Policy support for heating and cooling decarbonisation : roadmap.
Date: 2022-06-10
Institutions: Directorate-General for Energy
Subjects: EU Member State, EU energy policy, building industry, carbon neutrality, data collection, directive (EU), energy consumption, energy efficiency, energy technology, heating, renewable energy, report, water supply

Policy Support for Heating and 
Cooling Decarbonisation 

Roadmap 

Written  by  Frank  Gerard,  Liliana  Guevara  Opinska,  Tycho  Smit,  Koen 
Rademaekers (Trinomics),   

Sibylle Braungardt (Oeko-Institut), Maria E. Monejar Montagud (DTU) 
December 2021 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

Directorate-General for Energy 

Directorate C — Green Transition and Energy System Integration 

Unit C.1 — Renewables and Energy System Integration 

Contact:   Eva Hoos 

E-mail:  Eva.Hoos@ec.europa.eu  

European Commission 
B-1049 Brussels 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Policy Support for 

Heating and Cooling 

Decarbonisation 

Roadmap 

2022 

EN 

Directorate-General for Energy 
ENER/C1/2018-495 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Manuscript completed in December 2021 

First edition 

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Table of Contents 

Contents 

Table of Contents ................................................................................................. 1 

1.  Executive summary.......................................................................................... 5 

2.  Background .................................................................................................... 11 

3.  H&C building blocks ....................................................................................... 20 

3.1.1. Options for H&C decarbonisation ........................................................................20 
3.1.2. Fossil fuels phasing out ......................................................................................22 
3.1.3. Energy efficiency ................................................................................................24 
3.1.4. Industrial decarbonisation H&C technologies ......................................................26 
3.1.5. Energy storage ...................................................................................................28 
3.1.6. Cooling ...............................................................................................................29 
3.2.1. Resource availability ...........................................................................................30 
3.2.2. Coordinated planning at the core of H&C decarbonization ..................................33 
3.2.3. Managing costs and financial challenges in the transition to decarbonised H&C 
systems ........................................................................................................................34 
3.2.4. Energy Market frameworks .................................................................................35 
3.2.5. Consumers’ choice .............................................................................................36 
3.3.1. Direct electrification of heating systems ..............................................................38 
3.3.2. Renewable fuels of biological origin ....................................................................39 
3.3.3. Renewable fuels of non-biological origin .............................................................41 

4.  H&C decarbonisation roadmap ...................................................................... 43 

4.2.1. Addressing policy barriers ...................................................................................45 
4.2.2. Addressing market barriers .................................................................................48 
4.2.3. Addressing financial barriers ...............................................................................49 
4.2.4. Addressing capacity barriers ...............................................................................50 
4.2.5. Addressing technical barriers ..............................................................................52 
4.3.1. Stakeholders to involve in H&C decarbonisation .................................................53 
4.3.2. Develop a national vision and define national long-term targets ..........................54 
4.3.3. Evaluate the existing progress and gaps .............................................................56 
4.3.4. Assess the potential for domestic renewable production (and import) .................57 
4.3.5. Develop scenarios based on existing policies and plans .....................................59 
4.3.6. Municipal Heat Plan - enabling municipalities/local authorities to conduct & 
enforce local heat planning ...........................................................................................60 

5.  Conclusions ................................................................................................... 64 

ANNEX 1: Meta-Study .......................................................................................... 66 

1. 

Introduction to the Meta-study ....................................................................... 71 

2.  Synthesis of Findings: Part I .......................................................................... 75 

2.1.1. Reduction of energy demand ..............................................................................75 
2.1.2. Transition of the energy mix ................................................................................75 
2.1.3. Electrification ......................................................................................................76 
2.1.4. District heating ....................................................................................................77 
2.2.1. Reduction of energy demand ..............................................................................77 
2.2.2. Renewable heating .............................................................................................79 

1 

 
 
2.2.3. Economic measures and financing .....................................................................79 
2.2.4. Capacity building, qualification, information, motivation, and advice ...................81 
2.2.5. District heating ....................................................................................................81 
2.2.6. Examples from Member States ...........................................................................82 

3.  Summary of studies: Part I ............................................................................. 83 

4.  References: Part I ........................................................................................ 142 

5. 

Introduction to Part II .................................................................................... 148 

6.  Synthesis of Findings: Part II ....................................................................... 150 

7.  Summary of Studies: Part II ......................................................................... 153 

8.  References: Part II ....................................................................................... 173 

9. 

Introduction to Part III ................................................................................... 177 

10. 

11. 

Synthesis of findings ................................................................................ 180 

Summary of studies .................................................................................. 184 

12.  References ............................................................................................... 222 

2 

 
 
 
 
 
ACRONYMS 

4GDH 

BACS 

CCGT 

CCS 

CCUS 

CHP 

CSP 

DHC 

DHW 

DSO 

EE 

EED 

EEF 

EII 

EEOS 

EPBD 

ESCO 

EU 

GHG 

H&C 

HP 

HPA 

IEA 

LNG 

LTRS 

LTS 

MS 

NCA 

NECP 

nZEB 

PV 

PPA 

RAC 

RED 

RES 

4th Generation District Heating 

Building Automation and Control Systems 

Combined Cycle Gas Turbine   

Carbon Capture and Storage 

Carbon Capture Utilisation and/or Storage 

Combined Heat and Power 

Concentrated solar power 

District Heating and Cooling 

Domestic Hot Water 

Distribution System Operator 

Energy Efficiency 

Energy Efficiency Directive 

Energy Efficiency First (principle) 

Energy Intensive Industry 

Energy Efficiency Obligation Schemes 

Energy Performance of the Building Directive  

Energy Service Company 

European Union 

Greenhouse Gas 

Heating and Cooling 

Heat Pump 

Heat Purchase Agreement 

International Energy Agency 

Liquified Natural Gas 

Long Term Renovation Strategy 

Long Term Strategy 

Member State 

National Comprehensive Assessment 

National Energy & Climate Plan 

Nearly Zero-Energy Building 

Photovoltaic 

Power Purchase Agreement 

Refrigeration and Air Conditioning 

Renewable Energy Directive 

Renewable Energy Sources 

RES-H 

Renewable Heating 

3 

 
 
 
 
RFNBO 

SME 

SMR 

TCO 

TEN-E 

TES 

TSO 

TWh 

TYNDP 

Renewable Fuel of Non-Biological Origin, e.g. hydrogen and e-fuels 

Small Medium Enterprises  

Steam Methane Reforming 

Total Cost of Ownership  

Trans-European Networks in Energy  

Thermal Energy Storage 

Transmission System Operator 

TeraWatt-hour = 1 billion kiloWatt-hour 

10-Year Network Development Plans 

4 

 
 
 
 
 
1. Executive summary 

1.1. The Heating and Cooling landscape  

The  heating  and  cooling  (H&C)  sector  is  responsible  for  a  central  part  of  the  EU’s  energy 
demand,  representing  roughly  half  of  the  final  energy  consumption.  As  such,  the 
decarbonisation  of  the  H&C  sector  is  crucial  for  a  successful  transition  to  a  carbon-
neutral energy system by 2050. Most of the energy demand for H&C is related to heating 
purposes, although the demand for cooling is increasing. Space and water heating needs in 
buildings represent over 60% of the demand for heating, followed by industry, which represents 
a further 32% of heating needs, the remainder is related to agriculture and both building and 
industry related cooling applications. The decarbonisation rate and uptake of renewables in 
the H&C sector has been relatively slow, as more progress is needed in the adjustments to 
heating equipment, heat delivery systems, building envelopes/industrial processes, required 
infrastructure and energy supply, and paying attention to vulnerable consumers. 

In Europe, there is a significant stock of old buildings with poor energy performance, combined 
with a strong reliance on fossil-based heating systems. In many cases, stand-alone dwellings 
are heated through their own individual heating equipment, mostly gas-fired and to a lesser 
extent oil-fired, combined with high temperature heat delivery systems. Full decarbonisation of 
the building stock by 2050 requires to quickly stop the installation of heating systems fuelled 
by  fossil  fuels.  Switching  the  energy  carriers  from  fossil  fuels  to  the  similarly  combustible 
renewable  fuels  (e.g.  from  natural  gas  to  biogas),  while  maintaining  the  existing  heating 
equipment and delivery systems should be considered only for a limited share of the building 
stock,  as  the  resource will  remain  limited.  The  supply  of  renewable  gases  and  liquids  (e.g. 
biomethane, biopropane), which can directly replace fossil fuels in the existing equipment will 
be insufficient if the demand increases significantly, and/or too expensive compared to other 
alternatives. On top of their limited availability, bio-energies should be produced and used in a 
sustainable  manner,  further  limiting  the  supply  potential  and  viable  applications.  Although, 
renewable fuels of non-biological origin (RFNBOs), such as renewable hydrogen, will have a 
place in the transition to a carbon-neutral energy system, the extent to which these would play 
a  role  in  the  decarbonisation  of  H&C  and  especially  in  the  building  sector  is  still  subject  to 
debate.  Electrification  with  heat  pumps  as  well  as  the  connection  to  existing  and  the 
development  of  new  district  heating  grids  using  renewable  and  other  carbon-neutral  heat 
sources  should  be  increasingly  considered.  In  both  cases,  changes  to  and  investments  in 
energy infrastructure are required.  

The  number  of  H&C  solutions  that  can  be  applied  for  decarbonising  a  specific  building,  is 
intricately  linked  to  the  energy  performance  of  the  building(s)  concerned.  By  applying  the 
energy  efficiency  first  principle,  the  overall  energy  need  is  reduced,  thereby  reducing  the 
demands  on  the  infrastructure  required  and  the  required  volume  of  renewable  energy 
resources. Consequently, the investment needs are also lowered. Improvements in building 
energy  performance  are  important  to  reach  cost-efficient  decarbonisation  of  the  built 
environment and to reach the energy efficiency targets. However, it should be integrated and 

5 

 
 
 
 
balanced with supply-side decarbonisation measures to seek for the cost-optimum between 
energy efficiency and renewable supply. This means that deep renovations make sense for 
some buildings, whereas in other buildings more modest energy efficiency improvements may 
be more cost efficient or may be limited by other considerations like the cultural and patrimonial 
character of buildings.  

Adequate planning will be key to ensure that resources are utilized in an optimal way while 
keeping costs to a minimum. Infrastructure planning should facilitate the integration of various 
renewable and carbon-neutral energy sources and arbitrate between the development of new 
infrastructure or re-purposing of existing ones. It should consider alternatives to investment in 
energy network (e.g. electricity, gas) expansion, including demand-side solutions and storage. 
The  required  changes  to  the  heating  and  cooling  system  will  be  challenging  but  they  also 
represent a unique opportunity to promote energy system integration, increase flexibility 
and maximise energy efficiency across the entire energy system including, for example, 
making use of ‘waste heat’. Heat pumps allow for efficient integration of renewable electricity 
into the heat sector at high efficiency, while helping utilise geothermal and ambient energy or 
waste  heat.  In  addition,  heat  pumps,  district  heating  grids  or  thermal  energy  storage  can 
increase the flexibility to the entire energy system. Thermal energy storage is one of the key 
instruments to integrate the electricity and H&C sectors in a smart, integrated approach that 
benefits power as well as thermal systems. 

Changes to the heating and cooling system in the built environment can be disruptive as they 
often  require  modifications  to  dwellings  and  construction  works  in  cities’  roads  and  streets. 
This  is  one  of  the  main  reasons  why  the  decarbonisation  process  in  this  sector  must  be 
accomplished with citizen participation to ensure social legitimacy of the transformation 
process. While transitioning to a renewable and carbon-neutral H&C sector will represent a 
cost, tackling energy poverty and ensuring that the cost of this transition is not passed-on to 
the most vulnerable must be a priority. Consumers should be informed and empowered to take 
appropriate decisions, and a level-playing field in terms of prices between different technology 
options should be ensured through adequate policy and economic measures. 

Fuel price structures, including taxes and levies, have a large role to play in incentivizing the 
use of renewable and carbon-neutral H&C solutions. Furthermore, the barrier stemming from 
the high upfront costs associated with building renovations and investment in renewable H&C 
systems  needs  to  be  tackled.  This  applies  especially  to  low-income  households,  living  in 
buildings  with  low  energy  performance  and  fossil-based  H&C  systems.  In  the  context  of 
decarbonising the built environment, knowledge acquisition and coordination are important at 
all levels, from the design to the operation, to ensure the appropriate level of quality and the 
most adequate technological solutions are implemented.  

Lastly, the decarbonisation of industrial heat demand is also challenging. Industry is hard to 
decarbonise  due  to  conversion  costs,  temperature  levels,  competitiveness  risks,  and  long 
facility life among other elements.  Here, demand for high-temperature processes, which can 
currently  be  supplied  by  a  limited  number  of  technologies  and  carriers,  is  an  additional 
constraint.  Solutions to decarbonise industrial heat are dependent on the local context and 
parameters, so the most optimal solutions need to be determined on a case-by-case basis. 

6 

 
 
 
 
 
 
 
Renewable H&C development should be mainstreamed in the broader framework of industrial 
decarbonisation. A holistic perspective is essential to identify the most suitable zero-emission 
solutions. In some cases, existing processes can remain as they are but switched to renewable 
fuels or electricity, while in other cases the switch to renewable energy sources will require far-
reaching  changes  in  the  production  process  by  switching  to  innovative  breakthrough 
processes.  

1.2. Decarbonising the H&C sector – the way forward  

Decarbonising  the  H&C  sector  will  necessarily  imply  considering  a  number  of  different 
variables including the availability of renewable energy sources, the presence of the required 
infrastructure, the availability of financial instruments, a high energy performance, cost efficient 
heating/cooling  solutions,  consumer  awareness,  skilled  professionals  and  access  to  and 
affordability of renewable-based alternatives. These variables will be specific for each locality, 
thus  requiring  local  planning  and  expertise.  Thus,  transforming  the  H&C  sector  will  require 
strong action and adequate coordination, addressing simultaneously the reduction of energy 
use  and  the  deployment  of  renewable  based  H&C  solutions.  Integrated  and  coordinated 
planning is essential for a successful transition. Coordination, to ensure that different elements 
of relevant policies and legislations are comprehensively assessed and reinforce one another 
is important. Given the wide set of elements that require consideration and diversity of options, 
a central aspect of H&C decarbonisation is setting clear goals and objectives, and having clear 
plans at national, regional and local level. 
The large set of variables to consider and the fact that heating and cooling, especially in the 
built environment, has a direct impact on the citizens, means that the involvement of a wide 
variety of stakeholders in the decision-making process is of paramount importance. In 
order to ensure that the views, interests and needs of different stakeholders are accounted for 
innovative  participatory  models  and  structures  for  multi-level  governance  should  be 
considered. Capacity building is another essential element to ensure a successful and cost-
optimal decarbonisation process. Providing local authorities with the right tools and levers and 
empowering  them,  including  through  capacity  building  and  trainings,  to  be  able  to  make 
informed decisions about their local H&C systems will ensure that the best decisions are taken. 
Furthermore, training and upskilling of construction workers, architects, engineers, planners, 
installers  and  other  relevant  professionals  is  required  to  drive  the  transition  of  the  sector 
forward.  
All  the  above  elements  require  adequate  financial  support.  Although  several  financial 
instruments are available at the EU level to finance the decarbonisation of the building and 
industry  sectors,  there  is  still  a  need  for  establishing  a  comprehensive  and  integrated 
financial  &  fiscal  strategy  for  the  H&C  sector  and  for  creating  a  stable  and  long-term 
favourable investment environment. A variety of financial instruments (including grants/ loans, 
rebates, subsidies, etc.) should be considered and, in particular, ones that address high upfront 
costs  for  building  renovation  and  renewable  heating  equipment  are  important.  Support  to 
development of heat markets, is equally important. Currently, one of the difficulties is that even 
though the final users need heat, different types of H&C supply systems operate in completely 

7 

 
 
 
different markets due to the different energy carriers used. Provision of heat as a service, could 
address the need to simplify procedures and information on choices for consumers. 
As  immediate  next  steps,  furthermore,  policy  measures  and  instruments  to  promote  the 
transition in the H&C sector should be urgently implemented, where possible by reinforcing 
current  policies.  The  roadmap  identifies  a  number  of  no-regret  options,  which  can  be 
implemented  regardless  of  location-specific  considerations  and  with  low  risk  of  lock-ins. 
Finally, the urgency of decarbonising the H&C sector by mid-century at the latest, means that 
while setting up a comprehensive approach tackling all the elements at once, could be a great 
important  instrument,  actions  should  not  wait  until  the  end  of  a  possibly  longer  process  of 
exhaustive policy development. Instead of waiting for more time to set up a perfect approach 
– we must start acting now, while tackling the most important elements with diligence 
and based on best-available knowledge. 

1.3. Aim and structure of the project 

The  project  ‘Policy  Support for  Heating  and  Cooling  Decarbonisation’  commissioned  by  the 
European  Commission  –  Directorate  General  for  Energy,  was  aimed  at  providing  policy 
support  for  policy  makers  and  stakeholders  to  explore  pathways  and  agree  on  solutions  to 
decarbonise the  European  H&C  sector. To  do  this,  the study  endeavoured  to  increase and 
systematise  the  knowledge  base  of  decarbonisation  solutions  through  the  elaboration  of  a 
meta-study,  promoting  the  cooperation  of  stakeholders  through a  series  of  workshops and 
identify  a  number  of  key  determining  factors  (building  blocks)  in  order  to  produce  a 
decarbonisation roadmap. 

This roadmap aims to bring these elements together illustrating all the complexity to 
decarbonise the H&C sector. Since there is no silver bullet solution for decarbonizing this 
sector, this roadmap will touch upon the various elements that need to be considered when 
developing a H&C decarbonisation strategy and how these are interlinked. 

The development of the roadmap is supported by an extensive review of recent literature on 
the  decarbonisation  of  H&C  sector,  catalogued in an  accompanying meta-study. The  meta-
study consists of three parts:  

  Part I: Strategies for the decarbonisation of H&C in buildings: The first part of the 
meta-study  covers  studies  providing  modelling  pathways  at  EU  level,  contributions 
assessing  policies  and  financing  strategies  as  well  as  national  strategies  for  the 
decarbonisation of heating and cooling. Across the studies covered in the review, the 
reduction of the energy demand in buildings is seen as key for achieving the long-term 
greenhouse gas (GHG) reduction goals. Reducing the energy demand by enhancing 
energy efficiency also prepares the ground for a large-scale application of renewables 
in the heating sector by reducing the needed temperatures in the heating systems of 
buildings. The use of heat pumps plays an important role in most of the scenarios, and 
electricity  demand  for  heating  is  expected  to  increase  considerably.  The  assessed 
studies  differ  considerably  in  the  rating  of  different  renewable  energy  sources, 
especially  regarding  the  use  of  biomass  in  the  (building)  heating  sector.  The  role  of 
district  heating  also  differs  between  the  studies,  with  most  studies  highlighting  the 
importance of district heating for the decarbonisation of the heating sector especially in 
urban areas. The studies included in the meta-study identify a multitude of barriers for 
the decarbonisation of H&C, including economic barriers (high investment costs, low 
prices for fossil fuels, lack of economies of scale resulting in higher prices), structural 
barriers  (split  incentives,  lack  of  supply  chains),  technical  barriers  (suitability  of  the 
building  stock  and  process  heat  technologies),  psychological  barriers  (lack  of 

8 

 
 
awareness, hassle factor) and a lack of data at various levels. These multiple barriers 
need to be addressed by multiple policy instruments, working together in a consistent 
policy set. Several studies included in the meta-study identify the need for an integrated 
policy mix including regulatory, economic and other complementary policies. 

  Part II: Decarbonising industrial heating and cooling: The second part of the meta-
study  covers  studies  addressing  decarbonisation  strategies  for  process  heat.  The 
opportunities  for  the  decarbonisation  of  industrial  process  heating  and  cooling  are 
essentially based on the substitution of fossil energy sources with renewable electricity, 
green  hydrogen  and,  to  a  certain  extent,  biomass,  solar  thermal  and  geothermal 
energy.  For  heat  demand  up  to  a  temperature  level  of  200°C,  there  are  several 
technology  options,  such  as  industrial  heat  pumps  in  combination  with  waste  heat, 
environmental  heat  (ambient  energy)  or  solar  thermal  energy.  The  analysed  studies 
agree  that  main  barriers  for  energy-intensive  industry  decarbonisation  are  the  high 
capital  investments  needed  for  the  transition  as  well  as  low  energy  prices  for  fossil 
fuels. Some studies point out the lack of market-ready alternative technologies for high-
temperature  process  heat.  Regarding  suggested  policies  for  the  promotion  of 
decarbonisation in industry, there is an agreement on the need for stronger support of 
research  and  development  (R&D)  activities,  innovation,  and  commercialisation, 
promoting  pilot  projects  and  product  development.  Moreover,  the  necessity  of 
decarbonising  energy-intensive  industry  is  emphasised,  since  the  main  energy-
intensive sectors (e.g., production of cement, steel, petrochemicals, glass) account for 
nearly 21 % of global CO2 emissions. 

  Part III: Energy carriers and infrastructure: The third part of the meta-study covers 
an overview of the different decarbonisation options  including heat pumps, biomass, 
solar  thermal,  geothermal,  hydrogen  and  e-fuels  as  well  as  the  studies  addressing 
sector  coupling  and  infrastructures.  For  heat  pumps,  key  elements  discussed  in  the 
studies  are  the  efficient  use  in  existing  buildings,  the  impact  of  heat  pumps  on  the 
electricity  grid  as  well  as  the  flexibility  potentials.  For  district  heating,  where  several 
successful examples for positive energy districts based on efficient district heating and 
cooling systems have been implemented, key priorities for research and development 
to  support  large-scale  deployment  remain.  This  includes  novel  approaches  for  low-
temperature district heating, the integration of renewable energies, and waste heat in 
district heating and cooling, scaling up the use of large-scale heat pumps for district 
heating and cooling, the development and deployment of digital technologies as well 
as  the  introduction  of  local  planning.  The  role  of  new  gaseous  fuels  for  heating  are 
discussed  controversially  in  the  studies  covered  in  the  review.  There  are  numerous 
studies addressing potential pathways for the future use of gas for heating, however 
the projected use of gas differs largely in the different scenarios. While the demand for 
gas is expected to decrease due to improvements of the efficiency of buildings and the 
use of renewable heating, the technological, economic, and regulatory implications for 
the future of the gas grid are discussed controversially. 

The roadmap contains a section on ‘building blocks’, which refer to the essential underlying 
elements that must be taken into consideration in the planning of the practical steps for the 
decarbonisation  of  the  H&C  sector.  The  building  block  components  are:  options  for  H&C 
decarbonisation,  fossil  fuel  phase  out,  energy  efficiency,  industrial  H&C  decarbonisation, 
energy storage, cooling, resource availability, coordinated planning, cost and financing, energy 
markets,  consumer  choice,  direct  electrification,  renewable  fuels  of  biological  origin  and 
renewable 
flexibility  and 
acknowledges that there are no “fit-for-all” solutions when it comes to decarbonising the H&C 
sector across Europe. The roadmap lists different types of barriers as identified in the analysis 

fuels  of  non-biological  origin.  The  approach  emphasises 

9 

 
 
 
 
of  the  building  blocks  and  corresponding  policy  measures  to  address  them.  Finally,  the 
roadmap  addresses  different  aspects  pertinent  to  the  development  of  national  H&C 
decarbonisation strategies including the involvement of different stakeholders in the process, 
the  evaluation  of  existing  progress  and  gaps,  an  assessment  of  the  potential  for  domestic 
renewable production and suggestions for developing scenarios based on existing policies and 
plans.  

10 

 
 
EUROPEAN COMMISSION 

2. Background  

2.1. Introducing the challenges to decarbonise the H&C sector 

The heating and cooling (H&C) sector is one of the key drivers of the EU’s energy demand, 
representing roughly half of the final energy consumption. As such, the decarbonisation of the 
H&C sector is crucial for a successful transition to a carbon-neutral energy system by 2050. 
The lion’s share of the energy demand for H&C is related to heating purposes, although the 
demand for  cooling  is  increasing.  Space  and  water  heating needs  in  buildings  accounts for 
over 62% of the EU energy consumption for heating and cooling, followed by industry, which 
represents a further 32% of heating and cooling needs.1 The remaining demand comes from 
industry-related  cooling  applications.  The 
agriculture  and 
decarbonisation rate and uptake of renewables in the H&C sector has been relatively slow, as 
more progress is needed in optimisation of heating equipment, heat delivery systems, building 
envelopes/industrial  processes,  required  infrastructure  and  energy  supply,  and  addressing 
energy poor consumers. 

from  both  building-  and 

In the built environment, there is a significant stock of relatively old buildings with rather poor 
energy  performance,  combined  with  a  strong  reliance  on  fossil-based  heating  systems.  In 
many cases, individual dwellings are heated with their own individual heating units, mostly gas-
fired and, to a lesser extent, oil- or coal-fired, combined with high temperature heat delivery 
systems (radiators). Switching the energy carriers from fossil fuels to the same renewable fuels 
(e.g. from natural gas to biogas), while maintaining the existing heating equipment and delivery 
systems should be considered only for a limited share of the building stock, as the resource 
will remain limited. The supply of renewable gases and liquids (e.g. biomethane, biopropane), 
which can directly replace fossil fuels in the existing equipment will be insufficient if the demand 
increases significantly, and/or too expensive compared to other alternatives. On top of their 
limited  availability,  like  all  resources,  bio-energies  should  be  produced  and  used  in  a 
sustainable manner, further limiting the supply potential and viable applications. Diversification 
of renewable heating sources (e.g. solar, geothermal, ambient energy, etc), electrification with 
heat pumps as well as district heating grids using a wide range of renewable or carbon-neutral 
heat sources should be increasingly considered. In these cases, changes to and investments 
in energy infrastructure are needed in addition to changes in the heating equipment, e.g. when 
an entire housing block switches to heat pumps, this may have repercussions on the required 
capacity  of  the  local  electricity  distribution  grid  (to  be  addressed  via  adequate  integrated 
infrastructure planning). The deployment of renewable H&C equipment should also consider 
creating  the  link  between  electricity  and  heating  and  cooling  systems  in  order  to  promote 
energy system integration.  Heat pumps, district heating grids or heat storage can increase the 
flexibility to the entire energy system. Furthermore, building renovations to make buildings fit 
for renewables by increasing their energy efficiency and replace fossil-based heating systems 
with  renewables  need  to  be  considered  in  a  coordinated  way  when  planning  the 
decarbonisation of the H&C system. The long planning cycle and implementation time of these 
infrastructural  changes (e.g.  when  new  district  heating grids  need to  be built)  highlights the 
need for clear choices with regard to the selection of the preferred H&C solution (on a local 
level) in the short term. 

that  can  be  applied 

The  number  of  H&C  solutions 
for  decarbonizing  a  specific 
building/neighbourhood, is also intricately linked to the energy performance of the building(s) 
concerned. By applying the energy efficiency first principle, the overall energy need is reduced, 
thereby  reducing  demands  on  the  infrastructure  required  as  well  as the  required  volume  of 
renewable energy resources. As a consequence, the investment needs are also lowered. This 
happens, for instance, when switching from an individual, gas-fired boiler to a heat pump and 

1 HeatRoadMapEurope (2018) Profile of heating and cooling demand in 2015. 

11 

 
                                                 
simultaneously improving the building envelope, and switching from a high-temperature to a 
low-temperature heat delivery system. Building renovations improve energy performance and 
reduce overall energy demand and hence also the extent to which electricity grids need to be 
reinforced,  considering  the  deployment  of  decentralized  electricity  production,  and  the 
increasing flexibility of the system elements. Also, to become fully renewable, auxiliary energy 
driving the heat pumps (mostly electricity) need to be supplied from green energy. Generally, 
the  more  the  energy  demand  in  the  built  environment  is  reduced,  the  lower  the  additional 
required  renewable  electricity  generation.  Improvements  in  buildings’  energy  efficiency 
performance are important for reaching cost-efficient decarbonisation of the built environment 
and for achieving energy efficiency targets. However,  measures for the reduction of energy 
demand    should  be  integrated  and  balanced  with  supply-side  decarbonisation  measures  to 
achieve cost-optimality between energy efficiency and renewable energy supply. This means 
that deep renovations make sense for some buildings, whereas in other buildings more modest 
energy efficiency improvements may be more cost efficient or the level of renovation may be 
limited  by  other  considerations,  such  as  preservingthe  cultural  and  historical  character  of 
buildings.  Daily  and  seasonal  variations  of  heat  demand  in  the  building  sector  is  also  an 
important and critical aspect to consider when addressing the decarbonisation of H&C supply. 

Greenhouse  gas  (GHG)  abatement  in the  built  environment  is  challenging  not  because  the 
lack  of  technologies  and  solutions,  but  because  the  various  actors  and  components  of  the 
value chain should be addressed in an integrated and coordinated way. Solutions based on 
renewable  energy  carriers  are  proven  and  available  today.  The  challenge  is  due  to  the 
complexities  involved  and  the  need  for  a  high  level  of  integration  of  the  various  factors, 
requiring  that  infrastructures  and  energy  carriers,  the  range  of  technology  options  and  the 
characteristic of the building stock are considered simultaneously to arrive to the most cost-
effective options. This should be done while also addressing energy efficiency in a coherent 
way. Another challenge is the relatively low price of fossil fuels compared to renewable heating 
alternatives.  Fuel  price  structures,  including  taxes  and  levies,  have  a  large  role  to  play  in 
incentivizing the use of zero- or low-emission H&C solutions. Furthermore, the barrier of high 
upfront costs associated with building renovations and investment in renewable H&C systems 
needs to be tackled. This applies especially to low-income households, living in buildings with 
low energy performance and fossil-based H&C systems. In the context of decarbonizing the 
built environment, knowledge acquisition and coordination are important at all levels, from the 
design to the operation, to ensure that the appropriate level of quality and the most adequate 
implemented.  These  options  should  cover  all  available 
technological  solutions  are 
technologies and energy carriers, being produced on-site, nearby or remotely.2 

Lastly,  the  decarbonisation  of  industrial  heat  demand  is  very  challenging,  although  some 
renewable solutions are already available. Industry is hard to decarbonise due to conversion 
costs, temperature levels, competitiveness risks, and long facility life among other elements. 
For  many  energy-intensive  industries,  energy  (including  heating)  costs  can  represent  a 
significant share of their overall production costs, meaning that the switch to renewable energy 
would  face  drastic  competitiveness  constraints.  .  Demand  for  high-temperature  processes, 
which can  only  be  supplied  by  certain  technologies and  carriers,  is  an  important  constraint, 
while on the other hand, a more constant demand for heat from industry can be considered an 
advantage compared to the variable seasonal demand of the built environment. Solutions to 
decarbonise industrial heat are dependent on the specific sector, context and parameters, so 

2 Following the terminology proposed under the Energy Performance of Buildings Directive, ‘on-site’ refers to the premises and 
the land on which the building is located and the building itself; ‘nearby’ means produced within a local or district level perimeter 
of the building assessed, which fulfils all the following conditions: 

(a) it can only be distributed and used within that local and district level perimeter through a dedicated distribution network; 

(b) it allows for the calculation of a specific primary energy factor valid only for the energy from renewable sources produced within 
that local or district level perimeter; and 

(c) it can be used on-site of the building assessed through a dedicated connection to the energy production source, that dedicated 
connection requiring specific equipment for the safe supply and metering of energy for self-use of the building assessed;Remote 
refers to premises which do not fall under the above two definitions.  

12 

 
 
                                                 
 
EUROPEAN COMMISSION 

the most optimal solutions need to be determined on a case-by-case basis. Renewable H&C 
development should be mainstreamed in the broader framework of industrial decarbonisation. 
A holistic perspective is essential to identify the most suitable carbon-neutral solutions. In some 
cases, existing processes can remain as they are but switched to renewable fuels or electricity, 
while in other cases the switch to renewable energy sources will require far-reaching changes 
in the production process by changing to innovative breakthrough processes.  

Thus, decarbonizing the H&C sector necessitates considering a number of different variables 
including  the  availability  of  renewable  heat/energy  sources,  existing  infrastructure  and  the 
specific  characteristics  and  distribution  of  buildings,  industry  structure,  the  availability  of 
financial  instruments,  cost  efficiency,  consumer  awareness,  administrative  capacities,  the 
availability  of  skills  and trained  professionals,  and access to and affordability  of  renewable-
based alternatives. These variables will be specific for each city, each rural area or island, to 
each  region  and  geography  to  a  large  extent,  thus  requiring  local  planning  and  expertise; 
however, goal setting and planning at national levels are important for ensuring the sufficient 
development of infrastructure, energy sources, technologies, financing and investment, skills 
and institutional capacities. 

This  roadmap  aims  to  bring  these  elements  together  and  illustrate  the  complexity  of 
decarbonizing the heating and cooling sector, and provides guidance for this decarbonisation 
process. Since there is no silver bullet solution for decarbonizing the H&C sector, this roadmap 
will  touch  upon  the  various  elements  that  need  to  be  considered  when  developing  a  H&C 
decarbonisation strategy and how these are interlinked. Given the urgency in decarbonising 
the sector by mid-century, trying to set up an exhaustive approach tackling all the elements at 
once, is no longer an option. There is no more time to set up a perfect approach – but we can 
start acting while tackling the most important elements with diligence! 

2.2. Progress  made  so 

far  and  ways 

to  reach  H&C 

decarbonisation 

The heating and cooling (H&C) sector plays a crucial role in the EU’s ambition to transition to 
a clean and carbon-neutral economy by 2050. Thus, efforts at the EU and Member State (MS) 
levels have been made over the last two decades to decarbonise the sector. Figure 1-1 shows 
the progress in increasing the share of renewable energy in the electricity, H&C and transport 
sectors. In 2019, the overall share of renewable energy consumption was 19.7% thus putting 
the EU on track to reach its 2020 overall target of 20% renewables share in its total energy 
mix.  Overall,  the  renewable  energy  share  in  the  H&C  sector  in  2019  was  estimated  to  be 
22.1%. 

13 

 
 
 
Figure  1.2. Share of RES in final energy consumption per sector in the period 2004-2019 

Source: own elaboration based on EUROSTAT3 

The  final  National  Energy  and  Climate  Plans  (NECPs)  of  EU  MSs  anticipate  a  share  of 
renewable energy in the H&C sector of 23% in 2020 and 33% in 2030. All countries show an 
increase  in  this  period;  however,  as  shown  in  Figure    3-2,  the  level  of  ambition  varies 
significantly among countries. Only nine countries (EE, IE, EL, ES, FR, LT, LU, FI, SE) meet 
the target of  a 1.3% annual increase of renewables in the H&C sector set in the Renewable 
Energy Directive (RED).  

Figure Error! No text of specified style in document.-4 Shares of RES in H&C in all MS in 2020 and in 2030 including share 
of H&C in final energy consumption4 

Source: own elaboration based on JRC (2020) 

In  Figure    1-2,  the  blue  bars  show  large  variations  between  MSs  regarding  their  share  of 
renewable energy as projected for 2020. In 2020, six MSs were expected to have a share of 

3 Eurostat – SHARES Tool. Available at: https://ec.europa.eu/eurostat/web/energy/data/shares 
4 JRC. (2020). Assessment of heating and cooling related chapters of the National Energy and Climate Plans. 

14 

 
 
 
 
 
 
                                                 
EUROPEAN COMMISSION 

Renewable  Energy  Sources  (RES)  in  H&C  above  50%  (mainly  driven  by  bioenergy),  while 
three MSs would have a share below 10%. In 2030, only nine MSs are expected to meet the 
target  of  1.3%-point  annual  increase  of renewables in  the  H&C  sector  established in  article 
23(4)  of  RED  II  (dark  green).  Four  additional  MSs  partially  meet  the  target  (light  green),  in 
either  the  2021-2025  or  the  2026-2030  period,  and  the  14  remaining  MSs  do  not  meet  the 
target (orange bars). Only a few countries provided details about the constraints responsible 
for not meeting the objectives in their NECPs. 5 

The black dots (Y-axis on the right side in Figure 1-2), illustrate the differences between MSs 
regarding the level of H&C in the total final energy consumption in 2018. For 21 MSs, this share 
is above 40% (with an average of 46%), emphasizing the importance of the H&C sector in the 
total energy system (and its impact on carbon emissions), the decarbonisation of which should 
be a priority. 

5 According to JRC. (2020). Assessment of heating and cooling related chapters of the National Energy and Climate Plans 

15 

 
 
 
                                                 
1.3  Main components: energy sources & carriers, infrastructure 
and technologies 
The decarbonisation of the H&C sector is a complex task given that, as seen in Figure 1-3, it 
requires  taking  into  consideration  and  linking  together  energy  sources,  energy  carriers, 
infrastructure, the characteristics and patterns of demand and technologies. 

Figure Error! No text of specified style in document.-5 Illustration of the complex interplay between energy sources, energy 
carriers, infrastructure and H&C technologies (non-exhaustive) 

Source: own elaboration 

The  decarbonisation  of  the  heating  sector  will  require  a  myriad  of  changes  in  the  energy 
system,  across  the  different  parts  of  the  value  chain  from  the  supply  to  the  transportation, 
transmission and distribution, and inside buildings or industrial plants to end-user applications. 
An overview of the energy carriers available for heating and cooling purposes is given in Table 
Error! No text of specified style in document.-1, covering both the conventional sources and 
renewables. 

16 

 
 
 
 
 
 
 
EUROPEAN COMMISSION 

Table Error! No text of specified style in document.-1  

Overview of energy carriers and energy sources available for H&C 

Energy carrier 

Fossil 

Methane  Natural gas 

Hydrogen  Hydrogen produced 

Gaseous 
fuels 

Other 
gases 

Electricity 

Liquid fuels 

Direct heat 

from natural gas using 
SMR (potentially with 
Carbon Capture and 
Storage (CCS) 
Propane and butane 

Coal, gas or oil-based 
thermal power 
generation 

Fuel oil/heating oil 
(petroleum based) 

District Heating and 
Cooling (DHC) supply 
(heat produced from 
fossil systems) 

Renewable 
Sustainable biogas and biomethane, 
synthetic methane produced from 
renewable hydrogen 
Hydrogen produced using renewable 
electricity or from biogenic sources 

Other 
N.A. 

N.A. 

Biopropane, biobutane 

N.A. 

Hydropower, wind, solar PV, 
concentrated solar power (CSP) and 
geothermal power generation. Thermal 
power generation from liquid, gaseous 
or solid biofuels or biomass 
Sustainable liquid biofuels or renewable 
fuels of non-biological origin (synthetic 
fuels) 
Ambient heat, solar heat, geothermal 
heat 

Solid fuels 

Coal, lignite, peat 

Solid sustainable biomass (wood pellets 
and chips, wood waste, energy crops) 

Source: own elaboration 

Nuclear power 
generation 

N.A. 

Waste heat from 
cooling or 
industrial 
processes (high-
temperature or 
low-temperature), 
and from nuclear 
Waste 
incineration heat 

Several  energy  carriers  need  dedicated  infrastructure  to  be  transported,  sometimes  stored, 
and delivered to the end-user. Renewable and carbon-neutral gases (incl. hydrogen blends to 
a certain extent) can be carried through the existing gas (methane) infrastructure, through the 
extension of the existing network or via new, small scale grids (supplied by local producers of 
biogas or by Liquefied Natural Gas - LNG trucks). For the transport of high concentrations of 
hydrogen, dedicated hydrogen pipelines are needed. These can be made through conversion 
of  existing  methane  grids  or  development  of  new  dedicated  hydrogen  grids.  Electricity  is 
transported via the electricity network, consisting of high-voltage transmission grids and lower 
voltage regional distribution grids. The growing electrification of the H&C sector carried out to 
benefit  from  renewable  electricity,  where  available  cost-effectively,  will  increase  electricity 
demand, especially at decentralised levels. This is an aspect that needs to be considered when 
planning. Finally, district heating and cooling networks (DHC) are used to transport energy in 
the form of thermal energy (heat & cold) to final users. 

Table  Error!  No  text  of  specified  style  in  document.-2  shows  the  different  H&C 
technologies/technology groups that can be used to produce renewable and carbon-neutral 
heat and cold and link them to the energy source they use.  

17 

 
 
 
 
 
 
 
 
Table Error! No text of specified style in document.-2  

Renewable heating technologies including the energy sources and carriers they consume 

Technology groups 
(carrier-based) 

Technologies for Heating and Cooling 

Direct heat 
technologies 

Gas-based heating 
technologies 

Solid-based 
technologies 

Liquid-based 
technologies 

Electricity-based 
technologies 

Hybrid technologies7  

  Deep & shallow geothermal heating & cooling (e.g. heat pumps, 

DHC) 
Solar panels (incl. heat collectors and PV) 
Ambient H&C (e.g. heat pumps, …) 

 
 
  Waste H&C recovery* 

 
 

Propane boilers, fuelled with bio-propane 
Conventional gas (CH4), H2 converted boilers (incl. Combined Heat 
and Power - CHP) fuelled with renewable fuels 

  H2 boilers / turbines (incl. CHP) 
  H2 Fuel cells (CHP) 
 
  Gas or thermally driven heat pumps6  

Industrial gas boilers and furnaces (incl. CHP and micro-CHP) 

 

 

Bio-based products (wood chips, split logs, agricultural bioenergy) 
gasifiers & gasification boilers (incl. CHP) 
Bio-based products (wood chips, agricultural bioenergy) boilers & 
stoves (incl. CHP) 

  Wood stoves (incl. coupling to central heating) 
 

Industrial solid fuel boilers and furnaces (incl. CHP) 

 

Liquid fuel boilers (incl. CHP) 

Electric heat pumps (all sources, building & industry) & air 
conditioners (cf. annex 6.2) 
Electric heaters 
Electric boilers 
Industrial process 

Combination of two or more energy carriers and heat generators 
(e.g. gas, liquid, electricity-based, solar thermal, pellet boiler). For 
some heat generator combinations, the carriers can be renewable-
based 

 

 
 
 

 

 

Source: own elaboration 

*Waste heat is not renewable energy, however it can be used to fulfil the renewable heating and cooling target up to 40%, 
and the renewable district heating and cooling target up to 100% under Directive (EU) 2018/2001 (Article 23 and 24, 
respectively). 

To arrive at a sustainable and decarbonised H&C sector, it is important that all energy carriers 
used  are  produced  in  an  emissions-free  and  sustainable  way.  For  electricity-based  H&C 
technologies  (i.e.  heat  pumps)  to  become  fully  decarbonised  this  means  that  the  electricity 
supply needs to be decarbonised, mainly through the switch to renewable electricity generation 
(e.g.  PV  and  wind),  potentially  in  combination  with  conventional,  fossil-based,  generation 
technology  combined  with  Carbon  Capture  and  Storage  (CCS).  For  technologies  using 
gaseous  fuels,  such  as  gas  boilers  or  several  types  of  Combined  Heat  and  Power  (CHP) 

6 Thermally driven heat pumps can be used with renewable gases like biomethane or biopropane. Developments are ongoing to 
ensure they can work with hydrogen blends or pure hydrogen as well. There are several types of thermally driven heat pumps, 
including thermally driven compression heat pumps, adsorption and absorption heat pumps. Thermally driven heat pumps can 
also run in waste heat.  
7 Hybrid systems build on the strengths of different technologies – i.e. they combine a traditional gas or oil boiler (possibly operating 
with  biomethane  or  bio-propane,  or  even  hydrogen)  with  a  renewable  heating  system  such  as  a  heat  pump.  Hybrid  heating 
systems can monitor the temperature outside and automatically choose the most efficient option. Hybrid systems combining fossil 
and renewable energy sources and technologies can provide a cost-effective solution to reduce GHGs in the building sector on 
the short and medium term and prepare a ground for full decarbonisation. Hybrid systems consisting of a gas/oil boiler and an 
electric heat pump support the idea of sector coupling with the possibility to switch between different energy sources to alleviate 
stress on the electricity grid and to reduce extension cost for the infrastructure of the electricity grid. They provide flexibility and 
support resource adequacy in an integrated gas-electricity system. They can gradually become fully decarbonised by replacing 
fossil gas and oil with decarbonised gas and liquid fuels. Hybrid systems consisting of a combination of renewable technologies 
can make it easier to provide 100% renewable heating and cooling for a building, in particular in combination with thermal storage,  

18 

 
 
 
 
 
 
 
 
 
 
 
 
                                                 
EUROPEAN COMMISSION 

plants, it is important that the gas supply is decarbonised. Carbon-neutral gases include biogas 
or  biomethane  (biogas  with  upgraded  methane  concentration  and  lower  levels  of  CO2  and 
contaminants), but also renewable and carbon-neutral hydrogen, and synthetic gases (such 
as  e-methane).  Lastly,  liquid  biofuels  and  synthetic  liquid  heating  fuels  produced  from 
hydrogen can theoretically be used for heating purposes. For biomass-based applications (bio-
liquids,  biogas  and  bio-solids),  it  is  important  that  the  biomass  is  sourced  in  a  sustainable 
manner,  avoiding  negative  impacts  on  the  environment,  biodiversity  and  additional  GHG 
emissions  through  (in)direct  land  use  change,  while  also  considering  the  emerging  bio-
economy  and  increasing  demand  for  the  resource.  Air  quality  and  health  impacts  are  an 
increasing concern due to the combustion of solid fuels, and to a more limited extent, of liquid 
fuels. 

1.4  Methodological approach for the roadmap 
The objective of this roadmap is to provide policy makers at different levels of government (e.g. 
regional, national and EU) with guidance on how to develop strategies for the decarbonisation 
of  heating  and  cooling.  At  EU-level  the  roadmap  aims  to  provide  information  on  elements 
where further guidance and support at EU-level could support Member States in their efforts 
to decarbonise their H&C systems) with a practical tool to design a tailored approach to fully 
decarbonising the H&C sector by 2050. Given the central place of the H&C sector in the whole 
energy  system,  and the complexity to  find  the  right  approach for  its decarbonisation,  the 
roadmap is based on a description of essential elements to consider for the decarbonisation of 
the H&C sector, both in buildings and industry. The approach is based on presenting a series 
of key ‘building blocks’ which refer to these essential underlying elements that must be taken 
into  consideration  in  the  planning  of  the  practical  steps  for  the  decarbonisation  of  the  H&C 
sector.  The  ‘building  blocks’  should  be  adaptable  to  the  needs  of  each  Member  State.  The 
approach emphasises flexibility and acknowledges that there are no “fit-for-all” solutions when 
it comes to decarbonising the H&C sector across Europe. 

In addition to the proposed ‘building blocks’ for decarbonising the H&C sector at the national 
level,  the roadmap contains a  set  of  recommendations  at  EU,  national  and  local-levels to 
address the barriers and gaps identified throughout the study that can be implemented without 
additional delays. These recommendations are a list of examples of policy measures that can 
be taken-up at different levels, but they do not constitute a fully-fledged set of complementary 
measures. They illustrate what the policy measures could look like. 

This roadmap should be considered as a guidance to develop individualised national, regional 
or local roadmaps. 

19 

 
 
 
 
3. H&C building blocks 

3.1. Structural building blocks 

3.1.1. Options for H&C decarbonisation 

The starting point in planning a decarbonised heating system (be it a district, city or country-
wide)  is  understanding  the  existing  (legacy)  heat  supply  structure:  fuels/energy  sources, 
technologies and infrastructure. An important element of planning is opting between individual 
or collective (district heating and cooling (DHC)) decarbonised H&C systems. Currently, most 
residential and commercial buildings in Europe are individual H&C systems (91%) and only 
9% is connected to a DHC network8. Today, these buildings are often equipped with fossil fuel 
boilers  (mainly  natural  gas,  heating  oil),  although  renewable  H&C  solutions  are  already 
available  and  cost-competitive,  such  as  modern  biomass  boilers/stoves,  solar  thermal 
collectors,  and  geothermal  and  ambient  heat-based  heat  pumps.  Given  the  recent 
electrification  trend,  scenarios  for  the  decarbonisation  of  heating  and  cooling  in  buildings 
foresee an increasing importance of electricity-driven heat pumps (air-source and geothermal) 
as the most important technology for individual heating.  

Other  views  advocate  renewable-based  gases  and  liquids,  as  alternative  solutions  to 
electrification, as they would require less changes at the consumer sites. Benefits sited include 
better  fitting  the  lack  of  available  space,  neighbourhood  or  aesthetic  constraints,  lower 
adaptation  costs9  and  capacity  to  provide  high  operation  temperature  (if  a  building  is  not 
sufficiently  insulated).  Depending  on  the  resource  availability,  and  whether  they  are  cost-
competitive in comparison with other solutions in terms of total cost of ownership, gas solutions 
could be considered in decarbonisation pathways, keeping in mind both their advantages and 
disadvantages. Gas technology may also be used in combination with heat pumps (in buildings 
with less insulation) in hybrid systems and provide a form of demand flexibility to help manage 
the electricity system and increase system resilience10. Gas infrastructure (transport, storage 
and distribution) partially exists, meaning that coupling gas, e-gas, e-liquid and electricity, via 
various11 appliances, could be one of the options for energy transition, where the availability of 
gas  infrastructure  and  the  future  costs  of  decarbonised  gases  make  it  cost-effective  and 
affordable.    

While some believe there is  vast potential to produce biomethane and e-gases (e.g. renewable 
hydrogen and e-methane), these solutions should be promoted only if there is strong evidence 
and certainty that the potential can be utilised in practice and these alternative fuels can be 
produced  sustainably  and  at  an  acceptable  cost.  As  regards  biogases,  sustainability 
constraints  need  to  be  also  taken  into  account.  In  the  case  of  e-gases,  note  that  their 
production requires renewable electricity, and since their primary energy efficiency is below 
that  of  a  heat  pump,  an  e-gas  pathway  will  require  more  electricty  production  and  possibly 
more electric grid expansion or adaptation compared to the direct heat electrification pathway 
using heat pumps. Both the sustainability constraints for biogases and the additional electricity 
production  need  for  e-gases  may  increase  the  cost  of  these  fuels  and  risk  making  them 
unaffordable,  unavailable  or  uneconomic  for  ordinary  consumers.  The  potentially  very  high 
costs and other constraints lead to a significant risk that gas decarbonisation will be hard to 
achieve, therefore resulting in lock-in with continued use of fossil gases. Stranded gas assets, 
both  in  heating  systems  and  infrastructure,  are  therefore  a  significant  risk.  Thus,  bio  and 
electricity-based fuels may best be used in specific and limited situations for individual heating. 
Stand-alone systems often are the only options when the heat consumption density is low and 

8 According to the EU Reference Scenario 2020 – Energy, transport and GHG emissions : trends to 2050, available at  
https://op.europa.eu/en/publication-detail/-/publication/96c2ca82-e85e-11eb-93a8-01aa75ed71a1/language-en/format-
PDF/source-219903975  
9 heating technologies (e.g. boilers) using gas are easy to retrofit (natural gas and e-gas produced with renewable electricity are 
chemically the same) 
10 e.g. combining an electric heat pump and a high-performance condensing boiler can make an efficient use of renewable gas 
11 E.g. power-to-gases, power-to-liquids, micro CHP, fossil-renewable hybrid systems 

20 

 
 
                                                 
EUROPEAN COMMISSION 

when other site conditions negatively affect the economic feasibility and efficiency of new heat 
grids. Last but not least, options for the development of gas, bio-based and electricity solutions 
and  infrastructure  have to  consider  local  parameters  like resource  availability  and  technical 
and economical constraints. 

Off-grid households or buildings, currently supplied by heating oil and other fossil-based fuels, 
will not always have the possibly to install heat pumps, and could therefore have no affordable, 
sustainable or practical alternatives than using liquid fuel for heating. An effective approach to 
decarbonise off-grid households and buildings could consider the use of hybrid systems (to 
optimise  the  use  of different  resources),  and  the  replacement  of fossil-based liquid fuels by 
100% renewable liquids  by 2050. The sector currently runs multiple field tests to verify and 
proof the compatibility of existing heating devices.  

On the other hand, DHC can deliver sustainable H&C by connecting multiple local resources 
to local needs. DHC is a proven solution for delivering heating, hot water, and cooling services 
through a network of insulated pipes, from one or several central points of generation to the 
end users. DHC is already widely deployed in Nordern and Eastern European countries, where 
they allow aggregating heat sources to progressively optimise the energy supply and switch to 
more  sustainable  fuels.  The  availability  of  district  heating  infrastructure  can  improve  the 
competitiveness of renewable heating and cooling technologies, for example within the solar-
thermal and geothermal segments. Some RES H&C technologies such as solar-thermal can 
be much cheaper at scale but require a district heating grid for the distribution. Geothermal 
energy often is much more economic to develop if there is a district heating network that can 
serve many customers. However, the refurbishment, construction, and expansion of modern, 
highly efficient DHC networks  (4th and even 5th generation DHC systems ), operating at lower 
temperature  levels  and  equiped  with  large  thermal  storage  and  smart  control  systems,  are 
prerequisites for deploying many renewable and sustainable energy sources.  Studies differ 
considerably  in  estimates  of  potential  to  expand  district  heating  and  cooling,  with  the  more 
ambitious ones suggesting that DHC could supply up to 50%12 of the heat demand in the EU, 
predominantly in urban areas.  DHC is a cost-efficient enabler for the development of carbon-
neutral  and  resilient  local  energy  systems.  It  has  the  potential  to  improve  energy  efficiency 
(e.g.  large  heat  pumps, efficient  piping)  and support  the  uptake  of multiple sources  of  local 
renewable energy (e.g. biogas, biomass energy through high efficiency cogeneration) even at 
very low temperature levels (e.g. solar thermal energy, or geothermal energy in many areas), 
as well as recycled waste heat.  

Several elements need to be considered when choosing between individual and  DHC-focused 
decarbonisation approaches. District heating is financially feasible for communities with heat 
densities that are comparable to inner and outer cities areas, especially if local waste heat13 
from industry or a power plant is available. The roadmap concerns both increasing the share 
of renewables in existing infrastructure and the deployment of new renewable-based district 
heating  (DH).  A  recent  analysis14  of  the  cost-effectiveness  of  district  heating  compared  to 
individual  heating  solutions  under  conditions  based  on  the  Danish  system  (e.g.  taxes  and 
tariffs)  shows  that  new  district  heating  can  be  competitive  vis-à-vis  individual  heating 
technologies.  Looking  at  a  heat  demand  of  13.800  kWh/year  corresponding  to  an  energy 
renovated  building  and  considering  DH  produced  with  a  wood  chip  boiler  or  electrical 
compression heat pump, the results shows that the annual costs of DH are ~ 19% (EUR 430 
cheaper) lower compared to an individual natural gas boiler and ~ 30-31% cheaper (EUR 805) 
than an individual biomass boiler or individual air-to-water heat pump. The study assumed no 

12 Paardekooper et al. (2018), Heat Roadmap Europe 4: Quantifying the Impact of Low-Carbon Heating and Cooling Roadmaps,  
available at  
https://vbn.aau.dk/ws/portalfiles/portal/288075507/Heat_Roadmap_Europe_4_Quantifying_the_Impact_of_Low_Carbon_Heatin
g_and_Cooling_Roadmaps..pdf  
13 Waste heat does not qualify as renewable energy but can fulfil the renewable heating and cooling target partially (up to 40%) 
and the renewable district heating and cooling target fully (100%) under Directive 2018/2001/EU on renewable energy (See Article 
23 and 24 of that Directive).  

14  Green  Energy  Association.  (2018).  The  competitiveness  of  district  heating  compared  to  individual  heating: When  is  district 
heating the cheapest source of heating? 

21 

 
                                                 
pre-existing heating systems in the area (neither DH nor individual heating). Interestingly the 
results show that heat demand and district network length are important variables. It is also 
essential to recall DHC can utilise many different local resources that could not be valued via 
individual systems. On the other hand it should be noted that  many people today prefer an 
individual system, even if competitive DHC solutions are available for them. 

The energy performance of buildings is also an important factor in the selection of a supply 
technology. When DHC is deployed in existing building stocks, the energy performance of all 
connected buildings must be considered during the design phase, as it will have an influence 
on  the  volume  of  energy  consumption  (energy  density  is  an  important  parameter  for  the 
economic  viability  of  a  DHC).The  technical  viability  of  low  temperature  DH  must  also  be 
evaluated because 4th15 or 5th16 Generation DH requires buildings or any other user to operate 
at low temperatures. The heat demand profile and especially peak demand also determines 
what  supply  (baseload,  peak  and  back  up)  and  infrastructure  capacities  are  needed.  A 
complete  green  retrofit  may  be  required  of  older  building  stocks  for  the  installation  or 
conversion to efficient DH (4th or 5th Generation). In the case of heat pumps, the smaller the 
temperature difference between the source and the heat output, the smaller and more efficient 
the heat pump is. A complete deep energy renovation remains needed in older buildings for 
the  installation  of  heat  pumps,  although  it  appears  that  heat  pumps  may  also  satisfy  heat 
demand in buildings not fully retrofitted either via high-temperature heat pumps or hybrid heat 
pumps17, which are complemented with gas condensing boilers to cover peak demand. The 
modernisation  of  windows  and  roofs  can  achieve  much  in  this  regard.  Better  insulation  of 
building  envelopes  allows  installing  low-temperature  floor  heating,  or  low-temperature 
radiators. As shown with the example of modern low-temperature efficient district heating and 
heat pumps, it is essential to combine the deployment of renewable and carbon-neutral heating 
technologies with building retrofits, especially in regions or countries with low energy building 
performance (this is further developed in the section on the “planning building block”). 

