District heating in a climate-neutral energy system - Modelling of transformation pathways and implications for policies
Creators: name: Billerbeck, Anna
name: :Unav
Publisher: name: Fraunhofer-Gesellschaft
Year: 2024
Subjects: District heating
Energy system modelling
Climate-neutrality
Renewable heat
Excess heat

description: A rapid transition to climate-neutral heating is essential if the European Union (EU) is to meet its climate and energy target of net zero greenhouse gas emissions by 2050. District heating networks play a vital role in this transition, especially in densely populated areas. They are an efficient and economically viable way to integrate climate-neutral heat sources on a large scale, including sources unsuitable for individual heating systems, such as deep geothermal energy or industrial excess heat. They can also provide flexibility to accommo-date the increasing share of variable renewable energy sources in the electricity grid, mainly through large-scale heat pumps and storage. However, there are challenges asso-ciated with transforming and expanding district heating networks due to the high regional and technological heterogeneity involved. These challenges range from integrating climate-neutral heat sources to competition from decentralised heating systems. In this context and with the aim to contribute to overcoming the existing challenges, this thesis investigates the following overarching question: What are suitable transformation pathways and policy implications for district heating in a climate-neutral European energy system? The question is divided into the following three research questions: • What is the current state of European district heating, and how is district heating affected by regulations and support measures? • How can a climate-neutral district heating supply be achieved in an integrated European energy system by 2050? • How do consumers perceive district heating in Europe, and what is needed for the successful adoption of district heating? The first research question focuses on the status quo of district heating in Europe. While there is a large body of literature on the technical aspects of district heating, the policy aspects have been comparatively understudied. However, an in-depth understanding of existing policy frameworks, their characteristics and their limitations is essential if climate-neutral district heating systems are to realise their full potential. Therefore, this thesis emphasises the policy perspective by examining how regulations and support measures affect district heating across Europe. The second research question is directed at the future of district heating in Europe. Because of the interdependencies between the development of electricity from renewable en-ergy sources and the use of electricity-based heat generation, it is becoming increasingly important to conduct integrated energy system analyses at the European level. Against this background, this thesis analyses district heating in an integrated European energy system model covering both electricity and heat. The third research question looks at the adoption of district heating in Europe. In order to increase the use of climate-neutral district heating, it is necessary to understand which factors influence the public perception of district heating. Therefore, this thesis examines consumer perceptions in Europe and the role of regulation in influencing consumer behaviour. In order to answer these questions, four hypotheses were developed and tested in five papers: • Hypothesis I: Policy frameworks with stricter and more rule-based regulation and comprehensive support result in higher shares of district heating and higher shares of re-newable and excess heat in district heating. • Hypothesis II: Direct electrification with large shares of decentralised and centralised heat pumps in district heating offers cost advantages for heating buildings in a climate-neutral energy system in Europe in 2050 compared to indirect electrification with large shares of hydrogen or synthetic fuels. • Hypothesis III: A high direct use of geothermal, solar thermal and industrial excess heat offers cost advantages for district heating and the overall European energy system in 2050 compared to a high use of heat pumps based on air and water sources. • Hypothesis IV: District heating regulations are a major factor influencing the consumer perception of district heating in Europe. This thesis used and improved several methods to investigate the research questions and test the hypotheses from different perspectives. Firstly, a literature and document review, online survey, interviews, morphological analysis and clustering analysis were used to identify and evaluate policy frameworks for district heating. Secondly, transformation pathways for building heating were developed and analysed using the existing building model INVERT/OPT and the existing energy system model ENERTILE. Thirdly, renewable and excess heat potentials for district heating were explored using a spatial matching algorithm and then grouped into district heating types using a clustering approach. The ENERTILE model was then expanded by integrating the district heating types developed. Finally, an online survey was conducted and econometric methods were used to analyse the perception of district heating. The results of this thesis can be summarised as follows: Addressing the first research question, a classification of district heating policies was provided and five prevalent policy frameworks in Europe were identified. These policy frame-works differ in their intensity of regulation and support: While some countries make use of strict regulation, others rely to a lesser degree on regulatory intervention. There is a ten-dency for strict regulation, particularly mandatory consumer connection and usage, to be associated with high connection rates to district heating. Moreover, comprehensive support measures seem to correlate with a higher share of renewable and excess heat in district heating. However, these findings should be interpreted as tendencies and not as clear causal relationships. Consequently, Hypothesis I can only be partially confirmed. In addition to regulation, other factors like high renewable potentials, suitable climatic conditions, low dependency on fossil fuels, or an early focus on climate policy are driving successful district heating markets. Addressing the second research question, pathways to transform space and water heating through electrification were explored by coupling the two models INVERT/OPT and ENERTILE. The results show that scenarios based on the direct electrification of space and hot water heating, mainly via heat pumps, exhibit lower overall system costs compared to indirect electrification scenarios using hydrogen or synthetic fuels. Thus, Hypothesis II can be fully confirmed. The results also indicate that scenarios with large shares of direct electrification require slightly lower investments in building renovation, lower amounts of renewable electricity and lower energy imports compared to scenarios with large shares of hydrogen or synthetic fuels. Hence, directly electrifying a substantial proportion of the heating demand is beneficial in terms of system costs but also with regard to thermal retrofitting investments, electricity generation and imports. This pathway requires a strong uptake of heat pumps, both decentralised and centralised large-scale heat pumps in district heating systems. At the same time, the cost-efficient direct electrification scenarios also foresee substantial expansion of district heating, reaching around 25% in the EU in 2050. In addition, the renewable and excess heat potentials that could supply future district heating areas in Europe were quantified and clustered to derive representative district heating types. The district heating types were subsequently integrated into ENERTILE and a scenario-based modelling analysis was performed. The results of this analysis indicate that higher shares of heat pumps, geothermal and industrial excess heat in district heating are cost-efficient for the overall energy system. However, they also show that the district heating technology mix has only a minimal impact on the total energy system costs for Europe as a whole. In contrast, for district heating costs, the results indicate that a higher share of renewable heat, especially from geothermal energy, leads to significant cost advantages for district heating. Hypothesis III can, therefore, be partially confirmed. To address the third research question, consumer perceptions of district heating in Europe and especially the role of regulation in influencing consumer behaviour were examined. The survey results indicate that respondents from countries with no mandatory connection, liberalised price regulation and mainly public ownership have a more positive perception of district heating, are more satisfied with its use and rate the price of district heating more positively. Regression analysis shows significant effects for mandatory connection and ownership structure, but not for price regulation. Accordingly, Hypothesis IV can be partially confirmed. Significant results were also found for individual factors and attitudes: older respondents, those already using district heating, those with higher environmental awareness, higher affinity to technology, and greater trust in policymakers showed a more positive perception. Overall, the research conducted in this thesis contributes to our understanding of the transformation of the European energy system by combining multiple economic and policy-oriented perspectives on the implementation of climate-neutral district heating systems. Future research can build on the results of this thesis and should further explore the favourable conditions for and potential barriers to efficient and climate-neutral district heating as part of an integrated energy system. Combining different research efforts from different fields and with different perspectives will help us to implement climate-neutral energy systems and achieve a more sustainable future.