5. HEAT AND DISTRICT HEATING

(the Swedish Association of Public Housing Companies) and Swedenergy (an industry association for energy companies).

The voluntary process, which builds on dialogue between local producers and consumers, has resulted in a written agreement between the parties (a local DH company and customers) on the principle for coming price adjustments. In 2017, such local agreements covered 72% of total DH supply in Sweden. In 2016, the Swedish Energy Markets Inspectorate (SEMI) evaluated the Prisdialog process, concluding that the process was a success and that it had strengthened consumer protection and provided transparency into the pricing mechanisms.

Data on the price development before and after 2011 also show a positive trend for DH consumers. In the period 2001-10, DH prices increased on average by 2.2% per year (in real prices). In the period 2011-17 following the introduction of Prisdialogen, the annual growth in DH prices averaged 0.9%, with price reductions (in real prices) in the past two years (Figure 5.9).

Figure 5.9 DH price development and annual price changes, 2001-17

DH prices have stabilised and declined slightly in recent years (in real prices), after a significant increase in prices following the market liberalisation.

* Average of listed prices for heating of one square metre during one year in Nils Holgersson (2018) corrected by consumer price index (2001 prices).

Source: IEA analysis based on Nils Holgersson Group (2018) Fjärrvärme – Historik [District Heating – Historic Data], http://nilsholgersson.nu/rapporter/rapporthistorik/fjarrvarme-historik/.

Market development

Future heat demand

In the past two decades, energy demand for heating in buildings has fallen from around 100 TWh to around 80 TWh (Figure 5.1). Energy efficiency in new buildings is continuously improving, thanks to stricter national energy performance standards and EU directives as well as to regulation on near-zero-energy buildings and building components. Energy performance in existing buildings has also improved through refurbishments, but a large potential remains for further energy efficiency improvements. Improved energy efficiency in existing and new buildings is likely to reduce the total heating demand further (Sköldberg and Rydén, 2014).

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5. HEAT AND DISTRICT HEATING

In areas with DH, the increasing energy efficiency is somewhat balanced by a trend towards more people living in cities with DH. To maintain their competitiveness, DH companies have adapted their business models. Traditionally, DH prices were the same throughout the year, with a fixed fee and a variable fee per kilowatt-hour consumed. However, heat demand varies significantly with the outdoor temperature, which leads to variations in production costs for the DH suppliers. To better reflect these cost variations, many DH companies are now introducing seasonal variable fees with differentiated DH prices for the summer, winter and spring/autumn. With differentiated seasonal prices, DH companies can promote energy efficiency improvements to reduce expensive winter demand, which also benefits DH suppliers.

DH companies also find new markets by expanding DH networks to new areas or by delivering DH for new purposes, e.g. in household appliances, such as washing machines, and thereby substituting electricity with DH. In addition, DC can increase and DH can be used to produce cooling in so-called absorption/adsorption chillers (refrigerators that use heat instead of electricity to drive the cooling process.). With heat pumps, DH and DC can be produced in an efficient and integrated process. DH and DC can also be produced together with electricity in so-called tri-generation, which is done, e.g. in the DH systems in Stockholm and in Helsinki, Finland.

Future fuel supply

The European Commission has assessed the role of waste-to-energy as part of the Circular Economy Package. They point out that some EU member states are excessively reliant on the incineration of municipal waste at high rates that are inconsistent with the more ambitious recycling targets (EC, 2017). In 2017, a government-appointed committee assessed introducing a tax on waste incineration (SOU 2017:83). The assessment concluded that such a tax would not have the intended effect to promote more recycling, and that regulation should focus on measures that encourage consumers to increase recycling. The government has not yet decided whether to introduce a tax on incineration.

In addition, a biomass-based fuel supply in DH can be challenged through increased competition from both the energy and industrial sectors. However, there is still a potential to increase the total outtake of biomass from the Swedish forests and agriculture, and different sectors’ consumption could be complementary rather than competitive (Börjesson, 2016). However, access to cheap available domestic biofuels for DH cannot be guaranteed (Ericsson and Werner, 2016).

4GDH

4GDH can provide for a more efficient use of the available heat sources, especially industrial waste heat. Compared to the existing DH systems, a 4GDH system can reduce the supply temperature to around 50°C and the return temperature to around 20°C. This enables the use of more industrial waste heat to replace fuel-based heat, but requires a new infrastructure in the DH systems to deliver low-temperature heat to energy-efficient buildings, as well as new business models.

In Stockholm, the DH network owner Stockholm Exergi introduced a concept of open district heating in which data centres, supermarkets and other businesses can be paid for supplying excess heat to the city’s DH grid (Stockholm Exergi, 2018). More such initiatives could increase the use of industrial waste heat in DH supply, but may require new infrastructure in line with 4GDH development.

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