3.1.2. Fossil fuels phasing out 

The  transition  from  fossil  fuel-based  energy  sources  to  low  carbon  H&C  must  be  carefully 
managed  as  it  requires  extensive  planning  and  high-level  expertise,  along  with  significant 
investments  in  building  retrofits,  in  developing  new  renewable  and  carbon-neutral  energy 
sources for heating and cooling, in renewable and zero/carbon-neutral gases and renewable 
electricity  generation,  in  end-user  technologies,  in  industrial  technology  development,  in 
energy  transmission  and  distribution  infrastructures,  and  in  storage  capacities.  The  future 
energy  mix  should  focus  on  both  ready-to-adopt  and  quickly  deployable  renewable  and 
carbon-neutral  H&C  technologies (in  the  short-term)  and  innovative  renewable  and carbon-
neutral H&C technologies and systems (in the medium-term), while phasing out fossil fuels. 
Full decarbonisation of the building stock by 2050 requires to quickly stop (ideally by 2025) the 
installation of heating systems fuelled by fossil fuels18, unless their installation is connected to 
spatial planning, clearly identifying areas where the gas grid should remain19. Several National 

15  4th  generation  District  Heating  (4GDH  or  4th  DH),  as  defined  in  Lund  H,  et  al.  (2014)  refers  to  “coherent  technological  and 
institutional concept, which by means of smart thermal grids assists the appropriate development of sustainable energy systems”. 

16 5th generation District Heating (5GDG or 5th DH) is defined by Abugabbara et al. (2020) as a system that “harnesses the shared 
energy concept which is realized in a network that connects ‘prosumers’”. 

For an overview of differences between 4th DH and 5th DH see: Lund H. et al. (2021) Perspectives on fourth and fifth generation 
district heating. Available at: https://www.sciencedirect.com/science/article/pii/S0360544221007696  

17 A hybrid heat pump is a system that uses a heat pump alongside another heat source, typically, a fossil fuel (gas, oil or LPG) 
boiler. 

18 Heating systems can run with either fossil fuels, low-carbon fuels or renewables. Note that heating systems such as boilers can 
use  either  fossil  fuels  or  the  same  renewable-based  fuel  (e.g.  replacing  natural  gas  by  biomethane  or  synthetic  natural  gas). 
Therefore, stopping  the installation  of systems  currently  using  fossil-based  fuels  could  prevent the  development  of  alternative 
renewable or low-carbon fuels, which should probably not be rejected in all cases (especially when there are limited alternatives, 
and the existing equipment can be easily run on renewable or low-carbon based fuels). 
19 https://www.oeko.de/fileadmin/oekodoc/Phase-out_fossil_heating.pdf  

22 

 
 
                                                 
EUROPEAN COMMISSION 

Energy and Climate Plans (NECPs)20 and Long Term Renovation Strategies21 already include 
measures for the phase out of fossil fuels for heating, such as quickly stopping the installation 
of heating systems fuelled by fossil fuels. Three EU countries already have plans to phase out 
oil-fired and gas-fired boilers in all buildings and five more have plans or implemented policies 
to ban the installation of fossil-based heating equipment in new buildings.22 

Policies to phase out fossil fuels must put citizens at the center allowing them to plan for the 
required changes, by keeping the market open and improving consumer information so that 
everyone has fair conditions to choose the most appropriate heating system for their specific 
situation.  In  the  building  sector,  the  new  EU  energy  label  (providing  information  on  energy  
savings of products, like heaters23) should be useful for end-users and investors to inform them 
how to faster and deeper modernise or completely replace their heating appliances according 
to  their  individual  needs,  as  there  is  evidence24  that  the  energy  label  in  its  current  form  is 
considered by consumers as not effective (people are aware of the label, but it does not trigger 
a switch to another heating technology). The main reason is that purchasing decisions depend 
on  the  building  characteristics  (e.g.  insulation  level,  size  of  radiators,  …)  and  financial 
capabilities. The revised label for space heaters could also integrate information on the origin 
of the energy carrier (i.e. to indicate if the origin is renewable or not), except for electricity (e.g. 
via a pictogram), and add information regarding smartness and digitalization. 

A progressive phase-out of fossil fuel boilers could be accelerated with the early rescaling of 
energy labels to downgrade inadequate appliances to the lowest grades (F and G)25. These 
appliances  could  then  be  progressively  phased  out  by  banning  the  installation  of  the  worst 
performing appliances (G) in the first phase (e.g. by 2023) and then of F-grade appliances in 
a second phase (e.g. by 2025). Ending the installation of new boilers fired by gas, oil and coal 
as of 2025 could bring about 110 million tonnes of annual CO2 savings by 2050, while a more 
gradual  approach  would  allow  consumers  and  manufacturers  to  plan  ahead.  Such  a 
progressive  ban  would  not  necessarily  depend  on  an  EU  level  decision;  it  could  be 
implemented at national level by Member States wishing to do so, depending on specific local 
characteristics26, e.g. under the Energy Performance of Buildings Directive transposition27.  

In  the  transition  to  a  fully  decarbonised  H&C  sector,  the  role  of  natural  gas  is  somewhat 
controversial. The H&C sector accounted for 64% of the overall natural gas demand in Europe 
in 2015 and thus decarbonising the sector will have important implications for future demand 
of gas.28  

Natural gas  has  a  lower  carbon footprint than  oil  or coal;  however,  it  is  not  compatible with 
climate  neutrality.  On  average,  switching  from  coal  to  gas  cuts  emissions  by  50%  when 
producing electricity and by 33% when used for heating.29 In addition, fuel switching from more 

20 Introduced under the Regulation on the governance of the energy union and climate action (EU/2018/1999), the NECPs are 10-
year integrated plans for energy and climate for the period 2021-2030. Areas covered adress energy efficiency, renewables, GHG 
emission reductions, interconnections and R&I. 

21  Under  the  2018  Energy  Performance  of  Buildings  Directive,  all  MS  are  required  to  submit  to  the  Commission  a  long-term 
renovation  strategy  outlining  plans  to  support  the  renovation  of  their  national  building  stock  into  a  highly  energy-efficient  and 
decarbonised one by 2050. 

(2021)  Member  States’  ambition 

22  ECOS 
https://www.coolproducts.eu/wp-content/uploads/2021/07/ECOS-Coolproducts-Background-Briefing-MS-ambition-to-phase-out-
fossil-fuel-heating.pdf  
23  As  example,  local  space  heaters  with  a  nominal  heat  output  of  50 kW or  less  are   sold  with  energy  labels  as  of  2018, 
https://ec.europa.eu/info/energy-climate-change-environment/standards-tools-and-labels/products-labelling-rules-and-
requirements/energy-label-and-ecodesign/energy-efficient-products_en   

fossil-fuel  heating  –  an  analysis,  available  at 

to  phase  out 

24 Consumer study on purchase decisions regarding heating appliances, CentERdata (2021).   
25 https://ec.europa.eu/transparency/expert-groups-
register/screen/meetings/consult?lang=en&meetingId=28735&fromExpertGroups=true  
26 Among the local characteristics, are the presence of gas infrastructure, the ability to effectively move to renewable-based fuels, 
the ability to conduct rapid and effective local H&C planning, … 
27 Directive 2010/31/EU of the European Parliament and of the Council of 19 May 2010 on the energy performance of buildings 
28 The Oxford institute for energy studies (2018) Decarbonisation of heat in Europe: implications for natural gas demand 
29  IEA  (2019),  The  Role  of  Gas  in  Today’s  Energy  Transitions.  Available  at:  https://webstore.iea.org/the-role-of-gas-in-todays-
energy-transitions  

23 

 
                                                 
polluting fuels to gas contributes to the improvement of air quality. On the other hand, natural 
gas is not compatible with a fully decarbonised system and if carbon neutrality is to be achieved 
by 2050, any lock-ins and investment in stranded assets must be avoided. Thus, investments 
in gas infrastructure should consider whether the projects and infrastructure are future-proofed, 
whether  such  infrastructure  could  be  adapted  to  transporting  decarbonised  and/or  carbon-
neutral  gases30,  and  should  ensure  that  renewable  gas  will  be  injected  in  the  concerned 
infrastructure  (given  the  limit  of  resource  availability).  As  such,  although  several  studies 
suggest that keeping the gas infrastructure and greening the gas is a viable and cost-effective 
solution31 to quickly decarbonise the H&C sector, this should not be seen as a general rule 
applicable  to  all  gas  network  segments  and  should  be  assessed  on  a  case  by  case  basis, 
taking into account the availability of renewable gases. 

In  addition  to  investments  in  infrastructure,  government  support  for  gas-based  heating 
appliances  is  important  to  re-examine.  A  recent  study  finds  that  many  Member  States  use 
‘green’ energy schemes to finance the installation of new gas boilers, which are already about 
three times  cheaper  than  heat  pumps.32  This  support  is  incompatible  with  the  results  of  an 
earlier study reporting that a total phase-out of gas and oil boilers would be needed by 2025, 
if  Europe is to  achieve  carbon neutrality  by  2050.33  This  support  is  also  not  in  line  with  the 
framework  Energy  labelling  regulation  1369/2017,  which  stipulates  that  “Member  States 
provide incentives for a product specified in a delegated act, those incentives shall aim at the 
highest two significantly populated classes of energy efficiency, or at higher classes as laid 
down in that delegated act.” With the proposed rescaled label, gas boilers are included in the 
space heating energy label (Commission Delegated Regulation (EU) No  811/201334) and are 
not  included  in  the  highest  efficiency  classes  (classes  reserved  to  more  efficient  heating 
products, such as heat pumps); hence they should not be supported by national incentives. 
Additional aspects related to decarbonised and/or low carbon gas and its role in decarbonising 
the H&C sector are discussed under various building blocks below. 

Given that most decarbonised heat solutions will require changes to the customers’ heating 
systems in their homes, offices or factories, an important consideration in planning fossil fuel 
phase-outs  is  the  distributional,  economic  and  social  effects  that  moving  towards  a 
decarbonised  H&C  sector  will  have,  especially  on  energy  poor  households  (for  further 
discussion on this topic see Error! Reference source not found. Error! Reference source 
not found.).  

3.1.3. Energy efficiency 

The  EU’s  energy  efficiency  first  principle,    enshrined  in  the  Governance  Regulation, 
emphasises the importance of measures to reduce energy demand. Energy savings are the 
easiest way to reduce GHG emissions while at the same time saving money for consumers. 
However, currently much of the building stock in the EU is not energy efficient, and 85% to 
95% of these buildings will still be in use in 2050.  Hence, defining pathways leading to a highly 
efficient and decarbonised building stock by 2050 is fundamental to achieving the objective of 
climate neutrality. 

for  Climate  &  Guidehouse 

transition  with  green  gas  benefits 

(2020)  Gas  Decarbonisation  Pathways 

30 European Commission (2020) Impact on the use of the biomethane and hydrogen potential on trans-European infrastructure. 
Available at: https://op.europa.eu/en/publication-detail/-/publication/10e93b15-8b56-11ea-812f-01aa75ed71a1/language-en   
31  Gas 
https://gasforclimate2050.eu/sdm_downloads/2020-gas-decarbonisation-pathways-study/ 
E.ON  (accessed  on  08/09/2021)  Energy 
https://www.eon.com/en/about-us/politics/energy-transition-with-green-gas.html  
32 European Environmental Bureau on behalf of Coolproducts campaign (2021) Clean heat grants are failing to green our homes 
– New analysis. Available at:  https://www.coolproducts.eu/failing-rules/green-heat-grants-are-failing-to-clean-up-the-sector-new-
analysis/  
33  ECOS  and  Coolproducts  campaign  (2021)  Five  Years  Left:  How  ecodesign  and  energy  labelling  can  decarbonise  heating. 
Available  at:  https://www.coolproducts.eu/wp-content/uploads/2020/12/Five-Years-Left-How-ecodesign-and-energy-labelling-
Coolproducts-report.pdf  
34  Commission  Delegated  Regulation  (EU)  No 811/2013  of  18 February  2013  supplementing  Directive  2010/30/EU  of  the 
European Parliament and of the Council with regard to the energy labelling of space heaters, combination heaters, packages of 
space heater, temperature control and solar device and packages of combination heater, temperature control and solar device 
Text with EEA relevance 

low-income  households.  Available  at: 

2020-2050.  Available 

at: 

24 

 
 
                                                 
EUROPEAN COMMISSION 

Improving the energy performance of buildings is a key element of decarbonising space H&C. 
Ambitious renovation of the building stock can lead to substantial energy savings, resulting in 
reduced investments in renewable energy generation technologies and energy infrastructure, 
but  also  providing  the  opportunity  to  broaden  the  number  of  renewable  options  (e.g.  better 
performing building can operate at lower temperature levels expanding the options of suitable 
technologies such as solar heating or heat pumps, while reduced consumption decreases the 
required capacity of production and storage, e.g. storage tank for hot water or for pellets). To 
that end, energy management solutions that guarantee energy/CO2 savings and performance 
over time, such as Energy Performance Contracts, are key tools to support decarbonising the 
building  sector.  The  current  renovation  rate  and  depth  need  to  be  substantially  increased 
across the EU Member States . The annual renovation rate at EU level is currently around 1%, 
while the annual rate of one-off, deep renovations is only around 0.2% - 0.3%, translating into 
low  replacement  rates  of  fossil-based  heating  equipment  and  low  development  and 
modernisation of DHC.  

Viable strategies to abate emissions from buildings needs to consider the heterogeneity of the 
building  stock,  the  varying  local  conditions  and  social  impacts.  The  decarbonisation  of 
buildings  will  likely  require  a  wide  range  of  solutions  and  energy  carriers.  Different  heating 
technologies are available for different building needs and for different renovation stages (deep 
renovation would favor technologies taking  care of the residual  heat  load  and domestic  hot 
water;  while  in  staged  renovation,  modularity  of  modern  heating  technologies  could  be 
preferred, e.g. hybrid systems). 

New  homes  often  represent  a  ‘low  hanging  fruit’  for  building  efficiency  and  for  installing 
renewable  heating,  as  new  buildings  are  usually  constructed  with  higher  performance 
standards and newer technology. High perfomance levels are harder to reach in buildings that 
have been  poorly  designed  and  built.  Under  the  Energy  Performance  of  Buildings  Directive 
(EPBD), all new buildings constructed after 31 December 2020 should be nearly zero-energy 
buildings (NZEB). Nearly zero-energy buildings need to have very high energy performance 
under  the  EPBD,  with  their  low  energy  needs  being  covered  largely  by  renewable  sources 
generated  on-site  or  nearby.  Such  buildings  are  often  based  on  common  characteristics 
including  a  well-insulated  thermal  envelope,  built  without  any  thermal  bridges  and  ensuring 
high level of airtightness. Furthermore, windows in NZEBs require thermally insulated frames 
and  high  quality  glazing.  Shading  is  another  important  factor  that  can  reduce  the  need  for 
cooling in the building. In many cases, NZEBs have a mechanical ventilation system with heat 
recovery and incorporate building automation and control systems and other smart solutions. 
Specificities of NZEBs need to consider the buildings’ location, climatic conditions, availability 
of local renewable resources and needs of the inhabitants. District heating systems either with 
a high share of renewables and/or high energy performance characteristics are a promising 
solution for NZEBs in urban areas.  

With regards to building renovation, given the current low energy performance of the building 
stock  in  the  EU,  it  is  essential  to  address  the  replacement  of  old  and  inefficient  heating 
equipment and the improvement of the building envelope in a holistic manner. Improvements 
of the building energy performance increase the number of options for renewable H&C systems 
that are available and decrease the overall investment and operational costs. Ideally, energy 
renovations are planned before the expected end-of-life of the existing H&C systems, so that 
urgent  replacement  with  new  fossil-based  systems  can  be  prevented.  Approaches  such  as 
Building Renovation Passports  (at building level), urban heat planning and zoning approaches 
(at community level), staged renovations and trigger points  may support coordinated and long-
term action. Planning in advance would allow end users to explore different renewable options 
and chose the most suitable for the application and local conditions. 

In cases where options for improving the energy performance of a building are limited (e.g. 
due to excessive cost of the works or for the case for historical buildings), suitable renewable 
heating (RES-H) technologies need to be identified. The technical feasibility of installing heat 
pumps in existing buildings is a key question to be addressed.  

As  highlighted  by the  Energy  Efficiency  First  Principle,  building  demand-side flexibility  must 
also  be  recognised  and  valorised  as  an  essential  dimension  of  the  building’s  energy 

25 

 
performance.  Doing so will capture the benefits of sector coupling and contribute to a more 
cost efficient energy transition (cf. section 2.3). The focus should be placed not only on average 
annual efficiency but also on a dynamic systemic approach considering the evolution of the 
energy mix. Buildings can play an important role by bringing affordable flexibility and resilience 
to the energy system, during the transition but also in fully decarbonised H&C systems.  

Ideally,  the  design  of  dynamic  electricity  tariffs  (time  of  use,  dynamic)  should  stimulate  the 
dynamic  use  of  energy  by  allowing  final  energy  users  (building  occupiers)  to  provide  load 
flexibility, and thus allowing better integration of intermittent renewables. This would ensure a 
more  efficient  use  of  electricity  infrastructure,  and  help  reduce  or  avoide  electric  grid 
reinforcement (by reducing peak demand). Preferably this is done through the use of systems 
that automatically adapt to fluctuations in energy availability (by means of price signals) so that 
consumers  can  provide  system  flexibility  in  a  convenient  and  accessible  manner.  Such 
developments  would  require  the  possibility  for  new  types  of  energy  contracts  with  more 
dynamic pricing. 

Inside buildings, hot water preparation accounts for 495 TWh final energy per year in EU. It is 
the main source of energy consumption for highly energy efficient new housing, and yet 80% 
of this heat ends up in sewers and is wasted. Considering up to 80% of hot water is used in 
showers, harvesting heat from shower drains in buildings could be a simple way to save wasted 
energy and CO2 emissions.  

3.1.4. Industrial decarbonisation H&C technologies 

Industry  is  an  important  and  challenging  sector  to  decarbonise.  In  the  EU,  heavy  industrial 
processes such as the production of cement, steel, petrochemicals, glass, ceramics, petroleum 
refining, and others contributed for at least 34% of total CO2 emissions in 2019.35  In the EU, 
the final energy consumption of the industrial sectors (e.g. manufacturing, construction) was 
2.780 TWh  in 2019, representing a share of 26% of the total final energy consumption.36 Within 
the  demand  for  H&C,  industrial  process  heat  accounted  for  roughly  one  third  of  the  total 
demand in 2015.37 Heat use under 200°C (process and space heating) represents 44% of the 
overall EU2838 final energy consumption for industrial H&C, while the final energy consumption 
for  process  and  space  cooling  accounts  for  around  4%  of  overall  final  H&C  energy 
consumption in industry. The remaining 51% of final energy consumption in EU’s industries is 
used to generate heat above 200°C.  

Industrial  decarbonisation  constitutes  a  particular  challenge  due  to  several  characteristics 
associated  with  this  sector.  Industry  is  hard  to  decarbonise  due  to  conversion  costs, 
temperature  levels,  competitiveness  risks,  and  long  facility  life.  For  many  energy-intensive 
industries (EIIs), energy costs make up a significant share of their overall production costs and 
hence increases in energy costs can have a significant impact on industrial competitiveness. 
Energy costs in manufacturing accounted for between 1% and 10% of production costs in the 
period 2010 to 2017 in the EU.39 For energy-intensive sectors such as paper, building material, 
iron  and  steel  and  cement  these  costs  are  on  the  high  end  of  the  spectrum  and  can  even 
exceed  10%  share  of  production  costs.    Even  with  the  increased  cost  competitiveness  of 
renewables observed in recent years, uptake of renewables will have an impact on the overall 
production  costs,  which  in  turn  will  translate  into  considerations  of  competitiveness.  While 
processes/sectors  using  low  temperature  heat  (<  150°C)  have  several  efficient  renewable 
heating and cooling technologies available, the higher the temperature of the heating demand 
is,  the  more  limited  the  options  are  for  decarbonisation  with  renewable-based  fuels  and 
sources. In addition, since the average economic lifetime of industrial facilities is long (~ 20 

35 https://ec.europa.eu/energy/sites/default/files/energy_statistical_countrydatasheets.xlsx  
36 Eurostat (2021) Complete Energy Balances.   
37 HeatRoadMapEurope (2018) Profile of heating and cooling demand in 2015. 
38  Industrial  data  on  heat  uses  differentiated  according  to  temperature  ranges  are  not  available  at  EU  level.  Such  data  were 
collected  specifically for the purposes of this study and do not provide disaggregation by Member States. The data relate to the 
year  2015  and  EU28.  The  quoted  data  provide  an  order  of  magnitude  as  regards  the  approximate  share  of  low  temperature 
process heat in overall industrial heat consumption. 
39  EC 
on 
https://www.euneighbours.eu/sites/default/files/publications/2020-10/MJ0220370ENN.en_.pdf  

(2021)  Study 

households. 

industry 

energy 

prices, 

impact 

costs 

their 

and 

and 

on 

26 

 
 
                                                 
 
EUROPEAN COMMISSION 

years or more), any intervention must be immediate and investments in new facilities should 
be based on low or zero carbon technologies. 

Figure 2 3 illustrates the decarbonisation strategies available for the industry, based on three 
approaches: 

  Dematerialize or recycle/reuse  – mainstreaming circular economy, depending on 

the sector; 

  Keep the core existing process and either capture the carbon (for usage or storage) 

and/or make fundamental changes to shift to low carbon fuels; or 

  Change the existing process. 

Figure Error! No text of specified style in document.-3 Flow chart for choosing the most suitable industrial decarbonisation 
options 

Source: Own elaboration inspired by: A review of technology and policy deep decarbonisation pathway options for making energy-
intensive industry production consistent with the Paris agreement 

A  selection  of  main  decarbonisation  pathways  applicable  to  most  industries  using  high 
temperature processes, and especially the EIIs, could include the following options : 

  Further energy efficiency improvements and energy savings 

  Process integration 

  Further electrification of heat 

  Further electrification of processes 

  Use of low-CO2 hydrogen 

  Valorisation of CO2 (Carbon Capture and Utilisation) 

  Use of biomass 

  Carbon Capture and Storage 

  Higher valorisation of waste streams and materials efficiency 

27 

 
 
 
 
 
Although  many  of  the  technology  options  are  already  well-developed,  there  is  still  need  for 
public  support  to  steer  demonstration  of  emerging  technologies,  to  promote  industrial 
investments and to ensure the appropriate market conditions are in place. Thus, to accelerate 
the decarbonisation of industrial processes, emerging technologies are still needed, such as 
more  efficient  electrolysis;  solid  oxide  fuel  cells  ;  producing  renewable  hydrogen-derived 
ammonia,  methane  and  methanol;  CO2  capture  &  storage  and/or  use  (e.g.  through 
methanation);  biomass  (ideally  waste)  gasification;  high-temperature  heat  pumps;  electric 
virgin steel production; new cement chemistries; electrothermal technologies, and; electrolytic 
smelting.  Finally, for low-CO2 technologies reaching maturity, their market uptake will depend 
on operational costs. Cost reductions can be achieved by having multiple technologies to be 
tested in demonstration projects to allow for experimentations with design improvements on 
an industrial scale. 

There  is  need  for  investments  in  infrastructure  to  support  an  industrial  carbon-neutral 
transition.  Mapping  infrastructure  needs  should  take  into  account  existing  connections 
between  industrial  clusters  across  borders  (e.g.  existing  pipeline  infrastructure  connection 
regions) and how economic or other synergies between regions can be realised. The risk of 
industrial  clusters  becoming  isolated  from  new  low-CO2  infrastructure  must  be  identified 
together  with  options  to  mitigate  this.  Furthermore,  it  is  important  to  consider  that  for  most 
energy-intensive industries, the current production location has significant strategic value (e.g. 
connections  to  infrastructure  and  logistics,  proximity  to  raw  materials  supply  chains  and/or 
customers). Most investments in low-CO2 processes will therefore likely happen at the same 
location. This implies that major brownfield conversions will have to be part of an industrial low-
CO2 transition. 

A  final  aspect  that  is  important  to  take  into  account  when  decarbonising  industry  is  that 
decarbonisation  strategies  should  not  focus  only  on  decarbonising  existing  processes  and 
energy  demand,  but  alternative  processes  and  solutions  for  subprocesses  need  to  be 
considered too. Traditionally, it was common to produce a large volume of heat at the highest 
temperature needed in one of the subprocesses in an industrial plant and then cascade for 
lower-temperature processes. In a fossil-based system, this is an efficient practice, but in a 
system based on renewables where energy carriers with a high energy density are scarce it is 
more  efficient to  break  up the  demand  in  components  with different temperature  levels  and 
find a solution for each. In some cases, the minimum temperature required for a process can 
be lowered by adjusting the production process or shifting to a new process, which increases 
the number of available renewable heat supply technologies. 

3.1.5. Energy storage 

Thermal energy storage refers to the temporary storage of energy in the form of heat so that 
the stored energy can be used at a later time in H&C applications or for power generation. The 
technology takes advantage of materials that gain energy when increasing their temperature, 
and lose enrgy when decreasing it.Thermal energy storage is one of the key instruments to 
integrate the electricity and H&C sectors in a smart integrated approach that benefits power 
as well as thermal systems.  

Figure 2-1 shows some of the key applications of thermal energy storage  in an energy system 
with high renewables penetration.  

Thermal energy storage is already broadly used in many different end-uses and applications. 
However,  many  aspects  still  require  further  development  or  improvement,  including:  liner 
materials for high temperature thermal energy storage that have long lifetime and acceptable 
costs;  construction  techniques  for  large  volumes,  deep  pit  or  tank  storage,  in  different 
geological settings; thermal insulation materials and techniques to cost-effectively lower the 
heat loss and improve storage performance; floating or self-carrying lid constructions to enable 
the use of the storage top area; optimised system integration and hydraulics and controls to 
optimise system performance. Generally, further improvement towards cost-effectiveness of 
such  systems  is  dependent  on  the  parallel  development  of  novel  materials,  improved 
components, and further development and demonstration of system-based applications. 

28 

 
 
 
EUROPEAN COMMISSION 

Figure Error! No text of specified style in document.-6 Key applications of TES in the energy sector40 

Source: IRENA 2020 Innovation outlook Thermal Energy Storage 

When it comes to heat pumps and their role in energy storage, the flexible operation of heat 
pumps in periods with low electricity prices can reduce the price of heat production and when 
the heat is needed in the short term, the heat capacity of the building itself can be used for 
temporary heat storage. To bridge longer time spans, dedicated thermal storage systems can 
be  used.  In  the  cases  where  reversible  heat  pumps  are  operating  in  the  context  of  district 
heating and cooling, the best approaches include hot or cold water/brine storage or ice storage. 

3.1.6. Cooling 

Cooling accounts for around 4% of final energy demand in the EU, with 106 TWh for space 
cooling and about 110 TWh for process cooling complemented by 0,6 TWh for district cooling41 
Due to the increased temperatures experienced during the last years and changes in lifestyles 
and expectations with regard to thermal indoor comfort, the cooling needs of buildings have 
risen and are expected to further increase in the near future. Given the expected demand for 
cooling  in  the future,  planning  ahead  is  an  important  element  to  address future demand for 
cooling. Such planning should consider implementing integrated solutions that decrease the 
cooling needs of buildings without compromising comfort on the one hand; and matching the 
demand by best available and renewable space cooling technologies on the other. Renewable 
space  cooling  technologies  well  adapted  to  the  different  building  types  and  needs.42 
Fortunately, currently 99% of cooling is electricity-driven;  unlike heating, cooling typically does 
not involvthe direct use of fossil fuels.  

The key drivers for the decarbonisation of space cooling are: 

  Reduction  of  space  cooling  demand  by  increasing  the  thermal  performance  of 

buildings (passive cooling) 

 

Increasing the efficiency of cooling appliances (incl. the use of free cooling) 

  Transformation of the electricity sector  

 

Increasing the share of cooling technologies using renewable heat or waste heat, 
and thermal energy storage  

For process cooling, it is essential to consider cooling and heating in an integrated way, e.g. 
to recover the ‘waste’ heat from cooling in data centers, malls, hyper- and supermarkets, large 

2020 

IRENA 

Innovation 

40 
Available 
/media/Files/IRENA/Agency/Publication/2020/Nov/IRENA_Innovation_Outlook_TES_2020.pdf  
41    Study ENER/C1/2018-493  “Renewable  Cooling  under  the  Revised  Renewable”,  by  TU-Wien, Armines, EURAC  Research, 
Viegand Maagøe, e-think, August 2021. 
42  

https://www.irena.org/-

Storage. 

Thermal 

outlook 

Energy 

at: 

29 

 
 
 
                                                 
cooling and freezing rooms, and similar processes. Reversible heat pumps, which can produce 
both high and low temperatures, can be a good technology choice for buildings.  

3.2. Transversal building blocks 

3.2.1. Resource availability 

Given that renewable energy for heating and cooling is derived from finite resources, resource 
availability  plays  a  key  role  in  the  planning  of  a  decarbonised  H&C  system.  Resource 
availability plays a role for all renewable energy sources, but is especially key for bioenergy 
feedstock, although the deployment of solar, wind, geothermal may also face availability and 
spatial  constraints,  public  acceptance  issues,  and critical raw  material  limitations. Technical 
wind energy potential can be constrained by competing land or water uses or can face public 
acceptance  related  constraints.    High-temperature/enthalpy  geothermal  energy  is  another 
resource that is not available everywhere43. Low-temperature/enthalpy geothermal energy  is 
available almost every where for heating and can be harnessed via heat pumps; its use can 
nevertheless be constrained, for examples by competeing uses of underground spaces or the 
need to protect the water tables. The sustainability impact of renewable energy sources should 
also be addressed in a comprehensive life-cycle assessment. 

For  bioenergy  development,  the  key  condition  is  the  availability  of  reliable,  affordable  and 
sustainable  biomass  sources,  considering  its  increasing  use  for  biomaterials.  Biomass 
production and use involves a chain of activities ranging from the growing and harvesting of 
feed stocks, processing, conversion, transport and distribution of bioenergy carriers up to the 
final  energy  use.  Each  step  can  pose  different  sustainability  challenges  that  need  to  be 
addressed.  The  environmental  performance  of  a  bioenergy  source  depends  on  the  specific 
characteristics of those steps in the value chain and need therefore to be assessed on a case-
by-case  basis.  Competition  is  not  only  about  competing  raw  material  uses,  but  also  about 
surface or land availability, including underground spaces, and potential conflicts among the 
various  uses  of  space  and  land.  Food  production  related  cultures  may  create  competition 
between  food  or  biomass  production;  lignocellulosic  resources  and  algae  involve  other 
challenges  including  indirect  competition  with  food  production  due  to  competition  for  land.  
However, producing biofuels (like bioethanol) may be complementary to the extraction of food 
molecules (e.g. proteins ) when biorefinery processes are applied.  

Recently, awareness has been growing about the importance of using biomass at the highest 
value possible. When competing biomass applications are present in a certain area, adhering 
to the biomass use hierarchy and cascading use, where material applications are prioritised, 
is a good principle for the optimal, economic, and sustainable use of biomass resources.  In 
this regard, new circular economy ambitions, where substitution of non-renewable materials 
with  biobased  materials  plays  a  significant  role,  combined  with  a  continued  increase  in 
bioenergy  use  ambition,  can  lead  to  a  situation  where  the  claim  on  biomass  resources  for 
different  applications  exceeds  the  realistic  sustainable  supply.    However,  it  should  also  be 
considered that (non-waste) solid bioenergy is mainly produced out of forest residues (woody 
by-products  not  fit  for  other  purposes)  and  from  industrial  by-products  (e.g.  sawdust). 
Therefore, the increase of the use of biobased material (e.g. wood in construction) could lead 
to an increase in the availability of the streams required to produce solid bioenergy like pellets 
or chips. This could create an additional opportunity, although recent insights on the use of 
woody biomass for energy also suggest that the cascading use of forestry residues for energy 
purposes  is  often  limited  because  direct  competition  with  material  applications,  e.g.  for 
production of wood panels and paper products, often exist. Still, in a specific local context, use 
of residues for energy might make economic sense as long-distance transport to a place where 

43 High enthalpy geothermal energy is generally used for electricity production, often together with heat production (cogeneration), 
and to supply process heat for industries.  

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it could be used for material purposes is not economically viable while good local bioenergy 
applications  exist.  This  means  that  energy  applications  of  biomass  should  not  be  ruled  out 
beforehand,  but  should  be  evaluated  on  a  case-by-case  basis.  Although  biomass  potential 
supply  estimations  significanlty  vary  between  studies44,  it  appears  it  is  unlikely  that  there  is 
enough  potential  for  expanding  biomass  supply  within  sustainable  boundaries,  when  also 
taking into account other emerging biomass applications.45 Hence, biomass use should strictly 
proceed on a precautionary basis, while only considering sustainable biomass. Governments 
should ideally manage biomass resources in holistic way, considering the bio-economy as well 
as environmental and social impacts. 

In the case of solar energy, solar irradiation increases when moving to lower latitudes and as 
such  solar  energy  is  most  abundantly  available  in  southern  Europe.  Average  annual  solar 
irradiation  in  southern  countries  is  significantly  higher  than  in  northern  countries,  with  Italy 
having the highest average solar irradiation and Finland having the lowest.  One of the main 
challenges with solar is its temporal availability, including its short-term variability (day versus 
night)  as  well  as  the  seasonal  variability  (summer  versus  winter).  The  latter  is  especially 
challenging  from  a  heating  point  of  view  given  that  there  is  a  mismatch  between  the  solar 
energy  availability  and  heating  demand.  This  mismatch  can  be  overcome  with  innovative 
thermal storage technologies, which highlights the importance of (affordable) energy storage 
solutions.  However,  there  is  a  match  for  cooling  demand,  meaning  that  solar  cooling 
technology could represent a promising solution. 

Wind as a resource varies strongly across Europe, with the highest availability of wind energy 
in the coastal and mountainous areas, when it comes to onshore wind power; but even better 
wind energy resources can be found offshore. The largest onshore wind potential resides in 
north-western Europe and the largest offshore potential is located in the North Sea, Baltic Sea, 
Atlantic ocean as well as some locations in the Mediterranean and the Black Sea.  There is a 
vast technical potential for wind energy generation in Europe of 75.000 TWh46, which is more 
than  7  times  the  total  EU  final  energy  demand  in  2030.47    However,  for  onshore  wind, 
environmental and social constraints mainly related to visual and sound impacts, stroboscopic 
effects and the impact on birds and bats reduce the overall potential. In offshore locations, the 
potential  is  restricted  even  more,  due  to  competing  uses  of  the  offshore  areas,  for  e.g., 
shipping, fisheries, protected areas and military purposes. Together, these constraints reduce 
the overall potential from an estimated potential of 30.000 TWh to around 3.500 TWh48 by 2030  
which  still  remains  higher  than  the  total  anticipated  electricity  consumption  in  that  year.  
According  to  the  recent  modelling  exercise  accompanying  the  Climate  Target  Plan  of  the 
European  Commission49,  the  total  electricity  consumption  in  2030  will  range  between  2.726 
TWh and 2.780 TWh, and 3.402 TWh and 3.446 TWh in 2050.   

Geothermal  energy  for  heat  production  can  be  split  in  two  categories:  shallow  geothermal 
energy,  and  deep  geothermal  with  depths  reaching  up  to  a  few  kilometres.  Generally,  the 
temperature  in the  earth’s  crust  increases  with depth  and  as  such geothermal  sources  with 
relatively  low  temperatures  are  available  virtually  everywhere  in  Europe.  For  individual  and 
small scale applications, the depths of geothermal heat exchange range from a few metres to 
more  than  200  meters,  depending  on  the  technology,  the  geological  situation,  the  demand 
profile, and on other design considerations.50  At these depths the temperature of the heat is 
often not high enough to be used directly for space heating and is therefore mostly ‘upgraded’ 
using a geothermal heat pump.  At higher reachable depths, there are only a few regions in 

(2021)  EU  biomass  use 

44 According to the Policy report on Biomass in the EU Green Deal – Towards consensus on sustainable use of biomass for EU 
IEEP,  November  2021,  available  at  https://ieep.eu/uploads/articles/attachments/a14e272d-c8a7-48ab-89bc-
bioenergy, 
31141693c4f6/Biomass%20in%20the%20EU%20Green%20Deal.pdf?v=63804370211 
45  Material  Economics 
content/uploads/2021/06/MATERIAL-ECONOMICS-EU-BIOMASS-USE-IN-A-NET-ZERO-ECONOMY-ONLINE-VERSION.pdf 
46 EEA (2009) Europe’s onshore and offshore wind energy potential, available at https://www.eea.europa.eu/publications/europes-
onshore-and-offshore-wind-energy-potential  
47 Based on the total final energy consumption of 840 Mtoe (9769 TWh) in 2030 projected in the EU Reference scenario 2020.  
48 Ibid. 
49 COM(2020) 562 final – Stepping up Europe’s 2030 climate ambition - Investing in a climate-neutral future for the benefit of our 
people. https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52020DC0562&from=EN  
50 https://publications.jrc.ec.europa.eu/repository/bitstream/JRC123160/jrc123160_online_1.pdf 

in  a  net-zero  economy.  https://www.climate-kic.org/wp-

31 

 
                                                 
Europe  where  the  temperature  gradient  is  steeper  and  high-temperature  sources  exist. 
Geothermal energy sources with higher temperatures, that allow for a combination of electricity 
and heat production also exist, but only in certain specific regions in Europe (Figure 2-2). 

Figure Error! No text of specified style in document.-7 Resource heat map for Geothermal Energy in Europe51 

As  underlined in several  works,  such  as in the  EU  project  Heat  Roadmap Europe or  in the 
2016 EU Heating and Cooling Strategy52, the EU produces more waste heat than the demand 
of  its  entire  building  stock;  despite  this  large  potential,  currently  the  number  of  small-scale 
examples of urban waste heat recovery across the EU is limited. The amount of waste heat 
produced by industries (hot water or flue gases) is sufficient to cover 100% of the EU’s heating 
needs. However, given that industrial sites are often located far from urban areas, only a part 
of this waste heat is available at a reasonable distance from urban centres where it could be 
recovered  in  district  heating.  More  easily  accessible  opportunities  rely  on  the  recovery  and 
reuse of low temperature waste heat from different urban sources such as: the transport sector, 
services  buildings,  sewage  water  networks,  data  centres,  harbours,  rivers,  lakes  and 
seawaters, as was well as electrical substations. However, until now these have been largely 
unexploited. These heat sources are low enthalpy sources (around 20-40°C) and due to the 
proximity to a large number of end-users, they could effectively provide H&C services through 
individual systems as well as DHC networks.  In addition, recovering waste heat also means a 
long-term relationship between heat providers and heat users, which should be considered in 
the frame of increasing efficiency and possibly switching to new industrial processes. 

Based on the above, it can be concluded that the technical potential for these resources will 
not be a constraint for expanding the use of H&C technologies that consume electricity (e.g. 
heat  pumps)  and/or  directly  use  thermal  energy.  The  challenge  lies  in  a  sufficiently  swift 
deployment  of  the  technologies  to  utilize  the  available  potential  as  well  as  the  creation  of 
suitable business models. 

51 ETIP Deep Geothermal (2018) A vision for Deep Geothermal.  
52 COM(2016) 51 final 

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3.2.2. Coordinated planning at the core of H&C decarbonization 

A global framework for planning is already in place in the form of the National Comprehensive 
Assessment  (NCA)  to  establish  the  technical  and  socially  cost-effective  potential  for  high-
efficiency cogeneration (CHP) and efficient district heating and cooling (DHC) under Article 14 
of the Energy Efficiency Directive (EED). An assessment of the potentials to use renewable 
energy as well as waste heat and cold for heating and cooling also exists under Article 15(7) 
of the Renewable Energy Directive (RED) II and this assessment should be art of the NCA 
under the EED. A better integration of these comprehensive assessments with NECPs under 
the  Governance  Framework  has  been  proposed  under  the  ‘Fit  for  55’  package53,  including 
developing these assessments into national heat decarbonisation strategies. The importance 
of  better  coordinating  the  preparation  of  these  comprehensive  heating  and  cooling 
assessments for energy efficiency and renewable energy under the EED and REDII with the 
Long-term Building Renovation Strategies under the EPBD is more and more recognised and 
needs to be pursued further. 

The  coordinated  preparation  of  Long  Term  Renovation  Strategies  (LTRS)  and  H&C 
assessments  would  ensure  that  the  supply  side  of  heating/cooling  (energy  production, 
capacities, technologies and infrastructures) and the demand side of heating/cooling (buildings 
technical H&C systems, building envelopes and enterprises/ factories equipment) are planned 
and developed together. Their integration into the Governance Process would ensure close 
coordination with financing, innovation, skills development, and market framework. 

The  expected  growth  in  demand  for  cooling  in  the  build  environment  should  be  carefully 
planned to ensure that the demand is met by supply based on renewable sources and while 
maximising system efficiencies. A better understanding of measures that can reduce cooling 
demand.  Possibilities  of  passive  cooling54  should  be  exploited  while  improving  the  overall 
energy  performance  of  the  building,  by  making  use  of  active  building  technologies  (active 
shading,  automation  and  control  systems)  should  also  be  considered.  Urban  planning 
measures for climate adaptation at district level through, for example, the implementation of 
programs for heat reduction, or the reduction of glazing in buildings need to be considered.55 

Infrastructure constitutes the backbone for the supply of carbon-neutral energy carriers in the 
H&C sector, except for some specific cases like biomass solids and liquids. Electricity, gas, 
DHC  and  hydrogen  infrastructures  are  closely  linked  to  the  design  of  the  decarbonisation 
pathway  for  the  H&C  sector  and  require  integrated  planning  which  should  ensure  the 
accessibility to infrastructure for all (see also the section on energy system integration). 

Infrastructure planning should facilitate the integration of various energy carriers and arbitrate 
between  the  development  of  new  infrastructure  or  re-purposing  of  existing  ones.  It  should 
consider alternatives to network-based options, including demand-side solutions and storage.  

The various components of the energy network will all need to evolve. Modern low-temperature 
district heating systems could be one of the key heat decarbonisation solutions, as they can 
connect local demand with often local renewable and waste energy sources, as well as the 
wider  electric  and  gas  grid,  contributing  to  the  optimisation  of  supply  and  demand  across 
energy carriers.  

The Regulation on Trans-European Networks in Energy (TEN-E) provides a framework for the 
selection of infrastructure projects of common interest in electricity, gas and CO2 networks. In 
this  context,  currently,  10-Year  Network  Development  Plans  at  national  and  EU  levels  are 
developed in parallel for gas and electricity by Transmission System Operators (TSO).  

53  A set of proposals and regulatory revisions proposed by the European Commission to make the EU’s climate, energy, land 
use, transport and taxation policies fit for reducing net GHG emissions by at least 55% by 2030, compared to 1990 levels.. 

54 Passive cooling refers to using design choices to reduce heat gain and increase heat loss. 

55  Swiss  Federal  Laboratories  for  Materials  Science  and  Technology  (2021)  Raisinf  energy  demand  for  cooling.  Available  at: 
https://www.sciencedaily.com/releases/2021/05/210518205457.htm  

33 

 
                                                 
Future network planning will require a more integrated and cross-sectoral approach, notably 
considering  infrastructure  choices  and  complementarities  between  electricity,  gas  and  DHC 
networks, and factoring in system integration benefits from connecting these networks. It will 
also require full consistency with climate and energy targets, including alignment with National 
Energy  and  Climate  Plans,  an  adequate consideration of all  relevant  actors,  and  should  be 
informed by local conditions.  

Achieving  full  decarbonisation  of  the  sector  requires  both  clear  goals  and  active  policies  to 
support the development of infrastructures for heating and cooling within the individual Member 
States’ own contexts, on the EU level, as well as the local level. Policies for the decarbonisation 
of the H&C should be monitored periodically for compliance and changed or expanded if they 
do not have the desired level of results. A framework for expanding and establishing thermal 
infrastructure when this is the most cost-effective and viable option should be initiated by local 
governments in line with EU and national policies for gas and electricity grids. 

It is key to involve local authorities and players in order to plan the distribution and delivery 
side. This planning should be carried out based on well-defined criteria to be tackled from a 
local perspective. Central coordination remains key in the process to ensure coherence and 
continuity. 

3.2.3. Managing  costs  and  financial  challenges  in  the  transition  to 

decarbonised H&C systems 

Higher  costs,  either  related  to  higher  upfront  (capital)  investment  (for  heating  systems  and 
higher energy performance buildings) or the higher variable costs related to new decarbonised 
energy carrier (e.g. renewable fuels of non-biological origins, such as e-methane) used are a 
key barrier for the deployment of renewable H&C solutions. In some cases, the variable costs 
of using carbon-neutral energy carriers such as renewable electricity are higher than those of 
fossil fuels like natural gas or heating oil, even when correcting for the fact that electric H&C 
solutions like heat pumps lower the overall energy consumption through their higher system 
efficiency. This highlights the need to align the prices of different energy carriers with climate 
objectives, which often involves changes in fiscal regimes and these should take into account 
the external (climate change related) costs that energy carriers incur.  

In  some  cases,  the  total  cost  of  ownership  is  already  more  favourable  for  renewable  H&C 
solutions than their fossil-based counterparts due to high system efficiencies and relatively low 
variable costs, as illustrated in Figure 2-3. However, even in these cases high upfront costs 
and  the  split  incentive56  or  ‘landlord-tenant’  problem  can  be  a  barrier  for  these  renewable 
systems  to  be  deployed.  For  households,  this  barrier  can  be  addressed  to  a  large  extent 
through the provision of financial support, e.g. in the form of subsidies or cheap loans, while 
for the rental sector other policy instruments may be needed. A study by the United Kingdom’s 
National  Energy  Agency57,  focused  on  the  country  estimates  that  depending  on  the  chosen 
decarbonisation pathway, the average costs of heating per household could rise by between 
£200 and £800 per year. This, in turn, could accumulate to a difference in cost between £4.000 
and £16.000 for the first and last households to convert to decarbonised heating over a 20-
year period.  Experience from different projects has shown that help to those unable to pay the 
high  up-front  costs  of  technology  upgrades  is  more  effective  in  the  form  of  up-front  capital 
support rather than ongoing payments. 

56  Split  incentives  describe  a  situation  where  the  flow  of  investments  and  benefits  associated  with  these  investments  are  not 
properly distributed among the parties to a transaction, discouraging investment decisions. 

57 https://www.nea.org.uk/wp-content/uploads/2020/11/Heat-Decarbonisation-Report-2017.pdf 

34 

 
 
 
                                                 
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Figure 2-3 Comparison of costs of individual heating systems in France. ADEME (2020)58 

Figure 2-3 provides a comparison of the cost of differenet heating systems in France. These 
costs may differ from one country to another, as they depend on local/national costs. 

One  of  the  other  important  aspects  of  addressing  the  costs  involved  with  transitioning  to 
renewable/carbon-neutral H&C systems in the built environment is the impact on low-income 
households. In many cases, such households use relatively old fossil-based H&C systems and 
those living in rented buildings are usually not in charge of the maintenance or replacement of 
the heating appliances because it is owned by the building owner. In such cases, increasing 
fossil fuel prices can increase the energy bills of these households, aggravating their financial 
situation,  and  increasing  the  risk  of  energy  poverty;  such  households  also  have  limited 
possibilities for shifting to renewable alternatives. Therefore, to ensure a just transition, it is 
important  that  specific  policies  are  implemented  to  support  the  shift  of  these  low-income 
households to sustainable H&C systems. 

3.2.4. Energy Market frameworks 

The  progressive  increase  of  renewable  and  carbon-neutral  carriers  in  the  energy  system, 
including  in  the  H&C  sector,  will  require  the  re-design  of  electricity  and  gas  markets.  The 
penetration of these energy carriers also implies a higher share of variable renewable energy 
in  the  system  and  will  require  further  energy  system  integration  (discussed  in  the  following 
section) to maximise efficiency and minimise energy losses. Technologies such as CHP link 
electricity and heat and fuel markets on the supply side whereas heat pumps and electrolysers 
can  link the  electricity  and  heat and fuel  markets  on the  demand  side. Thus, the  increased 
integration  across  energy  carriers  should  also  imply  the  need  for  analysis  of  the  energy 
markets based on a coherent understanding of the electricity market, gas and liquid markets 
and  heat  market.  In  this  regard,  recent  studies  have  shown,  through  modelling,  the  price 
influence  of  electricity  and  heating  markets  on  gas  and  liquid  fuel  markets  and  vice  versa.  
Additional research underlines the benefits of a hybrid, multi-energy day-ahead market, which 
would eliminate the need for price forecasting in parallel markets, would allow for the use of 
flexibility from one carrier to balance another, and increase optimality of the market.  

58 Own elaboration based on ADEME (2020), Coûts des énergies renouvelables et de récupération (data 2019). 
https://www.geothermies.fr/sites/default/files/inline-files/ADEME_couts-energies-renouvelables-et-recuperation-donnees-2019-010895.pdf   

35 

 
 
 
                                                 
Heat markets are currently not as developed as electricity markets. One of the difficulties is 
that even though the final users need heat as a final energy service, different types of H&C 
supply  systems  operate in  completely  different  markets  due  to  the  different  energy  carriers 
used. Consequently, it is very complex for consumers to easily compare different H&C options 
with one another. Heat purchase agreements (HPAs) can be an important tool to support the 
creation of heat markets. Unsurprisingly, heat purchase agreements are currently used much 
less  frequently  than  power  purchase  agreements  (PPAs).  Although  supplies  of  heat  (or 
cooling) are similar in many respects to other utility type supplies, in heat networks there is a 
key difference, namely that the customer’s use of the energy supplied has a significant effect 
on  the  overall  operational  efficiency  of  the  network.  This  is  reflected  in  how  heat  purchase 
agreements and their tariffs are structured.  Recently, innovative examples to incentivise heat 
markets  have  been  developed.  For  example,  a  recent  study  shows  that  a  business  model 
based on heat purchase agreements could be used to lower the barriers to heat pump adoption 
associated with their high upfront costs. The study is the first to consider economic analysis of 
heat purchase agreements as a third-party ownership model for electric heat pumps.  Such 
new  business  models  for  efficient  heat  pumps  significantly  reduces  or  even  eliminates 
(depending  on  the  scheme  design)  the  user’s  initial  cost.  If  appropriately  designed,  the 
business  model  could  also  include  provisions  enabling  the  access  to  wholesale  electricity 
markets and services, decreasing the fuel-costs (or adding some revenues), and facilitating 
the  integration  of  renewable  generation  into  the  power  system.  Bristol  Energy  developed  a 
scheme  combining  a  renewable  heat  purchase  agreement  and  a  “heat  as  a  service” 
instrument.  Combining  the  purchase  agreement  with  a  “heat  as  a  service”  was  shown  to 
increase the attractiveness of renewable heat for consumers by up to 85%. Consumers are 
more  willing  to  switch  to  renewables  when  the  provider  can  guarantee  the  desired  level  of 
comfort for a predetermined price acceptable to the consumers.    

Competitive markets should ensure a level playing field across all energy carriers, considering 
direct  and  indirect  incentives  and  disincentives,  among  which  energy  taxes  are  key 
determinant. Energy taxes account for a significant share of the final prices of energy and vary 
across  consumers  (industry  vs.  households),  energy  products  (e.g.  electricity  vs.  gas)  and 
across Member States. For households, they accounted for an average of 40% of the electricity 
price, 25% of the gas price, and 31% of the heating oil price in 2017. Electricity, gas, and oil 
products are taxed at very different rates across Member States, which does not necessarily 
reflect  the  energy  content  (which  was  one  of  the  recommendations  of  the  Energy  Taxation 
Directive) and are not adapted to the decarbonisation goals of the complete energy system. 
The current taxation framework provides indirect incentives to fossil fuels’ use in the form of 
tax benefits. A large share of these tax benefits comes from tax reductions for fossil fuels used 
as heating fuels granted mainly under the Energy Taxation Directive, which is currently being 
revised through the ‘Fit for 55’ package. 

3.2.5. Consumers’ choice  

Public acceptance is key for achieving climate neutrality as decarbonisation policies directly 
and indirectly affect our way of life. Therefore, the way consumers are making their choices is 
of paramount importance. Cost remains the main decision factor for most consumers when it 
comes to upgrading their heating system. In this light, it is key that the situation where fossil 
fuel  prices  increase  due  to  policy  while  building  owners  do  not  have  the  (financial,  legal  or 
technical) possibility to switch to low-emission alternatives, needs to be avoided. Therefore, it 
is important that policies aimed at levelising the playing field of fossil and renewable energy 
carriers (e.g. reforms of taxes and levies) are complemented with policies aimed at removing 
the barriers for switching to renewable H&C systems. 

Consumer  choice  is  also  directly  linked  to  behaviors  (e.g.  how  a  building  occupier  uses  its 
appiances)  and  cultural  dimensions  (e.g.  the  way  people  would  perceive  and  establish 
relationship  with  the  use  of  biomass  for  energy  purposes)  which  are  key  to  consider  when 
setting  up  appropriate  policy  packages.  However,  this  study/roadmap  is  more  focused  on 
‘hardware’ components of the decarbonisation of H&C; soft aspects are beyond its scope. 

36 

 
 
 
EUROPEAN COMMISSION 

3.3. Energy System Integration building blocks 

Sector integration and smart operation of electric heating systems, combined and integrated 
with  thermal  storage,  as  well  as  local  renewable  power  generation  and  storage  and  smart 
integration of EV charging and storage capacity, will be key to ensure energy efficiency and 
demand-side flexibility. This in turn will increase grid stability and reduce the investment needs 
for grid reinforcements. 

The  evolution  of  the  European  energy  mix  towards  a  more  intermittent  and  decentralised 
electricity  mix  requires  the  transformation  of  the  energy  system,  production,  end-uses,  and 
infrastructure, to adapt to the challenges at the lowest possible cost. A triple transformation will 
be required on the production side (providing flexible and dispatchable energy production and 
storage capacities), at the demand side (absorbing the electricity production when available, 
by  means  of  electrification  and  demand flexibility),  and  at  the  infrastructure  side  (balancing 
production and demand, at all times, from milliseconds to longer timescales, e.g. the coldest 
wave  happening  twice  a  century).  A  move  towards  electrification  requires  an  increase  in 
renewable electricity generation capacity, which should ideally be based on the additionality 
principle59. It also carries a risk of black-out (if demand is greater than the system capacity) and 
the  risk  of  over-reinforcing  the  electricity  grid  to  cover  peak  demand  if  the  pace  of  flexible 
solutions deployment is slower than the pace of electrification. This would lead to inefficient  
investments in infrastructure with very low utilisation rates (when demand decreases and/or 
flexibility increases). 

System coupling at production and consumption levels helps mitigate these risks. Flexibility is 
provided  at  the  production  level,by  means  of  Power-to-Gas    (efficient  solution  for  seasonal 
storage)  and  Thermal  Energy  Storage.  At  the  consumption  level,  flexibility  is  provided  by 
demand response, but also by hybrid heating solutions, such as hybrid heat pumps, enabling 
switching from electricity to gas according to the constraints existing on the electricity system, 
whatever the duration required.  

The combination of electrification via hybridisation and thermal renovation can lead to a strong 
reduction of gas demand in buildings if properly planned, which could possibly represent only 
a small fraction of the current gas consumption in 2050. This would of course depend on the 
biogas  (and  electricity-based  gases)  potential  at  local  and  global  levels.  The  near  100% 
building flexibility brought by hybrid systems could still be of use in a fully decarbonised society, 
to  respond  to  production  intermittency,  and  to  ensure  system  resilience.  However,  its  cost 
effectiveness should be assessed using local parameters. 

