Less than 1% of the household waste is put on a landfill. Besides the domestic waste incineration, Sweden imports waste to burn at waste-to-energy plants, mostly from Norway and the United Kingdom.

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Since the introduction of the CO2 tax, the landfill act and the green certificate system, biofuels and waste have become the dominant energy sources in DH.

*Coal includes coke oven and blast furnace gases.

**The CO2 tax levels are per tonne of coal, but the tax has been increased at the same rate for natural gas and oil.

Notes: Biofuels and waste includes the category other fuels from the statistics, assumed to be non-renewable waste. TWh = terawatt hours.

Sources: SEA (2018), Energy in Sweden, Facts and Figures 2018; STA (2018), Skattesatser på Bränslen och El under 2018 [Tax Levels for Fuels and Electricity 2018], www.skatteverket.se/foretagochorganisationer/skatter/punktskatter/energiskatter/skattesatserochvaxelkurser.4.77db cb041438070e0395e96.html.

Figure 5.5 Breakdown of municipal waste by treatment method, 2016

Note: Energy recovery refers to waste incineration.

Source: AS (2018), Aktuell Avfallsstatistik [Current Waste Statistics] www.avfallsverige.se/kunskapsbanken/avfallsstatistik/.

Most of remaining DH is supplied by industrial waste heat and heat pumps, both of which have been relatively stable in DH production. Industrial waste heat, which, together with waste incineration, often has the lowest operational cost in DH generation, is prioritised as the base load in DH systems. Heat pumps are used when electricity prices are low enough to support power-to-heat generation on a large scale.

With the growth in biofuels and waste heat, Swedish DH production is largely decarbonised. In 2016, fossil fuels accounted for 8%, shared between natural gas, coal, oil and some peat. The share of fossil fuels is declining further. Natural gas is used in a

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