5. HEAT AND DISTRICT HEATING

Integration of heat and power systems

Heat and electricity systems are integrated in several ways, e.g. in co-generation of electricity and heat, or when DH is produced with electric boilers or heat pumps. Heat can also be stored more easily than electricity, and thermal storages are used to improve the system balancing of variable power generation. By utilising co-generation, heat pumps and thermal storages, a DH supplier can respond to price signals on the electricity market. In times of high electricity prices, DH production can be adjusted to maximise the power generation and thermal storage used to cover heat demand, and in times of excess power, DH suppliers can utilise more heat pumps.

In the current market environment of low electricity prices, the co-generation business faces both a declining profitability and increased competition from heat pumps. This can cause problems for the electricity system, as peak demand for electricity and heat often coincide. A decline in co-generation capacity would also reduce the flexibility of the power system at the same time as non-controllable wind power generation is increasing. An improved system integration of heat and electricity can provide benefits to both sectors.

Assessment

Biomass and waste has decarbonised district heating

District heating has become a crucial part of energy consumption in Swedish buildings. It supplies 90% of heat to multi-dwelling houses and 77% to non-residential buildings. Active policy has transformed the DH supply over recent decades, from oil dominance in the 1970s to using mostly biofuels and waste today. The CO2 taxation, introduced in 1991, is the main driver of this transformation towards a renewable and secure energy system.

Sweden’s aim to decarbonise other sectors, such as transport and industry, can lead to increased competition for the available biomass resources. However, there are still untapped resources of forest residues and further potential for energy efficiency improvements, as well as new DH supply technologies that may balance an increased demand for biomass feedstocks.

Waste incineration has grown rapidly in DH systems, driven by DH development and the 2001 Landfill Act. Sweden also imports waste, mainly from Norway and the United Kingdom. As these countries are developing more domestic energy-from-waste solutions, competition for such waste could increase. Furthermore, the EU waste hierarchy prioritises waste reduction and material recycling over incineration, which led the government to assess the potential introduction of a waste incineration tax. The government has yet to decide on the tax or other policy measures to promote a higher degree of material recycling.

The price dialogue brings more transparency on the market

The DH market was deregulated together with the electricity market in 1996. Unlike in the electricity and gas markets, DH network owners and operators are not regulated, despite the networks being natural monopolies. TPA has been investigated several times but is not deemed suitable for Swedish DH networks. Instead of regulation, DH is

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