Also,  building  automation  and  control  systems  (BACS)  in  all  building  sizes,  when 
mainstreamed in buildings, would leverage the potential for energy savings, and the capacity 
of buildings to provide smart and flexible solutions to the energy system by optimising sector 
integration. BACS ensure that the whole building works at the highest level of energy efficiency, 
monitors  and  provides  feedback  encouraging  occupants  to  use  less  energy,  manages  load 
shifting and storage capacity of a building to optimize on-site renewable self-consumption and 
to  increase  grid  stability  and  ensure  that  equipment  only  operates  when,  where  and  to  the 
extent that is actually required. The remainder of this section addresses three main pillars of 
energy system integration, or system coupling:  

  Direct electrification, especially via heat pumps; 

  Renewable fuels of biological origin, in the form of solid, gaseous (to replace natural 

gas) and liquid (to replace heating oil e.g.) fuels; 

59 Additionality could be defined as the requirement that renewables-based electricity used in electrolysers for the production of 
renewable hydrogen is additional to the renewables-based electricity, which is used to meet the renewable penetration target with 
respect to final electricity consumption. 

37 

 
                                                 
  Renewable fuels of non biological origin (RFNBOs), such as renewable hydrogen 
produced with renewable electricity, and its derived products like  e-gases60 or e-
liquids61 ; 

3.3.1. Direct electrification of heating systems 

The direct use of electricity in heat pumps and power-to-heat systems is bound to grow strongly 
in the coming decades along with electrification solutions in other sectors such as transport 
due to the increasingly competitive prices of renewable electricity production (solar and wind). 
According to the 1.5TECH and 1.5LIFE scenarios of the EU Long-Term Strategy (LTS) as we 
approach climate neutrality by 2050, electricity demand is will increase significantly, with the 
share in total final energy consumption growing from 23% today to 30% in 2030, and 50% by 
2050. 

Heat pumps are a central technology when it comes to the electrification of heat supply. Since 
heat pumps do not generate heat from electricity, but rather transfer ambient and geothermal 
energy from the environment, these systems are highly energy efficient. As such, deployment 
of heat pumps does not only facilitate higher renewable electricity use but it can also greatly 
enhance end-use energy efficiency. Heat pump technologies can extract heat from  different 
sources: air source, ground source, water source, waste heat. Each of them has their merits 
and  advantages  and  disadvantages.  Heat  pumps  are  most  efficient  when  the  temperature 
difference between the heat source (from where the heat is transferred) and heat sink (where 
to the heat is transferred) is not too high and as such the largest potential for this technology 
lies  in  the  built  environment,  although they  can  also  be  used for  low-temperature  industrial 
applications.  

One of the challenges with large-scale heat pump (e.g. for DHC) deployment is the impact that 
these systems can have on electricity infrastructure. However, this impact would also happen 
with large-scale deployment of small individual heat pumps. Heat demand is typically much 
larger than the common electricity demand in buildings (except in the case of a very efficient 
building),  and  as  such  electricity  distribution  grids  may  face  challenges  in  providing  peak 
capacity when high heat pump penetrations in neighbourhoods occur, depending on the local 
grid. Also, large-scale deployment of heat pumps and other electric heating technologies can 
strongly  increase  electricity  peak  demand,  especially  in  wintertime.  Therefore,  to  limit  the 
amount  of  peak  electricity  generation  capacity  and  transmission  and  distribution  capacity, 
smart operation of electric heating systems integrated with thermal and other energy storage 
solutions will be key to ensure energy efficiency and system cost efficiency, and to deferring 
avoiding  electricity  network  upgrades.  This  requires  heat  and  infrastructure  planning  to  be 
coordinated with electricity planning, but also planning building performance improvements via 
renovation programmes and related policies (cf. section 2.2.2 on coordinated planning).  

Today,  small-scale  electricity  consumers,  such  as  households  and  SMEs  are  not 
systematically  incentivised  to  adjust  their  consumption  patterns  to  the  developments  in  the 
electricity market. In order to protect consumers, the balancing responsibilities relating to the 
electricity  use  of  small  consumers  are  borne  by  suppliers.  Even  though  full  exposure  of 
consumers  to  realistic  electricity  prices  is  not  desirable,  as  many  consumers  will  not  have 
sufficient  knowledge  nor  the  willingness  to  actively  operate  on  the  electricity  market,  the 
possibility for consumers to benefit from providing flexibility could be a valuable way forward. 
A  Smart  Readiness  Indicator    could  facilitate  consumers  in  providing  flexibility.  Likely,  the 
flexible management of electric loads in the residential and small-consumer sphere could be 
taken  up  by  energy  service  companies  (ESCOs)  and/or  aggregators.  In  such  cases,  the 
company  would  provide  heat  to  its  customers  through  the  operation  of  a  smart  heat  pump 
reacting  to  price  signals,  while  the  collective  management  and  operation  of  a  pool  of  heat 

60 E.g. synthetic methane 
61 E.g. liquefied hydrogen, ammonia, methanol, liquid organic hydrogen carrier (LOHC), or Fischer Tropsch e-kerosene, e-diesel, 
e-gasoline 

38 

 
 
 
                                                 
EUROPEAN COMMISSION 

pumps  would  ensure  they  are  operated  efficiently  and  cheaply,  which  could  bring  financial 
benefits to consumers.  

In industrial and DH applications, large-scale electric boilers can be deployed in times of high 
renewable electricity supply (low prices) and especially when combined with high-temperature 
heat  storage  technologies,  such  systems  can  make  a  significant  contribution  to  the 
decarbonisation  of  industrial  and  DH  demand.  To  make  optimal  use  of  such  solutions,  it  is 
important that companies that apply them are also remunerated for the benefits they bring to 
system flexibility and stability. 

For all electric H&C systems, a sufficiently high renewable or carbon-neutral electricity share 
is a prerequisite to ensure the GHG emission benefits of deploying these systems. As such, 
strategies  focused  on  electrification  should  always  ensure  sufficient  growth  in  renewable 
electricity supply takes place simultaneously. 

3.3.2. Renewable fuels of biological origin 

Bioenergy is an important renewable energy source in Europe, currently representing almost 
84% of the total renewable energy consumed, and ~80% in the H&C sector.62 In several EU 
Member States, bioenergy is a prominent energy source for heating in the built environment 
as well as in some industrial applications. In Scandinavia, the Baltics, Portugal, Greece and 
Austria,  biobased  energy  carriers  cover  a  significant  part  of  the  final  energy  demand  in 
households  and  the  tertiary  sector.63  In  many  cases  this  involves  the  use  of  (fuel)wood  in 
conventional wood stoves or the use of wood pellets. Next to solid biofuels (wood), gaseous 
biofuels can also play an important role in the decarbonisation of heating. Lastly, even though 
a rather expensive solution , liquid biofuels can be used to decarbonise heating using oil-fired 
boilers, but possibly in a limited number of cases .  

Biomass energy sources come from agriculture (e.g. crops and by-products), organic waste 
streams  (e.g.  from  households,  economic  activities  and  industry)  and  forestry  by-products. 
Agricultural biomass is expected to have a prominent role in the future energy mix in European 
and international scenarios, and aquacultural biomass is also receiving increasing interest in 
R&D even though the costs of this resource are still inhibitively high. 

Even though biomass is a versatile energy source, easily storable, flexible in its use, it is also 
associated with significant sustainability concerns. When improperly sourced, the production 
of biomass for energy purposes can contribute to biodiversity loss through (indirect) land use 
change  and  improper  use  of  forest  biomass  can  also  have  a  negative  impact  on  climate 
change.    Therefore,  sustainable  biomass  sourcing  is  an  essential  element  for  bioenergy  to 
make a valuable contribution to Europe’s climate and environmental objectives.  Consequently, 
small-scale  bioenergy  use  based  on  local/regional  resources  seems  to  be  one  of  the  most 
promising ways forward, as trade-offs between bioenergy benefits and negative biodiversity, 
land-use  change  and  other  environmental  impacts  tend  to  increase  with  the  scale  at  which 
bioenergy  is  deployed.    Next  to  sustainability  concerns  related  to  biomass  resourcing, 
bioenergy  installations  in  populated  areas,  if  not  properly  managed,  especially  small-scale 
systems  and  households,  can  negatively  impact  human  health  through  air  pollution.  To 
conclude, the  expectation  of  using  biomass  to  produce  energy  should  not  be  considered  in 
isolation, but should take into account the entire EU and even global bio-economy and use of 
the resource, limiting to what is strictly available and sustainable. 

Heating of buildings using solid biomass is often done using conventional inefficient fire stoves, 
although, as for any other technology, the performance of individual stoves and boilers has 
progressed  noticeably  over  the  last  years/decades.  Due  to  the  large  number  of  inefficient 
systems remaining, a significant share of the heat that is produced is lost to the environment. 

62 Bioenergy Europe (2021) Bioheat: a future-proof solution to achieve the Fit for 55 objectives.  
63 EUROSTAT (2021) Complete energy balances.  

39 

 
 
                                                 
This  means  that  replacement  of  such  equipment  with  new  efficient  systems  and  modern 
bioheat installations can free-up significant volumes of existing biomass consumption for the 
heating of additional buildings, even without increasing the total volume of biomass consumed.  
Simultaneously,  the  replacement  of  old  equipment  with  new  systems  can  reduce  other 
negative environmental impacts, such as the emission of fine particles, carbon monoxide and 
black carbon. 

On top of large-scale systems (for industry and district heating), individual heating solutions 
will remain important in areas where connection to the grid is difficult and district heating is not 
available or complicated to deploy. It will also offer an option for backup used in combination 
with other renewables such as solar thermal taking full advantage of the synergies offered by 
hybrid systems, providing  flexibility, and allowing to choose the most suitable set up for the 
heat needs. 

Biobased gases can to a limited extent be used to substitute the existing use of natural gas for 
heating via boilers or CHP (and as feedstock). Biogas is produced mainly through anaerobic 
digestion of plant by-products (e.g. from harvesting or garden activities), animal by-products 
(mostly manure), biowaste from households, industrial & commercial organic waste, sewage 
sludge (the organic matter obtained from waste water), or energy crops. Biogas is a mixture of 
methane  (CH4),  carbon  dioxide  (CO2)  and  small  quantities  of  other  gases.  The  methane 
content of biogas typically ranges from 50% to 70% by volume.64 Mostly, the gas is used on-
site  either  in  CHP  installations  or  in  gas  boilers.  Another,  increasingly  relevant  option  is  to 
purify the methane from the biogas to obtain biomethane in a process called upgrading. This 
biomethane  can  then  be  transported  though  the  natural  gas  network  and  be  used  in 
conventional  gas-fired  boilers, furnaces  or  CHP installations. The  production  of  biogas  also 
allows the production of high value fertilisers (digestate) that could theoretically replace mineral 
fertilisers (which are energy intensive). 

One of the places where bioenergy can provide a solution for decarbonising the heat supply is 
in district heating. In such systems, the fossil-based heat source can be replaced by a CHP or 
boiler  using  biogas  or  biomethane  or  even  syngas  derived  from  the  gasification  of  solid 
biomass. However, due to the above mentioned constraints to the availability of sustainable 
biomass,  biogas  should  ideally  mainly  be  used  in  combination  with  other  renewable  heat 
sources in DHC. Also, large scale use of bioenergy in DHC raises concerns of sustainability 
and  availability  as  mentioned  previously  and  therefore  stresses  the  importance  to  diversify 
away from large scale. A more efficient use of the limited resources comes also with increased 
boiler’s efficiency. In some MS, public acceptance with the use of large bioenergy boilers in 
DH decreases due to sustainability considerations. 

Some  studies  have  made  scenarios  for  very  strong  upscaling  of  biogas  and  biomethane 
production,  but those need to be backstopped by national or even local potential assessment, 
as the available feedstock can be complex to assess. Therefore, it is important to note that the 
potential for biogas/biomethane production in Europe will be largely insufficient to completely 
substitute  the  existing  natural  gas  demand for  heating.  This  means  that  a  large  part  of  the 
existing stock of natural gas-fired heating equipment will need to be replaced by non-gas based 
systems (see section on fossil fuels phasing out). Renovations aimed at improving the energy 
performance of buildings can reduce the energy demand per building and as such increase 
the number of buildings that can use biomethane for heating.  

The advantage of biomethane is that due to the fact that it has a very similar composition to 
natural gas, its transport does not require adjustments to the gas networks. However, due to a 
temporal  mismatch  between  biomethane  production  and  gas  demand  the  limited  storage 
capacity of distribution grids currently forms a barrier for biomethane injection (especially in 
summertime).  Investments  in  gas  distribution  grids  are  therefore  needed  in  some  areas  to 
facilitate higher biomethane injection levels and bi-directional gas flows (e.g. allowing gas to 
go from the distribution to the transmission level). 

IRENA 

64 
Technology 
/media/files/irena/agency/publication/2017/mar/irena_biogas_for_road_vehicles_2017.pdf  

vehicles 

Biogas 

(2018) 

road 

for 

– 

brief. 

https://www.irena.org/-

40 

 
 
                                                 
EUROPEAN COMMISSION 

3.3.3. Renewable fuels of non-biological origin 

During the last few years, the attention in the renewable energy debates broadened from a 
focus  on  renewable  electricity  to  a  wider  range  of  renewable  energy  carriers,  where  the 
importance of “green molecules” has been emphasised by many players. Within this debate, 
there is a growing support for the idea that renewable (and carbon-neutral) hydrogen and its 
derived synthetic fuels/E-fuels will play a substantial role in the future energy system. Even 
though a role of these renewable fuels of non-biological origin (RFNBOs) will undoubtedly have 
a  place  in  the  transition  to  an  emission-free  energy  system,  an  important  (and  still 
controversial)  issue  is the  role that  these  energy  carriers  will  play  in the  decarbonisation of 
heating and cooling, especially in the building sector. 

RFNBOs are mostly produced from hydrogen, which can be obtained through different routes. 
Acknowledging  the  importance  of  hydrogen  in  the  EU’s  energy  transition,  the  European 
Commission  published  its  hydrogen  strategy  in  202065,  which  distinguishes  three  different 
forms of hydrogen other than the common fossil based “grey” hydrogen, namely:  

  Electricity-based hydrogen’ refers to hydrogen produced through the electrolysis of 
water  (in  an  electrolyser,  powered  by  electricity),  regardless  of  the  electricity 
source. The full life-cycle greenhouse gas emissions of the production depend on 
the electricity mix;  

 

 

‘Renewable  hydrogen’  is  produced  through  the  electrolysis  of  water  (in  an 
electrolyser  powered  by  renewable  electricity),  or  from  biogenic  sources  (in  that 
case it’s not a RFNBO) 

‘Fossil-based hydrogen with carbon capture’ often referred to as blue hydrogen is 
a subpart of fossil-based hydrogen, but where greenhouse gases generated as part 
of  the  hydrogen  production  process  are  captured.  The  GHG  emissions  of  the 
production of fossil-based hydrogen with carbon capture or pyrolysis are lower than 
for fossil-fuel based hydrogen; 

In the short term, the main challenge for large scale use of renewable hydrogen is its high cost, 
which  are  mostly  due  to  high  electricity  prices  and  electrolyser  costs.  Therefore,  several 
countries and private stakeholders see fossil-based hydrogen with carbon capture and storage 
as an important stepping stone to kickstart hydrogen market development. The rate at which 
the costs for renewable hydrogen production will come down will depend strongly on the pace 
at which renewable electricity generation capacity will grow and the impact this will have on 
electricity prices. Furthermore, it will also depend on the rate at which water electrolysers for 
hydrogen production will be deployed in the coming years, which will determine the pace of 
technology development and as a consequence the costs of the technology. In the meantime, 
many EU countries have announced hydrogen-related plans as part of their energy and climate 
policies and the global pipeline of hydrogen projects that are planned between now and 2030 
amounts to a total investment value of US$ 500 billion, where Europe leads with a planned 
investment of US$ 130 billion (€ 111 billion). Within this pipeline, 359 large-scale projects were 
announced during the first half of 2021.66 

Hydrogen is a versatile energy carrier and can be used in a wide variety of applications and 
sectors. In the short and medium term, hydrogen is expected to play an especially important 
role in the decarbonisation of energy-intensive industries, particularly in the fertilizers sector 
and in steelmaking, but also in heavy-duty transport applications as well as maritime transport 

COM(2020) 

65 
final 
https://ec.europa.eu/energy/sites/ener/files/hydrogen_strategy.pdf  
66 Hydrogen Council (2021) Hydrogen investment pipeline grows to $500 billion in response to government commitments to deep 
decarbonisation. https://hydrogencouncil.com/en/hydrogen-insights-updates-july2021/ Last retrieved: 17-12-2021 

climate-neutral 

hydrogen 

strategy 

Europe 

301 

for 

A 

– 

a 

- 

41 

 
 
                                                 
and aviation. Hydrogen can also be used for heating (in gas-fired boilers) but for the time being 
this seems to be a costly solution and because of this several societal groups have spoken out 
against  this  solution.  While  the  European  Commission  Hydrogen  Strategy67  recognises  the 
potential  of  hydrogen  in  residential  and  commercial  buildings,  notably  via  local  hydrogen 
clusters  (or  hydrogen  valleys),  the  European  Commission  for  Energy  System  Integration 
Strategy68 states that hydrogen is best used in hard-to-decarbonise sectors, where there are 
no other solutions, such as the aviation and maritime sectors. On the one hand, this has to do 
with  the  availability  of  rather  efficient  alternatives  (e.g.  heat  pumps)  and  the  high  costs  of 
hydrogen  (especially  on  the  short  and  mid-term).  In  the  long-term  the  attractiveness  of  the 
direct  use  of  hydrogen  for  heating  in  the  built  environment  will  depend  strongly  on  price 
developments, which are also linked to the availability of cheap hydrogen imports from other 
parts  of  the  world.  The  cost  estimates  of  renewable  and  decarbonised  fuels  show  different 
ranges,  with  important  organisations  foreseeing  a  quick  downward  development.  Several 
ongoing projects demonstrate that the deployment of hydrogen in heating applications could 
be an option and that some initiatives could be replicated. 

For  countries  with  substantial  natural  gas  consumption  and  expansive  natural  gas 
infrastructure, hydrogen is often seen as an opportunity to sustain the use of these assets. In 
some cases, large gas storage facilities also offer opportunities for seasonal energy storage in 
the form of hydrogen. Even though the use of existing gas infrastructure (after conversion) for 
the transport, distribution and storage of hydrogen can be an attractive element of the future 
energy  system  in  some  EU  Member  States,  this  still  does  not  mean  that  hydrogen  could 
substitute  all  existing  natural  gas  demand.  Some  studies  also  showed  that  despite  the 
associated energy losses, hydrogen can be an attractive long-term energy storage medium, 
and possibly regenerate power, even in winter depending on the needs. 

67 COM(2020) 301 final - A hydrogen strategy for a climate-neutral Europe –  
68  COM(2020)  299  final  –  Powering  a  climate-neutral  economy:  An  EU  Strategy  for  Energy  System  Integration  -  https://eur-
lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52020DC0299&from=EN  

42 

 
 
 
 
                                                 
EUROPEAN COMMISSION 

4. H&C decarbonisation roadmap 

4.1. Barriers hampering H&C decarbonisation 

Renewable and energy efficient H&C faces multiple barriers to compete with established H&C 
technologies  and  practices.  Barriers  can  be  divided  into  policy,  economic/market,  financial, 
capacity,  technical,  administrative,  and  regulatory  categories.  These  sets  of  barriers  are 
important and often interact thereby hindering consumers and industrial players in opting for 
renewable H&C solutions and energy efficiency investments. 

When  setting  up  policy  responses,  these  barriers  should  be  addressed  in  a  coherent  way, 
ensuring they do not jeopardise a complete long-term decarbonisation via lock-ins, avoid the 
duplication of efforts and prevent that the removal of one barrier worsens another. 

Policy barriers correspond to those overarching barriers related to the lack of a clear H&C 
decarbonisation vision and concrete objectives and incentives. Those are mainly addressed 
by establishing appropriate planning in a coordinated and integrated way and based on specific 
pathways. The lack of a vision can be caused by the uncertainties surrounding the future role 
of different fuels and technologies, the need for new or repurposed infrastructure, the evolution 
of the demand impacting the supply side (e.g. energy efficiency in buildings and industry), the 
weak  understanding  of  the  interactions  between  all  energy  system  components  (incl. 
infrastructure), or the availability of carbon-neutral heat sources. 

Among the market barriers, renewable heating and cooling systems are generally not as cost-
competitive as fossil fuel-based systems, even though their total cost of ownership (TCO) is 
often lower. This lack of level playing field is often due to failure of the market to internalise 
external costs, and the low cost of fossil-based fuels, which are delivered via fully amortised 
infrastructures (e.g. gas) and mass produced technologies with decades long cost reduction 
and direct and indirect price subsidies (still ongoing in many cases). Ensuring a level playing 
field for renewable H&C technologies and solutions thus cannot be seen in isolation from the 
regulatory and fiscal frameworks (across EU, natural gas is the main incumbent heating fuel 
in both industry and buildings). In some cases, renewable and carbon-neutral H&C options are 
already competitive with the incumbent technologies, but are still rarely deployed due to high 
upfront investment needs, higher cost of capital given the higher risk perception, opportunity 
cost due to availability of investment opportunities with higher returns, the reduced certainty 
over  long-term  profitability  of  renewable  solutions  compared  to  fossil  heating,  the  lack  of 
access  to  affordable  finance  (especially  for  low-income  households),  or  lack  of  qualified 
companies and workers with the right capacity and expertise to install and operate renewable 
H&C  technologies.  In  the  early  stage  of  market  growth,  developing  supply  chains  and  new 
infrastructure can lead to higher system costs (e.g. district heating deployment costs); these 
costs have already been paid for and amortised for fossil fuels (e.g. gas). 

Financial barriers are closely linked to market barriers, but should be addressed separately 
and  with  a  dedicated  focus.  Financial  bottlenecks  can  be  linked  to  incoherent  incentive 
schemes  and  unsecure  conditions  for  investors  due  to  regular  changes  (lack  of  a  global 
decarbonisation  strategy),  to  split  incentives  in  the  rented  sector  (building  owners  are 
supposed to invest, but  the tenant benefits in bill savings), or the lack of economies of scale 
resulting in higher transaction costs. 

Capacity barriers encompass a broad set of “capacities”, such as awareness, knowledge and 
understanding of policymakers, technical and economic skills of installers, planners, architects, 
construction workers and operators. These barriers mainly concern the lack of awareness due 
to irrelevant or difficult to find information (e.g. uncertainties concerning the best point in time 
for  changing  heating  technologies,  or  established,  well-developed  supply  chains  for 
mainstream,  often  fossil-based  H&C  technologies,  hinder  the  development  of  emerging 
solutions and technologies) or due to behaviours or consumer preferences (e.g. lack of interest 
of households, heating system installers, construction players, policymakers, building owners 
and lenders). They are also linked to the lack of confidence in renewable heating, making it 

43 

 
harder for the consumer to choose (e.g. perception of renewable systems as inferior in terms 
of  user  comfort,  exacerbated  by  failures  of  previous  poorly  designed/installed  systems, 
uncertainties  concerning  reliability  of  technologies  or  noise,  lack  of  adequate  product 
standards  and  clear  information  promoting  efficient  systems)  or  in  DHC  (e.g.  limitation  of 
freedom to choose technology for heating and cooling in own property, limited transparency, 
DHC  construction  leads  to  disturbance).  The  lack  of  trained  installers  and  workforce  for 
design/specification, manufacturing, installation and O&M (requiring higher expertise) are also 
important  barriers.  The  lack  of  heat  data  at  end-use  installation  level  to  select  the  most 
adequate  option  and  on  the  local  level  to  support  H&C  decarbonisation  planning  and 
technological choices on a larger scale also count as important barriers. Finally, the lack of 
capacity  and  knowledge  of  local  players,  especially  authorities,  may  jeopardise  integrated 
planning and engagement of the concerned actors. 

Technical barriers encompass infrastructure barriers, local constraints, building conditions, 
process requirements. In buildings, e.g., not all renewable H&C options may be suitable due 
to technical constraints (e.g. underfloor heating or heat pumps require low heating needs given 
the  low  temperature  operation,  biomass  fuel  storage  requires  space,  Photovoltaic  (PV)  on 
roofs  requires  space  and  orientation),  low  energy  efficiency  in  building  results  in  reducing 
system  efficiency,  limited  space  in  densely  populated  areas  (a  challenge  to  install  ground 
source  heat  pumps,  solar  thermal  collectors,  store  bio-energy,  or  install  renewable  heat 
generation for DHC). Users may be discouraged from undertaking deep renovations in their 
dwellings because of the disruptions associated with it, reducing the window of opportunity for 
undertaking  the  renovation.  Biomass,  which  is  often  the  most  convenient  or  even  the  only 
renewable source (gaseous or solid), may face sustainability and availability constraints and 
growing public acceptance issues (see section 2.2.1 and 2.3.2). Additional electricity demand 
may  require  reinforcement  of  the  electricity  network  at  both  the  distribution  and  the 
transmission  levels.  Energy  system  integration,  and  especially  electrification  (e.g.  in  some 
industrial processes, electrification technologies may remain immature) is still at its infancy, 
with limited view on the consequences on the system (e.g. network constraints). 

The relative importance of the aforementioned barriers varies between countries, sectors and 
specific renewable H&C applications. Some of these barriers may become hard constraints 
and will influence the choice of H&C decarbonisation pathway, by focusing on some renewable 
options  while  avoiding  others.  Strategic  heating  and  cooling  decarbonisation  planning  is 
essential to adequately identify and overcome the existing barriers in the sector. 

4.2.   Key policy approaches addressing the barriers 

The lack of a clear H&C decarbonisation vision, specific goals and strategy can be addressed 
by establishing integrated H&C planning. Depending on the progress made by an authority, 
and  on  the  existing  framework,  such  H&C  planning  may  require  dedicating  considerable 
resources (knowledge, expertise and data , etc.) and time. 

Even  before  completing  the  strategis  planning  process,  which  can  be  iterative,  several 
measures can be taken without delay to continue and even strengthen existing policies, to get 
prepared  for  a  long-term  H&C  decarbonisation  process,  and  to  source  investment.  Some 
barriers can be addressed without awaiting for the complete long-term vision and plan to be 
ready for implementation. The following recommendations focus on the most immediate policy 
measures and are no-regret options, paying attention to the risk of lock-in effect, and the need 
to carefully avoid taking an inadequate direction to reach carbon neutrality by 2050. 

NOTE:  all  these  policy  measures  are  examples  of  good  practices,  they  do  not  constitute  a 
comprehensive  set  of  options  guaranteeing  a  smooth  and  affordable  decarbonisation.  A 
tailored and adapted selection is required to complement existing policy frameworks. 

44 

 
 
 
 
EUROPEAN COMMISSION 

4.2.1. Addressing policy barriers 

Immediate  policy  actions  should  ideally  be  designed  in  consideration  of  the  following  main 
principles: 

  The  building  sector,  to  overcome  all  (non-price)  barriers  to  renovation  and 
decarbonisation,  and  to  reach  targeted  groups  (owners/landlords,  tenants,  low-
income  households),  requires  a  comprehensive  and  integrated  package  of 
regulation and support measures at EU, national and local levels. All are related 
and should operate in synergy to achieve the common goal; 

  Stability is essential for a vision to materialise, to secure investments and long-term 
developments. Changing the ambition, the direction and associated measures too 
often compromises the final goal and creates stop and go; 

 

Important  measures  may  require  long  lead  times  from  announcement  to 
enforcement, and additional time for mass market results; 

  Making  the  right  infrastructure  choices  is  important.  There  should  be  an 
assessment of where the most effort and invesment should be based: on electricity, 
district heating, or alternative and gas infrastructures.  

  Keeping  the  existing  infrastructure  as  a  backbone  may  not  always  be  the  best 
option,  leading  to  lock-in  effect;  therefore  thinking  beyond  existing  infrastructure 
should start as soon as possible: 

o  Regarding the gas infrastructure, it is reasonable to stop further expansion 
of gas grids to avoid useless infrastructure and possibly stranded assets as 
alternatives to gas-fuelled systems exist (e.g. heat pumps, solid or liquids 
bioenergy  heaters,  …)  and  the  potential  for  renewable  gas  is  likely  to  be 
already  lower  than  the  existing  natural  gas  demand.  Secondly,  where 
alternatives  are  available,  affordable,  and  can  easily  be  deployed  (e.g. 
electricity  network  with  enough  capacity  to  cover  the  peak  need  of  large 
heat  pump  deployment,  or  when  DHC  can  be  deployed),  it  should  be 
considered  that  some  parts  of  the  gas  network  may  be  dismantled. 
Furthermore,  in specific cases,  retrofitting gas  to  hydrogen  pipelines may 
be considered, especially when it comes to industrial gas networks.  

o  Regarding  electricity  infrastructure,  in  addition  to  the  electricity  grid  and 
market challenges (e.g. deploying flexible assets, decentralised renewable 
production,  …),  a massive  deployment  of  heat  pumps  should  not  lead to 
heavy and costly grid reinforcement if alternatives are available that lead to 
a  lower  overall  system  cost,  and  can  easily  be  deployed  (e.g.  enough 
resources to produce biomethane, or synthetic natural gas being produced 
at an affordable cost). 

  A  progressive  fossil  fuel  phase  out  should  be  in  focus,  even  via  differentiated 
approaches (e.g. focus on certain sources first, on certain buildings segments or 
on certain districts); 

  Distributional  impacts  should  be  addressed  through  public  funding  of  building 
renovation  and  renewable  and  carbon  neutral  H&C  system  installation  amongst 
households that face energy poverty, low-income and vulnerable households; 

These main principles of H&C decarbonisation could be embedded in a legal framework, such 
as in a Heat Act, Climate Act, Renovation Pact, or equivalent, with the aim of: achieving GHG 
targets; internalising externalities; fixing rules for the use of renewable resources to segment 
markets; recognising adequate technologies; emphasising the need for further RD&I; engaging 
all decision levels in a coordinated planning; ensuring the appropriate mainstreaming of energy 
infrastructure planning in the concerned legal framework; recalling the urgent need to stop any 

45 

 
kind of fossil subsidy; and/or mainstreaming digitalisation in the decarbonisation of H&C. Some 
best practices include: 

  Climate Agreement (Netherlands) - Ministerie van Economische Zaken en Klimaat 

2019; 

  French  strategy  for  energy  and  climate  -  Ministère  de  la  transition  écologique  et 

solidaire 2018 ; 

Defining clear targets and objectives for decarbonising the H&C sector and for the deployment 
of  renewable  H&C  is  of  critical  importance  in  any  legal  framework  or  decarbonisation  plan. 
Equally important is the putting in place of measures to reach those objectives and targets. 
These  targets  and  objects  must  be  realistic  and  provide  a  coherent  and  stable  policy  and 
regulatory framework, ensuring predictability for consumers, security for investors, and stability 
for financial institutions. Achieving the target will depend on the effective implementation of the 
policy measures, including the ability of those measures to tackle existing barriers. 

The  following  table  summarises  examples  of  immediate  policy  areas  to  address  barriers, 
focusing on no-regret options. It is important to note that these examples do not constitute  a 
comprehensive set of complementary policy measures; such a set should be developed on 
case by case basis (incrementally).  

Main policy area   
Phasing out of fossil 
fuels use 

Manage urgent 
Heating System 
replacements 

Stop supporting 
fossil energy 

Establish a level 
playing field 

Examples of concrete policy measures 
Phase-out regulations for gas and liquid boilers for new buildings, by a predefined date 
(e.g. 2025) {at EU and national level}69; 
Prohibit selling gas and liquid boilers in buildings with sufficiently high energy 
performance (or when the potential to reach such high performance exists, based on a 
Building Renovation Passport), by a predefined date, if affordable alternatives are 
available and if there is no evidence renewable-based gases and liquids will be produced 
in sufficient quantities {at the national level}; 

Deploy Building Renovation Passports encompassing the supply of energy through 
100% renewable and/or waste heat/cold recovery, based on building insulation potential 
{at the national level} 
Incentivising replacement of existing H&C systems by renewable systems in time so that 
urgent replacement is prevented (e.g. via Building Renovation Passports). This could for 
example be done by giving additional financial incentives like grants for the anticipated of 
current, functioning heating systems (retrofits) older than 20 years. Measures should 
make sure that the H&C system and the energy performance of the building are 
addressed simultaneously so that the deployment of long-term solutions is 
enabled/facilitated {at the national level}.   

Phase out all subsidies and grants for fossil based heating and cooling systems (e.g. oil, 
gas condensing boilers or hybrid heating using fossil energy), and revert them to support 
alternative renewable heat options, waste heat and energy efficiency {at the national 
level}; 
Replace all support to fossil energy/sources (e.g. support to low income households for 
their yearly heating oil bill) by alternative support to their energy bill (e.g. prioritised 
renovation) {at national level}. 

Introduce a gradual and measured carbon pricing for the fuels used in building, providing 
a long-term vision and stability; depends on the expansion of the ETS to the building 
sector {at national level}; 
Reform fiscal systems to ensure that tax levels and levies on different energy carriers 
reflect the differences in GHG emissions intensities and incentivise the use of the least 
carbon-intense energy carriers {at EU but especially at national level}; 
Creating lower tariff for electricity fed in energy efficiency equipment with low GHG 
emissions (e.g. heat pumps) {at national and regional level}. 
Creating stimulating schemes (quota, support, …) for renewable-based gas or liquid use 
in energy efficient heating systems {at national and local level} 

69 When applicable, we indicate the  intended level of government which we identify as most suitable to adress the policy measure 
listed. The level(s) of govermet are indicated beween {} brackets.  

46 

 
 
 
 
 
 
 
 
                                                 
EUROPEAN COMMISSION 

Main policy area   
Improve District 
Heating & Cooling 
performance 

Examples of concrete policy measures 
Establish clear timelines and plans to decarbonise existing DHC systems, providing 
support where required, and imposing milestones to reach full decarbonisation by 2050 
{at national and local level}; 

Planning Heating 
and Cooling  

Develop a bioenergy 
strategy, fully 
integrated in the 
bioeconomy policy 
framework, and 
streamlining 
sustainability 

Establish policies and regulations that protect DHC consumers and prevent negative 
impacts of (monopolistic) market power of suppliers {at national and local level, with EU 
guidance}; 

Promote the development of efficient renewable energy based DHC networks with 
multiple renewable and carbon-neutral energy sources (incl. as waste heat recovery) and 
technologies and facilitate / support the access of new entrants {at national and local 
level}; 

Ensure national long-term renovation strategy (LTRS, EPBD article 2a70) instruments 
and incentives like subsidies or support schemes, or norms (like Minimum Energy 
Performance Standards) have integrated energy supply and its decarbonisation (e.g. link 
deep renovation to the replacement of the heating system by renewable systems), to 
switch to carbon-neutral/renewable heating systems {at national level}; 
Given that most MSs are not implementing their LTRSs (EPBD Art. 2a) quickly enough, 
ensure adequate financing of all LTRS instruments71, in line with the ambition and targets 
{at national level}; 
Ensure proper coordination between all plans and strategies (e.g. national 
comprehensive heating and cooling assessments under article 14 of EED and article 
15(7) of REDII, renewable action plans, NECP, LTRS, …) {at national and local level}; 
Make heating and cooling planning a requirement and empower the concerned 
authorities and actors {at EU & national level}; 

o 

Such a bioenergy strategy should be built on the following main principles 
o  Sustainability of used biomass and other (renewable) fuels must be guaranteed. The 
same sustainability approach should apply to all fuels, especially fossil fuels {at 
national level}; 
Incentivise anticipated replacement of inefficient bioenergy H&C systems to 
increasing efficiency, e.g. by giving financial incentives like grants for the anticipated 
replacement of heating systems older than 20 years {at national and local level};  
o  Research projects are needed to assess the extent to which concepts to sustainably 
produce low ILUC risk biogas crops through double cropping can be scaled up {at 
national level}; 

o  Clear guidelines, piloting, and support incentives will be required for sustainable 

sequential cropping {at national and local level}; 

o  Ensure that bioenergy potential and growth take into account competing biomass 
uses to guarantee the anticipated resources will be available and coordinate such 
planning at the inter-regional level and with neighbouring countries. 

o  The implementation of the new Circular Economy Action Plan and waste legislation 
and sustainable agriculture and forestry management systems could result in 
increased sustainable production of bioenergy from wastewater, waste and 
residues72 

Think about the geographic location of bioenergy in the entire economy, considering all 
other uses (especially bio-materials) and services provided by the same resource; 
Possibly create distinctions between biomass types or categories to design their 
appropriate use (contaminated vs non-contaminated), between applications (easy to 
replace or hard to abate), and between technologies (combustion vs gasification) {at 
national level}; 

Require complementary and alternative solutions that can support reducing biomass use 
for energy purposes where possible {at national level}; 

70  Article  2a  of  the  EPBD  stipulates  that  “Each  Member  State  shall  establish  a  long-term  renovation  strategy  to  support  the 
renovation of the national stock of residential and non- residential buildings, both public and private, into a highly energy efficient 
and decarbonised building stock by 2050, facilitating the cost-effective transformation of existing buildings into nearly zero- energy 
buildings.” 

71 https://www.bpie.eu/publication/the-road-to-climate-neutrality-are-national-long-term-renovation-strategies-fit-for-2050/  

72 Some farm infrastructures are suitable for an integrated production of solar-origin electricity and heat, creating the potential for 
renewable energy self-consumption and injection into the grid. In agriculture, through the Common Agriculture Policy, farmers 
could be incentivised to contribute to a greater mobilisation of sustainable biomass for energy. Renewable energy communities 
can provide a sound framework for the use of such energy in a local context. 

47 

 
 
 
 
 
 
 
                                                 
Main policy area   

Examples of concrete policy measures 

Promote using wood as construction material, and carbon sink (considering the life cycle 
carbon content) {at national level}; 

4.2.2. Addressing market barriers 

Main policy area   

Concrete measure – concrete examples 

Build a level playing 
field with fossil 
heating fuels 

Adjustment of markets, investments, regulation, taxes, tariffs and levies to promote 
the required carbon-neutral technologies, giving the right incentives and signals (in 
market driven transition) {at national level}; 
Assess and adapt the implementation of the Energy Taxation Directive to provide a 
level-playing field for all energy sources, considering carbon content & GHG 
emissions {at national level}; 

Decrease the price difference between electricity as well as renewable fuels and 
fossil fuels (e.g. by a comprehensive and high CO2 price, by adjusting the tax and 
fee structure, by supporting) {at national level}; 

Fully efficient EU ETS to spur low carbon and renewable options in industry, 
including carbon leakage measures to support industries to invest in the carbon-
neutral transition {at EU level}; 

Support the market acceleration of renewable heating technologies  to achieve cost 
reductions from economies of scale, and increased knowledge {at EU and national 
level}; 

Better support renewable heating technologies in buildings considering possible 
adjustments to the heating installations in existing buildings {at national and local 
level}; 

In DHC, support the use of recovered waste heat and of a varied set of renewable 
energy sources, energy efficiency performance improvements (e.g. lower 
temperature, efficient equipment and regulation) {at national and local level}; 

Ensure a level playing field for renewable infrastructure (mainly on DHC), with 
existing energy infrastructure (electricity and gas, which were public investments in 
the past) {at EU and national level}; 

Extend TEN-E to DHC, to support development of new heat infrastructure in 
regions, cities and municipalities {at EU level}; 

Support developing 
the entire supply 
chain with qualifying 
companies (design, 
architects, 
construction workers, 
installers, operators, 
owners) 

In the short term, capacity building programmes can be set up and successful 
existing programmes such as BUILDUPSKILLS can be strengthened. However, the 
most efficient way to ensure that professionals will receive sufficient training is to 
give a clear and stable signal to the market that fossil-based H&C systems will be 
phased out and the future will lie in renewable and carbon-neutral systems. Long 
term stability is needed to incentivise companies to invest in the required expertise 
and capacities. {at national level, with EU guidance} 

Heat market 
facilitation 

Establish an enabling framework for Energy Performance Contracts and ESCOs {at 
national level}; 

Increase and assure price transparency on the one hand in the DHC market itself, 
on the other hand between different heating and cooling supply options, considering 
externalities {at national level}; 

Set up financial instruments to overcome high upfront costs {at national and local 
level}; 

Promote cooperation between energy and heating technology professionals and 
consumer organisations to develop new business models and services that support 
consumers in shifting to renewable H&C systems, reducing the complexity of their 
choices {at national level, with EU guidance}; 

Inform customers about the energy and non-energy benefits of renewable H&C, 
paying attention to the needs of the entire system (e.g. providing flexibility services 

48 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

Main policy area   

Concrete measure – concrete examples 

to the energy system like heat pump for the electricity grid) {at national level, with 
EU guidance} 

4.2.3. Addressing financial barriers 

The  National  Recovery  and  Resilience  Plans73  address  the  renovation  of  national  building 
stocks,  in  line  with  the  Renovation  Wave,  and  often  building  on  the  national  Long  Term 
Renovation  Strategies  required  under  the  Energy  Performance  of  Buildings  Directive.  At 
national  levels,  it  is  also  expected  that  some  public  funds  will  be  made  available  for  the 
implementation of additional NECP measures. However, despite the availability of financing 
and funding, the required renovation rate and investments remain insufficient to reach the 2030 
objective of reducing GHG emissions by 60% in the building sector.74  

The following  table summarises the  possible measures that can  address  the main financial 
barriers, focusing on no-regret options. 

Main policy area   

Concrete measure – concrete examples 

Integrated financial 
strategy 

Establish a comprehensive and integrated financial & fiscal strategy, creating a 
stable and long-term favourable investment environment. Several financial 
instruments are available at the EU level to finance the decarbonisation of the 
building and industry sectors. Particularly, the Recovery and Resilience Facility 
(RRF), which the European Council endowed with 672.5 billion EUR, 37% of which 
must be targeted towards climate-related expenditures, can support MSs with 
decarbonisation investments and related reforms. Other EU financial instruments 
are suggested, such as the European Initiative for Building Renovation by the 
European Investment Bank (EIB), InvestEU, and possibly revenues from the EU 
Emission Trading System (ETS) (via the new Social Climate Fund). Further, the 
NextGenerationEU is also a key financial resource to ensure adequate and well-
targeted funding for energy efficiency and renewable measures {at national level; 

Ensure national funds and finance are available, in addition and complementing the 
EU funding and financing programs, to ensure continuation of all efforts beyond 
2027 (end of the RRF) {at national level}; 

Address split 
incentives 

Inform building owners of the multiple benefits of energy efficiency (e.g. tenants 
staying longer, less complaints, lower maintenance costs, etc) {at national and local 
levels}; 

Facilitate the redistribution of costs and savings between owners and tenants/users 
(this could include giving owners the possibility to demand a part of the cost savings 
from the tenants when an investment in improved energy efficiency is made75.  

Preferably this should take into account the actual energy performance of the new 
installation to protect tenants from paying for anticipated/estimated savings that did 
not materialise76) {at national level, with EU guidance on best practices}; 

73  The  Recovery  and  Resilience  Plans  are  plans  submited  by  Member  States  setting  up  reforms  and  invesmtnets  to  be 
implemented by end of 2026 and with the aim of mitigating the economic and social impact of the coronavirus pandemic. The 
European Commission established the Recovery and Resilience Facility to raise funds to help  Member States financially in the 
implementation  of 
information  see:  https://ec.europa.eu/info/business-economy-euro/recovery-
these  plans.  For  more 
coronavirus/recovery-and-resilience-facility_en  

74 BPIE (2020) Contributions from the building sector to a strenghtened 2030 climate target. Avialable at: https://www.bpie.eu/wp-
content/uploads/2020/12/On-the-way-to-a-climate-neutral-Europe-_Final.pdf  

75 JRC (2017) Overcoming the split incentive barrier in the building sector.  

76 Ibid. 

49 

 
 
 
 
 
 
 
 
 
 
                                                 
Main policy area   

Concrete measure – concrete examples 

Implement minimum performance standards for buildings and H&C systems (MEPS 
in the framework of the EPBD) {at national level}; 

Support the financial sector to establish financing instruments that provide capital 
linked to the building assets rather than the creditworthiness of the owner or tenants; 
can help incentivise investments in solutions with long payback times that exceed 
the usual duration of tenant occupancy or ownership77 {at national level}; 
Financial instruments: Grants/ capital subsidies; Loans; Rebates; Subsidies for 
electricity; Heating tariffs; Redesigning demand charges (for large power 
consumers) {at national and local level}; 

Creation of a yearly guarantee fund for low-income households {at national level}; 

Adoption of a 0% green loan programme, or other financial instrument {at national 
level}; 

Lower VAT-rates for renovation aiming at increasing energy performance of the 
building {at national level}; 

Focus on specific market segments for the renovation and replacement of heating 
systems, e.g. giving additional financial incentives (e.g. grants) to low income & 
social housing households for home renovation {at national and local level}; 

Establish financing instruments providing access to cheap capital (e.g. through 
concessional loans) could spur investments in building renovations and renewable 
H&C equipment78 {at national level}; 

Provide grants (subsidies) that cover part of the investment costs for renewable 
heating equipment {at national and local level}.  

Develop financial 
instruments to 
support creating 
economies of scale  

Integrate Energy 
Poverty within social 
programmes and link 
to financial strategy. 

Address the barrier of 
high upfront costs for 
building renovations 
and renewable 
heating equipment 
through financial 
instruments, e.g. 
large revolving funds 
providing cheap 
loans. 

4.2.4. Addressing capacity barriers 

Capacity barriers encompass awareness, knowledge, skills and understanding of all players 
along the value chain. As all these actors have a key role to play in building the right solutions, 
dedicating  specific  efforts  to  remove  capacity  barriers  in  each  group  is  important.  The 
recommendations  in  this  section  will  be  further  developed  in  section  3.4.  According  to 
stakeholders’  views  collected  during  expert  meetings,  workshops  and  through  multiple 
interactions with the heating cooling sector, the capacity gaps are the largest in the installers’ 
trade group. 

Main policy area   

Concrete measure – concrete examples 

Strengthen policy 
makers 

At national level 
o  Ensure that education and occupational training programs for building, energy 

and heat professionals include capacity building on energy 
performance/efficiency and renewable H&C technologies; 

o  Support local governments with provision of high-quality information on regional 

renewable energy resources; 

o  Support all levels of policy makers to design and manage EU funding schemes. 
These funds should specifically address capacity building for professionals (e.g. 
NRRPs are usually not including capacity building for the construction sector); 

77 JRC (2017) Overcoming the split incentive barrier in the building sector. 

78 In many cases, investments in building energy performance and or renewable heating systems in the built environment are 
postponed because of the high upfront costs/lack of capital 

50 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
EUROPEAN COMMISSION 

Main policy area   

Concrete measure – concrete examples 

o  Set up an expertise centre for decarbonisation of the H&C sector, with experts 

that can be consulted by small municipalities to provide technical assistance. 

At municipal level (see section 3.3) 

Strengthen planners 
and infrastructure 
operators 

Coordination among all actors: building and real estate professionals, NGOs, local 
authorities, communities and energy companies, to better identify the relevant 
renovation solutions for vulnerable households, enhancing household knowledge 
and confidence, and coordinating existing grants and financing {at national level}; 

Strengthen architects 

Train architects on all carbon-neutral alternatives, especially on H&C systems (heat 
pumps, solar heat, biomass-based systems, …) {at national level}; 
Make sure that education and training of architects and building design processes 
pay attention to energy performance as an integral design element from the 
beginning {at national level}; 

Strengthen service 
providers (auditors, 
advisors, …) 

Education and training of energy consultancies and heating installers to (i) avoid 
capacity constraints in the sector and (ii) assure high knowledge about renewable 
heating {at national level}; 

Strengthen 
construction workers 
and installers 

Support the training of skilled workers under training programmes e.g. under the 
Updated Skills Agenda {at national level}; 
Train installers and construction workers on all carbon-neutral alternatives, 
especially on H&C systems (heat pumps, solar heat, biomass-based systems, …) 
{at national level}. Here it is important that there are no dedicated installers per 
technology, but that installers have the know-how to adequately install a wide range 
of H&C systems; 
The expertise on how to combine different H&C technologies and storage solutions 
is another area where expertise should be strengthened.  

Strengthen 
infrastructure 
operators 

Promote cooperation between grid operators of electricity, gas and DHC grids and 
involve infrastructure operators in the H&C decarbonisation planning process {at 
national and local level}. 

Consumer awareness, 
including for building 
occupants and 
owners 

General information campaign (e.g. on the best point in time for changing heating 
system with alternatives, given technology and qualified workers availability), to 
improve perception and acceptance of RES heat, demonstrating RES system 
reliability {at national and regional level}; 

Information campaign on the advantages of DHC {at national and regional level}; 

Improve energy performance certificates (EPCs), and integrate heating system 
metric {at national level}; 

Support for the realization of energy audits in the industry and Building Renovation 
Passports {at national and regional level}; 
Promoting the deployment of energy management systems (ISO 50001 type) and 
energy benchmarks in industry and tertiary sectors {at national and local level}; 

One-Stop-Shop or any other advisory and technical assistance, with quick and 
easily RES H&C system available solutions for urgent replacement {at national and 
local level}; 

Recall the importance of behaviours, to act at consumer level (e.g. communicating 
on instruments like support schemes, …), increase the interest {at national and local 
level}; 

Adjust regulatory frameworks in such a way that households can also (potentially via 
an intermediary, e.g. their energy supplier) operate in energy markets to operate 
their H&C equipment in a dynamic, smart and optimal manner {at national level};  

Set up Building Renovation Passports and integrate energy supply {at national 
level}; 

Set up communication programs to inform citizens and consumers about the 
challenges and their expected roles, to engage them actively in the decarbonisation 
of their buildings {at national and local level}; 

51 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Main policy area   

Concrete measure – concrete examples 

Ensure the regulatory and policy framework facilitate and stimulate for local 
initiatives (citizens, communities) {at national and local level}; 

Define and support nearly zero-energy or zero-energy districts or energy positive 
neighbourhoods and communities in the frame of the EPBD {at national level}; 

Support developing renewable energy communities covering renewable and 
decarbonised H&C under REDII {at national and local level}. 

4.2.5. Addressing technical barriers 

Main policy area   

Concrete measure – concrete examples 

Set up global 
monitoring strategy 

Gather data at building level (logbook) {at national level}; 

Improve high-resolution knowledge on subsurface temperature gradients and other 
characteristics to provide regional players with high-quality information on the 
geothermal energy potential in their region {at national and regional level}. 

Digitalisation – Smart 
systems and 
operation 
Building instruments 
(MEPS, codes, EPCs) 

Facilitate new H&C systems, both individual and collective, to be equipped to perform 
smart operations, providing flexibility services where adapted {at national level}; 

Adapt building codes and standards to increase investments in building energy retrofits 
and other energy efficiency measures in buildings, and to switch to renewable {at 
national level}; 

Establish or reinforce building certificate schemes, ensuring heating systems are 
correctly addressed {at national level}; 

RD&I in industry 

A large and ambitious mission-oriented RD&I program for industrial low-CO2 
technologies, including funding for industrial demonstration and scale up {at national 
level}; 

Stimulate Industrial symbiosis and a circular economy through the effective combination 
of energy recovery and recycling {at national and regional level}; 

Policies combining R&D, industrialization, commercialization support and GHG pricing 
are needed to ensure a coherent and integrated approach to decarbonize industrial 
processes {at national level}; 

EU Innovation Fund can be used to co-finance large industrial scale biomass-to-
biomethane gasification plants {at national level}; 

Further develop and support the demonstration of renewable and carbon-neutral heat 
processes in industry {at national and regional level}.  
Work to introduce a common carbon-neutral threshold/standard for the promotion of 
hydrogen production installations based on their full life-cycle GHG performance {at EU 
and national level}; 

Harmonise gas quality standards for biomethane injection in gas grids and set 
standards and definitions for hydrogen and blended gases to enable their transport 
through gas infrastructure and across borders {at EU and national level}; 

Standardisation  

Energy system 
integration 

Enable energy system integration (between sectors), by facilitating the provision of 
flexibility to the electricity sector by the heating and cooling sector, and the use of waste 
heat {at national level}; 

Redesign of power markets Implement and parametrise Power Market considering H&C 
systems participation {at national level}; 

Time of-use tariffs; Redesigning progressive tariffs {at national level};  

Monitoring – 
improving H&C data 
availability (demand & 
supply) 

Support for digitalisation {at national level}; 
Heating and cooling should become more visible in energy statistics and reporting (incl. 
DHC) at national level and EU level {at national level}; 

Establish a national (or EU) platform for best practices exchange {at national level}; 

52 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

Main policy area   

Concrete measure – concrete examples 

Transparent accounting framework for CCU across sectors and value-chains to allow 
business cases to emerge {at EU and national level}; 

4.3.  

Integrated planning at national, regional and local level 

Providing a clear vision for the future of the heating and cooling sector is essential to support 
market  development,  avoid  undesired  lock-in  effects  and  ensure  a  stable  policy framework. 
The  long  investment  cycles  and  the  long  periods  needed  for  planning  and  constructing  the 
infrastructure, equipment and building systems require an equally long-term policy perspective, 
and  sufficient  time  for  market  adaptation  to  new  regulations.  This  section  provides  some 
general guidance on building the steps for the long-term H&C planning. 

The main principles of H&C planning encompass  

1.  1. 

the development of a vision and the definition of long term targets, objectives 

and measures; 

2.  2. 

the  evaluation  of 

the  existing  progress  and  gaps 

regarding  H&C 

decarbonisation;  

3.  3. 

4.  4. 

the assessment of the potential for renewable production and possible import;  

the development of scenarios based on existing policies and plans; and  

5.  5. 

the  enabling  of municipalities and  local  authorities to conduct  and  implement 
local heat planning. These elements could also be set in a legal framework, as seen 
above.  

It  should  be  noted  that  local  level  data  is  an  essential  input,  and  not  everything  can  be 
developed at the national level without due consideration for local parameters. Therefore, an 
iterative  process  to  integrate  planning  at  local  level  is  important.  However,  the  national 
planning needs to have a more global perspective (e.g. to indicate whether hydrogen is going 
to be supported) and set the framework conditions for local planners, who must take those into 
account  when they  consider  local  options.  Iterations  between  national  and local  planning  is 
important. 

Identifying all key stakeholders to engage in H&C decarbonisation is a crucial first step for a 
successful H&C planning development and implementation. 

4.3.1. Stakeholders to involve in H&C decarbonisation 

Planning of heating and cooling decarbonisation requires engaging local, national and EU level 
actors. The local level is important due to the local nature of heating and cooling supply and 
demand. The energy system integrates more and more local or decentralised elements, aiming 
at increasingly rational use, decarbonisation and resilience. The planning should be conducted 
from a system perspective. National energy and climate targets can be achieved only if they 
are locally supported, considering local adoption, transposition and integration. 

As  highlighted  in  the  Renovation  Wave,  local  authorities  and  utility  companies  have  an 
important role in creating the necessary regulatory framework, market conditions and skills and 
in preparing a robust pipeline of projects to finance the modernisation of heating and cooling 
systems. Local authorities have control over different levers, such as various local/municipal 
regulations,  the  development  of  the  infrastructure,  providing  financial  and  technical 
instruments,  urban  planning,  permitting,  incentives  to  reduce  energy  demand,  mutualising 
energy  needs,  mobilisation  of  the  concerned  parties  (e.g.  citizens  &  industries),  or  the 
coordination/facilitation  between  different  actors  from  the  supply  and  the  demand  sides, 
especially to create synergies. All public bodies have a role to play, although in many cases 

53 

 
 
 
 
 
they  would  not  perceive  themselves  as  having  a  responsibility  or  any  kind  of  remit  in  H&C 
planning, or in setting up enabling frameworks. Municipalities and cities are at the core  of a 
deep transformation of the energy systems, as depicted in the following figure. 

Figure Error! No text of specified style in document.-8 Municipalities at the centre of the H&C planning  

Source: own elaboration based on Lyon’s Metropol Energy Development Plan (SDE79) 

Regional actors can be an important link between the state government, the municipalities and 
the citizens. They could have a responsibility for implementing the state’s heating and cooling 
policy,  defining  a  strategic  framework,  as  well  as  managing  support,  raising  awareness, 
providing technical expertise and financial instruments, or setting up normative schemes (e.g. 
urban requirements). Regional authorities can play an especially important role in the support 
of the decarbonisation of the heat supply of large consumers (e.g. manufacturing companies, 
industry) and to take the coordinating role connecting different potential H&C consumers and 
suppliers. Enforcing their competences in the field of the energy transition may also be required 
to support energy use reduction, address energy poverty, deploy renewable and heat recovery, 
deploy and reinforce energy networks (electricity, gas, heat). Citizens, households, but also 
renewable  energy  communities,  workers,  Small  Medium  Enterprises  (SMEs)  have  an 
important role to play in heating and cooling planning, as potential energy producers, flexibility 
providers,  but  also  as  consumers  with  mutual  interests  (benefiting  from  scaling  factors, 
industrialisation and impactful solutions). Local communities have an important role to play in 
awareness  creation,  exchange  of  experience,    and  creating  demand  for  solution  providers, 
planners and system operators. Professionals involved should encompass the building sector 
(construction,  architects,  planners,  promoters),  the  financial  sector,  the  smart  and  digital 
solution providers, the energy sector (producers, suppliers, ESCOs and operators), the social 
actors, and network infrastructure operators. 

4.3.2. Develop  a  national  vision  and  define  national  long-term 

targets 

Having in mind the long-term (2050) full decarbonisation of the heating and cooling system, 
decision makers should define now how to pave the way towards this carbon-neutrality goal. 

https://blogs.grandlyon.com/plan-climat/wp-content/blogs.dir/8/files/dlm_uploads/2019/05/2019_Sch%C3%A9ma-directeur-

79 
des-%C3%A9nergies-lessentiel.pdf   

54 

 
 
 
 
 
 
 
                                                 
EUROPEAN COMMISSION 

Defining the vision of a decarbonised H&C would therefore encompass what the sector will 
look like in 2050, and by which means the society will reach this goal. Given the interconnection 
of the H&C sector with many other sectors (electricity, liquid fuels, gases, buildings, industry, 
transport, …), such vision needs to be built taking as context the full decarbonisation of the 
entire system which means that a holistic approach is required. 

The  energy  infrastructure  and  the  way  it  will  evolve  is  of  paramount  importance,  as  it  will 
determine  the  availability  of  energy  carriers  and  the  possibility  to  potentially  valorise  new 
energy sources. 

Such vision could comprise the following elements: 

  Among the list of energy carriers and sources, defining which ones are expected to 
play  a  role  in  the  fuel  mix  in  2050.  This  should  be  carried  out  based  on  the 
assessment of available energy sources (or the potential, see below section 3.4.3), 
also considering import (in most of the cases local or even national resources will 
not  cover  all  needs).  Each  source  or  carrier  should  be  assigned  to  dedicated 
applications, to prioritise and fill in potential gaps (e.g. bio-energies production will 
not  be  able  to  cover  our  current  energy  demand,  and  should  be  preceded  by 
decreased  energy  use  and  should  be  used  for  high  value  applications,  from  a 
system point of view. A similar logic applies to hydrogen). Local level planning will 
be strongly dependent on local conditions (availability of infrastructures). It will not 
always  be  possible to follow  national  planning guidelines.  Prescribing the role of 
energy carriers at national level is too restrictive, there might be different energy 
uses on regional level; 

  Decreasing energy consumption in the building sector and the industry, and how it 
will affect the demand of H&C, but also the required technologies and capacities to 
achieve this reduction in energy consumption; 

  The evolution (reinforcement, expansion or (partial) decommissioning) of the fuel 
transport, storage and distribution infrastructure should be framed by general rules 
depending on their expected role in the 2050 scenario. Here an important aspect is 
to  assess  which  parts  of  the  gas  network  should  be  kept  (assuming  fully 
decarbonised gas will be available) or adapted to function as dedicated hydrogen 
pipelines  and  which  parts  should  be  decommissioned  (assuming  non-gaseous 
alternatives are preferred options). This would also include the place and role of 
DHC  systems,  including  the  way  to  fully  decarbonise  existing  DHC  (e.g.  via 
electrification like large scale heat pumps, with renewable fuels like geothermal or 
solar  energy  combined with  heat  storage),  with various types  of bioenergy fuels, 
with  CHP  also  based  on  hydrogen,  or  via  waste  heat  recovery),  and  the  main 
conditions to deploy new low or zero-carbon DHC should be defined, such as heat 
consumption density, town planning and technical constraints, the deployment of 
new districts, …; 

  The  involvement  of  all  stakeholders  is  important,  and  certainly  defining their role 
will  also  be  required.  The  empowerment  of  some  decision  makers  at  more 
decentralised  levels  will  be  necessary  to  ensure  the  mobilisation  of  the  needed 
workforce  and  capacity.  Technical  support  should  certainly  be  provided  at 
decentralised levels via a national one-stop-shop or a similar expertise centre with 
H&C experts providing advice to local governments; 

  Building the required green skills by setting new training programmes, encouraging 
young people to work in the sector by making it more attractive, mainstream H&C 
decarbonisation technologies in various curricula in collaboration with universities, 
knowledge  institutions,  and  schools  to  address  the  whole  value  chain  stage 
(architects,  construction  workers,  installers,  O&M,  utilities,  infrastructure  system 
operators).  There  is  a  lack  of  staff  to  do  proper  planning,  cities  have  to  rely  on 
outsourcing, which has less quality and on the ground knowledge, so trainings and 

55 

 
guidance  through  by  strengthening  capacity  building  and  upskilling  initiatives  is 
paramount,  

  Financial support is essential to facilitate the transition, and should be considered 

as a starting point when developing the concept of a national vision. 

4.3.3. Evaluate the existing progress and gaps 

This  section  has  two  related  purposes:  assess  the  progress  made  so  far  regarding  carbon 
emissions reduction and the deployment of renewable energy in the H&C sector; and building 
on the existing assessments, plans and strategies, to evaluate where the remaining gaps are. 

Monitoring the progress in reducing carbon emissions should be covered in National Energy 
and Climate Plans. However, most of the plans could have been more precise in the way the 
MSs intend to decarbonise the heating and cooling sector, both for industry and for the built 
environment.  

Regarding the building sector, what is usually missing is the way the deployment of renewable 
energy supply will be addressed in the context of the renovation, and how energy efficiency 
and H&C supply will be addressed in a coherent way. Assessing the progress in this field is 
essential. 

As stipulated by EPBD  Article 2a concerning national Long-Term Renovation Strategies, MSs 
must establish a long-term renovation strategy to support the renovation of their national stock 
of  residential  and  non-  residential  buildings.  The  LTRS  should  facilitate  the  cost-effective 
transformation of existing buildings into nearly zero-energy buildings in order to ensure a highly 
energy  efficient  and  decarbonised  national  building  stock, 
the 
decarbonisation of energy supply through reduced demand. The assessment should evaluate 
how each instrument of the LTRS (normative or incentive) considers the switch from fossil to 
renewable fuels. 

facilitating 

thereby 

As stipulated by EED  Article 14 concerning the promotion of efficiency in heating and cooling, 
MSs had to undertake a National Comprehensive Assessment (NCA) to establish the technical 
and socially cost-effective potential for high-efficiency cogeneration (CHP) and efficient district 
heating and cooling (DHC). Both DHC and CHP are closely linked to the use of renewables in 
H&C and these NCAs should include an assessment of the potential to use renewable energy 
as well as waste heat and cold for heating and cooling under Article 15(7) of REDII.  

The  evolution  of  DH  is  characterised  by  a  movement  towards  lower  temperatures,  higher 
efficiencies and a broader variety of energy sources within one system. DH is currently in the 
transition from the 3rd to the 4th, and even 5th generation, characterised by the use of more 
renewable energy sources, possibly at lower temperature, such as solar, geothermal, ambient, 
bioenergy and waste heat (from the industry or urban activities), combined with large thermal 
storage. CHP plants also could have a dominant role to play in DH, but this will require a shift 
towards bioenergy carriers or hydrogen.  

As more renewable energy sources are introduced into DH systems, the need for more flexible 
energy  production  and  consumption  increases  to  ensure  the  adequate  level  of  security  of 
supply, which could be further strengthened by the implementation of larger thermal storage. 
Lower temperatures are a necessity for achieving higher efficiencies. The evaluation should 
assess how DH are adapted to increase the share and low-temperature options of renewable 
energy sources. 

CHP can be used in industrial applications, to supply DH, large buildings, and even micro-CHP 
for small buildings (e.g. for households). Most of the CHP across the EU is still fossil-based. 
Its decarbonisation will rely on on bioenergy (solid, liquid & gaseous) and e-fuels (e-gases & 
possibly  e-liquids)  produced  from  renewable  electricity  (RFNBOs).  The  evaluation  should 
assess whether fuel switching from fossil to renewable (potentially combined with adjustment 
or replacement  of the  existing  CHP  plant)  is realistic  and if  not,  a  switch to  another type  of 
renewable energy source should be considered. 

56 

 
 
EUROPEAN COMMISSION 

  The evaluation should describe today's energy use and supply for space and water 
heating, and for industrial energy needs at national levels, including information on 
energy consumption for the technology distribution, the building structure, as well 
as  the  regulatory  frame  in  place.  Data  should  be  as  recent  as  possible:  Heat 
demand  structure  and  energy  use  (to  be  used  to  the  regular  energy  statistics) 
should  comprise;  energy  demand  in  the  building  and  the  industry  (final  energy 
demand by energy carrier and energy source, by sub-sector, by type of application); 
the  building  stock  (floor  areas  per  sub-sector  and  levels  of  performance  where 
available); industrial process heat profiles; weather conditions; generation mix for 
electricity and DHC (with a focus on renewables). This should also comprise the 
evolution  over  time  (2 decades)  and the  success factors (e.g.  implementation of 
measures) highlighting the progress made in the deployment of renewable in H&C 
or  in  increasing  energy  efficiency.  Gathering  data  on  supply  and  demand  is 
complicated  (at  the  national  level,  but  also  at  local  level),  e.g.  data  on  solar 
collectors can be based on sales statistics, but these are combined only at national 
level (not at local), while data on waste are hard to get at national level. Heat or 
energy suppliers might be reluctant to provide data (mandate to access these data 
should be given to authorities/regulators); 

  Technologies  used  for  individual  H&C  and  for  DHC  should  cover:  the  current 
levelized  cost  of  heat  (based  on  regional  cost  factors);  market  share  of  different 
individual  technologies  (air-source  &  ground-source  HP;  oil-fuel  boilers;  gas  fuel 
boilers; solid fuel boilers; solar thermal; micro CHP); large scale heat production for 
DHC (gas, oil and solid CHP and boilers; large solar thermal plants; large HP; waste 
heat recovery; geothermal); 

  Policies and measures for H&C, renewable H&C and the decarbonisation of H&C, 
encompassing:  regulations  (e.g.  building  codes,  urban  constraints,  zoning 
deployment,  permitting,  …);  fiscal  and  financial  instruments  (e.g.  carbon  taxes, 
specific loans, risk mitigation instruments, tax exemptions, reduced tariffs etc. …); 
incentivizing instruments (e.g. support schemes, quota for decarbonised heat, …); 
institutional framework (e.g. mandating local level to develop H&C plans); 

A complete monitoring system should be put into place, and track record of the following items  

  Progress in renewable heat production and carbon emissions saved; 

  Review of policies and measures following the problems experienced; 

  Uptake  of  individual  and  DHC  technologies,  to  enable  cost  control  measures  as 

and when needed; 

4.3.4. Assess the potential for domestic renewable production (and 

import) 

For  each  renewable  source,  a  good  understanding  of  domestic  potential  is  important.  This 
would help address the  importance  of  decreasing  energy  demand,  and of   evaluating fossil 
import reduction potential, as well as possible renewable energy import needs from abroad. A 
local  focus  would  ensure  domestic  heating  and  cooling  needs  are  fully  accounted  in  H&C 
decarbonisation.  The  assessment  of  the  potential  should  make  a  clear  distinction  between 
buildings and industry, considering the needs and conditions are quite different. Article 14 of 
the EED requires National Comprehensive Assessments; these already provide a framework 
for such renewables’ potential assessment in accordance with Article 15(7) of REDII .  

Assessing potential requires an appropriate monitoring scheme. Heating and cooling mapping 
is  central  to  properly  plan  the  decarbonisation  of  the  sector,  and  should  comprise  the 
identification,  analysis  (modelling)  and  national  mapping  of  resources  and  possibilities  to 
supply  H&C  at  the  municipal  level  in  a  resource-  and  cost-efficient  way,  while  considering 
national supply . Such a mapping exercise and the resulting database should help authorities 

57 

 
to develop local, regional or national heating and cooling strategies, in alignment with national 
and EU renewable energy and CO2-emission targets. Defining RES production potential may 
be a complicated exercise, even for countries well advanced in the mapping of energy demand, 
as more local data are required to assess the potential . Strong coordination between regions, 
and  ideally  Member  States,  is  required  for  the  global  assessment  of  the  availability  of  a 
resource  (biomass).  Considering  the  potential  and  developments  (objectives,  policies  and 
measures)  beyond  state  boundaries,  encompassing  a  broader  economic  scope,  taking  into 
account  interconnected  cities  across  borders  can  also  be  an  efficient  approach  (like  in 
Luxembourg,  with  its  neighbouring  countries,  and  especially  with  large  cities).  This  could 
highlight the importance of urban-rural partnership to supply the missing renewable energy. 

The assessment could be driven by the following considerations: 

  A  significant  transition  towards  renewables  in  European  electricity  systems  is 
expected from the fall in price of solar and wind technologies and the policy action 
across H&C the EU. This will present a significant opportunity for the H&C sector, 
but also an integration challenge, which will be reflected in electricity market prices, 
which are expected to fluctuate considerably more than today. An important tool for 
integrating wind and solar energy into the electricity system will be more flexible in  
the  generation  and  use  of  electricity,  via  heat  pumps,  small-scale  CHP,  or 
electrolysers to produce H2. However, this later solution is currently expensive and 
should  probably  be  dedicated  to  a  limited  number  of  applications  (including 
processes involving industrial process heat); 

  Bioenergy, as discussed in chapter 2, is a valuable but limited resource and should 
therefore be used with care. This entail the consideration of the consequences of 
replacing the current level of natural gas consumption with biomass and renewable 
gases (greening the gas via biogas and e-gases), which can lead to the conclusion 
that this  would not  be  a viable option due to  lack  of sufficient resources and  the 
enviromental  and food  security  impacts  (e.g.  a  large  share of  arable  land  would 
likely  need  to  be  dedicated  to  produce  energy  crops).  It  is  therefore  essential  to 
concretely implement the Energy Efficiency First Principle to seriously decrease the  
heating  demand,  and  then  to  allocate  bioenergy  to  specific  applications  where 
alternatives may still be too expensive, or do not exist. However, local application 
of bioenergy (mainly biogas and solids biomass for H&C), where its sustainability 
can  be  easily  monitored  and  enforced,  remains  an 
important  pillar  of 
decarbonisation.  Biogas  production  in  the  agricultural  sector,  for  instance,  also 
provides a way to recover a green fertiliser, from digestate80. Therefore, bioenergy 
remains  part  of  the  decarbonisation  portfolio  but  its  exact  role  should  be  clearly 
defined.  A  no-regret  measure  is  to  ensure  a  more  rapid  replacement  of  existing 
inefficient bioenergy-based heating equipment such as fireplaces and wood stoves 
by more efficient alternatives; 

  As  more  renewable energy sources,  such  as  wind  and  solar,  are added  into  the 
energy system, the need for thermal power generation is declining, and thus the 
role  of  CHP  will  evolve.  This  role  will  also  be  affected  by  the  progressive 
prioritisation  of  biomass  for  the  production  of  high-energy  density  fuels,  or 
materials. CHP plants were mainly considered electricity suppliers with heat as a 
by-product. The changed role of the CHP plants has turned the focus towards new 
heat  supply  technologies,  such  as  heat  pumps.  Heat  pumps  allow  for  efficient 
integration  of  renewable  electricity  into  the  heat  sector.  The  combination  of 
electricity generation from renewable energy source, such as wind and solar, and 
heat pumps in cooperation with industrial surplus heat e.g. could possibly replace 
the  role  of  the  CHP  plants.  Still,  some  capacity  of  renewable  fuel-based  CHP 

80  Anaerobic  digestion  produces  two  main  products: digestate and  methane.  Digestate is  the  material  remaining  after  the 
anaerobic digestion of a biodegradable feedstock. More can be found on https://www.europeanbiogas.eu/digestate-factsheet/  

58 

 
 
                                                 
EUROPEAN COMMISSION 

installations  might  still  be  required  for  the  provision  of  dispatchable  power 
generation capacity; 

  Heat pumps (environmental heat, including geothermal) are subject to constraints 
in terms of heat demand, heat sources and electricity supply. On the demand side, 
the temperature level to be provided is determined by the heat transmission system. 
The lower the necessary flow temperature, the more efficient the heat pumps. The 
heat source will depend on the environment (availability, accessibility, and quality 
of geothermal heat, or ambient heat). The deployment of electricity networks should 
also be able to cope with heat pump deployment, which means that coordination 
with  electricity  Distribution  System  Operators  (DSOs)  is  key  when  planning  for 
large-scale deployment of heat pumps in certain areas; 

  The potential for solar thermal energy is limited by the following factors: dimensions 
and  orientation  of  existing  roof  surfaces,  or  available  fields;  competition  with  PV 
modules  for  surface  areas;  restrictions  due  to  structural  stability  and  design 
conditions.  However,  the  bulk  of  solar  heat  is  expected  from  large-scale  solar 
thermal  plants,  the  potential  of  which  is  determined  to  a  lesser  degree  by  the 
availability of surfaces than by the availability of DH for feeding in solar heat or other 
low-cost heat sources (including, for instance, waste heat from urban activities) and 
the willingness to use arable land for the installation of solar thermal plants. Solar 
thermal can also be a valuable way to upgrade low-temperature waste or cooling 
heat to a temperature that can be used directly (after storage) for heating purposes 
with minimal energy input from heat pumps required; 

 

In many areas in Europe, there is a potential to provide (at least low-temperature) 
heat from (deep) geothermal sources. The challenge is how to upscale this industry, 
increase the competition between market players to reduce drilling costs (possibly 
by  de-risking)  as  these  still  represent  the  lion’s  share  of  the  overall  costs  in 
geothermal  projects.  Facilitation  of  geothermal  energy  can  be  done  by  ensuring  
good geolological mapping is performed so that this information can be accessed 
by  regional  and  local  stakeholders.  Furthermore,  protection  against  the  financial 
risks  for  failed  drilling  holes  can  help  to  reduce  the  investment  risk  related  to 
geothermal projects.  

  The energy system is moving from a centralised system with a few large producers, 
to  a  distributed,  decentralised  energy  system  with  many  smaller  producers. 
Additionally, significant numbers of producers of fluctuating renewable energy have 
entered the energy system. This transition requires a much more flexible and robust 
infrastructure  to  maintain  adequate  security  of  supply.  The  trend  of  shifting  from 
central to decentral energy production is expected to continue for years to come, 
creating possibilities for new technologies to enter the energy system; 

4.3.5. Develop scenarios based on existing policies and plans 

Building on the current situation, the development of scenarios requires combining a long-term 
vision  with the evolution of energy demand and renewable potential based on geographical 
distribution,  timescale,  availability  and  deployment  cost.  Scenarios  will  link  all  relevant 
components in a comprehensive way to allow for (the most) energy efficient and cost-effective 
solutions to emerge. Scenarios should help in the following: 

  Fix  the  energy  sources  and  carriers  mix,  and  technologies  to  be  used,  and 
determine  how  to  deal  with  their  deployment.  Consider  decarbonisation  of  the 
current fuels, especially greening of gases (biomethane, and RFNBOs), at national 
scale, but also via import. Renewable-based liquids (biofuels, and RFNBOs) may 
also play an important role in more rural areas; 

  Central  systems  (DHC)  and  individual  systems  are  fit  for  different  situations  and 
contexts, and reach different levels of performance (where feasible, DHC will bring 

59 

 
down  cost,  improve  energy  performance,  and  allow  more  low-temperature 
renewable sources to be valorised). Consider the decarbonisation of existing DHC; 
the  deployment  of  new  zero-carbon  DHC;  and  the  use  of  individual  heating 
systems; 

  Link with other plans, such as the decarbonisation of the electricity and transport 

sectors; urbanisation strategies, the NECP, LTRS, …; 

  Facilitate  synergies  between  sectors,  such  as  tertiary  and  housing,  industry, 
transport infrastructure, agriculture, considering the share of resources (e.g. waste 
heat recovery, digestible organic waste, …), the combination of flexible options (e.g. 
the more variety of energy use profiles, the more flexible the solutions); 

  Environmental  taxation  policies  or  other  economic  incentives  should  ensure  that 
solutions that are desirable from a social perspective are also advantageous from 
a economic and consumer viewpoint; 

  The future of the infrastructure is a central issue, to avoid lock-in effect and possible 

stranded assets on the long term; 

 

It is important that the first steps towards full decarbonisation by 2050 are taken 
now. When designing H&C decarbonisation pathways and policies, the search for 
the perfect most cost-effective strategy is often the worst approach in the long-run; 
a good, cost-effective strategy is often the best strategy because it is often more 
feasible and economically sustainable. 

4.3.6. Municipal Heat Plan - enabling municipalities/local authorities 

to conduct & enforce local heat planning 

Introductory remark: there are already many planning requirements at local level, which can 
be  a  burden  for  planners.  Therefore,  streamlining  and  consolidating  the  different  planning 
requirements is of paramount importance (e.g. with energy efficiency plans, urban planning, 
etc.).  This  could  be  done  by  developing  guidance  documents  with  clear  information  on  
planning  requirements  as  well  as  tools  to  support  the  development  of  local  heating  plans. 
Establishing  networks  to  support  the  coordination  of  local  decarbonisation  plans  would  be 
beneficial  in  involving  different  types  of  stakholders  in  the  planning  process.  Furthermore, 
building  staff  competences,  is  a  crucual  element  to  provide  capacity  at  local  level  for  the 
development of decarbonisation plans. 

Guidance for local authorities on heat planning is important and should be provided by national 
authorities or at the European level. Dedicated financing and human resources for small and 
medium size local authorities is of paramount importance (such as through the Just Transition 
Fund).  Finally,  rural  communities  with  low  population  densities  would  probably  require 
dedicated programmes. 

Municipal Energy Planning 

A  Municipal  Energy  Plan  is  a  planning  tool  that  allows  municipalities  to  plan  local  energy 
conditions for a more flexible and energy efficient energy system. The planning must, among 
other things, help to systematically explore the possibilities of promoting renewable energy and 
energy savings, as well as help to utilize the potentials in a socially appropriate way. Municipal 
Energy  Planning  encompasses  all  forms  of  energy  consumption  and  energy  supply  in  all 
sectors  (households  municipal  and  other  public  service,  private  service,  manufacturing, 
transport). 

Usually,  municipalities  are  not  yet  required  to  meet  a  specific  target  in  reduction  of  CO2 
emissions  and  renewable  energy  share  in  the  H&C  sector,  although  there  is  currently  an 
increasing number of ambitious municipalities and cities.  Commonly seen is a target of 100% 
renewable  energy  share  in  DHC,  where  the  heat  would  be  produced  from  biomass  boilers 
(straw, wood pellets or wood chips), solar heating, electrical boilers, heat pumps (based on air, 
seawater,  wastewater  or  surplus  heat)  and  geothermal  energy.  100%  renewable  energy 

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EUROPEAN COMMISSION 

shares at the municipal level (within the geographical boundaries of a given municipality) is 
often  difficult  to  reach  as  municipal  options  to  act  and  local  resources  remain  limited.  E.g. 
replacing oil furnaces and individual natural gas boilers with individual heat pumps requires 
the will and investment from house owners, not from the municipality.  

In  energy  planning,  the  municipality  can  play  several  important  roles  to  influence  the 
development  in  the  energy  field.  Depending  on  the  national  (and  regional)  context,  the 
municipality  can  be  a  company,  a  planning  and  approval  authority,  the  owner  of  utilities,  a 
facilitator, or an information provider (raising awareness). In some cases, the municipality has 
a direct opportunity to take action and develop concrete projects, while in other cases it would 
act via its network and would then play a coordination role. Another key role of the municipality 
is  to  make  sure  low-income  households  are  sufficiently  supported  and  facilitated  in  the 
decarbonisation of their H&C systems and that this transition does not generate or aggravate 
energy poverty. 

Process to prepare a Municipal Energy Planning 

Municipal Energy Planning can be divided into four main steps, which should certainly done 
through an iterative process with interactions and loopbacks between the different steps. Many 
municipalities may already have worked on several components of the entire process, possibly 
in another context, while a few know quite well how to deliver Municipal Energy Plans. In any 
case,  it  is  crucial  to  build  on  existing  work  and  utilize  the  experience,  the  plans,  the  built 
knowledge and existing networks. 

 

times 

important 

In the initial step, the Municipal Energy Planning process is organized. The political 
willingness  is  the  starting  point,  and  decision  makers  should  be  involved  at 
the  municipality's 
strategically 
stakeholders at the earliest stage is usually seen as a second key success factor, 
building on the identification of stakeholders and cooperation opportunities within 
and  outside  the  municipal  boundary.  Thirdly,  this  step  will  also  define  the  main 
strategic (and political) principles that will guide the process, answering the main 
questions  regarding  the  decarbonisation  of  H&C  and  of  the  energy  system. 
Fourthly, it will define the long-term goal to be achieved; 

the  process.  Engaging 

in 

  During  the  mapping  step,  data  is  collected  regarding  the  current  situation  of  the 
municipality's  energy  consumption  and  supply,  to  prepare  a  reference  scenario. 
Data gathering should also support the next step and include an assessment of the 
potential  for  renewable  within  the  borders  of  the  municipality  and  outside,  the 
energy  performance  of  the  building  stocks  and  performance  improvement 
possibilities,  increased  energy  efficiency  in  small  and middle size industry  (large 
industries will also require the involvement of national authorities in most cases), 
the existing infrastructure, and all local constraints and challenges; 

  The analysis step confirms the decarbonisation goals and vision, and therefore it 
includes  a  review  of  the  municipality's  starting  point  and  ongoing  projects,  and 
subsequent analysis and prioritization of decarbonisation opportunities towards the 
goal and vision. This is then used to set up scenarios on the steps and milestones 
to reach the long-term goals. A specific guidance for municipalities to develop these 
scenarios will be needed to give clear direction; 

  The planning and implementation step articulates all actions to achieve the target 
and goals, forming the basis to prepare the Municipal Energy Plan in connection 
with municipal investment projects, urban developments, approval of projects, or 
other climate actions; 

  During  these  steps,  municipalities  can  also  analyse  to  what  extent  the  broader 
national framework  (legal,  regulatory,  markets,  infrastructure)  enables or hinders 
them in implementing decarbonisation plans and actions, and how discrepancies 
with national framework and shortcomings or gaps can be addressed.  

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Spurring Municipal Heat Planning 

As suggested earlier, a national legal framework (e.g. Heat Act) could mandate municipalities 
to prepare and implement a Municipal Heat Plan, as part of a Municipal Energy Planning , in 
close  collaboration  with  gas  and  electricity  DSOs  (and  where  needed  TSOs)  to  ensure  the 
infrastructure is at the core of the planning. For instance, such a framework could give them 
more responsibility  in climate  action;  mandate them  to  phase  out fossil fuels;  municipalities 
with more than 10.000 inhabitants could be obliged to carry out such Municipal Heat Planning 
with a full decarbonisation target; they could become responsible for setting up knowledge and 
learning programmes; they could be obliged to study DHC infrastructure development in the 
case of any intervention (telecommunication, waste water, electricity, gas, …); they could be 
obliged  to  ensure  the  integration  of  renewable  energy  and  waste  heat  recovery  in  their 
territorial policy and plans; municipalities should streamline the permitting procedures allowing 
a  timely  and  predictable  set  of  infrastructures  and  interconnections...  The  other  side  of 
increased responsibility is the need to equip municipalities with the necessary new resources 
(personnel,  financial,  training,  skills,  capacities)  to  deal  with  their  tasks  associated  with 
Municipal Heat Plans.  

The  Municipal  Heat  Plan  can  be  considered  a  tool  to  prioritise  which  heat  supply  solutions 
must subsequently be analysed in more detail in accordance with a national vision regarding 
the decarbonisation of the H&C sector. Through the Municipal Heat Plan, the municipality can 
ensure that the increasing interdependency between sectors (sector coupling) is reflected in 
both long-term heat planning and the planning in other sectors. As previously described, the 
district heating sector may have a special role in providing flexibility to the energy system.  

In other parts of the energy system, the municipality does not have many competences and 
options to act, although they have a number of potential opportunities for promoting long-term 
development  towards  a fossil-free  energy  supply,  which is  why  Municipal  Energy  Plans  are 
also useful for municipalities to integrate the rest of the energy system. 

The process to prepare and implement a Municipal Heat Plan could be driven by the following: 

  A National regulatory framework regarding municipal heat planning must define the 

authority role and mandatory tasks; 

 

 

It should be driven by political engagement with a strong impetus from the national 
ambition, to ensure resources and commitment to heat planning, which is not only 
an administrative task (although administration role is central); 

It should contribute to the LTRS and NECPs objectives and actions; 

  All  interested  parties  should  be  involved  in  the  preparation  process  to  have  all 
necessary data available and to get a concrete commitment in the vision and action 
plan: real estate, system operators, architects, planners, construction companies, 
building occupants, social housing, industry, agriculture, authorities, administration, 
regulator and infrastructure operators; 

  All  non-sensitive  building  information  and  sensitive  energy  consumption  data 
should  be  made  available  to  municipal  workers  with  heat  planning  and  energy 
optimization. The respect to GDPR is therefore essential;  

  Capacity  building  is  part  of  the  process,  and  also  knowledge  sharing  among  all 

stakeholders involved in heat planning; 

 

Integrating all private initiatives related to H&C decarbonization; 

  Securing the financing of the required investments 

  Setting  up  multilateral  municipal  coordination  groups  and  educational  programs, 
also  ensuring the representativeness of  all  groups  of  society  (citizen,  enterprise, 
agriculture, system operator, …). Public consultation should also be at the core of 
the process; 

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EUROPEAN COMMISSION 

  A  key  step  is  to  decide  on  common  H&C  planning  assumptions  (also  based  on 
generic  assumptions  like  technology  cost  ),  to  support  setting  the  baseline,  and 
possible developments;  

 

If DHC is considered necessary to meet climate targets, this should be facilitated 
at  the  municipal  level,  therefore  requirements  for  zoning  (perhaps  including 
mandatory connection) should be considered. Conditions for heat recovery options 
should be developed so that the risk for lock-ins is mitigated; 

  Coordination  is  necessary  between  all  infrastructure  operators,  especially  when 
synergies  (or  system  integration)  are  expected,  at  the  earliest  stage  of 
development.  All  operators  should  be  concerned:  electricity  network,  DHC,  gas, 
industrial and commercial zoning, urban infrastructure; 

63 

 
 
 
5. Conclusions 

The decarbonisation of the heating and cooling sector (H&C) is pivotal for the success of the 
transition to a climate neutral energy system, given the central role of H&C in energy demand. 
This  change  in  the  H&C  sector  will  require  strong  action  and  adequate  coordination, 
addressing simultaneously the reduction of energy use and the deployment of renewable 
based heating and cooling solutions.  

The transition can build on a broad set of energy sources, carriers, infrastructure types and 
end-use technologies, depending on local needs and considering the benefits, constraints and 
risks of each solution. As such, there is no “fit-for-all” solution, nor a single option that would 
realise the full decarbonisation of H&C, but rather a set of diversified and combined options, 
complementing each other and balancing each other’s disadvantages and risks. Pathways to 
a fully decarbonised H&C systems will differ and depend on the specific conditions of each 
Member  State,  region,  municipality  and  even  district.  Some  pathways  could  centre  around 
electrification through the use of heat pumps, whereas others might focus on district heating & 
cooling, and/or exploit different sets of heat-sources from ambient, geothermal, solar energy 
sources, where possible heat/cold recovery from waste heat/cold, and/or exploit various types 
of bioenergy and biogas combined with renewable fuels of non-biological origins (RFNBOs). 
The  different  energy  sources,  carriers,  related  infrastructure  and technologies  will  all  play  a 
role to various degrees in each Member State’s specific mix. The selection of the most suited 
and  balanced  mix  will  vary  between  countries  and  even  regions,  depending  on  resource 
availability and other local parameters, including the heating/cooling demand pattern, existing 
infrastructure, and cost considerations.  

Today, natural gas is one of the dominant fuels used for heating in the EU. As recently stated 
by the EC in its Communication on the Gas Package, “In line with the policy scenarios that 
underpin the “Fit for 55” initiative, biogas and biomethane, renewable and low-carbon hydrogen 
and  synthetic  fuels  (E-gas)  will  gradually  replace  fossil  natural  gases”.  The  same 
communication also recognises that “In most areas, direct electrification will be the most cost-
effective  and  energy-efficient  way  to  decarbonise  final  energy  demand… ”,  while  “  … 
electrification  is  not  feasible  in  all  sectors.  Some  will  continue  to  rely  on  gases”.  This 
emphasizes that governments should not aim to count on fully replacing existing natural gas 
demand with renewable gases, but rather deploy the valuable yet limited supply of renewable 
gas in sectors where there are not many viable alternatives.  

A central aspect of H&C decarbonisation is setting clear goals and objectives, and having 
clear  plans at  national,  regional  and  local level  as  regards  what the cheapest  and most 
environmentally sustainable resources and solutions are, and how to implement, finance and 
maintain them. This is crucial to coordinate the many actors concerned by heating & cooling 
systems,  including  end  users  such  as  building  occupants/owners  and  industries,  energy 
suppliers  and  service  providers,  system  operators,  equipment  manufacturers,  installers, 
architects,  engineering, and  municipalities.  The planners  (e.g.  public  authorities, regulators, 
system operators, architects, builders, …) should take into account the need for coordinated 
action,  not  only  in  the  H&C  supply  but  also  on  the  demand  side.  Among  others,  adequate 
planning should address energy resource availability, total energy system cost, a level playing 
field with incumbent fossil-based options, contribution to energy system flexibility, sustainable 
sourcing,  decisions  regarding  (dis)continuation  of  existing  infrastructure,  heat  and  cold 
demand patterns  and  state  of the  building  stock, technical  constraints,  but  also  consumer’s 
interests and preferences. 

Integrated  H&C  decarbonization  planning  is  required,  with  three  main  dimensions  of 
integration. Firstly, all parties involved in the energy transition,  such as decision makers, as 
well  as  all  relevant  stakeholders  from  the  energy  system,  the  building  sector,  industry  and 
households should be involved as they all have a specific role to play in the process. Secondly, 
all decision levels need to be engaged, to ensure the link between the macro level giving the 
main  direction  (and  market  framework)  and  the  local  or  micro  level  having  an  important 

64 

 
 
EUROPEAN COMMISSION 

influence on the way the infrastructure and the local market systems should be shaped. Thirdly, 
to avoid additional  workload and  ensure  policy  coherence,  especially for local  authorities  in 
charge of local planning, the integration should build on existing energy and territorial plans, 
or any plans related to H&C infrastructure. 

Therefore, providing the local authorities with the right levers and tools to start such H&C 
decarbonisation planning, in close collaboration with the national authorities, should no longer 
wait,  as  it  is  a  key  step  towards  the  long  term  full  decarbonisation  of  the  H&C  system. 
Furthermore,  policy  measures  and  instruments  to  promote  the  transition  in  the  H&C 
sector  should  be  urgently  implemented,  where  possible  by  reinforcing  current  policies. 
Taking the appropriate measure to introduce a level playing field for renewable based solution 
should  be  seen  as  the  priority,  certainly  by  removing  any  subsidies  and  benefits  for  fossil-
based  systems  and  energy  carriers.  Ideally,  the  risks  for  stranded  assets  should  also  be 
evaluated for such measures, to ensure compliance with long-term climate goals and secure 
efficient investments. 

Finally, a larger workforce and additional skills are needed along the value chain, to get 
the  decarbonisation  of  H&C  implemented.  The  pace  of  energy  renovation  in  the  coming 
years/decades should accelerate dramatically, which requires major upscaling efforts across 
sectors,  including  the  training  and  upskilling  of  construction  workers,  but  also  architects, 
planners,  installers  and engineers.  Coordination and collaboration  between  professionals  is 
essential, to mainstream energy efficiency and renewable deployment in a comprehensive and 
integrated way. When it comes to the design and installation of renewable H&C systems, it is 
essential that service providers have expertise on all relevant technologies and can combine 
them to deliver tailored solutions that are optimized for each specific context. Energy service 
companies  supporting  the  consumers  and  authorities  at  national,  regional  and  local  levels 
should be reinforced. 

65 

 
 
 
ANNEX 1: Meta-Study 

Policy Support for Heating and 
Cooling Decarbonisation 

Meta-study 

Part 1: Strategies and policies for decarbonising heating and 
cooling in buildings 

Part 2: Decarbonising industrial heating and cooling 

Part 3: Technologies and infrastructures 

66 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EUROPEAN COMMISSION 

Contract details 

European Commission – DG Energy C.1. 

Policy Support for Heating and Cooling Decarbonisation (Ref. Ares (2019) 738582)  

No. ENER/C1/2018-495 

Presented by 

Consortium led by: 

Trinomics B.V. 

Westersingel 32A 

3014 GS, Rotterdam 

the Netherlands 

Contact main author(s) 

Sibylle Braungardt (Oeko-Institut) 

s.braungardt@oeko.de 

Date 

Rotterdam, December 2021 

67 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rotterdam, 29 Sept 2020 

Client: European Commission – DG Energy C.1 

Tenders No. ENER/C1/2018-495 

Policy Support for Heating and Cooling Decarbonisation 

In association with: 

Authors: 

Sibylle Braungardt, Benjamin Köhler, Irina Ganal (Oeko-Institut) 

Liliana Guevara Opinska, Tycho Smit, Koen Rademaekers (Trino

68 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
69 

 
 
Policy  Support 
Cooling Decarbonisation 

for  Heating  and 

Meta-study 

Part 1: Strategies and policies for decarbonising heating and 
cooling in buildings 

70 

 
 
 
 
 
EUROPEAN COMMISSION 

1. Introduction to the Meta-study 

The decarbonisation of heating and cooling (H&C) is a key priority for meeting the EU energy 
and climate targets. H&C account for about half of the final energy demand in the EU, with 
almost 80 % of the demand provided by fossil fuels81.  

With  heating  in  buildings  accounting  for  about  30 %  of  the  EU  energy  demand  of  the  H&C 
sector82, strategies are needed to accelerate the retrofit of buildings and the transition to zero-
carbon heating and cooling supply. At the EU level, the ‘Fit-for-55’ package includes proposals 
for strengthening the provisions for the decarbonisation of this sector across several directives: 
The  proposal  for  the  revision  of  the  Renewable  Energies  Directive83  (RED)  foresees  a 
strengthening of the target for increasing the share of renewable energy in H&C (Art. 23) as 
well as the introduction of a new target for the buildings sector (Art. 15). The proposal for the 
revised Energy Efficiency Directive84 (EED) foresees strengthening the requirements for public 
buildings (Art. 5), as well as provisions for energy efficiency obligations (Art. 7). The proposal 
for the revision of the EU Emissions Trading System (ETS) in the ETS Directive85 introduces 
a separate ETS for heating and road transport. The proposal for the revision of the Energy 
Performance  of Buildings  Directive  (EPBD)86  provides  a framework for  introducing  Minimum 
Energy  Performance  Requirements  (MEPS)  for  existing  buildings,  whose  potential  role  for 
substantially  increasing  the  renovation  rate  was  highlighted  in  the  Renovation  Wave 
Communication87. In addition, the revision of the Ecodesign and Energy Labelling regulations 
for boilers and water heating are currently ongoing. Along with a strengthening of requirements 
for  decarbonising  buildings,  the  new  funding  schemes  in  the  context  of  the  Multiannual 
Financial Framework and the Next Generation EU programme (NGEU) provide the opportunity 
to support the investments necessary to transform the sector. 

In the context of the dynamic policy developments in the sector, a large body of literature has 
been developed by scientific institutions and think tanks in recent years, covering a variety of 
aspects related to the transition of the heating and cooling sector.  

The meta-study collects the background scientific literature that informed the preparation of 
the heating and cooling decarbonisation Roadmap, which is one of the deliverables under this 
project. In addition, the aim of the meta-study is to support stakeholders and decision-makers 
involved  in the  decarbonisation of  heating  and  cooling  in  the  EU  and  its Member  States by 
providing an overview of the scientific knowledge base. The meta-study reviews recent studies 
addressing  the  decarbonisation  of  the  sector.  The  studies  were  identified  by  searching  the 
CORDIS and Web of Science databases and through internet research. 

The meta-study consists of three parts: 

  Part I: Strategies for the decarbonisation of H&C in buildings, covering an overview of 
studies providing modelling pathways at EU level, contributions assessing policies and 

8181 According to the Eurostat SHARES data, the share of renewable energies in H&C was 22%. 

82 See https://heatroadmap.eu/wp-content/uploads/2019/03/Brochure_Heating-and-Cooling_web.pdf 

83  RED  proposal :  https://ec.europa.eu/info/files/amendment-renewable-energy-directive-implement-ambition-new-2030-climate-
target_en 

84 EED proposal: https://ec.europa.eu/info/files/proposal-directive-energy-efficiency-recast_en 

85 ETS proposal: https://ec.europa.eu/info/files/revision-eu-emission-trading-system_en 

86 EPBD proposal: https://ec.europa.eu/energy/sites/default/files/proposal-recast-energy-performance-buildings-directive.pdf 

87 https://ec.europa.eu/energy/sites/ener/files/eu_renovation_wave_strategy.pdf 

71 

 
                                                 
financing  strategies  as  well  as  national  strategies  for  the  decarbonisation  of  heating 
and cooling.  

  Part  II:  Decarbonising  industrial  heating  and  cooling,  covering  studies  addressing 

decarbonisation strategies for process heat. 

  Part  III:  Energy  carriers  and  infrastructure,  covering  an  overview  of  the  different 
decarbonisation  options  including  heat  pumps,  biomass,  solar  thermal,  geothermal, 
hydrogen  and  e-fuels  as  well  as  the  studies  addressing  sector  coupling  and 
infrastructures.  

This section presents part I of the meta-study, reviewing recent works addressing pathways, 
policies  and  strategies  for  the  decarbonisation  of  heating  in  buildings.  The  meta-study  was 
conducted between January 2020 and September 2021. Error! Reference source not found. 
provides an overview of the studies contained in this part of the meta-study. 

Chapter 2 provides a synthesis of the analysis of the studies. Chapter 3 includes summaries 
of the individual studies. 

Overview of studies reviewed in Part I: Strategies for decarbonising heating in buildings 

Table 1 

Transition pathways at EU level 

1 

2 

3 

4 

5 

6 

GHG-neutral EU2050 – a scenario of an EU with net-zero greenhouse gas emissions and its 
implications (UBA 2019) 

Towards fossil-free energy in 2050 (Element Energy and Cambridge Econometrics 2019) 

Mapping and analyses of the current and future (2020 - 2030) heating/cooling fuel deployment 
(fossil/renewables) - Work package 3: Scenarios for heating & cooling demand and supply until 
2020 and 2030; Work package 4: Economic Analysis (Fraunhofer ISI et al. 2017a)(Fraunhofer ISI 
et al. 2017b) 

Hotmaps (Aalborg University et al. 2020) 

Decarbonisation pathways (Eurelectric 2018) 

Towards a decarbonized heating and cooling sector in Europe 

 (Aalborg University 2019) 

Policies and Strategies 

7 

8 

9 

Lessons learned to inform integrated approaches for the renovation and modernisation of the built 
environment (BPIE et al. 2021) 

Renewable Heat Policies. Delivering clean heat solutions for the energy transition (IEA 2018) 

Mapping and analyses of the current and future (2020 - 2030) heating/cooling fuel deployment 
(fossil/renewables) - Work package 5: Barriers, Best Practices and Policy Recommendations 
(Fraunhofer ISI et al. 2017c) 

10 

Best practice in heat decarbonisation policy: A review of the international experience of policies to 
promote the uptake of low-carbon heat supply (UKERC 2016) 

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EUROPEAN COMMISSION 

11 

12 

13 

14 

progRESheat: Policy recommendations to decarbonise European heating and cooling systems 
(Fraunhofer ISI et al. 2017e) 

Policies to enforce the transition to nZEB: Synthesis report and policy recommendations from the 
project (TU Wien et al. 2014) and Overview and assessment of new and innovative integrated 
policy sets that aim at the nZEB standard (Bürger 2013) 

National restrictions on fossil fuels in heating systems in the context of the Ecodesign Directive 
(Öko-Institut and Klinski 2021) 

Filling the policy gap: Minimum energy performance standards for European buildings 
(Sunderland and Santini 2021) 

15 

Minimum energy efficiency standards for a fair energy transition (BPIE and RAP 2018) 

16 

Policy proposals and concepts for tools of the Green paper on good practice in EPC assessment, 
certification, and use (QualDeEPC 2021) 

17 

Next-generation EPC’s user and stakeholder requirements & market needs (D2EPC 2021) 

18 

19 

The Concept of the Individual Building Renovation Roadmap – An in-depth case study of four 
frontrunner projects (iBROAD 2018) 

Pricing is just the icing: The role of carbon pricing in a comprehensive policy framework to 
decarbonise the EU buildings sector (Thomas et al. 2021) 

20 

Efficient District heating and cooling systems in the EU (Tilia 2016) 

21 

22 

23 

24 

Transition Zero - Make Net Zero Energy Refurbishments for Houses a Mass Market Reality: 
Position Paper on Funding Instruments (Energiesprong 2017) 
Report on Market Assessment and Bottlenecks (Energiesprong 2018) 

Low-carbon heating of homes and businesses and the Renewable Heat Incentive (National Audit 
Office 2018) 

Evaluating the renewable heating and efficiency obligation for existing buildings – insights into the 
mechanisms of mandatory building requirements (Pehnt et al. 2019) 

ZEBRA 2020 – Nearly zero energy building strategy 2020 (TU Wien - Energy Economics Group 
et al. 2016) 

73 

 
25 

Building  sector  Efficiency:  A  crucial  Component  of  the  Energy  Transition  (Agora  Energiewende 
2019) 

26 

Building energy renovation for decarbonisation and Covid-19 recovery (Zangheri et al. 2020) 

27 

Digitalisation: Opportunities for heating and cooling (JRC 2019) 

Financing 

28 

De financiële gevolgen van de warmtetransitie: Een onderzoek naar de investeringsuitdaging, 
effecten op energie-betaalbaarheid en het potentieel van (nieuwe) financieringsvormen (ECORYS 
2019) 

29 

Financial Incentives for Renewable Heating and Cooling (EREC 2007) 

30 

Identification of EU funding sources for the regional heating and cooling sector (PNO Consultants 
2019) 

31 

Matching money with green ideas (Agora Energiewende 2021) 

32 

Innovative financing schemes (Covenant of Mayors 2019) 

33 

Policy developments in the EU and strategies for P4P business models (SENSEI 2021) 

National Strategies 

34 

Climate Agreement (Netherlands) (Ministerie van Economische Zaken en Klimaat 2019) 

35 

Heat Transition 2030 (Agora Energiewende 2017) 

36 

Energy Efficiency Strategy for Buildings (BMWi 2015) 

37 

Systemic challenges of Germany's heat transition (Fraunhofer ISE et al. 2020)  

38 

French strategy for energy and climate (Ministière de la transition écologique et solidaire 2018) 

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2. Synthesis of Findings: Part I 

2.1. Decarbonisation pathways 

The meta-study reviews recent modelling studies projecting pathways for the decarbonisation 
of  space  heating  (see  Table  1).  While  the  transition  pathways  differ  in  the  level  of  detail, 
approaches,  scope  and  technological  focus,  the  analysis  aims  to  assess  the  key  elements 
required for the transition: The reduction of energy demand and the role of energy efficiency 
measures (Section 2.2.1), the share of renewable energy sources (Section 2.1.2), the supply 
structure  (Section  2.1.3),  the  level  of  electrification  (Section  Error!  Reference  source  not 
found.) and the role of synthetic gases (Section 2.1.5). 

2.1.1. Reduction of energy demand 

The reduction of the energy demand in buildings is seen as key for achieving the long-term 
greenhouse gas (GHG) reduction goals. Reducing the energy demand by enhancing energy 
efficiency also prepares the ground for a large-scale application of renewables in the heating 
sector  by  reducing  the  needed  temperatures  in  the  heating  systems  of  buildings  (Element 
Energy  and  Cambridge  Econometrics  2019).  The  reduction  of  heating  demand  until  2050 
ranges  between  28  and  47 %  compared  to  2015  in  the  various  studies  (excluding  process 
heat). The highest overall reduction of 47 % by 2050 is reported in (UBA 2019), with space 
heating demand being reduced by almost 60 %, water heating by 13 % and space cooling by 
5 %. Simultaneously, the final energy demand for ventilation is increased by 1,500 %. In the 
project  Hotmaps  (Aalborg  University  et  al.  2020;  TU Wien  et  al.  2019)  a  reduction  of  28 % 
(current  policy  scenario)  and  35 %  (ambitious  policy  scenario)  for  heating  and  cooling  is 
expected. Space heating will still have a share of 66 to 71 % in the total final energy demand 
for  heating  and  cooling  in  residential  and  non-residential  buildings.  The  share  of  cooling 
increases from 2 % to 8-9 % and the share of hot water from 13 % to 19-22 %. 

Key elements for achieving a reduction of energy demand are the increase of the  rate and 
depth  of  renovations  of  buildings  as  well  as  a  switch  to  highly  efficient  heat  and  cold 
supply technologies. In addition, it is essential that new buildings are constructed in a way 
that the energy demand is minimised, and the remaining energy demand is supplied to a large 
extent by on-site renewables. With regard to the increase of the renovation rate, the study 
GHG-neutral EU2050 (UBA 2019) assumes an increase of the refurbishment rate from 1 % to 
2.5 %  in  non-residential  buildings  and  to  2.75 %  in  residential  buildings.  Thereby,  the  final 
energy demand for space heating decreases by 25 % every five years, starting from 2020.  

All studies assume an increase of the minimum efficiency standards for thermal retrofits. 
In  (UBA  2019),  starting  from  a  maximum  energy  consumption  of  80 kWh/(m²a)  in  2015,  a 
reduction by 25 % is assumed every five years starting in 2020. With regard to new buildings, 
(UBA 2019) assumes that all new buildings achieve a “passive house” space heating demand 
of  15 kWh/(m²a)  from  2040  onwards,  while  the  other  studies  do  not  explicitly  specify  the 
assumptions regarding buildings standards for new buildings.  

2.1.2. Transition of the energy mix 

The  assessed  studies  strongly  differ  in  the  rating  of  different  renewable  energy  sources, 
especially  regarding  the  use  of  biomass  in  the  (building)  heating  sector.  While  the  use  of 
biomass for space is reduced from 528 TWh to 39 TWh in GHG-neutral EU2050 (UBA 2019), 
the share of biomass in the overall heating and cooling supply is assumed to increase until 

75 

 
 
2030 in (Fraunhofer ISI et al. 2017b) and biomass is still seen as the most important renewable 
energy source in 2050 in Hotmaps (TU Wien et al. 2019). In all studies, a strong increase of 
the  use  and  share  of  solar  thermal  energy  and  heat  pumps  is  expected.  In  Hotmaps,  heat 
pumps are seen as the dominating technology for heat supply especially in rural areas; they 
provide about 63 % of the final energy demand for heating. The remaining 32 % are provided 
by geothermal, solar thermal, biomass and secondary fuels like biofuels, hydrogen (H2) and 
district heat. In (UBA 2019), solar thermal is expected to cover 14 % of the heating and 19 % 
of  the  hot  water  demand  and  electrical  heat  pumps  8 %  of  heating  and  24 %  of  hot  water 
demand.  

Synthetic  gases  and  fuels  are  an  option  to  store  electricity  from  fluctuating  renewable 
generation seasonally and furthermore make renewable energy available in sectors which are 
difficult  to  electrify  directly.  However,  the  importance  of  synthetic  gases  and  fuels  for 
decarbonising  the  building  and  district  heating  sectors  differs  among  the  studies.  In  (UBA 
2019), results show that renewable fuels cover 230 TWh or 16 % of the heating demand and 
10 %  of  the  hot  water  demand  in  2050.  However,  buildings  only  account  for  5 %  of  the 
renewable  fuel  demand,  while  demand  from  the  industry  reaches  almost  1,000 TWh  for 
process  heat  and  almost  another  1,200 TWh  for  feedstocks.  Overall,  the  industry  sector  is 
responsible for 45 % of renewable fuel demand. The conversion sector uses another 800 TWh 
for peak gas turbines and district heating. The importance of synthetic gases is highlighted in 
(Element Energy and Cambridge Econometrics 2019) for countries with seasonal fluctuations 
in heat demand like in central and northern Europe. In these areas it is favourable to produce 
hydrogen in periods of high renewable electricity supply, which can then be stored for use in 
periods with high heat demand. 

In addition to the need for seasonal storage, developments until 2030 could lead to lock-ins if 
there  are  still  many  gas-burning  technologies  being  installed  in  buildings,  which  have  a 
technical lifetime of 20 years, but are often used much longer. In mapping and analyses of the 
current  and  future  (2020  -  2030)  heating/cooling  fuel  deployment  (fossil/renewables),  the 
current policy scenario shows that natural gas is still the dominating fuel in heating and cooling 
with a share of approx. 40 %, which either has to be replaced by fuel-switch within 20 years, 
or at least partly be supplied by renewable gases. 

2.1.3. Electrification 

Electrification  plays  an  important  role  in  most  of  the  scenarios,  and  electricity  demand  for 
heating  is  expected  to  increase  considerably.  An  increase  in  electricity  demand  of  50 %  is 
calculated in (UBA 2019), while in (Eurelectric 2018) the assessed scenarios show that 38 % 
to 60 % of the final energy consumption is directly electrified and 45 % (Scenario 1) to 63 % 
(Scenario 3) of the building energy consumption could be supplied by electricity (mainly electric 
heat pumps). In contrast, the current policy scenario of the study Mapping and analyses of the 
current and future (2020 - 2030) heating/cooling fuel deployment (fossil/renewables) expects 
a decrease of the electricity demand (for heating and cooling) of 7 %. 

Besides  investments  in  electricity  driven  heat  generation  technologies,  investments  in  the 
electricity grid are essential. Even though large investments are needed, the study Towards 
fossil-free energy in 2050 shows that electrification scenarios lead to the lowest annual costs 
associated with the transition to a net-zero emission energy system with lowest costs achieved 
in scenarios with a focus on demand side flexibility. This is related to lower needs in terms of 
electricity generation capacity as well as lower transport capacity requirements. 

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2.1.4. District heating 

While  final  energy  demand  covered  by  district  heating  is  assumed  to  decrease  in  absolute 
values  in  most  scenarios,  the  studies  highlight  the  importance  of  district  heating  for  the 
decarbonisation of the heating sector especially in urban areas. The highest share of district 
heating is found in the study (Aalborg University 2019), in which a share of about 50 % in the 
final  energy  demand  for  heating  is  assumed.  In  all  scenarios,  the  importance  of  integrating 
district  heating  systems  and  the  installed  supply  technologies  in  the  overall  energy  system 
(sector coupling) is emphasised. In this regard, a fuel switch to electricity driven technologies 
like large-scale heat pumps is an essential part for decarbonising the heat supply and providing 
flexibility  to  the  electricity  grid  needed  for  integrating  fluctuating  renewable  electricity 
production. Furthermore, CHP capacities are needed to generate electricity when needed in 
the grid. However, the fuels used in CHP plants will switch from mainly coal and natural gas to 
partly biomass and waste as well as synthetic and renewable fuels.  

  Focused local policy and coherence with urban planning: energy supply must be 
integrated  in  long-term  urban  planning  (including  zoning  for  different  heat  and  cold 
supply options), focus on compact and mixed-used districts, mandatory connection to 
grid (if possible and economically feasible) 

  Alignment  of  interest/  cooperation  maturity  between  DHC  operators,  consumers 

and municipality/ local authority 

2.2. Policies and strategies 

The studies included in the meta-study identify a multitude of barriers for the decarbonisation 
of H&C, including economic barriers (high investment costs, low prices for fossil fuels, lack of 
economies of scale resulting in higher prices), structural barriers (split incentives, lack of supply 
chains),  technical  barriers  (suitability  of  the  building  stock  and  process  heat  technologies), 
psychological barriers (lack of awareness, hassle factor) and a lack of data at various levels 
(IEA 2018).  

These multiple barriers need to be addressed by multiple policy instruments, working together 
in a consistent policy set. Several studies included in the meta-study identify the need for an 
integrated  policy  mix  including  regulatory,  economic  and  other  complementary  policies 
(Fraunhofer ISI et al. 2017e; IEA 2018; BPIE et al. 2021; UKERC 2016; Fraunhofer ISI et al. 
2017c; Thomas et al. 2021). 

The following subsections provide an overview of the findings across several elements of the 
decarbonisation of heating in buildings. 

2.2.1. Reduction of energy demand 

Increasing  energy  efficiency  in  buildings  is  key  for  the  cost-optimal  achievement  of  climate 
targets (Agora Energiewende 2019). If less energy savings in buildings are achieved, more 
renewable  energy  must  be  generated,  heat  pumps  run  with  lower  efficiency,  and  more 
synthetic fuels must be supplied. Due to the long lifetimes of building components, this requires 
immediate  action  in  the  building  sector.  Energy  efficiency  in  buildings  reduces  the  overall 
economic costs including the expenditure for energy generation and distribution and efficiency 
measures 
low-temperature  applications  (Agora 
Energiewende  2019).  To  this  end,  an  efficiency  roadmap  including  long-term  goals  for  the 
building stock is an essential component to avoid lock-in effects.  

in  buildings  are  a  door-opener 

for 

77 

 
 
Nearly zero-energy buildings and minimum energy performance standards 

A key challenge is the increase of the energy efficiency by deep renovations of existing 
buildings. All assessed studies highlight the importance of establishing and defining binding 
long-term efficiency targets for new and existing buildings. 

New  buildings  must  be  “nearly  zero-energy  buildings”  (nZEB)  as  defined  in  the  Energy 
Performance of Buildings Directive (EPBD). The exact definition of an nZEB is developed at 
the Member State level. An overview of the status of the implementation and definition of the 
nZEB standard as well as the nZEB market development is presented in (TU Wien - Energy 
Economics Group et al. 2016). The study shows that it is essential to have a clear and shared 
long-term vision for the building stock at Member State level, but also for the whole EU. 
This is of major importance to define suitable and target-compatible nZEB definitions and 
thereby guarantee that future-proof buildings are constructed.  

For existing buildings, Minimum Energy Performance Standards (MEPS) are seen as a  key 
instrument to drive renovations aligned with the EU climate targets  (Sunderland and Santini 
2021; BPIE et al. 2021). MEPS can help overcome important barriers when introduced as part 
of  a  comprehensive  renovation  policy  framework  including  financial,  technical  and  practical 
support and measures to limit the burden especially for low-income households (BPIE et al. 
2021). MEPS for rented buildings have the potential to support a fair transition by alleviating 
energy poverty and providing health benefits (BPIE and RAP 2018). Regarding the market for 
building  renovations,  MEPS  produce  a  “demand  floor”  for  renovation  finance  and  create 
continuity, predictability and scalability in the market by helping to align the demand and the 
supply  chains  (BPIE  et  al.  2021).  With  MEPS  typically  being  defined  based  on  the  energy 
classes provided in energy performance certificates, it is essential to enhance their quality and 
foster their deployment (see Section 0).  

Energy performance certificates 

Energy  performance  certificates  and  building  renovation  passports  are  seen  as  important 
instruments not only as a supporting tool to introduce MEPS but also to increase motivation 
and acceptance for deep retrofits among building owners (BPIE et al. 2021). To this end, it is 
important to transform Energy Performance Certificates into Building Certificates or “Building 
Passes” considering the whole lifetime of a building, which could increase their reliability and 
credibility  (TU  Wien  -  Energy  Economics  Group  et  al.  2016).  Furthermore,  the  gathering, 
availability and harmonisation of building data and information and the introduction of digital 
building logbooks are seen as key elements (BPIE et al. 2021). 

Serial retrofit and digital technologies  

The  Energiesprong  concept  (see  (Energiesprong  2017)  and  (Energiesprong  2018))  first 
established in the Netherlands is one option to increase the refurbishment rate and thereby 
increase the energy efficiency of the existing building stock. The project Transition Zero aimed 
at establishing the right market conditions for the broad introduction and market acceleration 
of  net  zero  energy  homes  in  Europe  with  a  focus  on  the  UK  and  France.  It  built  on  the 
experience  of  the  Energiesprong  concept  in  the  Netherlands.  Five  main  bottlenecks  were 
identified in the project, amongst them high transaction costs and often poor-quality delivery 
due to a fragmented supply side, but also a lack of demand for integrated components/ solution 
sets and a lack of skilled workers. It is highlighted that chances for (deep) refurbishment usually 
only appear once in several decades and therefore the importance of policymakers addressing 
what is needed and not only what is thought to be possible is emphasised to achieve the long-
term  climate  protection  targets  at  EU  level.  A  possible  solution  is  an  energy  performance 
guarantee  at  least  for  refurbishments.  For  new  buildings,  an  efficiency  standard  of  <30 
kWh/m²a (thermal) is recommended and for refurbishment the net zero standard is suggested. 
Both should be introduced as a binding standard as soon as possible. To achieve the latter, 

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prices  for  refurbishments  must  drop  dramatically  in  order  to  ensure  that  energy  cost 
savings  cover  the  refurbishment  costs,  and  refurbishment  needs  to  be  delivered  within  a 
shorter period. 

On the side of the building end-user, building energy management systems can support the 
reduction  of  energy  demand in buildings  (JRC  2019).  Such systems  combine  software  with 
smart  thermostats  and  sensors  to  detect  behaviour  and  use  weather  forecasts  and  energy 
prices to predict energy demand and control heating and cooling. A cost-effective first step is 
to provide regular feedback (e.g. via smart meters, in-house displays, energy bills or emails). 
However,  several  studies  show  that  it  is  difficult  to  engage  households  on  energy  issues, 
especially if the information received is not clear, actionable and timely or frequent enough. 
With  new  developments  in  artificial  intelligence,  systems  can  also  increasingly  be 
interconnected  and  controlled  on  smartphones.  Thus,  artificial  intelligence  offers  the 
opportunity  to  significantly  increase  the  balance  between  energy  savings  and  user-defined 
comfort.   

2.2.2. Renewable heating 

The transition to renewable energies in decentralised heating in buildings requires a regulatory 
framework  for  phasing  out  fossil  boilers  as  well  as  economic  instruments  (Öko-Institut  and 
Klinski 2021; IEA 2018; Fraunhofer ISE et al. 2020).  

Economic instruments can address the challenge that renewable heat appliances are typically 
more expensive than fossil-based alternatives. Support can be provided by directly supporting 
the investment (e.g. through grants, loans and tax breaks), by incentivising the renewable heat 
output  through  renewable  heat  incentives  (National  Audit  Office  2018)  or  through  the 
introduction  of  bonus/malus  schemes  (see  also  Section  0).  Aside  from  investment  support, 
carbon pricing can be an important driver for increasing the viability of investment in renewable 
heating and cooling equipment (see Section 0). 

In addition, regulations to support the phase-out of fossil fuels are required to ensure target 
achievement and to support the development of the market for renewable heating and cooling 
technologies. These can be introduced as renewable heat obligations (Pehnt et al. 2019) or as 
bans for fossil fuel boilers (Öko-Institut and Klinski 2021).  

When  scaling  up  the  market  for  renewable  heating  and  cooling  technologies,  policies  that 
address the quality and technological performance are important. This includes labels, training 
for installers and the introduction of mechanisms for consumer complaints (UKERC 2016). 

Heat pumps are expected to play a leading role in future energy consumption (see Section 2). 
For heat pumps, it is important to support the development and deployment of digital solutions. 
Digitalisation potentials are seen alongside the deployment of heat pumps, where sensors are 
used  that  provide  data  on  temperature,  weather  and  electricity  prices,  as  well  as  smart 
controllers that understand the thermal behaviour of the building and the user and can provide 
this data to optimise the application (JRC 2019).  

2.2.3. Economic measures and financing  

Investment support and financing 

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Access to finance is a key consideration for many projects focused on decarbonising the H&C 
sector and significant investment is still required for the widespread deployment of renewable 
and low-carbon solutions in the sector. In this context, financial incentive schemes in the form 
of grants, loans, guarantees, etc. can facilitate the overcoming of market barriers and speed 
up the transition process in the H&C sector. They can be used to reduce upfront investment 
cost and stimulate market development and availability of RES H&C technologies among other 
benefits (EREC 2007). There is a variety of existing financing instruments including grants and 
loans  for  specific  target  groups  (involving  vulnerable  households,  elderly),  social  tariffs,  tax 
breaks and energy saving obligations (BPIE et al. 2021). Other financing mechanisms include 
renewable heat incentives (National Audit Office 2018) and fiscal measures through a bonus-
malus system, where building owners with a building that is “future-proof” (e.g. based on the 
EPC rating or building renovation passport) receives a tax credit, while buildings trailing the 
standard will have to pay a fine (BPIE et al. 2021). 

Investments in H&C projects, energy efficiency and renewable energy, still have relatively long 
payback  periods  or/and  are  perceived  as  high  risk.  In  order  to  have  a  convincing  business 
case such investments often require the maximisation of public funding. Although there are 
currently no dedicated financing instruments for H&C at EU level, a large number of generic 
energy subsidies and grants are available and can be accessed for the purpose of financing 
H&C  initiatives  (PNO  Consultants  2019).  One  reason  why  these  instruments  are  not  fully 
exploited by the sector is lack of information on the side of key stakeholders. The compilation 
and accessible description of relevant funding sources can be useful to support stakeholders 
in the field. 

Innovative  financing  instruments,  such  as  on-bill  schemes  and  energy  performance 
contracting, are promising solutions as they can leverage private sector resources, however 
such  instruments  are  still  not  mainstream.  There  is  a  lack  of  de-risking  strategies,  with 
insufficient evidence on the performance of energy efficiency investments in buildings making 
financial risk harder to assess and mobilisation of both public and private investments more 
difficult (BPIE et al. 2021). Another approach for financing energy efficiency and renewable 
energy investments in buildings are transaction models building on pay-for-performance (P4P) 
schemes, where payments for energy efficiency are based on proven and measured savings 
(SENSEI 2021) 

Innovative financing instruments that have been deployed in some municipalities and regions 
include  green  municipal  bonds,  earmarking  environmental  or  energy  taxes,  energy 
performance contracting, local energy cooperatives, soft loans for renovation projects, on-tax 
financing, third-party investments and revolving funds (Covenant of Mayors 2019). 

Energy efficiency obligations can drive the retrofit market by stimulating the development of 
new business models such as ESCOs and provide an additional income stream for renovation 
programmes (BPIE et al. 2021).  

Carbon pricing 

The need for levelling the playing field for renewable heating by introducing carbon pricing is 
highlighted  in  several  studies  (Agora  Energiewende  2019;  BPIE  et  al.  2021;  Thomas  et  al. 
2021;  UKERC  2016;  Fraunhofer  ISI  et  al.  2017d).  Carbon  pricing  increases  the  economic 
viability  of  renewable  heating  and  cooling.  However,  in  view  of the  variety  of  non-economic 
barriers,  carbon  pricing  can  only  play  a  complementary  role  in  the  transition  and  a  strong 
regulatory  framework  is  needed  (Thomas  et  al.  2021).  Carbon  pricing  can  also support  the 
transition if the revenues are used to support energy efficiency and heat decarbonisation policy 
measures.  The  emission  reductions  induced  by  revenue  recycling  to  support  investments 
deliver  emissions  savings  going  beyond  the  effect  of  the  price  alone  and  supporting  low-
income households can help to address social challenges and increase acceptance (Thomas 
et al. 2021). 

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2.2.4. Capacity  building,  qualification,  information,  motivation,  and 

advice 

The  transition  to  renewable  heating  and  cooling  requires  a  supportive  policy  framework  to 
increase awareness, skills and competences including local communication activities, the 
involvement  and  empowerment  of  consumers  and  citizens  as  well  as  addressing 
intermediaries  such  as  craftsmen,  architects  or  project  developers  (Fraunhofer  ISI  et  al. 
2017e). This  includes  1)  the  communication  of  low-carbon transformation plans  at  the  local 
level,  e.g.  by  implementing  visible  demonstration  projects;  2)  consumer  empowerment  and 
transparency of costs and benefits; 3) intensifying policies for crucial change agents such as 
craftsmen, architects and planners, e.g. through regional training programmes, the initiation of 
local  networks,  changes  in  the  education  system  for  craftsmen  and  by  addressing  change 
agents in RES policies; 4) capacity building and supporting tools for the municipal level, e.g. 
based on EU projects like ProgRESheat, Celsius and Hotmaps. Furthermore, the development 
of one-stop-shops facilitating retrofit measures are highlighted in various studies.  

Several  studies  highlight  one-stop  shops  as  important  enablers  for  increasing  the  rate  and 
depth of thermal retrofit (BPIE et al. 2021; D2EPC 2021; Boza-Kiss and Bertoldi 2018) and 
several examples of one-stop-shop approaches have been implemented in EU Member States 
(Boza-Kiss and Bertoldi 2018). 

A bottleneck for the building sector is the availability of skilled labour (Agora Energiewende 
2019). 

2.2.5. District heating 

District heating provides the possibilities of large-scale integration of renewables and is a key 
strategy for decarbonising heating especially in densely populated areas. In order to support 
the decarbonisation of heating and cooling, the expansion of district heating grids as well as a 
reduction of the grid temperatures is needed. Furthermore, a transition to renewable energies 
is required. The transition can be supported by a variety of policies (UKERC 2016; Fraunhofer 
ISE et al. 2020; Tilia 2016): 

Strategic municipal heat planning is essential to avoid parallel expensive infrastructure and 
conflicts. This is of major importance for the gas and district heating infrastructure, but also for 
the use of ambient heat from the ground or ground water with heat pumps. Heat planning can 
be  fostered  by  introducing  an  obligation  for  municipalities  above  a  certain  size  and/or  by 
providing financial support and guidance to municipalities.  

As investment cycles in the district heating sector are long and the transition and expansion of 
district  heating  systems  needs  time,  transition  pathways  including  quota  for  renewable 
energies and waste heat in district heating systems until 2050 need to be defined.  

An improvement of the regulatory frame of the systems (currently single systems can be 
considered as local monopolies) and an adjustment of support schemes is required in order to 
ensure the needed grid expansion, densification, temperature adjustments and integration of 
renewables. 

Financial support schemes are important for the deployment of district heating in liberalised 
markets.  Financial  support  may  be  provided  for  network  development,  to  consumers  for 
connecting  to  DH  (e.g.  subsidy  for  replacing  fossil-based  heating  systems),  or  for  heat 
production  technologies  such  as  (biomass)  CHP  (e.g.  tradable  certificates  for  renewable 

81 

 
 
 
electricity, production-based incentives). The sequencing of policies supporting CHP and the 
deployment of DH is important. 

Planning  frameworks  supporting  or  mandating  district  heating  (zoning  regulations)  can 
reduce the financial risk of developing district heating projects. European countries with high 
levels  of  district  heating  have  greatly  reduced  the  risk  of  demand  uncertainty  through  heat 
planning,  including  granting  monopoly  powers  to  district  heating  companies,  leading  to  the 
ability to access capital at very low rates, and willingness to invest for relatively low rates of 
return. 

Price  regulation  can  be  important  to  increase  consumer  confidence  and  ensure consumer 
protection in district heating, in particular, where planning has created monopoly operation. For 
example in Sweden, cost-based pricing was mandatory and district heating companies were 
prohibited  from  making  profits  before  the  liberalisation.  Price  regulation  ended  with 
liberalisation, leading to protests from consumers who argued that district heating operators 
were then in a position to take advantage of operating as a natural monopoly.  

Digital technologies can make DHC more efficient, intelligent and cost-effective by enabling 
data  management  in  terms  of  temperatures,  flow,  leak  detection  or  pressure.  New  district 
heating  technologies  improve  energy  efficiency  and  make  it  easier  to  integrate  renewable 
energy,  e.g.  by  establishing  platforms  for  real-time  collection  of  energy  consumption  data, 
identification  of  building  heating  and  cooling  needs  depending  on  energy  efficiency,  energy 
consumption  and  building  type,  forecasting  short-  and  long-term  weather  conditions  and 
upcoming  heating  and  cooling  needs,  and  monitoring  and  controlling  the  level  of  energy 
storage. Several EU-funded projects have developed innovative approaches for DHC as well 
as  platforms  supporting  smart  DHC,  e.g.  TEMPO88,  CELSIUS89,  COOL  DH90,  RELaTED91, 
THERMOS92 or FLEXYNETS93.  

2.2.6. Examples from Member States 

Most  of  the  analysed  national  heat  strategies  have  quantitative  targets  for  the  reduction  of 
energy demand for heating, which in some cases are complemented with specific targets for 
the  improvement  of  existing  buildings  (e.g.  1.5  million  by  2030  in  the  Netherlands;  thermal 
retrofit  of  1,200,000  homes  in  the  decade  2021-2030  in  France).  Key  policy  measures  to 
support  these  targets  are  various  funding  schemes  (most  countries),  the  improvement  of 
energy  labelling  of  buildings  (France),  building-specific  renovation  roadmaps  (Germany), 
consulting and information (Germany), minimum standards, training of professionals (France) 
and energy efficiency obligations (France). 

While  all  considered  national  strategies  foresee  a  considerable  increase  of  the  share  of 
renewable energy sources, the approach to decarbonise the heating sector differs among the 
strategies. The Netherlands propose a district approach, in which municipalities take the lead 
in  the  transformation  through  “heat  visions”,  which  are  developed  at  municipal  level.  The 
decarbonisation measures proposed in the strategies in France and Germany largely address 
building owners as well as professionals in the building sector. The strategies do not provide 
quantitative  targets  for  individual  RES-H  technologies.  In  addition  to  subsidy  schemes,  the 

88 https://www.tempo-dhc.eu/ 

89 https://project.celsiuscity.eu/ 

90 http://www.cooldh.eu/ 

91 http://www.relatedproject.eu/ 

92 https://www.thermos-project.eu/home/ 

93 http://www.flexynets.eu/en/ 

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strategies  highlight  regulatory  measures  (RES  quota)  to  increase  the  share  of  renewable 
energies for heating. 

In Germany, the installation of mono-fuel oil boilers is phased out from 2026. Denmark has the 
most comprehensive approach for restricting the use of fossil fuels, based on a use obligation 
for renewable energies for new and existing buildings, connected to heat zoning. In Austria, 
the installation of oil boilers has been banned in new buildings since 2019. The Netherlands 
have introduced restrictions for the connection of new buildings to the gas grid, thus phasing 
out the use of gas in new buildings. In Norway, oil for heating is banned since 2020, covering 
not only the installations of boilers but also the use of fuels in existing boilers (Öko-Institut and 
Klinski  2021).  For  RES-H  obligations  in  existing  buildings,  despite  being  part  of  the  EU 
Renewable  Energy  Directive,  the  experience  is  still  limited.  The  RES-H  obligations 
implemented in the EWärmeG in Baden-Württemberg (Germany) provide an example (Pehnt 
et al. 2019). 

The  role  of  the  gas  infrastructure  as  well  as  synthetic  gases  is  explicitly  addressed  in  the 
strategies  of  the  Netherlands  and  France.  The  French  strategy  contains  a  target  for 
biomethane and foresees the use of hydrogen only for industrial processes and not for space 
heating. In the Netherlands, green gases and hydrogen form part of the transition pathways 
that are analysed by municipalities in the context of the heat vision.  

All strategies considered in the meta-study foresee a growth in district heating as well as its 
transformation to renewable energies. The French strategy contains a quantitative target for 
heat  and  cold delivered by  district  heating  and  supports  this  target through  various subsidy 
schemes  as  well  as  the  requirement  for  municipalities  to  conduct  feasibility  studies.  In  the 
Netherlands, district heating is one of the strategies analysed in the context of the heat vision. 
None of the national strategies explicitly address the transformation of existing district heating 
networks, however the pathway projections in (Agora Energiewende 2017) conclude that it is 
essential  that  temperatures  are  reduced  and  deep  geothermal  energy,  large-scale  solar 
thermal installations and/or ambient heat/waste heat utilisation (drain water, industry, rivers, 
sewage water, etc.) with large-scale heat pumps are expanded. 

3. Summary of studies: Part I 

3.1. Modelling pathways 

GHG-neutral EU2050 – a scenario of an EU with net-zero greenhouse gas emissions and its 
implications (UBA 2019) 

Overview 

The aim of the study is to provide a scenario GHG-neutral EU2050 for an EU with net-zero GHG emissions in 

2050. The study differs from other scenarios such as the EC’s Strategic Vision “A clean planet for all” with 

respect to the use of bioenergy and CCS, which are strongly restricted in the scenarios. While the study covers 

the emissions in all sectors, the focus of the summary is on the heating and cooling sector (space and water 

heating and process heat). 

Key assumptions and drivers 

83 

 
 
For the development of space heating, the study is based on the following assumptions and drivers: 

  The refurbishment rate increases from 1 % to 2.5 % (non-residential buildings) and 2.75 % (residential 

buildings) 

  The final energy demand for space heating (residential as well as non-residential) is lowered by 25 % 
every five years, starting from 2020. From 2040 onwards all new buildings achieve a “passive house” 

space  heating  demand  of  15 kWh/(m²a).  The  refurbishment  standard  for  newly  refurbished  buildings 

starts with 80 kWh/(m²a) in 2015 and is reduced by 25 % every five years starting in 2020 (for countries 

with a current demand below this level the starting point is the current demand). 

  The equipment rate for cooling systems is kept constant at 0.1 % (residential buildings) and 0.5 % (non-

residential buildings). 

  The residential floor area increases from 22.5 billion m² in 2015 to 28.3 billion m² in 2050 (+26 %) and 
the floor area in non-residential buildings increases from 6.3 billion m² in 2015 to 7.3 billion m² in 2050 

(+17 %). 

For electricity generation, the study assumes no construction of new nuclear power plants, while existing power 

plants and those under construction continue to be operated until the end of their technical lifetime, resulting in a 

total of 4.1 GW of nuclear power plants still in operation in 2050. 

The study excludes the large-scale use of carbon capture and storage technologies (CCS).  
The biomass available for energy purposes is limited to waste and residual materials. 

Results for space and water heating 

Reduction of final energy demand 

A reduction in final energy demand of -47 % is achieved for the combined demand for space heating, hot water, 

ventilation  and  space  cooling  in  2050  as  compared  to  2015  (space  heating:  almost-  60 %;  hot  water:  -13 %; 

ventilation demand: +1500 %; space cooling: -5 %) 

Energy mix in 2050 

For space heating (1,443 TWh total demand), the use of solar thermal energy and heat pumps increase strongly 

(25 TWh to 198 TWh and 33 TWh to 114 TWh). Demand for district heating and direct electricity decreases (48 % 

and 24 % reduction, respectively). The decentralised use of biomass for heating purposes is substantially reduced 

from 528 TWh to only 39 TWh to make the biomass available for other purposes including grid heat. Renewable 

fuels cover 230 TWh or 16 % of the demand in 2050. For hot water (674 TWh), half of the demand is supplied by 

renewable  sources  (heat  pumps,  solar  thermal  and  biomass),  with  strong  increase  in  solar  thermal  energy 

(26 TWh to 130 TWh) and heat pumps (23 TWh to 159 TWh). The need for electricity increases by 20 %, driven 

by the increase in heat pumps, while district heating decreases by 50 % to a share of 18 % in 2050. Renewable 

fuels account for 10 % of the demand.  

District heating 

In district heating, 20 % of generation come from local renewable sources, i.e. solar and geothermal energy, 

4 % from non-renewable waste and the remaining part from electricity, either directly through heat pumps and 
electrode boilers, or indirectly through renewable fuels. 

Results for process heat 

Total energy demand in industry is reduced by 12 % in the year 2050 and the energy demand is met by 

electricity, ambient heat and renewable fuels. The demand for electricity increases by 50 % while the demand 

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for district heating is roughly cut in half. Radical technology switches in production processes and innovations 

are required: 

 

Iron and steel industry: Radical switch away from blast oxygen furnaces to the mature but not common 

technology of hydrogen-based direct reduction of steel and scrap-based electric arc furnaces.  

  Diffusion of new kinds of low-carbon cements as well as recycling in the sector of non-metallic minerals. 

 

In the chemical sector, alternative synthesis using hydrogen and methanol. 

The study highlights that for all the radical innovations required, pilot and demonstration plants need to be built to 

prepare for market introduction. It may take ten years to progress from lab-scale to market, where certification 

processes such as those needed for new cement types can prolong the time taken even more. Consequently, the 

current policy mix needs to be adjusted to effectively support R&D activities directed at the GHG neutrality of all 
subsectors. 

Renewable fuels (hydrogen, synthetic hydrocarbons, biogenic energy sources) 

Buildings account for 5 % of the renewable fuel demand, while demand from the industry reaches almost 1,000 

TWh  for  industry  process  heat  and  almost  another  1,200  TWh  for  feedstocks.  Overall,  the  industry  sector  is 

responsible  for  45 %  of  renewable  fuel  demand.  The  conversion  sector  uses  another  800  TWh  for  peak  gas 

turbines and district heating. 

Biogenic resources play a minor role, as almost all biogenic sources are used as a feedstock in the chemical 
industry. Hydrogen is relevant in two industry processes, namely steel and ammonia production.  

Towards fossil-free energy in 2050 (Element Energy and Cambridge Econometrics 2019) 

Overview 

This study combined an energy systems model and macro-economic model to assess the impacts of  different 

technological choices on the transition to a net-zero emission energy system in 2050, which also has important 

implications for heating and cooling. The two main types of pathways that are being investigated are those with a 

strong focus on electrification and those with a stronger focus on renewable molecules (e.g. renewable gases like 

hydrogen).  The analysis  differentiates  the  results  based  on groups of countries  based  on  country archetypes, 

which are related to the nature of their renewable energy resources (wind vs. solar) and heating demand profile. 

Electrification and electricity infrastructure play a key role across scenarios 

Due to large-scale electrification of the energy demand and a strong growth of renewable electricity generation 

capacity across scenarios, all scenarios show significant investment needs relating to electricity infrastructure. 

Even in the high molecules scenario, the electricity network capacity needs to grow by 64 % and in the high-E 

scenario the capacity needs to double. 

Scenarios with a strong focus on electrification result in the lowest annual costs 

The electrification scenarios show the lowest annual costs associated with a transition to a net-zero emission 

energy system, with the scenarios deploying strong demand-side flexibility having the least cost. This is related 

both  to  a  lower  need  in  terms  of  total  electricity  generation  capacity  as  well  as  a  lower  transport  capacity 

85 

 
 
requirement  and  hence  lower  investments  in  infrastructure.  Within  these  demand-flexibility  options,  smart 

operation of heat pumps plays an important role. In the high molecules scenario, investment needs for district 

heating networks are lower, but this is more than compensated by the increased investment costs for electricity 

generation, due to the energy losses associated with hydrogen production. For Germany’s country archetype the 

cost differences seem to be larger than for Spain’s country archetype. 

Improving building performance can bring important system benefits  

Ambitious retrofits of building envelopes to reduce their heat loss and allow for lower-temperature heating systems 

brings  along  large  cost  savings.  These  cost  savings  derive  from  lower  capital  investments  in  electric  heating 

technologies (mostly heat pumps), energy savings and hence lower demand for electricity generation capacity 

and  lastly  lower  investment  needs  relating  to  infrastructure  expansion.  In  order  to  reap  the  benefits  of  these 

savings  in system  costs,  it is important  that means  are  found  to  remunerate/reward  people  for  these  avoided 

costs.    

Hydrogen important for long term energy storage 

In countries with high seasonal fluctuations in heat demand (archetype Germany), mostly the northern countries 

and countries in central Europe, there is a need for seasonal energy storage. Increasing the electricity 

generation capacity is very inefficient, as this will lead to strong curtailment in other sectors (very low load 

factor) and thus high costs. Therefore, it is favourable to produce hydrogen in periods of high renewable 

electricity supply. This hydrogen can then be stored for use in periods with high heat demand. In these periods, 

the hydrogen is used for additional electricity generation in gas turbines in the high electricity scenarios, where 

the additional electricity is used to drive heat pumps and electric boilers. In the scenarios with high use of 
renewable molecules, some of the hydrogen is used directly for heating in boilers. 

Mapping and analyses of the current and future (2020 - 2030) heating/cooling fuel deployment 

(fossil/renewables) - Work package 3: Scenarios for heating & cooling demand and supply 

until 2020 and 2030; Work package 4: Economic Analysis (Fraunhofer ISI et al. 

2017a)(Fraunhofer ISI et al. 2017b) 

Overview 

The aim of the study is to provide a detailed overview of the heat and cold supply as well as use in Europe in 

2012. The study covers all 28 EU Member States plus Iceland, Switzerland and Norway. It is composed of five 

reports and a complete dataset. The reports are: 

  Report 1:  Work package 1: Final energy consumption for the year 2012 

  Report 2:  Work package 2: Assessment of the technologies for the year 2012 

  Report 3 and 4 (published in one document): Work package 3: Scenarios for heating & cooling demand 

and supply until 2020 and 2030; Work package 4: Economic Analysis 

  Report 5: Work package 5: Barriers, Best Practices and Policy Recommendations 

This  summary  describes  Reports  3  and  4.  The  other  reports  can  be  found  in  the  respective  sub-chapters  by 

following the link given above. 

The report on work packages 3 and 4 (i) analyses three scenarios for the development of the heating and cooling 

demand until 2020 and 2030 in all relevant sectors (households, tertiary and industry): current policy scenario 

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and  two  different  RES  H/C  obligation  scenarios  considering  RES  quota  with  trade  options  and  (ii)  a  macro-

economic impact analysis (GDP, employment, investment costs, benefits) of an increased share of renewables 

in  the  heating  and  cooling  sector  for  the  two  scenarios  developed  in  work  package  3.  The  scenario  analysis 

provided scientific backgrounds for the development of the RED II proposal (mainly articles 23 and 24). 

Key assumptions and drivers for the scenarios (see (Fraunhofer ISI et al. 2017b)) 

General: 

For the scenario development, the bottom-up sector models FORECAST and Invert/EE-Lab are used to simulate 

the final and useful demand and supply of heating and cooling. Furthermore, the model Green-X is used to assess 

the development of district heating supply in detail.  

Current policy scenario: 

The  scenario  considers  targets  and  measures  concerning  renewable  heating  and  cooling  as  well  as  energy 

efficiency  already  agreed  or  implemented  latest  by  the  end  of  2015.  All  implemented  instruments  including 

financial support programmes in the assessed countries are assumed to be in place by 2030 without significant 

changes in the period until 2030 

RES H/C obligation scenarios: 

The  two  scenarios  analyse  the  introduction  of  renewable  obligations  for  heating  and  cooling  suppliers  and 

distributors. The scenarios are based on the current policy scenario and assume additional obligations starting in 

2020, which must be met by suppliers to increase the renewable share in heating and cooling across Europe. 

The scenarios are: 

  Q0.55: Supplier obligation with a quota increasing annually by at least 0.55 % on member state level. 
Certificates can be traded within single countries. No other subsidies for renewable heating and cooling 

are in place after 2020. 

Q27: Quota for the year 2030 at EU level of at least 27 % in the total final energy demand (excluding electricity). 

It allows the trade of certificates among suppliers across member states. No other subsidies for renewable 
heating and cooling are in place after 2020. 

Results 

Scenarios until 2030 (Fraunhofer ISI et al. 2017b) 

Current policy scenario: 

  Final energy demand for heating and cooling decreases by approx. 7 % from 6,350 TWh to 5,930 TWh 

in 2030 mainly driven by thermal efficiency measures in buildings and higher average outdoor 

temperatures 

  Final energy demand in the industry sector increases (+5.7 %) and only slightly decreases in the 

tertiary sector (-1 %), while it strongly decreases in the residential sector (-20.6 %); industry sector has 

a share of 42.5 % in total final energy demand for heating and cooling in 2030 overtaking the 

household sector as the dominating one 

  Primary energy demand decreases by 9 % from 7,495 TWh/a in 2012 to 6,823 TWh/a in 2030 
  CO2 emissions drop by 22.5% from 1,427 million tons per year in 2012 to 1,106 million tons in 2030 

(strongest decrease of 40.9 % in residential, lowest decrease of 5.3 % in industry sector) 

  The use of renewable energy sources increases to 1,093 TWh (+38 %), while the direct use of fossil 

fuels is reduced by 15 % 

  Electricity demand decreases by 7 % 
  District heating demand decreases by 3 % 

87 

 
  Natural gas is still the dominating fuel for heating and cooling in 2030 (share of approx. 40 %) 
  Sharp decrease of heating oil deployment (-43 % leading to an overall share of only 8 % in 2030) 
  Share of biomass increases from 11 % to 14 %; most important renewable energy source in the 

heating and cooling sector 

  Strong increase of solar thermal energy (+455 %), but still small share in the overall final energy 

demand (approx. 5 %) 

  No significant change in the electricity demand for heating and cooling 
  Share of district heating around 9 %, but with large differences amongst countries (in some countries 

strong increase) 

Q27: 

  Needed certificate price for reaching a renewable share in heating and cooling of 27 % RES-H/C at 

EU28 level is 3.5 €/MWhth 

  Achieved share of renewables is 27.2 % (average annual increase of 0.58 % between 2020 and 

2030) 

  The share of renewables strongly differs amongst member states (between 12 % in UK and 67.2 % in 

Sweden) 

In Denmark, the scenario setting leads to an annual decrease of the renewable share of 0.03 % 

 
  Between 2020 and 2030 an additional amount of 250 TWh of renewable energy is deployed 
  Compared to the current policy scenario, the achieved share of renewables is 1.4 percentage 

points higher in the Q27 scenario 

Q0.55: 

  For each country, a specific certificate price to induce an annual increase of the deployment of 

renewable energies of 0.55 %/a is determined. In some countries, already a price of 0 €/MWhth leads 

to a higher increase and therefore the price is set to 0 €/MWhth in the respective countries. The 

countries are Czech Republic, Greece, Croatia, Malta, Sweden and Slovakia; in many countries the 

target is substantially exceeded 

  The desired increase is achieved in all countries except Cyprus (0.1 %) and Italy (0.54 %) 
 

In the EU28, an average annual increase of 0.61 % is achieved leading to a share of renewables in 

heating and cooling in the EU28 of 27.6 % in 2030 (+267 TWh between 2020 and 2030, of which 

109 TWh are induced by the certificate prices) 

  The certificate price varies substantially across countries from zero to almost 20 €/MWh; the weighted 

average certificate price is approx. 7.7 €/MWh in the EU28 

  The achieved share of renewables in heating and cooling varies between 12 % in the UK and 65.7 % 

in Sweden 

  The achieved annual increase is between 0.1 % in Cyprus and 2.05 % in Malta 
  Compared to the current policy scenario, the achieved share of renewables is 1.7 percentage 

points higher in the Q0.55 scenario 

Major differences of current policy and quota scenarios: 

  Highest absolute increase of used renewable source is in biomass (+42 TWh in Q27 and 

+81 TWh Q0.55); in the medium term, biomass is the most relevant substitute of fossil fuels in 

high temperature industry applications, but also for space heating in the tertiary and household 

sectors in countries with sufficient potentials 

  Strong increase of the use of ambient heat in Q0.55 compared with the other scenarios: Heat 

pumps are a good option in countries with limited biomass resources and relatively cheap electricity 

supply 

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  Strong increase in the use of solar thermal (+22 %) in the quota scenarios compared to the current 

policy scenario 

 

Importance of district heating decreases in the quota scenarios compared to the current policy 

scenario (-3 % and -5 %) 

  The strongest decrease of non-renewable fuels is observed for natural gas (-55 and -112 TWh) 
  The primary energy demand in Q27 increases by 0.3 % and decreases by 0.1 % in Q0.55 compared to 

current policies 

  The Q27 scenario only leads to a CO2 emission reduction of 0.1 % compared to the current policies, 

while the Q0.55 scenario leads to a reduction of 2.8 % 

Economic analysis (Fraunhofer ISI et al. 2017b) 

In the economic analysis the ASTRA-EC model is applied. The assessed scenarios are the same as above 

(current policies, Q0.55 and Q27). Furthermore, detailed input from all used bottom-up models for the industry, 

tertiary and household sector as well as district heating is used. The analysis shows that for the Q0.55 and Q27 

scenarios only additional investments of 14.6 and 11.4 billion € compared to the current policy scenario 

are needed in the EU28, which is less than 1 % of the investments of the current policy scenario. The 

switch from a system based on public subsidies to subsidies provided in the quota system (certificate 

prices) on the one hand reduces public spending by about €38 billion, on the other hand provides 

subsidies of €145 billion (Q0.55) and €59 billion (Q27) within the obligation scheme, which is not funded 

by states. The analysis shows an increase of the GDP for EU28 of 0.12 % in 2030 in Q0.55 compared with 

current policies. The full-time equivalent (FTE) employment increases marginally by 0.04 %. Furthermore, 

investment and consumption increase by 0.32 % and 0.33 % respectively. An even lower positive economic 

effect is detected for the Q27 scenario. GDP only increases by 0.07 % compared with the current policies 

scenario and the FTE employment is 0.02 % higher. Investments increase by 0.25 % and consumption of 

private households by 0.12 %. 

Hotmaps (Aalborg University et al. 2020)  

Overview 

The goal of the project is to develop an open source heating / cooling mapping and planning toolbox. Furthermore, 

default data for EU28 is provided at national and local level. The data and tool shall allow public authorities the 

identification,  analysis,  modelling  and  mapping  of  resources  and  possibilities  to  supply  energy  within  their 

municipalities,  counties  etc.  in  a  resource-  and  cost-efficient  way.  The  tool  and  other  results  ought  to  help 

authorities to develop local, regional or national heating and cooling strategies. The renewable energy and CO 2 

emission targets at national and EU level are integrated. 

The tool is available online: https://www.hotmaps.eu/map 

Data and assumptions 

The project provides a starting data set, calculation modules for the assessment of renewable heating potentials 

and  future  scenarios.  In  addition,  own  datasets can  be uploaded and used  in  the  modules.  The  tool  provides 

information on the heating and cooling demands in different areas, potential and most economic areas for DHC, 

89 

 
 
potentials of building renovation, renewable heating and industrial excess heat and favourable decarbonisation 

pathways. 

The starting dataset comprises data for the residential (three different building types), service (six sub-sectors), 

industry and transport sector for the whole EU 28. Data was collected at national level and – if available – at 

regional/ local levels. A detailed description of the development of the data set can be found in (Eurac Research 
et al. 2019). The generated heat density maps are available at hectare level (100 m x 100 m). 

Case studies 

The  tool  was  tested  and  applied  in  several  pilot  cities.  These  are  Aalborg,  Bistrita,  Geneva,  Frankfurt,  Milton 

Keynes, Kerry County and San Sebastian. Main results and important pillars with respect to the decarbonisation 

of the heating and cooling sector from the case studies are: 

  Aalborg: already long experience with strategic heat planning since late 1980s and many plans already 

developed; main focus in project: share knowledge and learn from others 

  Bistrita: Reduction of heat demand in buildings through renovation; supply of remaining heat demand 

with locally available renewable and excess heat  

  Geneva: obligation to realise own territorial energy planning based on cantonal energy master plan; 

planning process ongoing; use of own data for assessment of status quo, identification of coherent DH 

supply areas and comparison with planned network extensions and non-DH areas 

  Frankfurt: goals: reduce energy demand by 50 % (50 % of remaining demand covered by renewables 
from region and 50 % by local sources), climate neutrality in 2050; challenges: growing population and 

workspaces; opportunities: increase refurbishment rate, use excess heat and expand DH system; DH 

is the system with lowest cost for providing 100 % renewable heat, however business case for local 

utility might not exist; main challenge also in 2050: provide the peak heat demands with renewables 

  Milton Keynes: New city (founded in1967); goal: net zero carbon city by 2030, HotMaps for fast 
identification of heat resources in the region, identification of opportunities and comparison of 

scenarios; low carbon heat or housing and businesses identified as major elements and strategy 

document for planners and developers prepared 

  Kerry County: rural, touristic area  (population doubles during summer due to tourists, many hotels 

leading to high heat demand in summer), goals: identification of heat demand and feasible DH areas, 

cost indication, reduce dependency on fuel imports and create opportunities for local renewable energy 

sources; process ongoing 

  San Sebastian: Only few small DH systems so far; existing plans: SmartCity Plan, Climate Strategy, 
Sustainable Mobility, Green City, Agenda 21 and more, but no strategic plan for heating and cooling 

existed; Based I Energy demand calculation different scenarios and Heating Strategy developed: 

possible heat savings through retrofit is 25 – 40 % (40 – 74 % of entire buildings gross floor area would 

need to be renovated), excess heat of waste incineration plant could provide a high share of heat 

demand with low costs 

Besides the focus on the case studies, scenarios for the EU 28 at country level were developed. They describe 

pathways for the space heating (residential and non-residential), industry, electricity generation and district 

heating as well as transport sector (TU Wien et al. 2019). For heating and cooling, a reduction of 28 % (current 

policy scenario) and 35 % (ambitious policy scenario) is expected. Space heating will still have a share of 66 to 

71 % in the total final energy demand for heating and cooling in residential and non-residential buildings (in 

2012 84 %). The share of cooling increases from 2 % to 8-9 % and the share of hot water from 13 % to 19 – 

22 %. In the scenarios, gas remains the main energy carrier even though the share is declining. The most 
important renewable energy source is biomass. 

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Decarbonisation pathways (Eurelectric 2018) 

Overview 

The Paris Agreement requires an increasing contribution of the EU to mitigate climate change. From the authors’ 

point of view, an increased electrification is essential for a cost-effective decarbonisation of the EU and the power/ 

electricity sector plays an important role. The power sector aims to achieve carbon neutrality well before 2050 in 

order to support the overall CO2 emission reduction targets. The electrification potential is substantial in all energy-

using sectors. In the study three different scenarios were developed: 

  Scenario 1: 80 % emission reduction; emission reduction of approx. 4 %/a; acceleration of current 

technology trends, policies and customer uptakes 

  Scenario 2: 90 % emission reduction; emission reduction of approx. 6 %/a; significantly shift policies to 

remove barriers and promote decarbonisation and electrification 

  Scenario 3: 95 % emission reduction; emission reduction of approx. 8 %/a; towards full decarbonisation 
of the EU economy; support early technology breakthrough and deployment by global coordination 

Main results 

For achieving an overall emission reduction of up to 95 % a fast removal of barriers to adopt electric 

technologies in combination with technological progress are essential. In the assessed scenarios, 38 % to 60 % 

of the final energy consumption is directly electrified. To achieve the goal, an increase of 1 % to 1.5 % of direct 

electricity consumption is required in the whole EU. In the same time, the total final energy consumption must 

be reduced by 0.6 % to 1.3 % per year. 

In the building sector energy efficiency is seen as the key driver for emission reductions. District heating and 

cooling are assumed to play an important role in some areas and 45 % (Scenario 1) to 63 % (Scenario 3) of the 

building energy consumption could be supplied by electricity (mainly electric heat pumps). The switch to electric 

heat pumps is seen as a main contributor to energy efficiency gains as their efficiency is about four to five times 

higher than the efficiency of typical gas boilers. Also in the industry sector a switch to electric processes is seen 

as a key driver for energy efficiency gains especially in the steel production where electric arc furnaces use five 
to six times less energy than traditional coal-based production routes. 

Key drivers and pre-requisites 

Scenario 1: 
 
Implementing what is promised under the Paris Agreement 
  Technology: acceleration of current trends and learning curves 
 
  User behaviour: cost/convenience remain most important factors, but increase in end user awareness 

Increase of market share of currently available low-carbon technologies 

for clean technologies; taxes etc. hinder switch to electric solutions 

  Policies including emission-related and pricing policies start to drive market forces towards clean 

technologies 

Scenario 2: 

  More ambitious implementation of Paris Agreement in context of increased international coordination; 

ambitious review process of Agreement 

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  Early technology development and deployment leading to steep cost reductions of mature technologies 

until 2030; currently new technologies deployed at large scale after 2040 

  Complex industry processes still challenging to decarbonise, but many industry processes are 

redesigned 

  User behaviour: Clean technologies become mainstream and competitive; electricity is becoming 

competitive against other energy carriers 

  Tighter regulation on CO2 emissions, environment, fossil fuels and infrastructure 
  Removing barriers to support earlier electrification by major shift in policies, tariffs and taxes 

Scenario 3: 

  Decision to fully decarbonise EU’s economy in context of concerted efforts around the world 
  Technological breakthroughs: major early cost reduction of non-mature technologies by high adoption 

of electric technologies, innovation, R&D 

  User behaviour: fast and large-scale adoption of clean technologies worldwide due to high 

competitiveness of electricity vs. other energy carriers 

  Regulation: regulations and mechanisms of Scenario 2 established worldwide; earlier implementation 

of regulation compared to Scenario 2 
  Overcoming several challenges needed: 

o  Only 1/3 of annual energy productivity gains of 2 % - 2.8 % driven by electrification; removal 

of currently observed barriers to energy efficiency measures essential 

o  Decarbonisation of industry might come at extra cost 

o  Materialisation of significant technological progress needed (e.g. cost competitive and clean 

H2 and synthetic fuels at scale) 

o  Ramp-up in supply chain and infrastructure needed for adoption of electric solutions 

  Acceptability of e.g. CCS 

Sector results: Buildings 

The total final energy consumption in buildings is reduced from 18.5 EJ in 2015 to 15.6 EJ (Scenario 1), 13.0 EJ 

(Scenario 2) and 10.8 EJ (Scenario 3) in 2050. In Scenario 3, so-called emitting fuels only have a share of 5 % in 

the final energy consumption of buildings in 2050 while electricity delivers 63 % of the final energy consumption 

(the remaining 32 % are provided by geothermal, solar thermal, biomass and secondary fuels like biofuels, H 2, 

district heat). 

  Electrification in commercial sector 

o  Scenario 1: Space heating 25 %, water heating 25 %, cooking 75 % 

o  Scenario 2: Space heating 43 %, water heating 43 %, cooking 90 % 

o  Scenario 3: Space heating 53 %, water heating 53 %, cooking 95 % 

  Electrification in residential sector 

o  Scenario 1: Space heating 21 %, water heating 22 %, cooking 75 % 

o  Scenario 2: Space heating 32 %, water heating 32 %, cooking 90 % 

o  Scenario 3: Space heating 44 %, water heating 44 %, cooking 95 % 

Towards a decarbonized heating and cooling sector in Europe (Aalborg University 2019) 

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Overview 

The study is based on the results of the Heat Roadmap Europe studies and develops a roadmap for the Heat 

Roadmap Europe 4 (HRE4) study. The report analyses and quantifies (if possible) the potentials of district energy 

and energy efficiency as enablers of the decarbonisation of heating and cooling in Europe. Based on the analysis, 

a roadmap for decarbonising the heating and cooling sector was developed and key milestones were described. 

According to the authors, district energy can play an essential role for the decarbonisation of the sector by (i) 

energy efficiency, (ii) renewable energy and (iii) sector coupling. Previous Heat Roadmap Europe studies showed 

that energy systems with a share of 50 % district heating and sector integration have a higher efficiency than 

decentralised systems. They furthermore allow a higher share of renewables at lower costs. 

Main results 

An affordable decarbonisation pathway requires a 30 % end-use saving in heating by 2050 (compared to 2015) 

and an expansion of district heating to a share of about 50 % in the final heating energy demand. The remaining 

heating energy demand (mainly in rural areas) is provided by heat pumps. Thereby, a CO2 emission reduction 

of 85 % (compared with 1990 levels) and a reduction of primary energy demand of 13 % compared with a 

conventionally decarbonised energy system scenario are achieved. It is essential that district heating systems 

become integrated parts of other sectors of the energy system, e.g. by CHP, use of waste heat and use of 

electricity in large scale heat pumps and electric boilers. District heating systems also have to switch from 

supply- to demand-driven systems with automatic controls. Furthermore, the temperature levels of the system 

will be reduced by efficiency measures in buildings (i.e. refurbishments) and efficiency measures in the systems 

themselves. The switch to low-temperature networks could save up to 120 TWh and up to €6 bn  on the supply 
side. 

Roadmap for realising the Heat Roadmap 2050 scenario 

It is essential that the transition of the heating sector is well established and underway in 2030 in order to achieve 

the  long-term  goals  in  2050  (completely  decarbonised  energy  system).  District  heating  systems  are  essential 

enablers for: 
 

Increased energy efficiency and access to heat sources, which are difficult/ impossible to use in single 

buildings 

  Energy system and sector coupling benefits 

The study identified prospective supply districts based on minimum heat demand densities and maximum 

investment costs with a potential for about 25,000 district heating systems. In order to activate the potential, a 

significant expansion between 2025 and 2035 is needed (increase from approx. 500 new systems in 2025 to a 

peak of 2,000 new systems (invest of 47.6 bn €) in 2030). The expansion of district heating systems is 

accompanied by large investments in an energy-efficient building stock (i.e. refurbishments) also peaking in 

2030 (427.3 bn €). Even though the needed investments seem to be high they lead to an overall cheaper 
energy system than a “conventionally decarbonised” system due to lower costs for fuels, CO2 and O&M. 

Milestones and policy recommendations 

2020 – 2030: 

  Establishment of local and national plans and potentials for district heating and cooling 
 

Increased investments in energetic building retrofits and other energy efficiency measures in 

buildings: enabling policy framework consisting of e.g. building codes and standards as well as 

renovation strategies 

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  Stop investments in decentralised fossil fuel heating capacities (gas and oil boilers) and fuel-

switch to heat pumps 

  Commitments to deploy actions together with local (regional, municipal) authorities as heating is 

a local energy demand; important to enable coordination between national and local level 

  Data availability must be improved in the heating sector especially concerning heat demands, building 

stock quality, availability of heat sources and installed heating technologies 

 

Investigation of district cooling potentials must be started as cooling demands are increasing fast 

and district cooling systems must be integrated in the overall energy system as well 

  Adjustment of markets, investments, regulation, taxes and tariffs in order to promote technologies 

needed in a low-carbon and energy-efficient future. If the transition is to be market-driven, right 

incentives and signals are essential 

  System approach needed in order to enable synergies between sectors (e.g. use of waste heat, 

provision of flexibility to the electricity sector by the heating and cooling sector) 

  Ramp up installation of new district heating systems; approx. 8,700 new systems should be 

installed in the period 

 

Increased investments in district heating supply and distribution infrastructure (between 2020 

and 2030 118 bn € and 223 bn € respectively) 

2031 – 2040: 

  Saturate heating markets: established supply districts should start to cover majority of feasible supply 
areas; meanwhile, energy retrofits should still be a major focus and remaining “low hanging fruits” 

should be exploited 

  Build remaining approx. 11,000 district heating systems 
 

Investments in district heating supply and distribution infrastructure should grow and reach 

127 bn € and 273 bn € respectively 

  Progress monitoring for district heating and cooling: especially benefits captured from increased 

use of district heating and cooling should become visible in energy statistics and reporting 

  Phase out remaining fossil fuel capacities: most likely requires ban of fossil gas and oil boilers and 

replacement schemes 

2041 – 2050: 

  Achievement of remaining sector coupling benefits: exploit all flexibility measures and sector 

coupling benefits available as last fossil fuel capacities will be phased out 

  Expansion of district heating market share to 50 %; build remaining district heating systems 
  Replacement of remaining fossil fuels in energy system, e.g. gas in CHP, back-up capacities, 

transport sector 

  Ambitious decarbonisation policies will still be needed towards a complete decarbonisation of the 

energy supply 

  Connecting remaining demands to district energy systems: most district heating and cooling areas 

are established and last remaining demands in existing systems/ areas are connected 

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3.2. Policies and strategies 

Lessons learned to inform integrated approaches for the renovation and modernisation of the 

built environment (BPIE et al. 2021) 

Overview 

The report analyses policy instruments and strategies for the renovation and modernisation of the building stock 

and the built environment and derives lessons learned for the design and amendment of policies to support the 

achievement of the EU climate targets. The study covers seven strategic areas: 1) Built environment sustainability 

and adaption to climate change; 2) Clean and sustainable mobility; 3) Digital technology; 4) District approaches; 

5) Engaging transformation and phasing out inefficient buildings; 6) Financing renovation; 7) Health and wellbeing.  

With the focus of this meta-study being on the decarbonisation of heating and cooling, the review focuses on 

strategic areas 3-6.  

Lessons learned 

Digital technology 

There are solutions to digitalise the buildings renovation supply chain, but their application in practice is still low. 

Important potentials for digital technologies to support the decarbonisation of heating include the digitalised data 

collection of information about the building stock across Europe, however there is no harmonised framework. 

Another important application are digital technologies for flexible energy consumption patterns to support the 

global energy system, however an administrative framework is lacking. Another area of application highlighted 

is the optimisation of energy uses, however, as for the other applications the current deployment of such 

technologies is low. 

District approaches 

Local approaches to decarbonising heating and cooling (e.g. micro-grids, energy communities) often focus on 

renewable energies and do not sufficiently take into account the efficiency of the building envelope. 

Streamlining and aggregation of renovations at the district level are promising solutions but are currently 

implemented mainly in pilot projects. The diffusion  of comprehensive (sub)urban strategies combining energy 

and carbon efficiency of the building stock is currently low. Trust and communications are mentioned as key 

success factors at district level and the study highlights the role of EU support to demonstrate the benefits of 

district approaches.  

Engaging transformation and phasing out inefficient buildings 

There is a lack of sufficiently effective, coherent, and well-targeted enabling frameworks for deep renovations 

that are not yet cost-effective. The comprehensive existing policy mix is not sufficiently effective to drive 

renovations aligned with the EU climate targets. The impact of measures to accelerate the market penetration of 

innovative solutions for deep renovations (e.g. based on prefabrication and automation) is still rather low. The 

study identifies one-stop shops and comprehensive building renovation roadmaps as factors that may trigger 

acceptance and behavioural change among building owners and occupants towards deep renovations. It 

highlights mandatory minimum requirements as one of the most promising policy instruments to achieve deep 

renovations addressing the split-incentive dilemma. 

Financing renovation  

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There is a variety of existing financing instruments including grants and loans for specific target groups 

(involving vulnerable households, elderly), social tariffs, tax breaks and energy saving obligations. Innovative 

financing instruments, such as on-bill schemes and energy performance contracting, are promising solutions as 

they can leverage private sector resources, however such instruments are still not mainstream. There is a lack 

of de-risking strategies, with insufficient evidence on the performance of energy efficiency investments in 

buildings making financial risk harder to assess and mobilisation of both public and private investments more 

difficult. Most countries address barriers to energy efficiency in buildings through financial support instruments, 

however, a stronger policy framework to address non-economic barriers would be beneficial. Energy efficiency 

obligations can drive the retrofit market by stimulating the development of new business models such as 

ESCOs and provide an additional income stream for renovation programmes. Thus the study highlights the 

need to target the (scarce) resources in grant programmes, e.g. by addressing vulnerable groups and by 

requiring minimum performance levels. The study suggests the use of fiscal measures through a bonus-malus 

system, where building owners with a building that is “future-proof” (e.g. based on the EPC rating or building 

renovation passport) receive a tax credit, while owners of buildings trailing the standard will have to pay a fine. 

Cross-cutting 

  The objectives can only be achieved with a sound policy mix, where regulations and mandatory 

minimum requirements are an indispensable part.  

  For achieving an accelerated deployment of deep retrofit, additional trigger points are required (e.g. 

measures to facilitate accessibility).  

  The lack of data on the EU building stock needs to be addressed, e.g. by providing financial support for 
data collection, by harmonising and standardising data collection activities and by supporting the 

deployment of digital logbooks. 

  Strengthening energy performance certificates is beneficial as data availability is increased and EPCs 

can provide the basis for other policies, such as MEPS. 

  Urban planning can be a promising way for supporting integrated policy approaches 
  Fostering dissemination of new approaches is needed, e.g. ways to de-risk investments in energy 
efficiency, new ways of financing such as on-bill or on-tax financing, project aggregation and an 

overview of renovation services via one-stop shops, defining and delineating the neighbourhood/district 

approach. 

  Financing remains a bottleneck and new business models are required to facilitate the Renovation 

Wave (e.g. aggregation of renovation projects, the use of prefabricated systems for deep renovations, 

and the use of robotics and automation). 

  The roll-out of available digital technologies supports promising approaches to support the creation of 

a sustainable built environment. 

  Transparent communication and stakeholder engagement are important success factors. 
  Market-based approaches have limited significance in existing policy mixes, which may partly be due 

to the importance of non-economic barriers in the built environment. 

Policy actions 

The identified policy actions are clustered in six groups: 

1.  Align policies with long-term objectives, including a definition of “decarbonised buildings stock” and the 

requirement for MS to introduce local LTRS to build positive energy districts, requirement for MS to 

upgrade nZEB definitions aligned with 2050 objective; development of a detailed climate change 

adaption strategy for the European buildings stock and built environment; revision of the cost-optimal 

definition to incorporate all renovation-related benefits. 

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2.  Regulatory and market-based instruments for a transformation of the European building stock, 

including the introduction of an EU-wide carbon price for heating and road transport; introduction of 

MEPS for existing buildings; minimum mandatory green public procurement criteria for all new 

buildings and renovations; mandatory minimum standards for indoor air quality for schools and 

hospitals; requirement for inspection of stand-alone ventilation systems in residential buildings; 

address climate change adaption in buildings. 

3.  Enhance the gathering, availability and harmonisation of building data and information, including an 

improvement of the reliability and increase of scope of EPCs; requirement for MS to introduce building 

renovation passports; introduce requirement for assessing and reporting lifecycle aspects; requirement 

for MS to make data available through digital building logbooks. 

4.  Facilitate the market penetration of innovative financial mechanisms; including support to Member 

States for introducing national decarbonisation funds; mainstreaming energy performance contracting 

and use financial guarantees to enable deep renovations; establishing a regulatory framework for on-

bill financing schemes and allow for transferable loans attached to the meter; support national one-stop 

shops. 

5.  Accelerate renovation and flexibility in the built environment by utilising digitalisation and automation; 

including a requirement for public and large new buildings to include an interoperable energy 

management system; continuing to remove legal barriers to enable demand-side flexibility in buildings;  

introduction of integration of BIM in urban planning and as a requirement for larger new buildings and 

public infrastructure projects; enabling public and private entities to aggregate demand for energy 

renovations, to facilitate higher production rate and industrialised renovation approaches. 

6.  Achieve policy integration through information exchange hubs and integrated urban planning, including 

guidance and requirements for municipalities to identify and support energy-poor groups; requirements 

for integrated municipal planning; ensuring district-level application of green and blue infrastructure for 

new and renovated buildings and in public space; supporting regional exchange platforms to trigger 

innovations, collaboration and replication of good practices. 

Renewable Heat Policies. Delivering clean heat solutions for the energy transition (IEA 2018) 

Overview 

The report examines the key economic and non-economic barriers for the deployment of renewable heat and 

discusses  policy  options  to  increase  its  share.  The  study  analyses  the  policy  approaches  of  nine  case  study 

countries and derives policy recommendations for different country groups. The selection of case study countries 

encompasses  countries  that  have  achieved  high  renewable  heat  penetration  (Denmark,  Finland,  Sweden), 

countries  that  have  lower  shares  but  ambitious  energy  transition  goals  for  which  heat  decarbonisation  will  be 

important  (France,  Germany),  countries  with  low  renewable  heat  penetration  and  extensive  natural  gas  grids 

(Netherlands, United Kingdom) and the global top two heat consuming countries (China, United States). 

Barriers to renewable heat 

The study distinguishes between economic and non-economic barriers and identifies the following key barriers: 

Economic barriers: 

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  Higher investment costs than fossil fuel alternatives and lack of access to affordable finance and 

capital for renewable heat investments. Policy solutions: Investment support via grants and low interest 

loans (e.g. France zero-loan interests); Heat generation-based subsidies to reduce payback periods 

and Energy Service Company approaches (e.g. Renewable Heat Incentive (RHI) in the UK). 

  No level playing field with fossil heating fuels, as externalities such as carbon or air quality impacts 
not included for fossil heating fuels and/or fossil fuels are subsidised. Policy solutions: Energy taxation 

and carbon pricing (e.g. energy and carbon taxes in Nordic countries); Removal of fossil fuel subsidies 

(e.g. fossil fuel subsidy reform in countries such as India, Malaysia and Indonesia). 

  Current low and cyclical fossil fuel prices impeding long-term certainty and competitiveness of 

renewable solutions as compared to fossil fuel base heating. Policy solutions: Adjustable 

energy/carbon taxes to provide price stability through ‘’floor’’ price (no known examples specifically for 

heat); Mechanisms to increase liquidity and tradability of biomass fuels (e.g. Baltpool Exchange, 

ENplus certification, futures contracts for wood pellets). 

  Split incentives in the private rented sector. Policy solutions: Grants and ESCO approaches; 
Measures to pass the initial investment cost on to a third party (e.g. Green Deal scheme in UK, 

discontinued); Obligations (e.g. Baden-Württemberg renewable heat law, Germany). 
  Lack of economies of scale resulting in higher system costs and lack of district heating 

infrastructure reduces cost-effective opportunities to integrate renewable heat. Policy solutions: Long-

term policy support measures to allow supplier base and supply chains to grow (e.g. RHI in the United 

Kingdom); Incentives for local authorities, cities and industry to encourage investment in efficient 

district heating schemes with low-carbon supply (e.g. Fonds Chaleur in France). 

Non-economic barriers: 
  Building suitability: Renewable heat options may not be suitable in certain buildings (e.g. 

apartments, low-efficiency buildings). Policy solutions: Integrated energy efficiency and renewable heat 

grant schemes (e.g zero-interest loans in France and KfW programmes in Germany); Ensuring high 

efficiency through building codes (e.g. EPBD). 

 

Industrial heat requirements, e.g. temperature levels, pressure and quantity of heat can be a 

challenge for RES-H. Biomass can be restricted due to stringent emission requirements. Policy 

solutions: Technology-related research, development and demonstration funding (e.g. H2020 funding); 

Carbon taxation on industrial emissions to encourage use where possible (e.g. EU ETS). 

  Lack of awareness and confidence in renewable heat technologies (applying to households, 

heating system specifiers and lenders). Policy solutions: Information programmes and advice provision 

(e.g. RHI roadshows in the UK); Equipment certification and standards as well as after-installation 

technical support services (e.g. Microgeneration Certification Scheme (MSC) in the UK). 

  Lack of supply chains (e.g. biomass from agricultural residues) and trained installers: Policy 
solutions: Coordinated policies for agriculture, forestry and energy; Training and certification 

programmes, better recognition of technology certification among countries (e.g. Pan-European Heat 

Pump Keymark scheme). 

  Distressed purchase and consumer inertia: Short-term decision-making when existing boiler breaks 

down tends to favour replacement with the same (e.g. fossil fuel) technology. Policy solutions: 

Renewable obligation for boiler replacement (e.g. Baden-Württemberg renewable heat law, Germany).  
  Disruption and “hassle” factors: Retrofit installation of renewable heat systems may entail disruption 
(e.g. underfloor heating, biomass fuel storage) and may require more space and higher maintenance 

requirements. Policy solutions: District heating to allow offsite deployment (Municipality activities in 

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Nordic countries); Installation of renewable systems during wider building renovation and regulations to 
ensure integration in new-build properties (Merton Rule policies for commercial buildings in the UK). 
  Lack of heat data, statistics and heat demand mapping, needed to select favourable locations for 
installations, develop supply chains and planning of district heating networks. Policy solutions: 

Organisation and funding for heat mapping and zoning by local authorities (e.g. Heat Networks 
Delivery Unit support in the UK, zoning in Denmark). 

Key RES-H Policies highlighted in the report 

  Long-term heat policy with ambitious targets and an effective regulatory framework (Denmark, Finland, 

Sweden). 

  Comprehensive heat planning at local level, with district heating as public infrastructure (Denmark, 

Finland, Sweden). 

  Energy taxation with exemptions for renewables (Denmark, Finland, Sweden). 
  Regulatory measures restricting the use of fossil fuel heating (Denmark: ban on oil and gas heating in 
new-build properties since 2013 and on new oil heating installations in existing buildings in areas 

supplied by district heating or natural gas since 2016). 

  Support schemes for energy retrofits in existing buildings and RES-H technologies 
  Premium tariff payments for biogas used in heating and for biomethane for grid injection (Denmark and 

Finland). 

  Energy saving obligation scheme (Art. 7 EED): In Denmark, the district heating sector is included in the 
obligation scheme, resulting in a deployment of solar thermal solutions as heat produced from solar 

energy is also allowed to be counted as energy savings. 

  The SDE+ scheme (Netherlands): Combined support scheme for renewable electricity, biogas, and 
renewable heating technologies through feed-in premium allocated via a tendering procedure.  
  The UK Renewable Heat Incentive (RHI): Long-term support programme for renewable heat with 

payments based on heat generated.  

Policy recommendations 

The report provides differentiated policy recommendations for different country groups: 

1. Countries with extensive district heating networks 

a) Countries that already have high shares of renewable heat (40+%) 

  Put more focus on sector coupling, especially in countries where there is also rapid growth of variable 

renewable power (e.g. incentivising the use of heat pumps for demand response). 

  Ensure cost-optimal alignment between energy efficiency and heat policy (e.g. to avoid stranded 

district heating assets where they are the best option to supply renewable heat). 

  Ensure biomass resources are allocated optimally between district heating and other sectors where 

they are needed for decarbonisation. 

b) Countries with medium shares of renewable heat (20-40%) 

  Set targets and develop strategies for further decarbonisation of district heating. 
  Develop instruments to overcome non-economic barriers (e.g. support for developing supply chains). 
 
Incentivise options for renewable heat in industry, especially those that provide opportunities for 

connection to district heating through use of co-generation or excess heat. 

2. Countries with relatively low shares of renewable heat (10-20%) and some district heating 

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  Consider regulations for building renovation requiring a specific share of renewable heat (or connection 

to district heating). 

 
Incentivise accelerated district heating expansion focused on low-carbon heat sources. 
  Ensure that energy taxes and other charges (e.g. surcharges for renewable electricity) do not 

disincentivise renewable heat, in particular the use of heat pumps. 

3. Natural gas countries (extensive gas grids, low gas prices, very little renewable heat or district heating) 
  Set clear targets; develop trajectories and strategies for increasing the share of renewable heat over 

time. 

Implement carbon pricing, with progressive increases over time. 

 
  Develop effective regulations (e.g. building codes for new buildings that require the installation of 

renewable heat options to provide more market certainty). 

  Support R&D into innovative options such as the production of hydrogen with RES and its use in the 

gas grid. 

Mapping and analyses of the current and future (2020 - 2030) heating/cooling fuel deployment 

(fossil/renewables) - Work package 5: Barriers, Best Practices and Policy Recommendations 

(Fraunhofer ISI et al. 2017c) 

Overview 

The aim of the study is to provide a detailed overview of the heat and cold supply as well as use in Europe in 

2012. The study covers all 28 EU Member States plus Iceland, Switzerland and Norway. It is composed of five 

reports and a complete dataset. The reports are: 

  Report 1: Work package 1: Final energy consumption for the year 2012 
  Report 2: Work package 2: Assessment of the technologies for the year 2012 
  Report 3 and 4 (published in one document): Work package 3: Scenarios for heating & cooling 

demand and supply until 2020 and 2030; Work package 4: Economic Analysis 
  Report 5: Work package 5: Barriers, Best Practices and Policy Recommendations 

In the following, Report 5 is described in detail. The other reports can be found in the respective sub-chapters by 

following the link provided above. 

The report on work package 5 covers barriers, best practices and policy recommendations. In the centre of the 

analysis are the identification of factors and bottlenecks (economic aspects, behavioural issues, decision-making 

routines,  financing  conditions,  subsidy  programmes  among  different  stakeholders)  influencing  the  diffusion  of 

renewable heating and cooling technologies and that might be overcome with suitable policies. 

Barriers, Best Practices and Policy Recommendations (Fraunhofer ISI et al. 2017c) 

In the centre of the analyses was the identification of factors and bottlenecks, like economic aspects, behavioural 

issues, and decision-making routines influencing the market acceleration and helping to overcome bottlenecks of 

renewable  heating  and  cooling  technologies.  Furthermore,  financing  conditions  and  subsidy  programmes  for 

different stakeholders were assessed. From the assessment, suitable policies were derived. The major barriers 

identified are: 

  Access to capital 
 

Imperfect information 

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  Bounded rationality 
  Split incentives 
  Perceived and measured risks 
  Hidden costs 

Furthermore, barriers and bottlenecks were assessed along the product life cycle. The identified obstacles 

are: 

  Too little R&D expenditures; missing goal orientation by R&D (product R&D) 
  No lifecycle-cost analysis from buyers’ point of view (machines and plant manufacturer) 
  Sale price minimisation; minimisation of warehouse costs (manufacturer and wholesaler) 
  Lack of market overview, too little knowledge, mistrust in external consulting; purchasers, rules, lack of 

capital (investment) 

  Lack of knowledge; lack of incentives, comfort zone (usage) 

Barriers, best practices and policy recommendations are structured according to the main heating and cooling 

sectors,  which  are  space  heating  and  cooling  (residential  and  non-residential  buildings),  process  heating  and 

cooling (industry and tertiary sector) as well as district heating and cooling. 

The two major obstacles identified for a broad deployment of renewable heating and cooling technologies 

in residential and non-residential buildings, which are (i) the high initial costs and (ii) a lack of awareness 

of energy-efficient and renewable technologies of building owners, tenants and energy consultants. To overcome 

the first obstacle the study suggests removing all subsidies and other incentives for fossil fuel-based heating 

and cooling technologies to correct market distortions and price signals. For the second one the study suggests 

fostering  information  campaigns  for  both  the  supply  and  demand  side.  Suggested  items  are  building 

certificates,  energy  labels  and  customer  relationship  activities  by  local  experts.  Furthermore,  good 

professional education and up-to-date training are needed. 

In addition, suitable financial support schemes and incentives are needed addressing the specific needs of 

the various stakeholders/ owner types (single family homeowners, shared property in multi-family houses, housing 

companies, etc.). Furthermore, the cost sharing concepts between owners and tenants must be adapted in many 

countries. A harmonisation of tenants’ law across member states could also bring in sharing concepts at EU 

level. 

The process heating and cooling sector also faces two major barriers, which are (i) concerns and changes 

affecting the core business of enterprises and (ii) a lack of strategic priorities and governances based on 

fossil fuel prices and market conditions. The first barrier can be overcome by  information and best practice 

examples  (well-operating  pilots  and  demonstration  projects,  energy  efficiency  networks).  The  second  barrier 

could be overcome by removing subsidies and incentives for using fossil fuel-based technologies to create 

impulses  towards  a  broader  application  of  technologies  using  renewable  fuels/energy.  Furthermore,  it  is 

highlighted  that  especially  small  and  medium-sized  companies  face  budget  constraints  when  it  comes to 

large investments in new/renewable technologies. This constraint can be tackled by tailored financial incentive 

schemes. Larger enterprises mainly face organisational barriers, which are difficult to address from outside. 

An additional obstacle is that not all companies in the EU are in the scope of the ETS. The companies outside 

of the scheme lack incentives to switch from fossil to renewable technologies/fuels. 

District heating and cooling face high initial investment costs for (i) the installation of large heat and cold 

generation capacities and (ii) for the development of their networks. To overcome this barrier innovative 

financial instruments and new business models are suggested in the study. They must be accompanied by 

suitable policies. Furthermore, many possible customers do not know (enough) about the possible benefits 
from the connection to a district heating or cooling network; information campaigns are therefore essential. 

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Best  practice  in  heat  decarbonisation  policy:  A  review  of  the  international  experience  of 

policies to promote the uptake of low-carbon heat supply (UKERC 2016) 

Overview 

The report provides an overview of policies supporting the deployment of heat pumps and district heating. The 

report draws upon experience from countries where these technologies have shown large deployment, such as 

the Nordic countries and Germany. The report highlights key factors for successful policies for both technologies, 

including  policy  continuity,  financial  support  and  the  quality  of  the  consumer  experience.  It  also  describes 

important differences between policy support for heat pumps and heat networks, with the latter requiring a higher 

degree of regional or urban coordination and planning. 

Policies supporting the deployment of heat pumps 

The  report  identifies  three  key  barriers  for  the  deployment  of  heat  pumps  and  analyses  successful  policies 

addressing these: 

1.  Heat pumps have a relatively higher investment cost than fossil fuel-based heating technologies 

2.  Pricing structure of heating fuels and electricity that disencourages the use of heat pumps 

3.  Lack of quality and customer satisfaction  

Financial support schemes  

Investment subsidies, grants and tax exemptions can be effective in stimulating deployment, where capital grants 

covering a proportion of installation costs and tax breaks on labour costs have been two of the most common 

approaches. As a condition for receiving a subsidy, countries may require heat pumps to achieve a minimum level 

of performance (e.g. a mean seasonal COP (Coefficient of Performance) of 4 in Austria). 

Some countries implemented subsidy schemes for the replacement of specific technologies with heat pumps, e.g. 

direct electric heating in Sweden, or fossil fuel systems in Austria. The report remarks that the impact assessment 

of a Swedish subsidy scheme found considerable free-rider effects (85% of those surveyed would have installed 

heat pumps even if the subsidy had not been available). 

Carbon and energy pricing 

Energy and carbon pricing on fossil heating fuels is highlighted as a key driver for the deployment of heat pumps 

(e.g. Sweden and Denmark). However, carbon pricing can also have negative impacts when leading to increased 

electricity  prices.  As  an  example  for  the  dependence  of  heat  pumps  on  the  pricing  of  fossil  fuels,  the  report 

describes that heat pump markets developed in several countries after the oil crisis in the 1970s, however, the 

markets collapsed as oil prices decreased.  

Policies addressing technological performance and the availability of information 

The report flags technical standards and quality assurance as key measures required for a successful deployment 

of heat pumps. Based on previous experience (e.g. Sweden), where heat pumps suffered from a poor reputation 

due to a lack of quality control, the report highlights the importance of combining other support measures (e.g. 

subsidies) with measures for quality assurance. The following successful approaches are suggested:  

  Establishment of test facilities in Switzerland for raising the technical standards of heat pumps and 

providing quality assurance  

  Quality labels, e.g. EHPA quality label setting minimum standards for heat pumps  

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  Procurement programmes, e.g. by NUTEK, Sweden: In cooperation with a group of purchasers and 

specialists, NUTEK developed the requirements for a competition to procure technically advanced heat 

pumps which were 30% cheaper and 30% more efficient than existing heat pumps on the market.  

 

Independent complaints board or ‘Heat Pump Court’ (VPN ) in Sweden to address litigation cases 

relating to the false claims of installers about heat pump performance. Court decisions on cases are 

made public so that companies linked to substandard installations are effectively ‘named and shamed’. 

Building regulations 

Building regulations may directly or indirectly support the deployment of heat pumps through requirements for 

the use of renewable heating in new buildings and existing buildings (e.g. the renewable heating obligation in 

Baden-Württemberg); Building codes mandating high efficiency levels in new buildings tend to require controlled 
ventilation and may contribute to supporting air-to-air heat pumps over GSHPs (e.g. Sweden).  

Policies supporting district heating 

The report describes the contextual factors that are important for the deployment of district heating: ownership 

structures, degree of liberalisation, energy prices. These factors are key as the deployment of district heating is 

capital intensive and has uncertain returns unless established as a monopoly. In Denmark and Sweden, most 

development  took  place  before  energy  market  liberalisation,  with  district  heating  companies  owned  and/or 

controlled by municipalities, and risk reduced through planning and regulation of heat supply. 

Financial support schemes are important for the deployment of district heating in liberalised markets. Financial 

support may be provided for network development, to consumers for connecting to DH (e.g. subsidy for replacing 

fossil-based  heating  systems),  or  for  heat  production  technologies  such  as  (biomass)  CHP  (e.g.  tradable 

certificates for renewable electricity, production-based incentives). The sequencing of policies supporting CHP 

and the deployment of DH is important. 

Carbon or energy taxes on fossil-fuel based heating technologies can incentivise heat network development 

and may have a significant impact on the heat sources used to provide networks with heat. 

Urban heat planning 

Planning  frameworks  supporting  or  mandating district  heating  in certain  areas  can  reduce  the  financial  risk of 

developing district heating projects. European countries with high levels of district heating have greatly reduced 

the  risk  of  demand  uncertainty  through  heat  planning,  including  granting  monopoly  powers  to  district  heating 

companies, leading to the ability to access capital at very low rates, and willingness to invest for relatively low 

rates of return. 

Besides the structural and legal framework for heat planning, the report states that such approaches show limited 

application in some countries as they are considered unpopular (e.g. Germany). Urban planning supporting DH 

may include the following elements: 

  Requirement for local authorities to produce local heat plans that identify existing and future heat 

demands of buildings and current and potential heat sources, and assess which heat sources are most 

socio-economically cost-effective and locally appropriate (e.g. Denmark, Sweden). The report 

highlights the importance of providing clarity on what the plans should include and on sanctions for 

municipalities not producing plans. 

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  Mandates for local authorities to set obligations for new buildings to connect to DH, or ban the use of 

technologies (e.g electric resistance heating or fossil fuels) in DH areas.  

Regulations relating to building energy efficiency and the use of waste heat 

Obligations  for  the  use  of  renewable  heating  in  new  buildings  may  cover  DH  (e.g.  the  German  EEWärmeG 

includes DH if heat is produced by a substantial share of renewables, at least 50% CHP, or a combination of 

both). 

Building regulations addressing primary energy (rather than final energy) provide the advantage for DH as they 

account for the efficiency benefits of DH from CHP or renewables. 

Price regulation can be important to increase consumer confidence in district heating, in particular where 

planning has created monopoly operation. For example in Sweden, cost-based pricing was mandatory and 

district heating companies were prohibited from making profits before the liberalisation. Price regulation ended 

with liberalisation, leading to protests from consumers who argued that district heating operators were then in a 

position to take advantage of operating as a natural monopoly. The report highlights the importance of 

implementing price regulation or other consumer protection alongside the deployment of DH. 

progRESheat: Policy recommendations to decarbonise European heating and cooling systems 

(Fraunhofer ISI et al. 2017e) 

Overview 

The progRESheat project develops heating and cooling strategies focusing on six target countries across Europe 

(AT, DE, CZ, DK, PT, RO) through  an analysis  of  (1)  heating  and cooling  demands  and  future  developments,  

(2)  long-term  potentials  of  renewable  energies and  waste  heat  in  the  regions,  (3) barriers  & drivers  and  

(4)  a  model-based  assessment of policy intervention in scenarios up to 2050. Here, we summarise the key 

policy recommendations at EU, national and local level that are derived from the study. 

Recommendations for local, national and European policy making 

Heating and cooling planning 

The report highlights strategic heating and cooling planning as a key element for the decarbonisation of 

heating and cooling. While heating and cooling planning needs to be performed at the local or regional level by 

the municipal or regional authorities, the European and national level need to provide policy support for local 

implementation. This includes 1) the provision of binding targets for the H&C sector (at EU, national and local 

level); 2) the provision of funding for local planning (national level); 3) the establishment of local planning as a 

mandatory part of municipal service tasks (national level); 4) the analysis of H&C demand and supply (local 

level); 5) enabling a long-term investment horizon (local level, national level); 6) cooperation among 

stakeholders (local level). 

Awareness raising, skills and competences 

Other important elements highlighted in the report are awareness raising, skills and competences including 

local communication activities, the involvement and empowerment of consumers and citizens as well as 

addressing intermediaries such as craftsmen, architects or project developers. This includes 1) the 

communication of low-carbon transformation plans at the local level, e.g. by implementing visible demonstration 

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projects; 2) consumer empowerment and transparency of costs and benefits; 3) intensifying policies for crucial 

change agents such as craftsmen, architects and planners, e.g. through regional training programmes, the 

initiation of local networks, changes in the education system for craftsmen and by addressing change agents in 

RES policies; 4) capacity building and supporting tools for the municipal level, e.g. based on EU projects like 

progRESheat, Celsius and Hotmaps. 

Regulatory instruments 

The regulatory instruments for the decarbonisation of H&C concentrate mainly on the national and EU level, 

however, the municipal level is highlighted for defining areas of priorities for different decarbonisation options 

(“heat zoning”). At the national and EU level, the following instruments are proposed: 1) Ban of fossil fuel 

technologies, RES quota and use obligations; 2) non-renewable primary energy demand requirements; 3) 

extension of pollution permits to CO2 and energy efficiency; 4) mandatory energy management systems in 

industry companies. 

Improvement of economic conditions 

The study suggests the following economic instruments. 1)  Implementation of efficient price-based economic 

regulations through energy taxes and/or carbon pricing (national and EU level); 2)  Focus financial support on 

technologies in line with targets (local and national level); 3)  Coherent and innovative financial support 
instruments such as contracting schemes, crowdfunding, ESCOs (national level). 

Policies to enforce the transition to nZEB: Synthesis report and policy recommendations from 

the  project    (TU  Wien  et  al.  2014)    and  Overview  and  assessment  of  new  and  innovative 

integrated policy sets that aim at the nZeB standard (Bürger 2013) 

Overview 

The project ENTRANZE aimed at supporting the deployment of nearly-zero energy buildings (nZEB) and RES-

H&C through collecting data on the EU building stock, an analysis of stakeholder behaviour and acceptance of 

various  technologies, cost-optimality  calculations  and  model-based  policy  scenarios of building-related  energy 

demand. The project provided an extensive assessment of barriers and policies and discusses how individual 

policy instruments can be combined to consistent policy packages. 

Policy instruments 

The report discusses a variety of policy instruments:  

  Regulatory instruments: For the buildings sector, the following regulatory instruments are considered: 

Building codes, refurbishment obligations, RES-H obligations 

  Economic instruments: The economic instruments considered include 1) Grants/preferential loans, 
where different options for financing the programmes are outlined (state budget, state-like budget, 

surcharge on energy and climate taxes, levy on buildings); 2) Tax incentives, differentiating between 

positive incentives (tax credits, tax deductions, reduced VAT) and negative incentives (bonus/malus on 

property tax or property purchase tax); 3) Energy tariffs that depend on consumption, e.g. higher tariffs 

when a given consumption level is exceeded; 4) Non-fiscal  instruments strengthening  support  and  

financing  activities within the market, e.g. energy saving obligations, quota for RES-H, bonus/premium 

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scheme (e.g. the renewable heat incentive in the UK), contracting (including ESCOs and Energy 

Performance Contracting), bank obligation to grant interest-reduced loans. 

  Capacity building qualification and quality assurance, including professional training and vocational 

education, branded quality standards and qualified building-specific refurbishment plans 

 

Information, motivation and advice, including the combination of financial support with mandatory 

advice and establishing competence centres for thermal building retrofit. 

  Market transformation (supply side) measures: 1) R&D support to ensure innovation and technology 
improvement; 2) Technology procurement, including public procurement as well as procurement 

groups; 3) Premiums for providers of efficient technologies; 4) Organising competitions or tenders 

between technology providers; 5) Creating networks; 6) Labelling, testing and certification 

Policy packages 

For the combination of different instruments to a policy package, the report provides the following guidelines: 

 

Instruments should 1) address the main barriers; 2) address the main target groups; 3) reflect the 

maturity of the market of the different technologies 

  Avoid redundancy: If a certain barrier (e.g. a financial barrier) is addressed by two or more instruments, 

this should be adequately justified (e.g. if instruments address different target groups).  

  Efficiency: Keep the administrative costs low, e.g. by exploiting synergies by administering several 

instruments together 

  Public acceptance and communication: Keep the packages as simple as possible to ensure easy 

communication. 

National restrictions on fossil fuels in heating systems in the context of the Ecodesign Directive 

(Öko-Institut and Klinski 2021) 

Overview 

This study examines whether and how the use of fossil fuels for space and water heating can be further restricted 

and later phased out under German law in accordance with the EU legal framework. The focus of the analysis is 

the compatibility of these measures with the Ecodesign implementing Regulations (EU) 813/2013 and 814/2013, 

setting  EU-wide  binding  energy  efficiency  requirements  for  space  and  combination  heaters  as  well  as  water 

heaters and hot water storage tanks. The study further examines additional aspects, such as the compatibility 

with  the  provisions  of  the  Treaty  on  the  Functioning of  the European  Union  (TFEU)  on  the  free movement  of 

goods. The analysis is complemented by a survey of existing restrictions on the use of fossil fuels for heating in 

other European countries. 

National phase-out regulations: Examples 

The study examines existing phase-out regulations in Austria, Denmark, the Netherlands, Switzerland and 

Norway and furthermore elaborates on the German regulation phasing out the installation of monofuel oil boilers 

from 2026. According to the study, Denmark has the most comprehensive approach for restricting the use of 

fossil fuels, based on a use obligation for renewable energies for new and existing buildings. The use obligation 

is connected to zoning. In Austria, the installation of oil boilers is banned in new buildings since 2019. The 

Netherlands have introduced restrictions for the connection of new buildings to the gas grid, thus phasing out 

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the use of gas in new buildings. In Norway, oil for heating is banned since 2020, covering not only the 

installation of boilers but also the use of fuels in existing boilers (which however make up for a minor share of 

heat supply). 

National phase-out regulations: Legal assessment 

The study assesses whether there are legal barriers for the introduction of phase-out regulations at national 

level arising from the requirements for space and water heaters introduced in the context of the Ecodesign 

Directive. The study finds the ecodesign requirements do not limit national phase-out regulations addressing the 

use of fuels in heating systems, as the fuels used in the system are not specified as ecodesign parameters. The 

findings are supported by the EU Commission’s decision (EU) 2020/654 of 13 May 2020 to approve the German 

Regulation on small and medium-sized combustion units (1st BImSchV – Ordinance for the Implementation of 

the Federal Immission Control Act) stipulating requirements for solid fuel boilers as derogations from Ecodesign 

Regulation 2015/1189. 

Filling  the  policy  gap:  Minimum  energy  performance  standards  for  European  buildings 

(Sunderland and Santini 2021) 

Overview 

This study analyses options for the implementation of minimum energy performance standards in the EU and its 

Member States. It describes the role of MEPS to support the transition of the buildings stock, reviews existing 

MEPS in several countries and describes options for the introduction of MEPS at EU and national level. 

Key design features of MEPS 

The  report  reviews  existing approaches  for  MEPS  in  various countries  and  identifies  the  following  key  design 

features for MEPS: 

1.  Metric and standard: The most common metrics used are carbon (CO2 per m2), energy ratings (kWh 

per m2) or the EPC class. MEPS can also be designed as requirements for a minimum set of building 

fabric and/or heating system measures. 

2.  Section of stock: The standards reviewed address different building stock sectors, tenures and 

ownership and can also be based on building type or size. 

3.  Trigger(s) for compliance: The trigger for compliance with a standard can be a hard date by which all 

obligated buildings must comply; this may also be accompanied by a timeframe for incremental 

improvements. Existing standards use building life-cycle trigger points, including major renovation, 

inspection or building transactions such as sale or change of rental contract. Other policy proposals 

use further repair, maintenance and improvement trigger points, like building extensions and 

replacements. 

The role of MEPS in overcoming the barriers to renovation 

The study suggest that MEPS can help overcome the significant barriers when introduced as part of a 

comprehensive renovation policy framework. Important elements of the framework are funding, finance and 

incentives, technical and practical support and measures to limit the burden especially for low-income 

households. MEPS can produce a “demand floor” for renovation finance and create continuity, predictability and 

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scalability in renovation markets. MEPS signal the destination for the whole stock and individual buildings, 

which helps align the demand and the supply chains, providing space for business and social innovation.  

Options for MEPS at EU and national level 

This  study  proposes  several  options  to  introduce  MEPS  at  EU  level,  including  (1)  expanding  existing  MEPS 

legislative  provisions,  (2)  proposing  MEPS  for  the  European  building  stock  while  leaving  some  flexibility  to 

Member States for the implementation, (3) creating an obligation for Member States. 

At the Member State level, the study recomments to introduce integrated and informed strategies based on clear 

defnitions, interactions with key stakeholders as well as taking into account the learnings from existing systems. 

Regarding  the  comprehensive  framework,  the  study  highlights  the  importance  to  support  the  supply  chain,  to 

ensure that financial support is available (especially for low-income households) and that buildings assessment 

tools, EPCs and planning instruments are strengthened.  

Minimum energy efficiency standards for a fair energy transition (BPIE and RAP 2018) 

Overview 

The  policy  brief  summarises  key  findings  regarding  the  role  of  minimum  energy  efficiency  standards  for 

addressing energy poverty and supporting a fair transition of the buildings sector in Germany. The focus is on 

minimum energy efficiency standards for rented buildings.  

Energy poverty and health 

The report argues that energy poverty is prevailing in tenant households, while at the same time these 

households have limited possibilities to improve the energy performance of their homes (split incentives). 

Furthermore, it points out the link between energy poverty and health effects, stating that households affected 

by energy poverty are more likely to suffer from health problems related to insufficient heating and poor building 

fabric. 

Minimum energy efficiency standards 

The report proposes dynamic minimum standards for rented buildings, successively phasing out all energy 

classes lower than A+ until 2050. The current lowest energy class G is phased out in 2025, followed by a 

phase-out of the subsequent energy classes in four-year steps. The study proposes to link the enhanced energy 

performance to indoor air quality parameters and highlights the need to provide appropriate financing models to 

prevent rent increases, ensuring the renovations are carried out in a socially responsible manner. The 

importance to improve data quality in order to design minimum standards for specific target groups is 

highlighted. 

Policy  proposals  and  concepts  for  tools  of  the  Green  paper  on  good  practice  in  EPC 

assessment, certification, and use (QualDeEPC 2021) 

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Overview 

The  QualDeEPC  project  aims  to  both  improve  quality  and  cross-EU  convergence  of  Energy  Performance 

Certificate  schemes,  and  the  link  between  EPCs  and  deep  renovation.  The  project  analyses  existing  EPC 

schemes in various EU MS and derives recommendations to improve  EPCs across the following dimensions: A) 

Improving the recommendations for renovation provided on the EPCs, towards deep energy renovation; B) Online 

tool  for  comparing  EPC  recommendations  to  deep  energy  renovation  recommendations;  C)  Creating  Deep 

Renovation  Network  Platforms;  D)  Regular  mandatory  EPC  assessor 

training  on  assessment  and 

recommendations  required  for  certification/accreditation  and  registry;  E)  High  user-friendliness  of  the  EPC;  F) 

Voluntary/mandatory advertising guidelines for EPCs; G) Improving compliance with the mandatory use of EPCs 

in real estate advertisements 

Key recommendations 

The report provides recommendations for Member States to define deep renovations by linking them to the nZEB 

framework. For full retrofits it recommends values for non-renewable primary energy savings above 60 % and for 

staged  approaches,  the  component  energy  efficiency  levels  that  are  legally  required  or  usually  necessary  to 

achieve deep energy renovation in the nZEB-based definition is recommended. The report further highlights that 

the  recommendations  for  retrofit  measures  provided  in  EPCs  are  typically  not  aligned  with  deep  renovation 

approaches and provides guidance for improving the recommendations. In this context, the project develops an 

online tool for assessing the energy performance of buildings and for deriving deep retrofit recommendations, as 

well  as  an  online  platform  that  provides  a  one-stop  shop  including  relevant  information. The  project  develops 

support for regular trainings for EPC assessors and derives recommendations for increasing the user-friendliness 

of EPCs. It further addresses the presentation of EPCs in real-estate advertisement and the compliance with the 

mandatory use. 

Next-generation EPC’s user and stakeholder requirements & market needs (D2EPC 2021) 

Overview and results 

The D^2EPC aims to support the development of dynamic Energy Performance Certificates (EPCs) for buildings 

using  digital  technologies.  The  report  highlights  the  need  to  improve  the  recommendations  for  renovation 

measures  in  EPCs  and  provides  a  list  of  recommended  measures.  The  project  develops  an  online  tool  that 

provides recommendations for retrofit measures for individual buildings and compares recommendations in EPCs 

to deep retrofit measures. The project establishes deep renovation network platforms that act as one-stop shops 

and connect different actors of the renovation market. The project further points out the need for strengthening 

the  training  of  EPC  assessors  and  proposes  a framework  to  increase  the  user-friendliness of  EPCs. Lastly,  it 

addresses the advertisements of EPCs in real estate transactions, covering recommendations on the content of 

information,  the  way  of  displaying  it  as  well  as  the  legal  framework  for  voluntary  and  mandatory  provision  of 

information. 

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The Concept of the Individual Building Renovation Roadmap – An in-depth case study of four 

frontrunner projects (iBROAD 2018) 

Overview 

Building renovation faces a variety of barriers such as a lack of knowledge about the process or a perception of 

burden  due  to  time-consuming  planning  or  unreliable  professionals.  The  EU-funded  project  iBRoad  works  to 

remove such barriers by offering an individual renovation plan for single-family houses. This considers both the 

needs of the residents and their specific situation (e.g. age, financial situation).  A Building Renovation Passport 

is a document outlining a long-term step-by-step renovation roadmap for a specific building. It results from an on-

site energy audit fulfilling quality criteria and indicators established during a design phase, following a dialogue 

with building owners. The expected benefits of the building renovation passport are lower heating costs, improved 

comfort, and reduced CO2, which should be explained in a user-friendly way. It is possible to combine the plan 

with a repository of building-related information in a logbook on aspects such as energy consumption or energy 

production. 

Main results 

This study provides an overview of how to create building renovation plans and addresses the key issues for 

developing and implementing the process. Four practical examples are highlighted from Denmark (BetterHome), 

Flanders  (Woningpas  and  EPC+),  France  (Passeport  Efficacité  Energétique)  and  Germany  (individueller 

Sanierungsfahrplan). Most of these examples are entering or have concluded the testing phase and will soon 

start implementation.  

The report also includes important insights that could be gained from the four analysed examples to implement 

individual  renovation  roadmaps.  The  process  can  be  summarised  in  four  blocks:  exploration,  concept  design, 

implementation  and  evaluation.  Careful  planning  is  important  for  the  successful  implementation  of  the  whole 

process. An evaluation should be carried out after the tool has been available on the market for at least one year 

to assess and measure the success of the tool. This will also allow adjustments and improvements to be made to 

the tool to ensure and increase its usability and added value. 

The study states that despite a promising start, it is too early to judge whether the four examples from Denmark, 

Flanders, France and Germany will ultimately lead to success. However, research could help to identify mistakes 

early to avoid them in the process. For a successful implementation of the instrument, the early involvement of 

the right stakeholders is initially relevant. In this context, the composition of an interdisciplinary project team from 

different disciplines is an important success factor. Furthermore, funding should also be guaranteed throughout 

the  entire  period  in  order  not  to  jeopardise  the  process.  It  is  additionally  important  that  the  information  of  the 

renovation  roadmap  as  well  as  the  logbook  goes  beyond  energy  and  includes  useful  information  about  the 

building. As the roadmap is created for the users, it should also be user-friendly and affordable. Finally, marketing 

the  product  through  the  right  channels  is  also  important  to  attract  users  and  increase  demand.  Creating  an 

obligation could also be a key success factor. 

Pricing is just the icing: The role of carbon pricing in a comprehensive policy framework to 

decarbonise the EU buildings sector (Thomas et al. 2021) 

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Overview 

The  report  considers  the  possible  role  of  carbon  pricing  in  the  decarbonisation  of  buildings  in  the  EU  and  its 

Member States. It describes the opportunities and risks of introducing carbon pricing and considers its integration 

in a supporting policy mix. 

Opportunity and limits of carbon pricing in the buildings sector 

The study argues that carbon pricing can play an important role for the decarbonisation of the buildings sector if 

combined  with  a  strong  policy  mix,  however,  that  carbon  pricing  alone  is  not  sufficient  for  achieving 

decarbonisation. It highlights the need to introduce carbon pricing along with regulatory and financing measures 

as well as with 55%-proof Effort Sharing Regulation (ESR) targets.  

The study points out two important roles for carbon pricing in the building decarbonisation policy framework:  

1.  Making investments in energy efficiency and renewable heating more cost-effective by applying the 

polluter pays principle: Currently, in most EU MS electricity is more expensive than fossil fuels for 

heating, as electricity prices have been increased due to taxes and levies. Carbon pricing for heating is 

needed to rebalance the prices, as decarbonisation efforts are underminded without a level playing 

field. 

2.  Generating revenues that can be used to support energy efficiency and heat decarbonisation policy 

measures: Recycling the revenues from carbon pricing to support investments delivers emissions 

savings going beyond the effect of the price alone. The report argues that revenues should be targeted 

at supporting the households that would be most affected by price increases and least able to invest in 

low-carbon technologies. Explicitly linking the carbon price to supporting policy measures could 

increase public support for carbon pricing. 

The  study  argues  that  carbon  pricing  needs  to  be  implemented  along  with  a  strong  regulatory  framework  to 

address the structural barriers in the sector and to ensure target achievement. If relying solely on carbon pricing, 

the study  points  out  the  risk  that carbon  pricing  with a  fixed  cap  would  potentially  lead  to  very  high prices  for 

heating and thus create unacceptable burdens especially for low-income households. 

Efficient District heating and cooling systems in the EU (Tilia 2016) 

Overview 

The study was conducted for the Joint Research Centre (JRC). It focuses on  

  High-quality, low-carbon and efficient district heating and cooling (DHC) systems 
  A holistic approach: national policy frameworks, local conditions, business models 
  The in-depth analysis of eight case studies 
  The identification of key success factors 

Objective and approach 

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The main objective was to identify the key success factors for the development of highly efficient and low-carbon 

DHC  systems.  Furthermore,  it  was  discussed if  and  how  these  factors  could  be  replicated  in  other  European 

Member States. Therefore, eight of the most efficient DHC systems in the EU (according to the authors) have 

been thoroughly analysed with a holistic approach assessing the national policy framework, local conditions and 

business models. They are located in Denmark, Estonia, France, Germany, Italy, Spain and Sweden. For the 

identification of efficient DHC systems, six indicators, which were identified as the most relevant ones out of many 

more defined at the beginning of the project, were used. These are (i) the economic viability of the DHC grid, (ii) 

affordable heating and cooling prices, (iii) resilient and stable supply, (iv) service quality, (v) adaptability of the 

service (mid- to long-term), and (vi) low CO2 emissions and environmental impacts. 

In the centre of the analysis were several meetings and exchanges with the main stakeholders (DHC operators, 

national and local authorities, site visits, own expertise). In order to get a broad overview of different settings, the 

case studies were chosen in a way that they cover different conditions: older systems, which were upgraded over 

time, new systems with a low-carbon design, different countries, large and medium sized (7 – 3,600 MWth). 

Results 

The analysis showed that there is not one model for the development and operation of low-carbon and efficient 

DHC systems, which can always be used. However, several success factors were identified, which occurred in 

different case studies. These are: 

  Adequate national policy and regulatory environment: Renewable energies and CHP must be 
supported in the heating and cooling sector and ambitious CO2 emission reduction targets are 

required. Three main models for national regulation were identified (DHC only regulated through 

contracts without central regulation; central regulation of the market; hybrid of central and local 

regulation) 

  Financial support (direct and indirect): Long-term debt funding, investment subsidies, tax incentives 
  Focused local policy and coherence with urban planning: energy supply must be integrated in 
long-term urban planning (including zoning for different heat and cold supply options), focus on 

compact and mixed-used districts, mandatory connection to grid (if possible and economically feasible) 

  Alignment of interest/cooperation maturity between DHC operators, consumers and municipality/ 

local authority 

  Availability and relevance of local resources: renewables, waste heat and cold etc. 
  Comprehensive project development: assessment of demand, secured and optimised supply, 

continuity throughout system lifetime 

  Price competitiveness: competitive prices against alternative solutions throughout a system’s lifetime 
  Flexibility of heat and cold production based on diversified, flexible (e.g. CHP) and complementary 
energy carrier mix in combination with thermal storage, continuous optimisation of operation 

  Combination of technical and non-technical innovation: use best available technologies, research 
and development, governance and social initiatives (e.g. citizen empowerment, awareness raising on 

benefits of DHC,…) 

Besides key success factors, four other, secondary success factors were identified in the study. These are the 

size of the system (economies of scale), customer empowerment (mainly in Denmark), long-term secured prices 

as an incentive and base for investors, and climate conditions (cold climates improve the business case of district 

heating). 

Furthermore, potential implications on selected policy guidelines were identified and described: 

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  Support in-depth design and comparison of optimal systems: programmes and initiatives for 
detailed design focusing on pre-optimisation (concept development and modelling), holistic 

assessment of different local supply options based on defined criteria 

  Revisiting and updating regulatory patterns like benchmarks, contractual patterns and guidelines, 

customer involvement on local level 

  Better support for co- and trigeneration: CHP and CCHP are the cornerstone of smart local 

systems and provide high systemic benefit; these benefits should be valued better in market design 

and support schemes 

  A stronger focus on DHC systems should be put in overall smart grid and innovation 

programmes: focus on multi-energy systems with a stronger integration of DHC systems, up-scaling 

of EU R&D programmes for public authorities to develop new system designs (flexibility, sector-

coupling…) 

The  study  highlights  the  dependency  of  the  success  of  DHC  systems  on  local  conditions  (economic  and 

population dynamics, climate etc.) and policy frameworks (local, state, national). Therefore, models and strategies 

can only partly be replicated in other locations or even Member States. 

Transition - Make Net Zero Energy Refurbishments for Houses a Mass Market Reality: 

Position Paper on Funding Instruments (Energiesprong 2017) 

Report on Market Assessment and Bottlenecks (Energiesprong 2018) 

Overview 

The project Transition Zero was conducted by Energiesprong. Its aim was to establish the right market conditions 

for the broad introduction and market acceleration of net zero energy homes in Europe with a focus on the UK 

and France. It built on the success of the Energiesprong concept in the Netherlands and focused on the social 

housing sector as a catalyst. First, the concept was introduced under current market conditions. Furthermore, 

opportunities were identified how a better combination of policy, funding and regulation could pave the way for 

the establishment of a mass market for the deep-retrofit concept of Energiesprong. 

Approach 

The aim of the project was to facilitate commitments for 5,000 houses to be refurbished to a net zero-building and 

creating a pipeline of additional demand. It was aimed to achieve this by a viable refurbishment proposition for 

social housing companies, financiers and governments. The addressed stakeholders should be enabled to adjust 

their financing products and regulations. By creating a large demand, the construction sector is challenged to 

deliver the value proposition (viable, cost efficient net zero energy refurbishments). 

Market assessment (Energiesprong 2018) 

For the creation of a viable and scalable market two main elements are needed: 

  Demand: a large number of commitments for net zero retrofits. Thereby, the industry can invest in 
the required R&D/innovation needed to reduce the costs and increase the quality of the solution sets 

needed 

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  Supply: stakeholders in the building sector who are willing to invest in the design and delivery of the 
required solution sets and provide long-term performance warranties. Scaling up the market and 

establishing industrialised processes in the delivery of the solution leads to significant cost 

reductions 

The project identified several  critical issues in order to establish a mass market for net zero energy retrofits. 

These are: 

  A minimum secure market is needed to convince the industry to invest in innovations 
  Housing companies usually only want to apply solutions that have proved to deliver the desired 

performance 

 

In the Netherlands the issue was solved by establishing a “large volume deal” among four solution 

providers and six housing companies. This deal allowed experiments and prototypes (ca. 1,000 units) 

before upscaling to high performance solutions (next 10,000 units) and upscaling to a large volume of 

100,000 units 

  Other countries (in this project France and the UK) were able to build on the Dutch experience. 

However, they also needed national learning to happen (other stakeholders, different market and 

political conditions etc.) 

  There is usually an uncertainty on the volume combined with public procurement constraints, 
which lead to market inertia (e.g. no large commitment from housing companies, solution providers 

reluctant to invest in prototypes) 

Bottlenecks (Energiesprong 2018) 

Five main bottlenecks were identified in the project. Most of them are interrelated. The bottlenecks are: 

  Contracting and procurement barriers: in some countries social housing providers are subject to 
national versions of EU public procurement rules. On the one hand, these rules ensure competitive 

pricing, on the other hand they are a barrier to kick-starting an early market. 

  Supply side is very fragmented: construction companies, architects, developers, technical 

consultants, industrial component suppliers etc. result in high transaction costs and often poor-quality 

delivery --> deeper supply chain integration and co-design of products / solution set are needed to 

deliver high performing solutions at affordable prices 

  A lack of trust in the value chain (industry to end user): amongst different players/stakeholders; 

furthermore, terminology like ‘modern methods of construction’ or ‘prefabrication’ are often viewed with 

suspicion / have a negative image (historic associations with insolvency risk, poor technical or quality 

issues etc.) 

  A lack of demand for integrated components / solution sets: industry mainly provides materials 

and loose components instead of integrated components for refurbishments; lack of co-design and use 

of available materials and components to design solutions leads to high margins and costs 
  Lack of skilled workers and low productivity levels: almost no increase in productivity in the 

construction sector in the past 20 years; workforce size and demographics are a high risk and can lead 

to lack of skilled workers in construction sector 

Funding Instruments (Energiesprong 2017) 

It is highlighted that chances for (deep) refurbishment usually only appear once in several decades. The authors 

therefore emphasise the need that policymakers address what is needed and not only what is thought to 

be  possible in  order  to achieve  the  long-term  climate  protection  targets  at  EU  level.  As key,  the authors  see 

energy performance guarantees at least for refurbishments. Furthermore, net zero energy buildings should be 

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marketed as desirable (and achievable) instead of aiming at minimum standards like EPC B-ratings (B-ratings 

are not in line with the long-term goals of the EU). 

Concerning EU funding, the authors recommend focusing on ambitious and higher risk projects. Furthermore, 

funding should focus on outcomes (e.g. through energy performance guarantees). The shift in the focus 

could benefit the ERDF (European Regional Development Fund) and European Social Fund projects. In order to 

pave the road for new ideas, it is recommended to accept higher failure rates for H2020 projects comparable 

to experienced failure rates from entrepreneurs developing new products and ideas. Instead of predefining the 

calls for proposals it could be asked “Who has a good idea to solve the challenge of energy efficiency performance 

in buildings in Europe?” (Energiesprong 2017, p. 5). Furthermore, more radical/market-changing ideas should be 

accepted. 

The  following  recommendations  are  for  the  whole  EU.  For  new  buildings,  an  efficiency  standard  of 

<30 kWh/m²a  (thermal)  is  recommended.  This  should  be  introduced  as  a  binding  standard  as  soon  as 

possible and accompanied by efficiency standards for lighting and appliances. For refurbishments, it is also 

recommended to support deep renovation to achieve a net zero standard also in existing buildings as soon as 

possible,  because  buildings  are  seldom  refurbished  more  often  than  every  30  years.  In  order  to  achieve  the 

efficiency standard, it is highlighted that prices for refurbishments must drop dramatically in order to ensure 

that energy cost savings cover the refurbishment costs. The refurbishment itself needs to be delivered within a 

shorter period and improve the look of a building. In addition, energy performance guarantees are needed for 

convincing financiers of the investment in refurbishments is profitable and secure. It is recommended to focus 

on whole refurbishments rather than a sequential patchwork of  measures as a good quality can only be 

assured when all measures are combined and focusing on single measures will not lead to the “right” solutions. 

Concerning legislation, the authors recommend that the EU should not legislate on refurbishments even though 

the topic is important. The main reason is that legislation like a minimum refurbishment rate could lead to the 

situation that billions are spent for half-measures not compatible with the long-term goals. Instead, the authors 

recommend that the EU institutions support the development of refurbishment activities by wisely spending EU 

funds  and  –  even  more  important  –  support  refurbishments  by  CO2  prices,  energy  taxation  and  full 

unbundling of demand side obligations (DSO). Funding should be focused on process support of market 

development  for  deep,  net  zero  energy  refurbishments  to  increase  the  impact  rather  than  subsidising 

refurbishment works itself. For the ERDF it is recommended to at least ask for energy performance guarantees. 

Besides recommendations at EU level, (Energiesprong 2017) also includes recommendations for the countries 

addressed,  which  are  the  UK,  France  and  the  Netherlands.  The  recommendations  address  country-specific 

challenges and situations and are only available in the respective national languages. 

Low-carbon heating of homes and businesses and the Renewable Heat Incentive (National 

Audit Office 2018)  

Overview 

With  the  Renewable  Heat  Incentive  (RHI),  Great  Britain  was  the  first  country  in  the  world  to  use  a  financial 

incentive for renewable heating linked to the production of heat rather than to the upfront costs of installation. It 

has been followed by Northern Ireland and the Netherlands. The objectives of the RHI are: 

  To increase the amount of heat produced from renewable sources;  

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 
 

to reduce carbon emissions from heating homes and business premises;  
to help to grow supply chains which can support a national transition from fossil fuel to low-carbon 

heating technology from the 2020s. 

Policy design and implementation 

Technologies supported by the RHI include biomass boilers, heat pumps and anaerobic digestion plants, which 

produce biomethane injected into the gas grid. The scheme is funded directly by taxpayers, unlike subsidies for 

low-carbon electricity, which are funded through higher energy bills.  

The RHI consists of two parts: 

  Non-domestic RHI: launched in November 2011 for industry, businesses and public sector organisations; 

participants receive payments over 20 years. 

  Domestic  RHI:  launched  in  April  2014  for  homeowners,  self-builders,  private  and  social  landlords; 

participants receive payments over seven years. 

In the non-domestic scheme, payments to participants are based on the amount of renewable heat they produce. 

This  is  measured  through  meter  readings  participants  submit  in  order  to  receive  payments.  In  the  domestic 

scheme,  payments  are  based  on  a  specified  heat  demand  as  set  out  in  the  applicant’s  Energy  Performance 

Certificate. 

The RHI includes strong cost control measures:  

 

tiered  tariffs:  included  in  the  Non-domestic  scheme  when  it  was  launched,  this  involves  switching 

participants’ tariff from a higher to a lower rate once their heat production reaches a pre-defined limit. 

This reduces the incentive for participants to produce excessive heat solely for the purposes of financial 

gains;  

  deemed  payments:  included  in  the  Domestic  scheme  when  it  was  launched,  for  most  participants 
payments  are  based  on  the  annual  heat  demand  figure  listed  in  the  property’s  Energy  Performance 

Certificate. This is known as ‘deemed payments’ and predetermines the amount of money participants 

will receive;  

 

tariff degression: introduced to the Non-domestic scheme in 2012 and the Domestic scheme when it was 

launched  in  2014.  It  provides  the  possibility  to  reduce  tariffs  for  new  applicants  when  total  forecast 

spending on a technology exceeds its pre-defined limit. This measure has led to significant reductions 

in the biomass boiler tariff since the scheme started;  

  budget cap: notwithstanding the intention to provide confidence to the supply chain, this control measure 
was  introduced  in  2016.  It  enables  the  Department  to  reserve  the  right  to  close  the  scheme  to  new 

applicants with little or no notice when forecast spend exceeds a pre-defined limit. 

Policy performance 

The RHI is on track to reduce carbon emissions from heating by 7 MtCO2e per year from 2020-21. The cost-

effectiveness of the RHI, measured as the amount of taxpayers’ money spent to achieve each one megawatt hour 

(MWh) of renewable heat and to reduce carbon emissions by one tonne (t/CO2e), is estimated to 49 £/MWh and 

142 £/tCO2e. This estimate assumes that none of the accredited installations would have occurred had the RHI 

not been launched.  

Surveys found that 25 % of participants in the Non-domestic scheme and 24 % of participants in the Domestic 

scheme stated that they would have installed a renewable heating technology anyway, even if the RHI had not 

existed.  

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Using this data to form a less optimistic assumption about the additionality of the scheme, our heat cost-

effectiveness estimate deteriorates from £49 to £65 per MWh and carbon cost-effectiveness from £142 to £189 

per tonne of CO2e saved. 

Monitoring and lesson learning 

The programme uses the following items for monitoring and updating: 

 

 

 

tracking of progress – on renewable heat produced, carbon emissions saved and installations 

supported – through an internal ‘benefits realisation tracker’; 

improving its understanding of the user experience and the market through surveys, interviews with 

different scheme participants and industry stakeholders; 

reviewing the scheme following the problems experienced with the devolved Northern Ireland RHI 

scheme;  

  monitoring the uptake of individual technologies, which it uses to manage the budget and enable cost 

control measures as and when needed 

Experience from the (suspended) Non-domestic Renewable Heat Incentive (RHI) scheme in Northern 

Ireland 

The scheme was launched in 2012 based on a similar design to the Great Britain RHI but with significant 

differences, in particular as it did not include cost control measures until 2015. In 2015, following an increase in 

the number of applications as a result of the higher tariffs, it announced that it would introduce the tiering of 

tariffs, which led to a spike in applications before it was able to implement the cost control reform. This led to the 

scheme running out of money and being suspended to new applicants in February 2016. 

Evaluating the renewable heating and efficiency obligation for existing buildings – insights 

into the mechanisms of mandatory building requirements (Pehnt et al. 2019) 

Overview 

Germany’s largest federal state, Baden-Württemberg, introduced a law (EWärmeG) mandating a minimum share 

of renewable energy in existing buildings when the heating system is replaced. The law was first introduced in 

2008 covering residential buildings and requiring a minimum share of renewable energy of 10% of heat demand; 

and was amended in 2015, widening the scope to including most types of non-residential buildings and increasing 

the requirement to 15%. 

The EWärmeG covers most residential buildings (exemptions are holiday homes that are used infrequently as 

well as very small houses with less than 50m2 living space) and more than 70% of non-residential buildings. The 

law covers buildings with central heating systems, such that multi-family buildings with individual heating systems 

per  apartment  are  not  covered. With  an  annual  exchange  rate  of  heating  systems  of  aroung  2.5%  in  Baden-

Württemberg, around 38 000 buildings are covered by the regulation each year. 

Compliance options and evolution of compliance mix 

The  EWärmeG  includes  several  renewable  heat  technologies  as  well  as  some  alternative  measures  as 

compliance options: 

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  Solar-thermal collectors (at least 0.07 m² collector area per m² living space for one- and two-family 
dwellings and 0.06 m² for multi-family dwellings) accounted for 30% of the compliance mix for 

residential buildings in 2010, with the share gradually decreasing to 8% in 2017. For non-residential 

buildings the share has been between 2% and 4%. 

  Heat pumps (minimum seasonal performance factor 3.5) have a fluctuating share between 4 % and 
15 % over the entire period for residential buildings, with no clear upward or downward trend. For non-

residential buildings, a low share of 1%-4% use heat pumps as a compliance option. The diffusion of 

heat pumps is limited by the fact that many buildings subject to the EWärmeG are unsuitable for heat 

pumps, due to low heat insulation standards and high temperature levels in the heating system. 
  Solid biomass boilers have a fluctuating share between 15% and 27% for residential buildings, with 

no clear upward or downward trend and 10%-16% for non-residential buildings. 

  Purchasing gas products with a 10 % share of biogas or heating oil with 10 % bio-oil accounted 
for 16%-35% (biogas) and 7%-11% (bio-oil) until the amendment in 2015, after which the share 

decreased considerably. The decrease is attributed to the fact that the maximum accountable share of 

this option is limited to 10% in the amendment, such that for fulfilling the 15% requirement additional 5 

%-points must be fulfilled through other measures, such as a renovation roadmap (see below). 
  Building owners may opt to connect to a district heating system or an efficient CHP device with 

requirements on the efficiency (CHP) and the share of CHP, waste heat or renewable energies (district 

heating). The connection to district heating makes up for 4%-8% of the compliance mix throughout the 

evaluation period (2010-2017), whereas the option of connecting to CHP makes up for at most 1%. 
  PV installations (at least 0.02 kWp per m² of living space) have become a popular compliance option 
since the amendment in 2015, making up for 9-11 % for residential buildings and 17-24% for non-

residential buildings. However, the evaluation team finds that a large number of PV systems were 

already present on the buildings or would have been installed anyway.  

  Efficiency measures: Instead of employing a renewable heating system, the building owner can opt 
for efficiency measures (insulation of the whole building, the external wall, the roof or the basement 

ceiling). This compliance option’s share increased substantially after the law’s amendment (from 4-6% 

before 2015 to 14-15% after 2015). 

  Energy audits: Since the amendment in 2015, a part of the obligation (in residential buildings: 5 %-
points) can be fulfilled by carrying out an energy audit of the building based on an individual building 

roadmap. In 2016 and 2017, the building renovation roadmap contributed to about 17 % of the 

compliance mix for residential buildings, in combination with other measures. For non-residential 

buildings, building owners may comply with the EWärmeG with the renovation roadmap as the only 

measure, making the renovation roadmap the most popular compliance option (22%-30%).   

  Since the amendment in 2015, building owners may choose a combination of measures, where the 
most common combination for residential buildings is the renovation roadmap and a share of 10% 

biogas or bio-oil. 

Impact of the law on the deployment of renewable energies and on carbon emissions 

The evaluation team assesses the impact of the law on the deployment of the various options included in the 

compliance mix and finds that, while slight positive impulses are observed for other measures, the most important 

impact is found in the following measures: 

Biogas and bio-oil: The range of blended products for both natural gas with biomethane content and heating oil 

with a share of bio-oil is much broader in Baden-Württemberg than in the rest of Germany. Gas suppliers began 

to  introduce  special  biogas  tariffs  after  the  introduction  of  the  EWärmeG  in  2008.  Furthermore,  since  the 

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amendment in 2015, utilities offer and advertise biomethane products as a package with a renovation roadmap 

to  comply  with  the  EWärmeG.  In  Baden-Württemberg,  64  %  of  the  examined  fuel  oil  suppliers  offer  bio-oil 

products, while in the rest of Germany almost no products are available. 

Renovation  roadmaps:  Likewise,  the  number  of  government-funded  detailed  energy  audits  per  inhabitant  in 

Baden-Württemberg  has  increased  significantly  since  2015,  when  the  renovation  roadmap  was  introduced. 

However,  the  building  renovation  roadmap  is  primarily  an  information  tool  and  the  evaluators  point  out  that  it 

needs to be assessed in the future if renovation roadmaps really induce additional refurbishment measures. 

The combination of biogas and a renovation roadmap represents a relatively simple and (from an investment cost 

perspective)  cheap  compliance  measure.  The  evaluation  team  points  out  that  the  use  of  these  fuel-based 

compliance  options  –  instead  of  technology-based  compliance  options  (heat  pumps,  biomass  boiler,  solar 

thermal) – provide only a small contribution to long-term climate protection targets in the building stock as they 

support the existing infrastructure of gas and oil-based heat supply. 

While the use obligation for renewable heat of the EWärmeG can be fulfilled rather easily by installing gas and 

fuel oil boilers with blended bio-fuels, there are few incentives for market actors (technology providers, installers) 

for innovations by establishing new decentralised renewable heat technologies with similar advantages. 

In total, the EWärmeG has triggered additional 110,000 to 170,000 t of CO2eq. savings annually since its 

amendment (residential buildings 50,000–70,000 t of CO2eq., non-residential buildings 60,000–100,000t of 

CO2eq.). All residential buildings under obligation of the EWärmeG have additionally saved 9 % to 16 % of 

emissions, compared to their emissions before the exchange of the heating system. 

ZEBRA 2020 – Nearly zero energy building strategy 2020  (TU Wien - Energy Economics 

Group et al. 2016) 

Overview 

In the project the market uptake of nearly zero-energy buildings (nZEBs) in Europe was analysed and monitored. 

Thereby, data and evidence for policy evaluation and optimisation was gathered to provide a basis for developing 

strategies to accelerate the market uptake of nZEBs. 17 European Member States were covered by the ZEBRA 

2020 project, which are Austria, Belgium, the Czech Republic, Denmark, France, Germany, Italy, the Netherlands, 

Norway, Poland, Lithuania, Luxemburg, Romania, Slovakia, Spain, Sweden and the United Kingdom. 

nZEBs are seen as a cornerstone for a sustainable society and economy in Europe. Furthermore, with the last 

recast of the Energy Performance of Buildings Directive (EPBD) nZEBs became the standard for new buildings 

by 2020 and Member States had to implement the directive in their national laws and define the nZEB standard 

taking into account national conditions and economic viability. 

Data and data availability 

In  the  project,  information  regarding  market  development  and  characteristics  of  nZEBs  was  collected. 

Furthermore, a new method to make available information and data comparable amongst countries / harmonise 

the available information was developed. A major challenge was the absence or at least difficult accessibility of 

key data. This especially regards non-residential and existing buildings as well as renovation activities (level as 

well as quantity). 

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The monitoring of market activities showed a substantial gap of market maturity of nZEBs at EU level, which 

must be closed by 2019/2021. 

Barriers and related recommendations 

  According to the study a clear and shared long-term vision for a building stock is essential for the 

definition of suitable and target compatible nZEB definitions at national level. 

  Different system boundaries, calculation methodologies, applied factors (e.g. primary energy 
factors) etc. make a quantitative comparison of nZEB definitions in different Member States very 

difficult. Nevertheless, the study found that many (or most) nZEB definitions in Member States do 

not meet the intention of the EPBD, which says that a building should only consume “nearly zero or 

very low amount” of energy. The remaining amount “should be covered to a very significant extent by 

energy from renewable sources” (i.e. at least 50 %). The definitions are vague and leave a lot of space 

for interpretations. Therefore, it is recommended that the new EPBD contains clear definitions of terms 

and goals. It is furthermore emphasised that new buildings and renovations are distinguished. 

  nZEB compliance monitoring as well as sanctions regimes need to be improved. Only about 50 % of 

the assessed Member States monitor the compliance of new constructions with energetic 

requirements. 

 

Insufficient professional skills are still an important barrier. This should remain a focus in policies at 

EU and national levels. 

  The reliability and credibility of Energy Performance Certificates (EPC) is questioned in many 

Member States by different stakeholders in the building sector. A transformation of EPCs into Building 

Certificates or “Building Passes” considering the whole lifetime of a building could increase their 

credibility. Thereby, they could serve as a key measure to encourage building renovations towards 

nZEB standards. In addition, saving building data from EPCs in a central electronic database, which is 

accessible for all stakeholders could significantly improve data availability. 

  Energy poverty and vulnerable consumers can be found in each Member State. A shift from fuel 

subsidies to energy efficiency support schemes could help tackling the issue. 

  Future-proof buildings are described as buildings which are highly efficient energy hubs consuming, 
producing, storing and supplying energy. The smartness of buildings and their readiness to interact 

with other buildings at district level should be part of a revised nZEB definition. 

Scenarios until 2050 

The project develops two scenarios describing the transition towards low/ zero emission building stocks. In the 

centre of the analyses are the assessment of the effect of current building standards and other policy settings on 

the energy demand in 2050. The scenarios are “current policy scenario” and “ambitious policy scenario”. 
  Current policy scenario: Existing policies like energy performance requirements, financial 

instruments and obligations for the use of renewable energies. 

  Ambitious policy scenario: more ambitious policies fostering higher renovation rates and depths, 

higher efficiency of new buildings and a higher share of renewables used in buildings leading to lower 

energy demands and CO2 emisisons; the scenario is not a “maximum intensity scenario” 

In the scenarios, the following instruments were implemented in a model (TU Wien - Energy Economics Group et 

al. 2016, p. 24): 

“Building codes for new buildings and building renovation; 

 
  Financial and fiscal support policies/programmes; 
 
Increase of renovation rate in public buildings; 

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  Obligation to install renewable heating systems; 
  Compliance with regulatory policies; 
  Other instruments like CO2 taxes, mandatory thermal retrofitting in case of façade maintenance or/and 

during real estate transaction, prohibition of oil boilers or in general all fossil fuel boilers.” 

Major results of the current policy scenario are: 
  Reduction of CO2 emissions: 27 % - 70 % 
  Reduction of primary energy demand: 27 % - 61 % 
  Reduction of final energy demand: 11 % - 48 % 

Major results of the ambitious policy scenario are: 
  Reduction of CO2 emissions: 36 % - 81 % 
  Reduction of primary energy demand: 37 % - 70 % 
  Reduction of final energy demand: 17 % - 60  

The results show that even the ambitious policy scenario is not in line with the long-term climate 

mitigation targets, which indicate that the emissions reduction should be beyond 80-90 % in the building 

sector. Furthermore, the different reduction potentials in the analysed countries are highlighted. Reasons for the 

different potentials are the current energy performance of buildings (the higher it already is, the more difficult 

and more expensive are additional savings), the role of different energy carriers (current and future role of 

fossil fuels in buildings), the share of renewable energies in buildings today (in countries which already have 

a high share an increase is more difficult and more expensive), increasing demand of electricity for cooling 

especially in southern European countries and the renovation rate and depth (key driver for energy savings). 

Building sector Efficiency: A crucial Component of the Energy Transition (Agora 

Energiewende 2019) 

Overview 

The study analyses the role of energy efficiency in buildings for the cost-optimal achievement of climate targets 

and what role buildings play in the overall energy system of Germany. Furthermore, alternative measures to be 

taken  if  energy  saving  measures  in  buildings  are  not  taken.  For  the  compensation  of  less  energy  savings  in 

buildings, more renewable energy must be generated, more heat pumps are needed, and more synthetic fuels 

must be supplied. The need for action (in the building sector) is highlighted. In the study, five scenarios meeting 

the climate targets in 2030 and 2050 are analysed: 

  Efficiency²: Baseline scenario; reduction of final energy consumption of buildings by 44 % 
  Efficiency + EE: reduction of final energy consumption of buildings by 34 %; additional energy demand 

supplied by conventional renewable energies (mainly solar thermal and district heat) 

  Efficiency + WP: reduction of final energy consumption of buildings by 34 %; additional energy demand 

supplied by heat pumps 

  Efficiency + PtG: reduction of final energy consumption of buildings by 34 %; additional energy 

demand supplied by Power-to-Gas (PtG) 

  BAU + PtG: efficiency efforts kept at today’s level; reduction of final energy consumption of buildings 

by 27 % 

Key findings 

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Energy  efficiency  in  buildings  reduces  overall  economic  costs.  It  reduces  the  expenditures  for  energy 

generation and distribution. When the additional energy demand compared to the baseline scenario (Efficiency²) 

is supplied by renewables, the additional annual costs sum up to 2.5 billion euros and if it is supplied by PtG to 

3.7 billion euros. If efficiency measures are not increased (business as usual), and the remaining energy demand 

is  supplied  by  PtG,  the  additional  annual  costs  are  the  highest  (8.2  billion  euros).  However,  less  efficiency  in 

buildings than in the Efficiency² scenario also reduces maintenance expenditures by 4.5 to 7.3 billion euros. 

Increased multiple benefits from efficiency measures: Efficient and high-quality buildings prevent damage from 

moisture and mold. They furthermore increase thermal comfort. Both effects have positive impacts on the health 

and performance of occupants. In addition, the import dependency is reduced, and renewable energy sources 

are relieved. Added value from building renovations stays in the country and increases the GDP. 

Efficiency  is  a  door-opener  for  all  kinds  of  technology:  Energy-efficient  buildings  pave  the  way  for  low-

temperature applications, which are inefficient and expensive in non-efficient buildings. 

Reduced  risk:  An  energy-efficient  building  stock  reduces  risks  associated  with  changes  to  existing  energy 

sources. 

Purposeful action: It is essential that the long-term goals for the building stock are in the centre of today’s 

decisions and actions to avoid lock-in effects and the need of changes outside the usual investment cycles in 

the sector, which are associated with high additional costs. 

Policy recommendations 

Efficiency roadmap: 

Due  to  the  long  investment cycles and in  the same  time high  efficiency  potentials in  the  building  sector  goal-

oriented policy guidelines must be established. They must be adopted in the Energy Performance of Buildings 

Directive (EPBD) at the European level and in the Building Energy Law (GEG) and Energy Economic Law (EnEG) 

at the national level. This has to be done as soon as possible to avoid that new buildings or buildings renovated 

today have to be renovated (again) before 2050 in order to meet the long-term targets. 

Improve efficiency’s image: 

A clear, long-term commitment by the government is needed to win back trust of the diverse stakeholders in the 

building sector. Furthermore, convincing arguments for insulation must be developed and communicated to build 

trust. This must be accompanied by advice, explanation, standards and technical solutions. 

Targeted incentives for deep renovations: 

Highly  efficient  buildings  are  usually  connected  to  high  initial  investment  costs  (new  buildings,  but  also 

refurbishments).  Therefore,  information  on  economic  benefits  of  such  buildings  must  be  available  to  decision 

makers. Existing incentive programmes already address this issue. However, they must be adjusted in a way that 

buildings that are not compatible with a climate-neutral building stock are no longer supported. Furthermore, also 

refurbishment standards and respective incentives must be in line with a climate-neutral building stock in 2050 as 

e.g. defined in a renovation roadmap. 

Prepare consultants and architects for higher efficiency: 

Energy  efficiency  of  buildings must  play  a  greater  role in planning and  consulting.  Therefore, consultants and 

planners must receive training. 

CO2 steering components in energy tax law: 

It is essential to internalise CO2 damage costs in energy prices in order to achieve a climate-neutral building stock 

and make energy efficiency measures more economically feasible.  

Promote skilled labour and training: 

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Skilled  workers  are  of  high importance  for  achieving  the  long-term  goal  and  realise  the  desired  refurbishment 

rates  and  qualities.  Therefore,  working  conditions  and  wages  must  be  improved  in  the  sector.  This  can  be 

accompanied by measures to elevate the social status of employees in the building sector. 

Improve the heating infrastructure: 

In areas suited for the integration of renewable heating (renewable/ decarbonised district heating supply, thermal 

storage), funding for new heating infrastructure should be increased. Furthermore, funding should be increased 

for transforming and decarbonising existing district heating systems. In addition, it is suggested to improve the 

calculation of primary energy factors to improve the allocation of environmental impacts to the ones causing them. 

Increase development and research: 

Manufacturers and research institutes should increase their efforts to develop efficient and renewable energy 

technologies as well as to improve existing ones. 

Building energy renovation for decarbonisation and Covid-19 recovery (Zangheri et al. 2020) 

Overview 

Energy efficiency in general and particularly in the buildings sector has the potential to support economic recovery 

and decarbonisation. Despite the introduction of various incentives and regulatory mechanisms in recent years, 

the European buildings sector still has a very high energy and emission saving potential, especially in residential 

buildings. However, there are regional differences. The report analyses the European buildings stock at local level 

and  identifies  the  most  critical  regions.  The  analysis  considers  buildings’  age,  climate  conditions,  structural 

barriers, and key economic indicators. Energy saving potentials of extensive renovations of residential buildings, 

associated  investment costs and  the impact  on employment  are  calculated.  The calculation  results  can  guide 

decision-makers to define programmes for the refurbishment of residential buildings at the European and national 

level. 

Approach 

Key indicators of the analysis are gathered at NUTS2 and NUTS3 level. These include climate conditions, the 

age of buildings, the type of buildings and ownership structures, and the economic well-being over the period of 

2018 – 2021: 

Climate conditions: Heating and cooling degree days on NUTS2 and NUTS3 levels 

Building age, building type and ownership: the analysis is based on EUROSTATs Census Hub published in 

2011, which was updated by down-scaling national constructions after 2011 based on the Building Stock 

Observatory of the EC. 

Economic well-being: The Spring 2020 Economic Forecast of the Commission is taken as the reference. The 

regional breakdown on NUTS2 level is based on EUROSTAT data. The following indicators are considered for 

the period 2018 – 2021: 

  Average GDP per inhabitant in Purchasing Power Standard (PPS) 

  Variation of GDP per inhabitant in PPS 

  Average unemployment rate 

  Average net disposable income of households per inhabitant in PPS 

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  Average net disposable income of households per inhabitant in PPS for 20 % of the population with the 

lowest income 

Based on this data, a synthetic indicator of economic well-being is calculated to compare the EU regions and 

identify the most critical areas. 

Composite index: the index combines all the information mentioned above. Therefore, weighing factors had to 

be defined and weights had to be normalised. The prioritisation is as follows: 35 % building age, 30 % economic 

well-being, 25 % heating degree days and 10 % non-ownership.  

Main results 

Age of the buildings stock: The lowest average age of existing buildings can be found in north-eastern 

Germany, south of Belgium, central France, and north-western Italy. The share of historical buildings is the 

highest in central Europe: Belgium, France, and Germany. 

Rented buildings: The highest share of non-owner-occupied dwellings and rented multi-family buildings can be 

found in urban areas of north-central Europe, e.g. in Stockholm, Berlin, Hamburg, Prague, and Vienna. 

GDP between 2018 and 2021 and unemployment: the lowest average GDP per inhabitant is observed in rural 

regions of southern and eastern Europe. Regions in the north of Italy had the greatest negative variation of GDP 

per inhabitant. In the southern regions of Spain and Italy, and in Greece the average unemployment rates are 

amongst the highest in Europe (over 20%). The average net disposable household income (per inhabitant) is 

very low in all southern and eastern regions. Based on this, the study identifies the south of Spain and Italy, as 

well as Greece and Bulgaria as the most critical regions in Europe. 

Renovation of residential buildings: It is seen as a key strategic choice for the recovery of regional 

economies and to build a zero-emission society. According to the study, deep renovations to nearly zero-energy 

buildings (nZEBs) and/or to cost-optimal levels can lead to (primary) energy savings of 2,251 TWh, which is 

equivalent to 57 % of the current energy consumption of residential buildings. To exploit the potential, an 

increase of the annual renovation rate to approx. 3 %/a within the next decade is needed. The rate must be kept 

at this level thereafter. Renovation depths must be ambitious. Thereby 79 % of existing buildings can be 

renovated until 2050 leading to primary energy savings of 1,517 TWh in the EU. Thereby, 55 million full-time 

equivalent jobs could be created. 

Regional energy benefits and economic expenditures: The ratio between energy benefits and economic 

expenditures is calculated on a regional level and can be described as the efficiency of buildings renovation. 

The efficiency is calculated from regional energy saving potentials, investment needs and impacts on 

occupants. The highest values are detected in eastern Europe, especially in Poland, the Czech Republic and 

Romania. 

Digitalisation: Opportunities for heating and cooling (JRC 2019) 

Overview 

Digitalisation  and  the  innovative  use  of  information  and  communication  technologies  create  opportunities  for 

energy  saving  and  energy  efficiency  in  buildings.  This  study  provides  a  literature  overview  on  technologies, 

opportunities and challenges of digitalisation in the field of heating and cooling. Practical examples are analysed 

and  existing  initiatives  and  research  projects  are  presented.  Compared  to  other  sectors,  such  as  transport, 

digitalisation in the heating and cooling sector has received less attention, even though this sector accounts for 

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about half of final energy consumption. The study shows that digitalisation offers various opportunities for energy 

savings  in  buildings  and  as  well  as  additional  benefits  beyond  energy  savings.  However,  due  to  the  energy 

consumption of digital technologies, the energy savings may not be as large as expected. Other risks, such as 

data protection and cyber security, also need to be considered. New policies are needed to mitigate the above 

risks and ensure that the best technologies and business models prevail. 

Smart buildings 

There are various applications of digitalisation for heating and cooling in buildings. Simulation tools are useful in 

the  planning  phase.  Through  the  building  data  modelling  approach,  the  entire  building  with  all  systems  is 

replicated on a computer and then simulated, tested and corrected. Regular feedback, e.g. via smart meters, is a 

cost-effective first step. Overall, there are fewer systems that go beyond basic information and visualisation to 

perform advanced analysis. Building energy management systems combine software with smart thermostats and 

sensors to detect behaviour and use weather forecasts and energy prices to predict energy demand and control 

heating  and cooling.  A cost-effective first  step is to  provide regular  feedback  (e.g.  via smart  meters,  in-house 

displays, energy bills or emails). However, several studies show that it is difficult to engage households on energy 

issues, especially if the information received is not clear, actionable and timely or frequent enough. With new 

developments  in  artificial  intelligence,  systems  can  also  increasingly  be  interconnected  and  controlled  on 

smartphones.  Thus,  artificial  intelligence  offers  the  opportunity  to  significantly  increase  the  balance  between 

energy savings and user-defined comfort.   

Examples: 

  Solutions for temperature monitoring and heating control 
  Voice-controlled assistants such as Amazon’s Echo or Google Home  
  LeanHeat from Finland offers smart building control and maintenance based on IoT and AI in around 
80,000 homes so far. 10-20% energy costs are expected to be saved through the smart heating control 

and up to 30% savings in technical maintenance costs 

  WattTime integrates software into smart thermostats 
  Fourdeg  from  Sweden:  Smart  heating  service  that  takes  into  account  the local  weather  forecast,  the 

number of open windows, the number of occupants and the characteristics of the rooms 

Heat pumps and electrification 

Digitised heat pumps use sensors that provide data on temperature, weather and electricity prices, as well as 

smart controllers that understand the thermal behaviour of the building and the user and can provide this data to 

optimise the application. Heat pumps are expected to play a leading role in future energy consumption (see 
Section 2). The decarbonisation of H&C via electrification requires that electricity generation is further 
decarbonised, power is increased and adapted to the consumption patterns of buildings, and that distribution 

networks are strengthened and digitalised. In the EU, currently only 37% of consumers on average are 

equipped with smart meters, which is why the non-binding target of 80% could not be reached. Smart meters 

and digitalisation enable the automation of controllable thermal loads such as air conditioners, heat pumps or 

electric water heaters. 

Examples: 

  European Project “Real Value” analyses the potential to electrify a large part of the heating load in 

aggregated, small-scale residential uses by introducing power-to-heat storage 

  BrenmillerEnergy: Offer of heat storage systems for district heating and industrial power-to-heat 

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  The DR-ROB project Will demonstrate the benefits of demand response for buildings at universities, 

hospitals and a technology park 

  The Horizon 2020 project SABINA aims to improve the use of synergies between electricity and 

heating networks by optimising the use of electricity for cooling and heating purposes. 

District heating and cooling 

DHC systems can make a significant contribution to reduce emissions and save primary energy. There are 

more than 6000 district heating systems in Europe. These are increasingly playing an important role in the 

energy plans of cities and regions. District cooling is much less common than district heating due to a more 

complex system. Currently, fossil fuels dominate district heating, but systems can use any fuel. From 12% 

today, district heating is expected to cover at least half of the heat demand in a cost-effective way by 2050, with 

heat supplied from renewable sources. The advantages lie in its simplicity and ease of installation. In addition, 

district heating can also help stabilise the electricity grid. Digital technologies can make DHC more efficient, 

intelligent and cost-effective through digital technologies that enable data management in terms of 

temperatures, flow, leak detection or pressure. New district heating technologies improve energy efficiency and 

make it easier to integrate renewable energy.  

Examples 

 

Indeal offers a platform for real-time collection of energy consumption data via smart meters, 

identification of building heating and cooling needs depending on energy efficiency, energy 

consumption and building type, forecasting short- and long-term weather conditions and upcoming 

heating and cooling needs, and monitoring and controlling the level of energy storage. 

  TEMPO offers a monitoring platform to detect and diagnose faults in district heating substations, 
visualisation tools and a smart grid controller to balance supply and demand and minimise return 

temperature. 

  Other examples of intelligent platforms are CELSIUS, COOL DH, RELaTED, THERMOS or 

FLEXYNETS. 

Smart energy systems 

In smart energy systems, electricity, heating and gas networks are coordinated to highlight synergies and achieve 

optimal solutions for the system. Data generated by smart meters and other digital technologies could be used to 

predict heating and cooling flows, detect inconsistencies and check for losses. In the process, AI has the potential 

to control production facilities to optimise resources and reduce costs.  

Example: 

The EU Project “HEAT4COOL” demonstrates integrated heating and cooling solutions complemented by heat 

pumps and renewable energy sources at building and district scales. 

Communities, cities and regions 

By 2050, around 84% of EU citizens are expected to live in cities. The decarbonisation of urban energy supply 

focuses on heat. In cities, DHC can be a cost-effective and efficient solution to reduce emissions and energy 

demand by capturing surplus heat. Long-term planning is essential to engage stakeholders and enable investment 

planning. Digitalisation can also be an important part of smart region concepts - especially for coal- and carbon-

intensive  regions  in  transition.  In  addition,  an  approach  with  local  communities  is  increasingly  being  pursued. 

There are around 3000 such energy communities in Europe, of which around 1000 are in Germany. The number 

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is  increasing  because  more  and  more  local  communities  are  getting  involved  locally.  Digitalisation  enables 

community energy storage (CES), which stores surplus local heat and makes it available later when it is needed.  

Examples: 

  Aspern  Seestadt:  New  urban  centre  in  Vienna  due  for  completion  in  2028.  It  includes  whole  system 
research, three smart buildings with solar thermal, heat pumps and heat storage. The 111 households 

are equipped with a smart home app. 

  The Kalasatama district in Helsinki: Smart district connected to district heating and cooling. It also hosts 

TeleCityGroup's data centre which uses seawater to cool and heat houses in Helsinki.  

  Schoonschip in Amsterdam: Floating residential quarter with 47 households that aims to become the 
quarter with the most sustainable urban development in Europe. In addition to an implemented smart 

grid, all houses are equipped with local photovoltaic production, battery storage, solar collectors, thermal 

storage, a smart heat pump and other smart grid-enabled devices.  

  The European Innovation Partnership for Smart Cities and Communities aims to find common solutions 

for cities with its 4600 partners in 31 countries. The focus is on energy, transport and ICT. 

  Another example of the European Commission supporting cities in implementing digital solutions is the 

Digital Cities Challenge, where experts offer advice to 15 European cities. 

Opportunities and challenges 

Most digitalisation trends will lead to an increase in total energy consumption - especially electricity consumption. 

The digitalisation of the energy sector itself could be an exception, as digital technologies have a great potential 

to deliver energy savings through better efficiency and create convenience and financial savings for the user. 

There are many advantages and opportunities that result from digitalisation: energy savings, reduced operating 

costs,  greater  resilience,  new  markets  for  local  heat  sources,  local  job  creation,  improved  industrial 

competitiveness, and mitigated environmental impacts including improved air quality.  However, there are also 

challenges for the economic and social life that should be considered: Up-front costs, privacy and data protection, 

fairness and impact on vulnerable groups are some of the negative effects that can accompany digitalisation. 

3.3. Financing 

De financiële gevolgen van de warmtetransitie: Een onderzoek naar de investeringsuitdaging, 

effecten op energie-betaalbaarheid en het potentieel van (nieuwe) financieringsvormen 

(ECORYS 2019) 

Overview 

The  Dutch  Climate  agreement  requires  2.3  M  households  to  have  switched from  natural gas  to  decarbonised 

energy sources by 2020 and this report investigates the costs of this ambition as well as the means by which this 

transition  can  be  financed.  The  2.3  M  to  be  decarbonised  consist  of  1.5  existing  buildings  and  0.7  M  of  new 

buildings. The segment of privately-owned houses is most challenging to decarbonise as individual solutions are 

more capital intensive than collective ones. For the 0.7 M privately-owned houses that need to switch from gas to 

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sustainable heating systems it is estimated that an average  investment of € 23,500 is needed per household, 

where  €  13,000  needs  to  be  financed  by  the  homeowners  themselves  and  the  remainder  is  expected  to  be 

financed  by  the  government.  In  total  this  market  segment  represents  an  investment  requirement  of  €66.4  bn 

between now and 2030. In terms of technologies, the largest contribution to the overall decarbonisation of the 

heat demand is expected from heat pumps, followed by district heating fed by CHP installations or waste heat.   

New forms of financing 

For more than a third of the private homeowners targeted by the government objective, it is possible to extend 

their mortgage and get additional finance through a green mortgage, using their house as a collateral. For 

almost half of the homeowners a building-connected form of financing, which is transferable from one owner to 

the next could be a means for financing the required investments. Around 15% of the homeowners will need a 

public loan to finance the required investments. Lastly, a very limited share (0.2%) of homeowners can finance 

the required investments themselves, potentially in combination with commercial loans, based on an increase in 

the value of the house and a reduced energy bill. 

Impacts of the decarbonisation of the heat demand of houses on the household energy bill 

The anticipated changes in the energy systems of the households, in case of an unchanged policy and taxation 

framework, would  lead to an increase in the overall energy bill, with an average of € 258 per household per 

year. As a consequence, a growing number of households would suffer from energy poverty as reflected by the 

fact that they would spend more than 10% of their income on the payment of their energy bill. It would require 

an annual subsidy of € 440 M to compensate for this effect. 

Financial Incentives for Renewable Heating and Cooling (EREC 2007) 

Overview 

The report is the output of task 4 of the K4RES-H project, which ran between 2005 and 2007 and was funded by 

the EU’s Intelligent Energy Europe programme. The project focused on  

  Verifiable targets and statistics for RES-H (renewable heating technologies) 
  Quantifying the energy delivery of individual RES-H installations 
  Regulations at a local, regional, national and European level 
  Financial incentives 
 

Innovative RES-H applications 

Barriers for the deployment of H&C 

The  decarbonisation  of  the  heating  and  cooling  sector  requires significant  investments and  there  are  multiple 

market barriers hindering the diffusion of renewable H&C technologies, such as high upfront costs, split-incentives 

and  the  lack  of  knowledge/professional  capacity.  Decarbonisation  of  H&C  applications  often  involves  the 

involvement of a high number of stakeholders (constructors, installers, H&C technology suppliers, financiers, etc.), 

who need to act in a concerted manner. Furthermore, in the built environment, there are often short windows of 

opportunity for sustainable refurbishment, especially in the case of replacement of heating equipment (e.g. broken 

old boiler). Lastly, there is often a lack of skills and expertise among construction and installation companies, 

which hampers demand for RES-H technologies and vice versa (chicken and egg problem).  

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Although  a  variety  of  policy  instruments  will  be  needed  to  remove  the  barriers  for  the  uptake  of  RES-H 

technologies, financial incentive schemes (FIS) can play an important role to speed up the transition process in 

the H&C sector, through a variety of ways. Financial incentive schemes can: 

  Reduce the (high) upfront investment costs  
  Act as a marketing tool; 
  Stimulate market development and availability of RES-H technologies; 
  Provide a positive stimulatory signal from public authorities. 

Best practices for financial incentive schemes 

FIS exist in many different forms (e.g. grants, concessional loans, guarantees, etc.), but the type of FIS seems to 

be less important for the effectiveness than the continuity of and long-term certainty around such an instrument 

as uncertainties around future adaptations can lead to postponement of investments. Furthermore, FIS should 

always  go  hand  in  hand  with  flanking  measures,  such  as  awareness  raising  campaigns  targeting  specific 

consumer groups or heating sector professionals, large-scale demonstration projects etc. 

Best-practice financial instruments have the following characteristics: 
  They avoid investment uncertainty and guarantee continuity; 
  They can be adjusted when implemented, but this should be carefully consulted with experts and 

minimise market interference; 

  They  have detailed criteria regarding the eligible applications and technologies and flanking measures 

are aligned with this; 

  The financial support should be proportional to the amount of renewable energy generated and 
requirements for measuring this should be proportional to the magnitude of the investment and 

benefits; 

 

Industrial RE applications might require additional support, because of the presence of other co-

benefits; 

  They keep administrative burden at a minimum; 
  They prevent interference with EU trade rules and the creation of isolated markets. 

Identification of EU funding sources for the regional heating and cooling sector (PNO 

Consultants 2019) 

Overview 

The document provides information for regions on how to access European funding sources for energy efficiency 

projects and projects aiming to deploy renewable energy in the heating and cooling sector. The EU does not have 

dedicated funding instruments for heating and cooling. EU funding for H&C projects is channeled through the five 

European Structural and Investment Funds (European Regional Development Fund (ERDF), European Social 

Fund  (ESF),  Cohesion  Fund  (CF),  European  Agricultural  Fund  for  Rural  Development  (EAFRD),  European 

Maritime and Fisheries Fund (EMFF)) and dedicated grants and financial instruments. There are a few dedicated 

calls within these EU funding programmes for the H&C sector. A number of the EU funding instruments require 

cross-border cooperation. 

Scope 

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The study focuses on public funding instruments including grants, soft loans and guarantees. EU energy subsidies 

are mostly funded via the structural investment funds (ESIF), Horizon2020, LIFE NER300/ETS Innovation Fund. 

The study provides information on the EU programming period 2014-2020. Where information is available, an 

outlook into the next programming period (2021-2027) is provided.  

The scope of activities covered focuses on but is not limited to: 

  District heating and cooling94 
  Renewable heating and cooling sources 
  House renovation 
  Support to R&I on energy efficiency in H&C 
  Support to local SMEs 

The report covers sources of funding for Technology Readiness Levels (TRLs) across the spectrum: TRL1 to 

TRL9. The report also covers some information on the regulatory framework and guidelines for combining different 

EU funding sources. 

Conclusions 
 

Investments in H&C projects, energy efficiency and renewable energy still have relatively long payback 

periods or/and are perceived as high risk. In order to have a convincing business case such 

investments often require the maximisation of public funding.  

  Although there are currently no specific funding instruments for heating and cooling at EU level, H&C 
projects can access a large number of generic energy subsidies and other more general innovation 

subsidies and support instruments. 

  Many of the EU funding sources in the report are large, well-known and established funding 

programmes. The report finds that generally, the more popular funding programmes have lower 

chances to be awarded. Thus, it is recommended to also examine alternative, lesser-known funding 

instruments. To identify relevant subsidies for a project it can help to look at the project from a different 

perspective. This approach can bring different funding instruments into view. For example, looking at a 

project from the employment perspective may help to identify subsidies that support social inclusion, 

e.g. through the European Social Fund. 

  There are many opportunities for combining EU funding with local, national or other EU funding 
instruments. An option is to use several funding instruments for the different phases of project 

development. However, familiarity with rules and guidelines is advised especially with regard to non-

cumulation and state aid regulations. Managing authorities have the primary responsibility to verify 

compliance with regulations, however, the report finds instances where this did not occur correctly and 

where beneficiaries hat to repay parts of the funding.  

  Results from several surveys supporting this report identified previous experience in drafting project 
applications as one of the key factors determining whether an application is successful or not. 

Matching money with green ideas (Agora Energiewende 2021) 

94 Based on the definition of efficient district heating and cooling as specified in Article 24(6) of Directive 2012/27/EU.  

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Overview 

The study provides an overview of the various EU funding schemes in the context of the Multiannual Financial 

Framework and the Next Generation EU programme (NGEU) and links these schemes to the investment needs 

in various sectors (industry, buildings, transport and energy). This summary focuses on the results concerning 

the buildings sector. 

EU funding and climate mainstreaming 

Across the EU budget, 30 per cent of expenditures must be directed to climate action (the so-called “climate 

mainstreaming” obligation), and various programmes also earmark and/or specifically focus on green transition 

activities. In addition, the recovery fund and several other EU programmes have to respect the do no significant 

harm principle that was established in the EU Taxonomy. 

Funding opportunities at EU level 

The Recovery and Resilience Facility (RRF) entered into force in February 2021 as the largest instrument of the 

Next Generation EU Fund (with €312.5 billion in grants and €360 billion in loans). It is introduced as a temporary 

instrument with the objective to help Member States repair the immediate economic and social harm caused by 

the coronavirus pandemic. The RRF has a climate earmarking of 37 per cent and a digital target of 20 per cent.  

Cohesion and structural funds are part of European Structural and Investment Funds (ESIF) and apply low-
carbon spending earmarking. Cohesion spending was increased for 2021–2022 with REACT-EU (€47.5 bn), 

which does not have the same low carbon conditions, however MS are “expected” to contribute 25 per cent to 

climate objectives. The European Regional Development Fund (ERDF) aims at reducing regional disparities in 

economic development and includes the net-zero-carbon economy as one of the main themes. At least 30 per 
cent of all funds are reserved for projects that contribute to the larger objective of climate neutrality. Cohesion 
Funding provides financing for Member States whose Gross National Income per inhabitant is less than 90 per 

cent of the EU average and funds multi-annual national programmes aligned to EU objectives (climate 

earmarking of 37 per cent). 

The European Social Fund (€88 bn) is the main fund for developing the human capital needed as the labour 

market transitions to a digital and green economy. There is no specific amount earmarked for activities related 

to decarbonisation, but upskilling in sectors related to the environment, climate, circular economy and bio-

economy is encouraged. 

The Just Transition Fund (JTF, €17.5 bn), which is part of the broader Just Transition Mechanism (JTM), is 

allocated through both the NGEU (€10 bn) and the MFF (€7.5 bn) and addresses Member States in regions that 

are heavily reliant on fossil fuels and other carbon-intensive industries. The fund focuses on creating a fair job 

market for workers who are forced to leave the fossil fuel industry through reskilling & upskilling programmes, 

R&D, job seeking assistance, digitalisation, the circular economy and technical assistance. The fund excludes 

fossil fuels and nuclear power. Moreover, the JTF includes climate policy incentives by a green rewarding 

system and conditional access to 50 per cent of national funding allocations for Member States based on the 

adoption of national objectives for climate neutrality by 2050. The JTF will be co-financed by MS and 

complemented with other MFF funds. 

Horizon Europe and the EU ETS Innovation Fund are funding instruments geared to early development stages, 

whilst the recovery funds are targeted more at market ready technologies that need to be upscaled for the 

revised 2030 ambition. The new LIFE budget features a new Clean Energy Transition sub-programme of 

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approx. €1 billion that comes in addition to another €1 billion of climate mitigation and adaption funding. The 

LIFE programme is the successor of the Intelligent Energy Europe programme. 

Innovative financing schemes (Covenant of Mayors 2019) 

Overview 

The  report  presents  the  lessons  learned  by  cities  and  regions  across  Europe  regarding  innovative  financing 

schemes to fund locally-owned projects. 

Lessons learned 

Green municipal bonds provide the bond issuer (borrower) with external funds to finance long-term 

investments that have positive environmental and/or climate benefits, while providing the bond holder (lender) a 

return on the investment. They can provide a low-cost source of capital and have been introduced successfully 

in several cities and regions, e.g. Gothenburg, Malmö, Stockholm and Örebro (Sweden), Oslo (Norway), 

Hannover (Germany), Paris and Region Ile de France. 

Earmarking local environmental or energy taxes, fees or congestion charges for projects and campaigns on 

sustainable energy has been implemented in several cities, e.g. Lausanne (Switzerland), Oslo (Norway), Milan 
(Italy), Nis (Serbia), London (UK). The revenues are partly distributed through grants, loans or subsidies to 
citizens, research institutions or businesses to support sustainable practices. 

Energy Performance Contracting (EPC) refers to the implementation of energy efficiency or renewable 

energy projects by external organisation (Energy Service Company – ESCO),  which then uses the stream of 

income from the energy savings achieved or the renewable energy produced to repay the costs of the project. 

The approach is based on a performance guarantee given by the ESCO, which transfers the technical risks 

from the client to the ESCO. Consequently, ESCO remuneration is based on demonstrated performance. 

Energy cooperative offers citizens the possibility to jointly own and/or participate in renewable energy and 

energy efficiency projects on municipal sites and infrastructures. Municipalities can support and promote 

citizens’ cooperatives and can also own part of the shares. 

Soft loans provide homeowners with money at lower-than-market interest rates, providing an incentive to carry 

out energy-efficient renovation works. 

On-tax financing can be used to recover payments from citizens and companies for energy efficiency 
measures financed by private investors. These investors lend the money for retrofits up-front and then get 
repaid over a timescale of up to 20 years through an additional charge on a property-related tax bill. The 

scheme is being deployed in Europe based on the experience of the “PACE scheme” established in the US. 

Third-party investment is a scheme where the investment on the renovation of a building is not paid by the 

homeowner but by a third-party investor. Thus the homeowner does not take on a debt but pays a service fee to 

the investor instead. The investment can be done via an Energy Performance Contract. In this case the costs 

are repaid through the guaranteed energy savings. 

A revolving fund is a reserve of money used to finance a particular set of activities by lending to one or more 

borrowers. Over a given period of time, the borrower is expected to repay the original sum that restocks the 

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fund. Usually, an interest is charged to the borrower as a fee for administrative costs but also to protect the fund 

from being depleted. 

Policy developments in the EU and strategies for P4P business models (SENSEI 2021) 

Overview 

The H2020-funded project SENSEI aims at designing and testing innovative transaction models building on pay-

for-performance  (P4P)  schemes.  In  these  schemes, payments  for  energy  efficiency  are  based  on  proven and 

measured savings (using pre-agreed measurement and verification methods). 

Strategies for rolling out P4P schemes in the EU 

The report proposes ten integrated strategies for rolling out P4P schemes in the EU : 

1.  Exploiting economic stimulus packages 

2.  Establishment of demanding energy performance requirements 

3.  Strengthening the role of energy efficiency market players 

4.  Recognising and valuing energy efficiency as a resource 

5.  Promoting metered methodologies to increase accuracy and transparency  

6. 

7. 

Increasing ambition on public buildings 

Increasing ambition on Small and Medium Enterprises 

8.  Ensuring stakeholders’ involvement 

9.  Establishing standards and promoting capacity building activities 

10.  Raising awareness and empowering citizens 

3.4. National strategies 

Climate Agreement (Netherlands) (Ministerie van Economische Zaken en Klimaat 2019) 

Overview 

The Dutch Climate Agreement was developed though a participative approach in 2018/2019 and covers the built 

environment,  mobility,  industry,  agriculture  and  land  use  and  electricity,  as  well  as  cross-sectoral  issues. 

Regarding the built environment, aside from climate change mitigation, the aim of the Dutch government to cease 

natural gas extraction in Groningen as soon as possible is a further reason for reducing transforming the heating 

sector. 

Targets and objectives 

  Reduction target of 3.4 Mt of CO2 in the built environment by 2030, compared to the reference 

scenario.  

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  Enhancing energy performance of 7 million homes and 1 million utility buildings 
  New buildings will no longer be heated with natural gas 
 

Improvement of existing buildings to enable fossil-free heating: 1.5 million by 2030; from 2021 onwards 

50,000 buildings per year; increase to 200,000 buildings per year before 2030 

  Growth in district heating, increasing up to approximately 80,000 home equivalents per year by 2025 

and holding that level up to 2030. This will result in a heating demand of 40 PJ by 2030.  

  Municipalities are in the lead, using a neighbourhood/district approach: -2019: 27 pilots -2021: 100 

pilots  

  Reduction efforts of 1 Mt of carbon dioxide are required for existing non-residential buildings  

District-oriented approach 

The Dutch plan takes a district-oriented approach, covering the following elements: 

  Transition vision:  Municipalities are obliged to have adopted a transition vision for heat by 31 

December 2021, in which they will establish the timetable for a step-by-step approach to phasing out 

natural gas. This includes an assessment of alternative energy infrastructures, of social costs and 

benefits and integral costs for the users. A review of the transition visions after five years is foreseen. 

  Development of a monitoring tool in which the municipalities communicate their progress on 

achieving their transition vision for heat.  

  Setting up an independent regional energy information platform  
  Explore whether energy information platforms or a digital platform can contribute to pooling 

the demand of owner-residents  

  Setting up a knowledge and learning programme for municipalities   
  Adaption of laws and regulations in the field of electricity, gas, heating and mining activities 
and environmental law to make them suitable for the district-oriented approach (by January 

2021)  

  Additional funds (150 million euro) for the period 2019 to 2021 

Natural gas phase-out in new construction 

The Gas Act (Gaswet) was amended as of 1 July 2018, such that new buildings are no longer fitted with gas 

connections. The change in the law affects new buildings for which the building permit was requested on or 

after 1 July 2018. The change applies to all small-scale users (<40 m3 gas/hour), such as homes and small 

commercial buildings. 

Non-residential buildings 

  Emissions target for 2030 of 1 Mt of carbon dioxide for existing non-residential buildings and 

development of standard for non-residential buildings. 

  Roadmaps for social real estate to be developed by twelve social real estate sectors to set out the 

starting points of the relevant sectors and outline according to which plan and timetable the sector will 

be working toward the 2030 target and toward achieving a low-carbon property portfolio by 2050 in a 

cost-effective manner. 
  Development of benchmarks 
  Development of a data system for energy consumption data, building data and building usage data 

Sustainable gases 

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  Objective to realise 70 PJ of green gas by 2030 (3.6 Mt of carbon dioxide reduction), of which a 

substantial percentage can then be used for the built environment (direct injection into the gas grid, 

hybrid heat pump or through the heating grid). 

  The green gas sector aims to achieve additional carbon dioxide reduction worth 1 to 2 Mt by 2030 

through CCS and CCU (negative emissions). 

  The green gas sector aims to arrive at a cost level of 100 – 150 euros per avoided tonne of carbon 

dioxide by 2030. The means to achieve this include a decrease of production, the combination of green 

gas production with carbon dioxide storage or reuse (CCS and CCU) and further improvement of the 

yields through multiple improved returns. 

  Elaboration whether the expanded financial support scheme SDE+ can stimulate green gas. 

Heat Transition 2030 (Agora Energiewende 2017) 

Overview 

The study examines the diffusion pathways until 2030 for key technologies required in the heat sector in order to 

meet the German decarbonisation targets for 2050 (80-95% reduction of greenhouse gases with respect to 1990 

levels).  The  study  identifies  building  efficiency,  district  heating  and  heat  pumps  as  key  pillars  of  the 

decarbonisation of heating and discusses the required diffusion pathways of these technologies until 2030. 

Key technologies and diffusion pathways 

Energy efficiency: Based on an analysis of existing projections, the study concludes that the final energy demand 

for heating needs to be reduced by around 40% in 2030 (as compared to 2008 levels) and around 60% by 2050 

through energy efficiency measures. With a final energy consumption for heat in buildings of 869 TWh in 2008, 

this corresponds to a remaining final energy demand of 521 kWh (2030) and 348 kWh in 2050. The increase in 

energy efficiency is highlighted as a key requirement in order to facilitate the accelerated diffusion of heat pumps 

in existing buildings. The study assumes an increase of the retrofit rate to 2% (from currently around 1%) and an 

increase in the depth of renovations.  

Decentralised renewable energy: The study estimates that the potential for decentralised renewable energy for 

heating is 197 to 447 TWh per year (solar thermal: 53–69 TWh; biomass: 69–139 TWh; ambient heat: 58–186 

TWh; electricity for heat pumps:17–53 TWh per year). 

District heating: The study states that the share of district heating needs to increase from around 10% of final 

energy consumption in 2014 to around 23% in 2050 and indicates a range of 15-21% of final energy consumption 

as a milestone for 2030. Due to the strong decrease in final energy demand, the increase in the share of district 

heating does not correspond to an increase of heat supply from district heating in absolute terms. For the long-

term decarbonisation of district heating, the study concludes that it is essential that temperatures are reduced and 

deep geothermal energy, large-scale solar thermal installations and/or ambient heat/waste heat utilisation (drain 

water, industry, rivers, sewage water, etc.) with large-scale heat pumps are expanded. 

Heat pumps: The study states that by 2030 a range between 6 and 8 million heat pumps need to be installed in 

order to meet a -95 % decarbonisation target by 2050. In 2018, the total number of installed heat pumps was 

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877,000 and the annual sales in 2019 reached around 86,00095. In order to meet the milestone of 6-8 million heat 

pumps in 2030, the annual sales would need to increase at least fivefold. With regard to the increase in peak 

demand due to the electricity consumption of heat pumps, the study concludes that by 2030, the  additional 21 

GW needed for heat pumps do not cause any serious challenges for the electricity system, as currently 35 GW 

are  needed  for  electric  resistive  heating  (of  which  demand  is  assumed  to  decrease).  By  2050,  the  study 

differentiates between a -80% decarbonisation target (total emissions in Germany) and a -95% target: While peak 

demand could be covered with electricity generated using efficient gas turbines in a  -80% scenario, in a -95% 

target the electricity system needs to be fully decarbonised, such that PtG technologies would be necessary to 

cover peak demand from heat pumps. The study concludes that peak demand is not a serious challenge for heat 

pumps. The study considers that the main challenge for the increased diffusion of heat pumps is the requirement 

of  ambitious  progress  in  increasing  the  energy  efficiency  of  buildings  in  order  to  ensure  an  efficient  and 

economically feasible use of heat pumps. 

Green gas: The study discusses renewable gas as an alternative to the ambitious expansion of heat pumps. As 

the potential or biomass is limited, the study focuses on power-to-gas (PtG) technologies. The study points out 

the advantages of heat pumps as compared to PtG in terms of efficiency (heat pumps produce around 3 to 4.5 

kWh of thermal heat per kWh of electricity and power-to-gas only produces between 0.24 and 0.84 kWh of heat 

per kWh due to conversion losses). 

Energy Efficiency Strategy for Buildings (BMWi 2015) 

Overview 

The Energy Efficiency Strategy for Buildings published by the German Ministry for Economic Affairs and Energy 

is based on the goal of reducing primary energy demand of buildings by 80 per cent against the 2008 level through 

a combination of energy savings and the use of renewable energy. The strategy labels this 80% reduction goal 

“virtually climate-neutral building stock” and indicates pathways to reach the goal. The pathways are presented 

as a target corridor, spanned by maximum energy efficiency combined with a slightly less ambitious expansion of 

renewable energies on the one hand, and maximum use of renewable energies combined with a lower ambition 

in energy efficiency on the other hand. 

The strategy is based on a reference scenario and two target scenarios:  

1.  The “energy efficiency” target scenario relies on an increase in energy efficiency up to the estimated 
maximum value of -54 per cent final energy consumption and covers the remaining target achievement 
gap by using renewable energies with a share of at least 57 per cent.  

2.  The “renewable energies” target scenario primarily relies on the development of renewable energies up 
to  the  estimated  maximum  potential  limit  of  69  per  cent  in  final  energy  consumption,  covering  the 
remaining target achievement gap by energy savings of at least -36 per cent.  

Key policies and measures 

Building-specific renovation roadmaps offer building owners a reliable strategy for a holistic assessment and 

an energy-efficient renovation programme for their buildings spanning a period of several years. Besides purely 

95 https://www.waermepumpe.de/presse/zahlen-daten/ 

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EUROPEAN COMMISSION 

energy-related issues, the determination of the renovation concept is to focus on the specific building owner’s 

options and to identify possible funding and/or support offers. 

Further  development  of  consulting  and  information,  in  particular  through  regional  renovation  networks 

involving  local  stakeholders  such  as  skilled  craftsmen,  consultants,  planners/designers,  consumer  protection 

associations,  etc.  The  tasks  of  these  networks  include  regional  networking  and  dissemination,  qualification  of 

craftsmen, planners/designers and other stakeholders as well as quality assurance through further training and 

feedback on quality on conclusion of a project. 

Public funding for investment in ambitious building renovation and new building project: Integration and 

further development of existing support schemes for energy efficiency in buildings and renewable heating. 

Public  funding  for  energy-efficient  urban  and  neighbourhood  renovation:  Improvement  and  better 

coordination of the “Energy efficient urban refurbishment” KfW programme, supporting the development of energy 

concepts for urban and neighbourhood renovation.  

Energy-saving  legislation  for  buildings:  Further  development  of  the  standards  of  the  Energy  Saving  Act 

(EnEG)  /  Energy  Saving  Ordinance  (EnEV)  and  the  Renewable  Energies  Heat  Act  (EEWärmeG)  as  are  key 

elements for achieving the Federal Government’s energy efficiency and climate targets. 

Targeted technology support and accelerated transfer to practical applications: launch of the promotional 

initiative on “Innovative Projects for a virtually Climate-neutral Building Stock 2050 (“EnEff.Gebäude2050”), 

aiming to show how innovations which are already available today but not yet very widespread can significantly 

reduce primary energy consumption in buildings. 

Systemic challenges of Germany's heat transition (Fraunhofer ISE et al. 2020) 

Overview 

The study addresses two targets for the transition of H&C in buildings in Germany until 2050, which are  (i) an 

almost climate-neutral building stock (target 1) in accordance with the  Energy Efficiency Strategy for Buildings 

(BMWi 2015) (reduction of the non-renewable primary energy demand by 80 % compared with 2008) and (ii) an 

overall  greenhouse  gas  reduction  of  95 %  in  Germany,  which  means  that  the  whole  energy  sector  including 

heating and cooling has to be completely climate neutral by 2050 (target  2). The basis of the study is a meta-

analysis of existing scenarios and studies analysing the transformation of the German energy system until 2050, 

from which different pathways, as well as central measures and technologies for achieving the goals are derived. 

Furthermore, different policy instruments are assessed and an in-depth analysis of the district heating sector in 

Germany is conducted including the identification of decarbonisation possibilities. For both targets a deficit and 

risk assessment is conducted and compensation possibilities for achieving the goals are identified and quantified. 

All results are combined in measure and policy roadmaps for both targets. Especially for target 2 it is necessary 

that the electricity and gas sectors are completely decarbonised until 2050. 

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Key measures 

Electricity  generation:  The  electricity  generation  must  be  almost  completely  decarbonised  for  target  1  and 

completely emission-free for target 2. Furthermore, the electricity system has to be adjusted and retrofitted due 

to new demands from heat pumps and other new electrical consumers. 

Allocation of biomass: Even though biomass is a renewable energy source, its potentials are limited and are 

needed in other sectors than the supply of low temperature heat in buildings. In both target pictures, biomass only 

plays a minor role in buildings. In order to direct the biomass to sectors in which its application has the highest 

benefits, an allocation strategy should be developed until 2050. 

Energy demand reduction in buildings: 

The energetic standard for new buildings in both target scenarios ís increased to KfW-Efficiency House 55 by 

2025 and KfW-Efficiency House 4096 for the period 2025-2050. Furthermore, the refurbishment rate and depth is 

strongly  increased  compared  to  the  past  decades  and  current  status  (from  approx.  1 %/a  to  1.75  –  2.3 %/a 

between  2020  and  2030  and  to  2.0  –  2.6 %/a  between  2030  and  2050).  The  average  energy  standard  of  a 

refurbished building is increased to KfW-55 standard from 2025 onwards. For supporting this development, the 

improvement and market acceleration of serial/industrialised refurbishment (e.g. Energiesprong) until latest 2030 

is suggested. It is furthermore required that with each refurbishment the supply temperature of the heating system 

is reduced in order to support the integration of renewable energies in the heating system. 

HVAC systems: 

All  generally  usable  roof  /  building  envelope  areas  must  be  used  for  the  installation  of  PV  and  solar  thermal 

systems from now on (new and refurbished buildings). Heat pumps will be the dominating heating technology for 

buildings with decentralised heat supply. The installation of monovalent oil and gas boilers has to be forbidden 

after 2020 and 2025 respectively (in the target 1 scenario five years later). For achieving target two also bivalent 

oil boilers will not be installed after 2025 and as biomass is needed in other sectors than the low temperature heat 

supply  in buildings,  no new  biomass boilers  will  be installed  in  buildings  after 2030.  Besides  that,  boilers  and 

(small) CHP must be developed, which can generally use hydrogen in the future. 

District heating: 

District  heating  provides  the  possibility  of  large-scale  integration  of  renewables  and  especially  in  densely 

populated areas it might often be the only possibility for the decarbonisation of the heat supply of buildings as not 

enough  areas  for  decentralised  application  of  renewables  are  available.  Therefore,  system  expansion  and 

densification accompanied by a reduction of the grid temperatures is needed. Coal must be replaced by renewable 

sources latest by 2025 and natural gas latest by 2050. 

Key policies 

Different  policies  supporting  the  strategic  dimension  of  the  heat  transition  are  required.  These  are  (amongst 

others):  

  obligation of a strategic municipal heat planning from now on: It is essential that municipalities plan the 
development of infrastructure and technologies in advance to avoid parallel expensive infrastructure 

and conflicts. This is of major importance for the gas and district heating infrastructure, but also for the 

use of ambient heat from the ground or ground water with heat pumps. 

the adjustment of taxes and fees to support the overall energy transformation   

integration of efficient monitoring 

 
 

96 KfW is a bank providing loans on behalf of the Federal Government of Germany to support e.g. efficient buildings. 
The  KfW-Efficiency  House  standard  refers  to  the  currently  applicable  Energy  Conservation  Ordinance  (soon 
Building Energy Law). The primary energy demand of a KfW-55 house is only 55 % of the primary energy demand 
of a reference building, the demand of a KfW-40 house only 40 % of the primary energy demand of the reference 
building. 

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 

 

increase of information for all stakeholders in the building sector, especially for refurbishment 

measures 

clearly defining how and in which sectors biomass and synthetic gases and fuels will be applied in the 

future 

  As the heat transition requires skilled work force, policies to ensure that enough skilled workers are 

available. 

 

 

In the frame of the energy demand reduction and HVAC systems policies and laws have to follow the 

long-term targets with respect to greenhouse gas emission and energy demand reductions;  

the long-term targets have to be integrated in laws even today with increasing energy requirements for 

buildings  

  a roadmap for phasing out fossil fuel burning boilers (including prohibitions to install these boilers) as 

well as a reduction/ elimination of existing exceptions.  

  The obligation to install PV and/ or solar thermal systems at each building must be integrated in the 

building energy law as soon as possible.  

  Besides obligations in the regulative law, support schemes are needed (i) to accelerate the heat 

transition and investments in refurbishments and renewable heating technologies and (ii) to ensure 

socially acceptable heat transition and too high burdens especially for low- and medium-income 

households. 

  As investment cycles in the district heating sector are long and the transition and expansion of district 

heating systems needs time, the frame must be defined now. This includes a clear quota for renewable 

energies and waste heat in district heating systems until 2050, an improvement of the regulatory frame 

of the systems (currently single systems can be considered as local monopolies) and an adjustment of 

support schemes in order to ensure the needed grid expansion, densification, temperature adjustments 

and integration of renewables. 

French strategy for energy and climate (Ministière de la transition écologique et solidaire 2018) 

Overview 

The French Multi-Annual Energy Plan (MAEP) establishes the priorities for government action regarding energy 

policy for Metropolitan France in the next decade, shared in two 5-year periods (2019-2023 and 2024-2028). It 

addresses, among other things, heating and cooling in buildings and industry, the development of heat networks 

using renewable energy and waste (recovered) heat as the main instruments of heat/cold decarbonisation. 

Targets related to H&C for 2030: 

 

38 % of RES in final heating consumption (RES-H&C share in 2018 according to SHARES data: 22 %) 

  Multiply the amount of RES-H&C and recovery in heat networks by five as compared to 2012 (in 2012: 

7.9 TWh of RES-H&C and recovery heat in DH in France) 

  Reduction of final energy consumption in buildings by 28 % (as compared to 2010) 

Objectives for renovation rates 

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 

Thermal retrofit (building envelope) of 1,200,000 homes in the decade 2021-2030 (i.e. average of 

120,000 per year) 

  Energy efficiency improvements (heating and cooling equipment) in 300,000 homes per year on 

average 

Strategies for the decarbonisation of H&C 

Besides increasing energy efficiency, the decarbonisation of H&C is mainly driven by direct use of renewable 

energies, by the systematic use of recovered (waste) heat for heating and to a lesser extent  by the injection of 

green gases into the gas grid. 

The  French  Strategy  for  Energy  and  Climate  provides  an  outline  of  the  policies  and  programmes  that  are 

implemented and planned in order to support building renovation and the use of renewable energies in H&C.  

For building retrofit, the strategy outlines key measures included in the plan for energy renovation of buildings: 
  Creation of a guarantee fund of more than 50 million euros for 35,000 low-income households each 

year; 

  Simplification of the existing incentive scheme, switching from a tax refund to a bonus; 
  Adaption of the 0% green loan programme; 
  Reliable energy labeling of houses 
  To train professionals and control the quality of works with a reform of the labeling RGE (validated for 
environment), with an investment of 30 million euros in the professional training and 40 million euros in 

innovation; 

  Promotion of a large renovation programme in public buildings (state and local authorities) with a 

budget of 4.8 billion euros.  

  The government will dedicate 200 million euros to implement the renovation plan with the white 

certificate scheme.  

Addressing professionals in the building retrofit sector, the strategy outlines the following measures: 

  Work with building and real estate professionals, NGOs, local authorities and energy companies, under 
the FAIRE banner to better identify the relevant renovation solutions for households, to trigger more 

action by enhancing household knowledge and confidence, and to better coordinate the existing grants 

and financing; 

  Finalisation of the implementation of the new environmental regulations for buildings, including: A RES 
quota for new buildings (individual, collective, tertiary) by 2020; updating the conversion factors in 

primary energy for electricity used in the regulation of new buildings according to the revised EED; 

Adopting criteria on greenhouse gas emissions on the life cycle of the building, being careful not to 

have a negative impact on electricity peak demand 

  Energy efficiency obligations for tertiary buildings (expected to cover 40 % of existing tertiary buildings 
in 2030 by targeting all business sectors and limiting exemptions to buildings of less than 1,000m²). 

Addressing private individuals, the strategy covers the following measures: 

  Several improvements to the Energy Transition Tax Credit (Crédit d’impôt pour la transition 

énergétique, CITE): Increase efficiency of the programme via a new fixed rate scale in 2020, which will 

take into account the energy efficiency of the actions and will be defined after wide consultation with 

stakeholders in the sector; extension to landlords in 2020; from 2019, extend the CITE for lower 

income households to cover the installation of renewable heat equipment and the disposal of oil tanks; 

make  the CITE payments through the French National Housing Agency (Agence nationale de l'habitat, 

ANAH) at the time of the work, for the households in the first four deciles (current scope of ANAH aid).  

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  Maintaining the VAT rate at 5.5% for energy renovation works eligible for the CITE and related works; 
  Enable the ecoPTZ (interest-free loan) to be applied at a fixed rate for single initiative work, without a 

work package (e.g.: installation of central heating powered by renewable energies); 

  100% funding of an energy audit for lower income households who own buildings with performance 
certificates F or G. Make this audit mandatory prior to letting a private category F or G dwelling and 

during transfer of a dwelling classified F or G between now and 2021, to encourage homeowners to 

initiate building work. 

Addressing the industry sector, the following measures are included: 

  Testing a managed release of the first energy saving certificates for energy saving operations carried 

out in facilities covered by the European carbon trading system; 

 

Including a technical-economic evaluation of solar or geothermal heat production in the energy audits 

of large and medium-sized companies; 

  Continuing to increase applications for the eco-energy loans (PEE) made available by BPI France, for 
SMEs and micro-companies engaged in work qualifying for energy saving certificates. Prolonging the 

PEE scheme until 2025; 

  Promoting the deployment of energy management systems (ISO 50 001 type) and energy benchmarks 

in industry. 

Direct use of renewables 

Main source of RES heat is solid biomass (wood), followed by heat pumps and to lesser extents solar thermal 

and geothermal heat. 

District heating 

Objective of five-fold increase in the amount of renewable and recovered (R&R) heat and cold delivered by district 

heating networks by 2030 (baseline 2012: 7.9 TWh), which represents a target of 39.5 TWh. 

The following key measures to support RES-H in district heating are mentioned in the strategy: 

Increasing the ratio of R&R Heat Fund projects.  

 
  Requirement for cities with more than 10,000 inhabitants to carry out feasibility studies into heating and 

cooling networks; 

  Keeping VAT at 5.5% for heat deliveries from networks that are more than 50% supplied by R&R 

energy (and incorporate solar thermal energy to eligible R&R energies); 

  Supporting the development of the most efficient R&R cooling networks through the Heat Fund;  
  Establishing a recognised definition of renewable cold when delivered by network, at European level;  
  Encouraging social landlords to develop R&R energy and anti-fuel poverty targets.  
  Ensuring the integration of R&R energy in territorial policies and plans and planning documents;  
  Promoting strategies for ranking networks when the master plans are submitted by the end of 2018. 

Green gases & New energy carriers & gas grid 

Biomethane: The French objective for injecting biomethane into gas grids is 8 TWh in 2023, starting from 0.4 TWh 

in 2017.  

Hydrogen: The strategy does not mention hydrogen in the context of heating and cooling but only for the use in 

industry, transport and storage (power-to-gas). While the plan foresees support for R&D and demonstrators, it 

states that it is unlikely that there is a need to implement power-to-gas on a large scale before 2035 in France. 

141 

 
 
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Policy Support for Heating and 
Cooling Decarbonisation 

Meta-study 

Part 2: Decarbonising industrial 
heating and cooling 

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5. Introduction to Part II 

This  section  presents  part  II  of  the  meta-study,  reviewing  recent  works  addressing  the 
decarbonisation of heating and cooling in industry. The meta-study was conducted between 
January 2020 and September 2021. Table 1 provides an overview of the studies contained in 
this part of the meta-study. 

Chapter  2  presents  the  key  findings  from  the  meta-study  and  provides  a  synthesis  of  the 
analysis of the studies. Chapter 3 includes summaries of the individual studies. 

Table 1 

Overview of studies 

No. 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

13 

14 

Error! Reference source not found. (Bataille et al. 2018) 

A review of cross-sector decarbonisation potentials in the European energy intensive industryError! 
Reference source not found. (Gerres et al. 2019)  

Deep decarbonisation of the German industry via electricity or gas? A scenario-based comparison of 
pathways (Fleiter et al. 2020) 

A review of the emission reduction potential of fuel switch towards biomass and electricity in European 
basic materials industry until 2030 (Rehfeldt et al. 2020) 

Breakthrough Strategies for Climate-Neutral Industry in Europe (Agora Energiewende 2020) 

Enabling European industry to invest into a climate-neutral future before 2030 (Agora Energiewende 
2021) 

Industrial Innovation: Pathways to deep decarbonisation of Industry (ICF Consulting und Fraunhofer ISI 
2019) 

Sustainably Heating Heavy Industry (Sutherland 2020) 

Decarbonizing Industrial Thermal Energy Usage (Gardiner 2020) 

Decarbonising industry in Sweden an assessment of possibilities and policy needs (Åhman et al. 2012) 

 The CO2 reduction potential for the European industry via direct electrification of heat supply (power-
to-heat), Environmental Research letters 15 (Madeddu et al. 2020) 

 Industrial Transformation 2050: Towards an Industrial strategy for a climate neutral Europe, Institute for 
European Studies: Brussels. (Institute for European Studies 2019) 

 Pathways to Net-Zero Emissions from EU Heavy Industry, University of Cambridge: Cambridge 
(University of Cambridge 2019) 

Decarbonisation of the Steel Industry: the Role of State Economic Policy (Glushchenko 2020) 

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15 

16 

Low carbon energy and feedstock for the European chemical industry, study commissioned by the 
European Chemical Industry Council (DECHEMA 2017b) 

DECHEMA and FutureCamp (2019), Roadmap Chemistry 2050 – On the way to a greenhouse gas 
neutral chemical industry in Germany  (DECHEMA; FutureCamp Climate 2019) 

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6. Synthesis of Findings: Part II 

This part of the meta-study analyses several studies presenting the technological options and 
policy instruments for the decarbonisation of heating and cooling in the industry. The studies 
included in the review analyse decarbonisation technologies and policy strategies for process 
heat in different industrial sectors (e.g., steel, cement, petrochemical, etc.). Although most of 
these studies analyse industry process heat decarbonisation from a general perspective, some 
provide a geographical perspective at the European (Gerres et al. 2019; Rehfeldt et al. 2020) 
and national levels (Åhman et al. 2012; Fleiter et al. 2020), focusing on the specific policies for 
the chosen geographical scope. The opportunities, implementation barriers, needed policies 
and suggested technologies for the decarbonisation of industry are discussed. 

6.1. Industry decarbonisation opportunities and barriers 

The  opportunities  for  the  decarbonisation  of  industrial  process  heating  and  cooling  are 
essentially based on the substitution of fossil energy sources with renewable electricity, green 
hydrogen and, to a certain extent, biomass, solar thermal and geothermal energy.  For heat 
demand up to a temperature  level  of  200°C,  there are several  technology  options,  such  as 
industrial  heat  pumps  in  combination  with  waste  heat,  environmental  heat  or  solar  thermal 
energy. 

that 

the  main  barriers 

The  analysed  studies  agree 
industry 
decarbonisation are the high capital investments needed for the transition, and some studies 
point out the lack of market-ready alternative technologies for high-temperature process heat. 
While investment costs are also a common barrier for  the decarbonisation of other sectors, 
they are more crucial in the industrial sector given the expected long lifetime of their facilities 
(Institute  for  European  Studies  2019),  their  intimate  ties  with  regional  economies  and  their 
impact on productivity and competitiveness. 

for  energy-intensive 

Regarding  the  availability  of  decarbonisation  technologies,  the  studies  differ  on  whether 
available technologies only lack commercial maturity (Bataille et al. 2018; Rehfeldt et al. 2020; 
Fleiter et al. 2020) or if they still need further technical development to be effective (Gerres et 
al.  2019).  In  this  sense,  the  worst  scenarios  indicate  that  the  required  breakthrough 
technologies may not be ready before 2030. By contrast, other studies estimate high technical 
potentials  for  reducing  emissions  by  switching  from  fossil  fuels  to  biomass  and  electricity 
across a variety of industrial processes, however fuel switching is not economically feasible 
under current pricing structures in the EU (Rehfeldt et al. 2020).  This experience is shared in 
the USA, where even for well-known technologies, the implementation is just below a tenth of 
what it could be, due to a lack of a comprehensive policy for renewable heat (Gardiner 2019).  

Economic barriers due to low fossil fuel prices are a key barrier for low-carbon technologies 
(Institute for European Studies 2019), especially in the existing fiscal and policy context where 
support for the use of fossil fuels still exists. The environmental and climate impact of fossil 
energy carriers is as of yet not depicted sufficiently in their pricing. CO2 pricing is therefore a 
key element to achieve cost-competitive of low-carbon technologies. 

As of yet industrial businesses do not face a political framework towards carbon neutrality that 
creates  sufficient  security for  low-CO2  investments  (Skoczkowski  et  al.  2020). This  leads to 
insecurity  regarding  investment  decisions.  Although  political  plans  focus  on  reducing 
emissions,  a  clear  pathway  towards  carbon  neutrality  is  lacking.  This  creates  uncertainty 
regarding  the  long-term  ambition  level  of  climate  policy  frameworks  and  thus  insecurity 
regarding  investments  that  might  lead  to  sunk  costs  or  competitive  disadvantages  in 
international markets. 

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If global competition does not face as strict environmental and climate policies as the European 
industry  does,  companies  face  a  disadvantage.  Without  policies  that  address  this  risk, 
investments  in  low-CO2  technologies lead to  losses for  European businesses  (University  of 
Cambridge 2019), highlighting the importance of policies that aim to mitigate such risks, like 
the Carbon Border Adjustment Mechanism.  

6.2. Policies for a decarbonised industrial sector 

With regard to suggested policies for the promotion of decarbonisation in industry, there is an 
agreement  on the  need for  stronger  support  of  research  and development  (R&D)  activities, 
innovation,  and  commercialisation,  promoting  pilot  projects  and  product  development. 
Moreover, the necessity of decarbonising energy-intensive industry is emphasised, since the 
main  energy-intensive  sectors  (e.g.,  production  of  cement,  steel,  petrochemicals,  glass) 
account for nearly 21 % of global CO2 emissions (Sutherland 2020). 

Several studies point out that due to the long investment cycles, it is important that the policy 
framework avoids lock-in by focussing not only on achieving the 2030 targets but taking into 
account the transition to climate neutrality by 2050 (Rehfeldt et al. 2020; Agora Energiewende 
2021; 2020). 

All studies confirm that additional policy efforts are needed. At the upstream level, this includes 
financial support instruments for low-CO2 technologies and for green hydrogen, the creation of 
a  sustainability  framework  for  hydrogen  as  well  as  strategic  planning  for  pan-European 
infrastructures  (Agora  Energiewende  2020).  At  the  midstream  level,  carbon  contracts-for-
difference  are  seen  as  a  key  instrument,  along  with  de-risking  instruments  for  capital 
expenditure  in  first-of-a-kind,  large-scale  investments  and  the  introduction  and  adaption  of 
standards for production processes to ensure compatibility with climate neutrality. 

At  the  downstream  level,  material  efficiency  can  be  addressed  by  introducing  material 
efficiency  in  green  public  procurement  approaches,  by  introducing  a  climate  surcharge  on 
material-intensive final products containing large amounts of basic materials, requirements to 
improve  recycled  material  quality  and  material  efficiency  in  manufacturing  and  construction 
and  climate-neutral  product  labelling  and  eco-design requirements  for  embedded  carbon  in 
final products (Agora Energiewende 2020). The introduction of these instruments will lead to 
demand  for  low-CO2  products,  which  is  the  basis  for  continuous  business  operation  when 
switching  from  CO2  intensive  to  low-CO2  production  processes.  Businesses  can  orient 
themselves by these new markets and plan their investment in innovative technologies and 
production processes. However, studies emphasise that it is necessary to protect European 
industry from international competition that does not face as high environmental standards as 
European businesses (Institute for European Studies 2019). 

Policies  should  be  flexible  and  be  revised  and  updated  regularly  as  implementation  targets 
evolve (Sutherland 2020). In addition to this, more comprehensive and in-depth roadmaps for 
specific technologies and industrial subsectors are necessary (Åhman et al. 2012). 

6.3. Technologies for decarbonisation 

The best-case scenarios within the studies considered in the review show that up to 95 % of 
industry emissions could be mitigated by 2050, but for that a strong policy support and a smart 
integration and combination of different technologies would be necessary (ICF Consulting and 
Fraunhofer  ISI  2019).  The  high  integration  of  different  processes  within  industry  makes  it 

151 

 
 
 
difficult to make individual technology changes and in most of the cases a full production chain 
re-design is needed (Glushchenko 2020).  

In  the  decarbonisation  of  the  highest  temperature  processes  (>500°C),  only  biofuels  and 
hydrogen  can  compete  with  fossil  fuels,  as  nuclear  power  or  electricity  cannot  reach  those 
temperatures  (Sutherland 2020).  If these  processes are  not  substituted by  other  production 
processes, energy carriers from carbon neutral sources play a key role. However, the supply 
of sustainable biomass is limited. As an example, it is seen that even in countries with high 
availability of biomass like Sweden, there is no clear strategy for its sustainable use (Åhman 
et  al.  2012).  In  addition,  the  clean  production  of  hydrogen  requires  the  development  of  the 
required  infrastructure.  Since  hydrogen  may  be  an  important  alternative for  some  industrial 
processes (e.g., iron furnaces, metal production and chemical industry), it is envisioned that 
industry may become the main actor in the development of hydrogen infrastructures.  

Although carbon capture and storage (CCS) is mentioned in many studies to also play a key 
role  in  the  decarbonisation  of  industry,  its  development  and reliability  are  not  yet  proven,  it 
faces concerns on the CO2 storage and transport, and its use may prevent the prioritisation of 
greener alternatives against fossil fuels (Sutherland 2020).  

Furthermore, studies for  the  decarbonisation of  the  basic  material  industry  indicate  that the 
most  effective  alternatives  may  be  based  on  material  substitution  for  cement  (e.g.,  wood, 
hemp),  use  of  alternative  chemistries  or  replacement  of  charcoal  with  bio  charcoal.  These 
alternatives  may  introduce  important  changes  in  the  production  chain,  for  which  the  entire 
process may need to be redesigned.  

Studies suggest that strong R&D efforts are necessary to spark innovations that lead to new 
technology routes. For example, new technologies discussed are plasma technologies, micro 
wave  and  induction  heating  that  can  be  applied  in  different  industrial  sectors  (University  of 
Cambridge  2019).  However,  as  these  processes  require  large  amounts  of  electricity,  the 
decarbonisation of electricity generation is necessary as well as a strong scale-up of electricity 
generation capacity (University of Cambridge 2019). This also entails sufficient grid expansion 
and  the  use  of  flexibility  options  that  guarantee  security  of  supply.  Flexibility  options  like 
electricity  storage  (e.g.  batteries)  as  well  as  demand  response  technologies  are  needed  to 
facilitate a larger share of electricity use in the industrial energy mix (Madeddu et al. 2020). 

A key element for the decarbonisation of the chemical industry is low-CO2 electricity generation 
from renewable energies. An important example of this are electrically heated steam crackers 
that split naphtha into olefins and aromatics (DECHEMA; FutureCamp Climate 2019). Another 
key component is green hydrogen from electrolysers powered by renewable electricity. Green 
hydrogen can replace the fossil-based hydrogen produced through steam reforming of natural 
gas  and  can  be  used  in  the  synthesis  of  both  ammonia,  methanol,  and  potentially  more 
complex hydrocarbons (provided that a climate neutral CO2 source is available).  

For the synthesis of methanol and other basic chemicals, a non-fossil carbon source is also 
needed. Biomass is one possibility, however its availability is limited. Biomass can be used 
either as feedstock directly (e.g., in the form of biomethane) or CO2 originating from biomass 
combustion can be used as a “climate neutral” carbon source for the synthesis of synthetic 
hydrocarbons with renewable hydrogen. CO2 as carbon source could also be captured from 
the atmosphere (direct air capture), which would then lead to increasing demand of renewable 
electricity (DECHEMA; FutureCamp Climate 2019). In addition, the recycling of polymers and 
other synthetic materials is another possibility for the decarbonisation of the feedstock in the 
chemical industry (DECHEMA 2017a). 

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7. Summary of Studies: Part II 

7.1. Industry in general 

A review of technology and policy deep decarbonisation pathway options for making energy-
intensive industry production consistent with the Paris Agreement (Bataille et al. 2018)  

Summary and main findings 

The article provides a review of grey climate policy and engineering literature to identify technological and process 
abatement options as well as policy solutions for the decarbonisation of energy intensive industry production. The 
main findings are: 

 

Industry is hard to decarbonise due to conversion costs, trade sensitivity, and long facility life. 

  Technologies  exist  to  decarbonise  all  industrial  commodity  production,  but  their  maturity  needs  to  be 

developed. 

  Knowledge of industry mitigation options is low, leading to skewed policy & effort. 

  Policies combining R&D, commercialisation support and GHG pricing are needed. 

  Since the average economic lifetime of industrial facilities is 20 years or more, all new investment must be 
net-zero emitting by 2035 - 2060 or compensated by negative emissions to guarantee GHG-neutrality 

  Reducing energy intensive industrial GHG emissions to Paris Agreement compatible levels is technically 

possible with sufficient prioritisation and policy effort 

  A database demonstrative of emerging and near-commercial technologies for decarbonisation of industry is 

provided 

  Electrification technologies provide a solution for decarbonisation in the short term. However, in the longer 
term,  the  re-design  of  industrial  processes  and  carbon  capture  strategies  will  be  needed  to  achieve  the 
decarbonisation goals. 

Main decarbonisation strategies 

The article identifies strategies for the key processes including the following aspects: 

  dematerialise or recycle/reuse 

 

 

keep the core existing process or make fundamental changes 

carbon capture and storage or GHG free process heating 

Pulp and paper 

  dissolved lignin as biofuel to heat and power using recovery boilers 

  decarbonised electricity for milling motors 

  production of wood pellets from waste and biomass 

Renewable fuels 

 

low temperature fermentation 

  anaerobic biochemical digestion 

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  medium temperature thermochemical gasification 

Energy carriers 

  use of bulk excess renewable electricity  

 

renewable hydrogen 

  gasified or digested biomass 

  post-combustion or direct capture to make synthetic renewable fuels and key chemicals 

Iron and steel 

 

replace coking coal with bio charcoal 

  use renewable hydrogen in a DRI-EAF as the reductant  

  decarbonised electricity for electrowinning 

Metallurgy 

  use renewable hydrogen, synthetic methane or biofuels for pyrometallurgy 

 

refocus where possible on hydrometallurgy or electrometallurgy 

Glass industry 

  oxycombustion with CCUS  

  direct electric melting 

Cement 

 

reduce clinker ratio in cementous materials 

  material substitution by adding wood, hemp, carbon fibre and other 

  use of CCUS for process emissions 

  alternative chemistries for cement 

Decarbonisation policies 

  make  decarbonisation of  energy  intensive  industry  a  priority  and  the  international,  national,  and  regional 

level 

  develop regional roadmaps 

  gradual phase out of free allowances in EU ETS to increase carbon costs 

  end-use based consumption carbon pricing 

 

Industrial R&D 

  piloting of net-zero technologies 

  multinational institution to fund portfolio of decarbonisation pilot projects 

A review of cross-sector decarbonisation potentials in the European energy intensive industry 
(Gerres et al. 2019)  

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Summary and main findings 

This  study  presents  a  review  of  public  and  private  sector  publications  and  scientific  literature  on  pathways  and 
roadmaps for the decarbonisation of different industries. It aims at identifying the key areas for emission abatement 
across all subsectors in order to comply with the European Union emission targets by 2050. The key strategies for 
this process include the decarbonisation of low temperature heat by cross-sector technologies, the use of membranes 
in  the  (petro)-chemical  industry,  carbon neutral steelmaking,  alternative  feedstock  for the cement  production,  and 
carbon capture & storage (CCS).  

Main decarbonisation strategies 

The industries analysed include iron & steel, (petro-)chemicals, cement, ceramics, glass, paper & pulp and food & 
beverages,  which  represent  64 %  of  EU  industrial  carbon  footprint.  Little  consensus  can  be  found  on  how  deep 
decarbonisation of energy intensive industries will be achieved.   

Heat recovery: Heat recovery may offer high reduction potentials, but numbers are not clear. It is estimated that the 
emissions among all subsectors may be reduced around 5 %, for which full redesign is required.   

Furnaces: minimizing CO2 emissions from furnaces requires new designs and technologies in all subsectors. Partial 
or  full  electrification  solutions  of  the  furnaces  are  proposed,  but  since  they  are  not  commercially  available,  other 
technologies with lower emission reduction potential are suggested as transitory technologies.  

Carbon capture & storage (CCS): CCS technology has been extensively investigated, but its high cost and storage 
technical issues hinder its commercialisation. CCS is feasible only in the cement and pulp & paper industry.  

Biomass & bio-based waste: besides the potential limits imposed by biomass availability, the use of internal bio-
based waste streams can play an important role in decarbonising subsectors such as food and pulp & paper industry  

Process heat provision: a high share of energy is required for boilers providing process heat up to 200°C. The most 
discussed solution are heat pumps, which may provide an incremental or full electrification of heat provision.  

Alternative  feedstock:  clinker  substitutes  can  significantly  reduce  emissions  from  the  cement  industry  provided 
novel process designs. Additives are expected to bring only minor improvements.  

Electrolysis: electrolysis with zero-emission electricity can be an alternative to furnaces and kilns for different metal 
production and also produce hydrogen as a renewable energy carrier.  

Combined heat & power (CHP): CHP is a viable option for heat and electricity intensive industries, like ceramic and 
food & drinks. Its potential depends on the level of penetration today, being minimal for (petro)chemical sector.  

Industrial ovens: Electrification of heat below 500°C will target the main CO2 emitters in the pulp & paper and food 
industry. Electrification options for food industry are closer to commercialization.  

Catalyst processes & membrane separation: advancements in membrane technology can reduce heat and energy 
intensity of the (petro-)chemical and food-processing subsector, but their potential is difficult to quantify.  

Decarbonisation policies  

Current technologies for decarbonisation will not be enough to lower industrial CO2 emissions. Breakthrough 
technologies are required, but none of them is market ready (and this is not expected before 2030).  
Policies to foster and accelerate the development and implementation of the key mentioned technologies 
are essential for reaching CO2 reduction targets. However, a previous better understanding of their expected 
decarbonisation potential and their status is essential, making further research necessary. It is important that 
models and simulations for policymaking account for cross-sectorial interactions.  

Deep decarbonisation of the German industry via electricity or gas? A scenario-based 
comparison of pathways (Fleiter et al. 2020) 

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Summary and main findings 

The article presents the results of a scenario analysis of different pathways for the decarbonisation of 
the industry sector in Germany. A variety of measures may contribute to the decarbonisation, including 
energy efficiency, biomass, electrification, green hydrogen, power to gas (PtG), circularity, material 
efficiency, process switch and carbon capture and storage. However, their individual contributions are 
debated controversially. The analysis compares two scenarios, one based on electrification as the main 
decarbonisation option and the other based on a broad availability of green gas. The results show that 
both  scenarios  reach  a  GHG  reduction  of  about  93  %  in  2050  without  using  carbon-capture  and 
storage, with the remaining emissions being mostly process-related. Common elements are substantial 
improvement  in  energy  efficiency  and  material  efficiency  along  the  value  chain  for  CO2-intensive 
products as well as a strong shift to a circular economy. The increase of direct use of electricity in the 
electrification scenario is about 100 TWh or 50 % by 2050 compared to 2015 plus additional 146 TWh 
green hydrogen. In the gas-focused scenario, a demand for 337 TWh of green gas emerges by 2050 
while electricity demand remains stable. While the analysis does not include a detailed analysis of the 
costs of each pathway, the study concludes that in the electrification scenario a stronger conversion 
of process heat generation and the construction of new industrial furnaces is required. In the scenario 
focusing on green gas, production can largely be continued in current gas-fired plants, however, the 
running costs increase more strongly, since synthetic gas as an energy source will be more expensive 
than renewable electricity. 

A review of the emission reduction potential of fuel switch towards biomass and electricity in 
European basic materials industry until 2030 (Rehfeldt et al. 2020)   

Summary and main findings 

The  article  provides  a  review  of  the  potential  for  reducing  green-house  gas  emissions  in  the  industrial  sector  by 
switching  from  fossil  fuels  to  biomass  and  electricity.  The  analysis  covers  the  European  basic  materials  industry 
including the production of clinker, lime and ammonia, blast furnace operations, refineries and others. The process is 
currently largely based on fossil fuels and the emission intensity of these installations is closely tied to the  type  of 
fuel used. The potentials for reducing emissions by fuel-switching are assessed for the year 2030 and are compared 
to the required emissions pathways in order to meet a 1.5° target. The article focuses on the technical potential to 
use biomass and electricity with existing or available technologies in important industrial processes including steam 
systems  and  other  furnaces,  non-metallic  minerals,  iron  and  steel  and  refineries.  The  industries  covered  in  the 
analysis account for 95 % of the total verified emissions in the EU ETS industrial sector  in 2015 and 64 % of total 
industrial emissions of the EU28. The analysis finds that 34 % (184 Mt) of these emissions could be avoided from a 
technical  perspective  until  2030  with  fuel  switch  measures  towards  biomass  and  electricity.  However,  while  the 
technical potential is compatible with pathways towards the 1.5° target, the options lack economic competitiveness 
under present conditions, e.g., due to high electricity prices. In view of full decarbonisation of the sector, the study 
concludes  that  deep  decarbonisation  in  line  with  climate  targets  requires  innovative  production  processes  only 
available in the long term. 

Breakthrough Strategies for Climate-Neutral Industry in Europe (Agora Energiewende 2020) 

Overview 

The study aims at identifying strategies and investments that meet the EU 2030 target and achieve climate neutrality 
by  2050.  The  latter  requires  a  rapid  introduction  of  low-carbon  break-through  technologies,  as  reinvestment  in 
traditional production processes, even if the best available technologies are used, is not an option so long as those 
processes are not easily convertible to zero-carbon or carbon-negative operation. The study presents strategies and 
pathways for deploying breakthrough technologies for industrial capacities in need of reinvestment, while allowing 
industrial assets with traditional processes to continue operation until they are scheduled for replacement. 

Breakthrough technologies 

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The study identifies breakthrough technologies supporting the reduction of greenhouse gas emissions to meet the 
target for 2030 as well as the climate neutrality target by 2050: 
In  steelmaking,  the  study  assumes  that  around  48  per  cent  of  the  primary  steel  capacity  requires  relining  or 
reinvestment before 2030. Key technologies are the direct reduced iron with clean, providing reductions by up to  -
97 %  relative  to  the  blast furnace  route.  Another low-carbon  option in the steel sector is  to  increase  the  share of 
secondary steel produced by electric arc furnaces.  
In the chemicals industry, power-to-heat, clean hydrogen and chemical recycling are named as key technologies.  
In the cement sector, demand-side measures, efficient application and packing of granules, partial substituting  of 
the clinker and material circularity and are named alongside with Oxyfuel CCS for clinker production. 

Policy instruments 

Upstream policies: 
Support  instruments  for  clean  hydrogen:  1)  A  feed-in premium for clean  hydrogen to close the  price  gap  with 
respect to conventional hydrogen; 2) carbon contracts-for-difference (CCfD) for the production, transport, and use of 
clean hydrogen; 3) A clean hydrogen quota can be applied on sellers of maritime and aviation fuels. 

Robust sustainability framework for clean hydrogen, including the governance of guarantees of origin for clean 
hydrogen and the “additionality” of renewable or decarbonised energy for clean hydrogen production; ensuring that 
clean hydrogen is allocated to the most appropriate “no-regret” options (e.g., steel, chemicals, maritime, and aviation); 
and governance of the safety of hydrogen production, transport, and use.  

Strategic planning for pan-European infrastructures for hydrogen, electricity, and CCS infrastructure. 

Midstream policies: 
Creating an EU policy framework for carbon contracts-for-difference to make investments viable.  
De-risking instruments for capital expenditure in first-of-a-kind, large-scale investments in addition to existing funds 
such as the EU Innovation Fund and InvestEU. 

Setting standards for production processes compatible with climate neutrality and facilitate the creation of lead 
markets for climate-neutral materials (e.g., through green public procurement).   

Reforming the anti-carbon leakage system, including the introduction of output-based allocation and a reform of 
state-aid guidelines. 

Downstream policies: 
Introducing a climate surcharge on material-intensive final products containing large amounts of basic materials 
(cars, plastic bottles, houses). 

Requirements to improve recycled material quality and material efficiency in manufacturing and construction. 

Climate-neutral product labelling and eco-design requirements for embedded carbon in final products. 

Green public procurement requirements for basic materials. 

Enabling European industry to invest into a climate-neutral future before 2030 (Agora 
Energiewende 2021)  

Summary and main findings  

The study provides suggestions for key elements of an EU strategy for reaching climate-neutrality in the EU industry 
sector. It proposes milestones for the year 2030 for the deployment of key technologies for decarbonising heating 
and cooling: 

  40 Mt of primary steel produced from “climate neutrality-compatible” technologies 

  16 Mt of EU cement production linked to offshore carbon capture and storage sites 

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 

 

large-scale demonstrators for innovative bio-mass-to-chemicals technology 

critical, innovative recycling technologies are established for chemicals and cement  

  50 % industrial steam demand at up to 200°C supplied by power-to-heat technologies 

Furthermore, the study proposes elements of a legislative roadmap to decarbonise the EU industry sector: 

 

 

 

creation of an enabling framework for Carbon Contracts-for-Difference for climate-neutral technologies 

standardised CO₂ and environmental performance labelling for intermediate basic material products 

lifecycle  assessments  (LCAs)  for  embedded  CO₂  emissions  and  resource  use  requirements  for  a)  new 
construction, b) public works and c) vehicles 

  enhanced recycling targets and end-of-life sorting and tracking requirements for basic materials 

  priorisation of access to clean hydrogen, power and biomass in “no regrets” industrial applications 

Industrial Innovation: Pathways to deep decarbonisation of Industry (ICF Consulting und 
Fraunhofer ISI 2019) 

Summary and main findings  

This second report uses the findings from its first part 1 on technology uptake pathways through 2050 in order to 
evaluate  the extent  to  which key  EU  industrial sectors  can  benefit  and  contribute  to  a  climate-neutral future.  The 
ability of industries to implement existing technologies and the development and commercialisation of new products 
and breakthrough technologies are evaluated. Current policies and trends will only result in a slow reduction of GHG 
emissions  in  industry,  so  a  fundamental  change  in  the  policy  and  regulatory  framework  is  needed.  Significant 
emissions reductions of up to 95 % can be achieved by combining several mitigation options, but for this, additional 
costs are expected in all scenarios and a strong policy and regulatory support will be needed. 

Modelling approach 

  A number of scenarios have been developed for the future evolution of energy demand and greenhouse gas 

emissions of the EU's industry sector by using the bottom-up simulation model FORECAST.  

  The input data include technology assumptions and economic framework. 

Scenarios 

  Four groups of scenarios are defined, including: i) reference scenarios; ii) scenarios with focus on clean 
gases (hydrogen and synthetic methane); iii) scenarios with focus on bioeconomy & circular economy; and 
iv) scenarios with focus on electrification. 

  The main result of the simulation are the annual GHG emissions of the scenarios, analysed by subsector, 

source, country, timeline and scenario.  

  The considered subsectors are: iron & steel, chemical industry, cement and lime, glass & ceramics, pulp & 

paper, non-ferrous metals, and refineries. 

  Considered mitigation  options:  process integration  improvement,  fuel switch,  CCS,  recycling  and  re-use, 

material efficiency and substitution. 

Decarbonisation strategies and policies 

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  Applying  best  available  technologies  in  energy  efficiency,  recycling  and  fuel  switch  may  achieve  59 % 
emission reduction by 2050, with reference to 1990, but does not result in a deeper decarbonisation beyond 
2050. 

  Deep decarbonisation needs innovative low-carbon production technologies, circular economy, material use 

efficiency, CO2-free energy carriers, biomass and CCS.  

  Clean gas may result in high costs, while biomass may be a cheaper solution but dependent on availability. 
CCS has reasonable costs, but its introduction poses a lot of uncertainty. Electrification requires significant 
changes in the production system and may compromise the electricity sector.  

  A reduction of up to 95 % emissions can be achieved by combining several mitigation options, however it 

has to be pointed out that all scenarios imply additional costs and high energy expenditures. 

  A new policy and regulatory framework should support R&D, revise economic incentives and include new 
incentives for sustainable value down to the final consumer, support the transition of construction sector to 
be less GHG-intensive, develop infrastructure for energy carriers, and promote the demand on low-carbon 
basic materials. This should be done while keeping the EU industry competitive. 

  Further research should: 

- 

- 

- 

Assess the role of re-investment cycles, age of the capital stock and impact on transition speeds and costs. 

Explore uncertainties regarding energy price and technology development interactions with other sectors 
where there is a high degree of coupling (clean gas, electricity). 

Explore the supply side of resources (e.g., clean gas, electricity, CO2). 

Sustainable Heating Heavy Industry (Sutherland, 2020) 

Summary and main findings  
This  article  reviews  the  state-of-the-art  available  technologies  for  low-carbon  heating  for  heavy  industry.  Heavy 
industry requires high-temperature heat for which the only feasible alternatives are biofuels, nuclear power, hydrogen, 
or carbon capture and storage. These options have each their own barriers, mostly concerning cost or inadequacy. 
Policy instruments to decarbonise this sector and technology innovation are urgently needed. 

Heating for heavy industry 

  Heavy  industrial  processes  such  as  the  production  of  cement,  steel,  petrochemicals,  glass,  ceramics, 

petroleum refining, and others contribute, together, approximately 21 % of global CO2 emissions. 

  Heavy industry is a key sector that needs rapid decarbonisation, but it has intimate ties to regional economies 
that need to be considered and their processes require flux heat at high temperatures (300°C - 1800°C) 

  This high-grade heat required for heavy industry, as for example that for the production of cement, steel, 

petrochemicals, and glass, accounts for nearly 10 % of global CO2 emissions. 

  There are multiple proposed approaches to reduce greenhouse-gas emissions from this sector. However, 
the proposed pathways are unclear, and existing options are costly, inadequate, or both. It is concluded that 
there are no quick wins when it comes to decarbonising heavy industry. 

  The most inexpensive way to produce high-grade heat is the combustion of fossil fuels, which is why it is  
the main source for industrial heat. As a result, roughly half the CO2 emissions of heavy industry (therefore 
about 11 % of global emissions) come from heat production. 

Proposed low-carbon technologies 

159 

 
 
 
  Nuclear  power,  while  low-carbon  and  cost-competitive,  does  not  provide  heat  at  sufficiently  high 

temperatures. 

  Biofuels can provide sufficiently high temperature heat during combustion, but they have a highly variable 

carbon footprint and are significantly more expensive. 

  Electricity can be used for high-grade heat generation through resistive heating, but its carbon footprint  is 

tied to the electricity source, which today is highly variable. 

  Hydrogen  can  produce  high-grade  heat  by  combustion  and  is  suitable  for  almost  all  heavy  industrial 
applications. Blue hydrogen made by reforming natural gas, may offer the lowest wholesale production costs 
for  fossil  fuel  alternative  high-grade  heat  if  combined  with  CCUS.  Green  hydrogen  based  on  renewable 
energy is a near ideal solution, except for the fact that present technology is prohibitively expensive. 

  The least disruptive option in the short term would be to continue business as usual and introduce a carbon 

capture, utilisation, and storage (CCUS) scheme. 

  The cost associated with CCUS is high, and without policy intervention, will be levied on consumers or the 

producing industry. 

Policies and strategies 

 

Increased  efforts  to  decarbonise  this  sector  through  policy  instruments  and  technology  innovation  are 
urgently needed. 

  Policy instruments should be reflective of the fragmented character, uncertainty, cost, and inadequacy of 

current technology. 

  Policies should remain ‘technology-neutral’, have limited time frames for their implementation, be replaced 

regularly, incentivise private investment and ensure that innovation is rewarded. 

Decarbonising Industrial Thermal Energy Usage (Gardiner 2020)  

Summary and main findings  

This article presents an overview on technologies to reduce emissions of industrial heating, with a focus on combined 
heat  and  power  (CHP)  and  integration  of  renewable  resources  including  biomass,  and  hydrogen.  The  overview 
presents the benefits and potential of these technologies in the North American industrial sector and suggests policies 
that may improve expansion of their use in the USA. 

Industrial heating in the USA 

 

Industrial  heat  makes  up  two-thirds  of  industrial  energy  demand  and  almost  one-fifth  of  total  energy 
consumption, rising the interest in the industrial sector to reduce GHG emissions through energy efficiency 
or reduction goals.  

  CHP and WHP can make manufacturers more competitive by reducing energy costs and cutting emissions. 

 

Industrial heating can run on renewable fuels such as biomass, biogas, or renewable hydrogen. 

  Most of the emissions are concentrated in six energy-intensive sectors: steel, chemicals, cement, pulp and 

paper, aluminum, and oil refining. 

Combined heat and power (CHP) 

  CHP can bring significant advantage for the chemicals and petroleum refining industries, and other critical 

infrastructures by providing resiliency against extreme weather conditions and power outages. 

  CHP could produce 20 % of all USA electricity by 2030, but it requires a significant capital investment. 

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  Depending on the marginal fuel mix of the electric grid, CHP can provide overall energy and CO2 savings 
comparable to solar photovoltaics, wind, and natural gas combined cycle (NGCC), at a lower capital cost. 

  The  chemicals,  petroleum  refining,  food,  paper,  and  primary  metals  industrial  sectors  have  the  greatest 

potential for CHP installation. 

Renewable resources for heating 

  Only 10 % of global heat production is powered with renewable energy. 

  The  Energy  Transmission  Commission  recommends  using  three  renewable  technologies  to  address 

industrial emissions for heat production: biomass, electrification, and hydrogen. 

  Renewable thermal technologies face supply, market, and policy barriers compared to renewable electricity. 

Current barriers  

  CHP  produces  only  9 %  of  US  electricity,  as  it  faces  economic,  financial,  regulatory,  and  informational 

barriers. 

  The United States do not have specific targets, nor a clear policy, for renewable heat at the federal level, 

although some states have adopted renewable heating and cooling plans. 

Decarbonisation strategies and policies 

 

 

Include approaches to reduce emissions from heat production in the industry, considering thermal energy 
process and non-process heating and cooling, as well as building space heating and cooling. 

Implement policies that make it easier for potential users and developers to obtain information about CHP, 
and provide financial incentives or loan and grant programs to support deployment of CHP and WHP. 

  For renewable resources, the best approach is to advance a broad range of renewable thermal technologies 

and let the markets determine the best outcomes. 

  Support,  by  the  national  government,  the  development  of  new  technologies,  innovation  and  efficiency 

improvements in existing technologies, and research and deployment 

  Follow  the  European  model  on  setting  ambitious  targets  for  renewable  heat  deployment  and  providing 

financial support for projects. 

Decarbonising industry in Sweden an assessment of possibilities and policy needs (Åhman et al. 
2012)   

Summary and main findings  

This report analyses the technical opportunities for a complete decarbonisation by 2050 of the basic material industry 
in Sweden (i.e. production of steel, cement, basic chemicals, aluminium, and pulp). Policy implications for the industry 
sector are discussed. It is concluded that the complete phase-out of greenhouse gas emission in the industrial sector 
by 2050 is very challenging and relying on current production systems and applying “end-of-pipe” solutions will be 
insufficient to decarbonise industry. Instead of decarbonising industry while maintaining production volumes a major 
effort to develop, introducing and investing in novel technologies and process designs will be needed. A set of broad 
technology platforms and infrastructure needs are identified (i.e. electro-thermal processes, black liquor gasification, 
bio-based chemicals, magnesium based cement, and application of industrial CCS). 

Methodological Approach 

Review  of  the  results  of  climate-economic  modelling  studies  and  technology  assessment  of  the  long-term 
opportunities not included in climate economic models. 

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Barriers 

  There is a need to develop the capacity to be “zero emission technology ready”. Technologies should be 
developed,  demonstrated  and  commercially  available  between  2040  and  2050,  and  even  though,  it  may 
take many years before they are widespread and common practice. 

  Decarbonisation will have to rely on energy carriers availability from carbon neutral sources (i.e. renewable 
or nuclear energy) and electricity is expected to be the backbone of future sustainable energy systems. In 
turn, the electrification of some industrial processes is dependent on a major supply of CO2-free electricity.  

  Sweden and the Nordic system already have high shares of renewable electricity (i.e. wind) and may support 

industry to deploy a mix of electricity and “stored electricity” as hydrogen or other fuels. 

  There are no clear strategies for the use of sustainable biomass, despite the high availability in Sweden. 

 

Industry will become an integral part of future energy system, serving as an important source of low-grade 
heat for district heating system and even a main actor in the development of hydrogen infrastructures. 

  For CCS to play a role, its legal situation, development and reliability need to be proven and transport of 
CO2  needs  to  be  solved.  The  legal  responsibility  and  scientific  knowledge  of  storage  sites  need 
development. 

Policies and strategies 

  There is a need to complete the current main climate policy approach of pricing the emissions with a stronger 
policy for technical change, including funding for R&D and market development support. This approach has 
worked well in the renewable energy sector. 

  A policy strategy towards decarbonisation needs to clarify the long term reduction target of the EU ETS and 

how to deal with the risk of carbon leakage. 

  There is a necessity to widen the scope of climate policy to include trade policy in the longer-term. 

  A technology strategy for industry’s decarbonisation is needed, identifying combinations of new technical 

systems, possible multi-purposes technology areas and infrastructure needs. 

  More comprehensive and in-depth roadmaps for specific technologies in different subsectors are necessary. 

  Energy efficient processes and technologies need continued development. 

  The wide scale deployment of new basic industry process technologies is likely to require high carbon prices 

(through taxes or trading schemes). 

  Policy strategies  must  consider  other options such  as  regulatory  approaches  and  permitting procedures, 

investment grants and subsidies, border adjustment taxes, and sectoral agreements. 

 The CO2 reduction potential for the European industry via direct electrification of heat supply 
(power-to-heat), Environmental Research letters 15. (Madeddu et al. 2020)   

Summary and main findings  

Madeddu et al. analyze the potential for decarbonisation of the European industry through electrification of processes. 
The focus lies on the generation of heat through existing and potential technologies, which are discussed in the paper. 
Policy recommendations are given in chapter 6 of the paper. These focus on possible instruments in the scope of the 
European Green Deal. 

Strategy to realise decarbonisation 

Industry stakeholders and the policy makers should jointly work out a transformation strategy that direct investments 
to technologies with lower emissions. 

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In  sectors  with  only  small  amounts  of  emissions  (e.g.  paper,  wood,  textiles)  the  retrofit  of  technologies  (e.g. 
substituting boilers with heat pumps) can introduce a gradual transition. Businesses can get used to new technologies 
maintain a stable production. 

High barriers exist in the steel, chemicals and cement sectors. 

As the industrial electrification will increase the electricity demand significantly the industrial electrification of heating 
and cooling needs to be accompanied by sufficient renewable extension. 

The industry will need to implement demand flexibility measures, e.g. load shifting and the implementation to hedge 
against price spikes. 

Electric processes and technologies are often more cost intensive than their fossil counterparts. This is due to different 
taxes that are raised on the energy carriers. 

Policy for industrial electrification and decarbonisation 

Taxation and levies on electricity prices need to be reduced to a reasonable level. This is the prerequisite for the cost 
competitiveness of the energy carrier electricity. The goal should not be to support electricity prices but to create a 
level playing field between energy carriers. 

A  clear  carbon  price  needs  to  be  introduced  that  reduces  investment  uncertainties  for  industrial  businesses.  The 
authors suggest the introduction of a EU ETS minimum price in combination with instruments against carbon leakage. 

Third complementing policies such as technology support schemes and market introduction programs in areas where 
the carbon price doesn`t have an effect. 

Based on these policy changes industrial businesses can orient themselves towards emissions reduction. 

 Industrial Transformation 2050: Towards an Industrial strategy for a climate neutral Europe, 
Institute for European Studies: Brussels. (Wyns et al. 2019)  

Summary and main findings  

This  study  is  the  result  of  the  joint  work  of  scientific  organizations  and  industrial  businesses.  The  goal  is  to  find 
pathways and policy options that reach the goal of carbon-neutrality in 2050. While reaching this goal the European 
Industry  should  stay  on  a  competitive  level.  This  report  seeks  to  enhance  understanding  of  the  implications  and 
opportunities of moving to industrial climate neutrality and shed light on the near term decisions to be made. 

Main challenges towards a climate-neutral industry 

This report considers six major challenges: 

 

innovation gaps from basic R&D towards the deployment of new technologies 

  an insufficient circular and materials efficient economy 

  barriers to market entry for low-CO2 solutions: 

- 

- 

- 

- 

 

low CO2 price 

existing standards that exclude low carbon products 

lack of information on LCA 

unused opportunities in procurement 

lack of streamlining between the energy and industrial transition to climate neutrality and infrastructure needs 
for the transition 

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  possible bottlenecks in scaling up investments and the risk of high-carbon lock-ins 

- 

regulatory framework needs to ensure that investments can be made with an acceptable amount of risk. 

  The  complexity  of  integrating  different  types  of  policy  instruments,  policy  areas  and  competences  into  a 

cohesive (industrial) strategy 

Strategy to realise decarbonisation connected to heating and cooling 

The study suggests different policy approaches. However, not all deal with heating and cooling and the connected 

electrification. The ones that deal with this topic are: 

Innovation framework for a climate neutral industry 

  Enhance innovation governance: Coordinate national industrial R&D programmes under Horizon Europe. 
Focus on supply side (process technologies) and demand side (materials efficiency, energy storage) 

  Accelerate technology market readiness: Introduce one-stop-shops that help businesses to get access to 
funding  quickly.  Support  should  be  introduced  for  systems  that  do  not  mitigate  emissions  on  their  own. 
Elimination of regulatory barriers that hinder upscaling of low carbon technologies. Consider low regulatory 
zones for technology demonstration and testing. This could include timely well-defined exemptions under 
the ETS. 

Create competitive lead markets for low-CO2 solutions 

The EC should introduce 

6. 

Instruments that make low CO2-solutions competitive through pricing support, this entails: 

a.  Subsidies for low-CO2 production technologies through premiums, tax reductions or CCFD 

b.  Extensions of EU ETS scope with low-CO2 processes 

c. 

Inclusion of consumption in the EU ETS to secure carbon price pass through 

2.  Standards that facilitate access to the market (among others) 

a. 

Introduce flexibility in the standardisation process 

b.  Redesign existing standards that hamper market access for low-CO2 products  

c.  Promotion of voluntary standards, labelling and certification 

3.  Use public procurement to gain market entry (among others) 

a.  Linking public procurement to low CO2 standardisation 

b. 

Introducing EU wide procurement task force 

c.  Sustainability quota in EU funding schemes 

4.  Global trade environment (among others) 

a.  Greenhouse gas standards for materials used in construction or assembly of domestically and 

imported materials 

b. 

Introduce carbon standards on imported final goods 

c.  Carbon border adjustment 

5.  Scaling up of investments and avoiding carbon lock in 

a.  Support investment in low-CO2 technologies 

b.  Test for carbon intensity of new investments to avoid high carbon lock-in effects. 

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 Pathways to Net-Zero Emissions from EU Heavy Industry, University of Cambridge: Cambridge. 
(Institute for European Studies, Wuppertal Institut 2019)  

Summary and main findings  

The  study  explores  multiple  ways  to  achieve  net-zero  emissions  from  EU  steel,  plastics,  ammonia  and  cement 
production while keeping that production in the EU. Any strategy to reduce emissions needs to address the main 
sources of CO2. For the sectors in scope here, three issues are particularly important: high-temperature heat, process 
emissions and end-of-life emissions. 

The basis for decarbonisation is that companies remain profitable and competitive. Policy needs to ensure that there 
is a business case for low-CO2 production routes. This is the base line. On this basis, new technologies need to be 
found and made economically viable. 

Barriers and measures for the decarbonisation of these sectors are: 

Technological options are not economically feasible or not even found yet. Innovation must be speed up and the 
application and economic feasibility of new technologies must be reached. Further development, deployment and 
associated cost reductions are necessary to make a decarbonisation in these areas viable. 

Industrial businesses face high costs when it comes to the implementation of new processes. Therefore, a support 
policy is necessary to make their quick adoption feasible. Businesses will only engage in low-carbon investments 
when the long-term profitability is secured. This makes strong political support and a regulatory framework necessary 
that ensures this long-term prospects. 

The  necessary  political  framework  needs  to  be  established  as  soon  as  possible.  As  life  cycles  are  long  and 
investments are long term decisions, the decision towards a conventional technology may lead to a costly carbon 
lock-in. These processes then will be in place for the next decades. 

Large amount of RES-E is needed for direct and indirect use in industrial processes. Also, the electricity costs need 
to low to guarantee the competitiveness of production of goods. Infrastructure related to RES-E will be necessary to 
enable a continuous and secure electricity supply. That entails grid expansion and installation of storage capacities. 

Policy 

The  first  step  to  transition  will  require  major  policy  innovation,  but  also  changes  in  the  strategy  of  businesses 
themselves. 

The EU ETS is one instrument that can have an effect on the reduction of CO2 emissions. However, actors doubt that 
it will spark innovation and does not correct market failures that hinder new technological options. Also, this instrument 
does not ensure the protection of the European industry in the international competition. 

A policy agenda that enables a low-carbon industry consists of different instruments: 

  Launch of major mechanisms for innovation. This entails early support of research and piloting. On the other 
hand, support until fully commercial viability. Parts of this are among others an innovation agenda and also 
public finance for demonstration. 

  Create lead-markets for low carbon products. A business case is needed for businesses to make a decision 
towards low-carbon processes and products. The EU ETS is one instrument that should be complemented 
by carbon contracts for differences and carbon boarder adjustments. 

-  Remove existing regulatory hurdles, e.g., product standards that hinder low-carbon solutions 

- 

- 

- 

Subsidies  for  low  carbon  solutions:  similar  to  the  support  in  the  electricity  sector,  an  instrument  should 
support low-carbon solutions. 

Product quotas and standards: Defining a minimum of necessary low-carbon ingredients in products creates 
a market for industrial products. 

Public procurement can directly create demand for low carbon products. 

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- 

Border adjustment: Raising taxes on products form emission intensive regions. To allay fears of revenue-
raising protectionism, the taxes could be refunded to the countries of origin. 

  Financing  mechanisms  should  hedge  the  risk  for  businesses.  As  many  technologies  are  not  completely 
economically viable an investment needs to be supported financially. Different options can be thought of: 
public financing, risk-sharing models, tax reduction, concessional finance or early direct public investments. 
Investment inertia caused by permitting rules could be addressed through “low regulatory zones”. 

  The  risk  of  stranded  assets  needs  to  be  addressed.  Redundancy  will  most  likely  be  inevitable  and  CO2 
intensive technologies will be written off before the end of their lifetime. This will hit companies balances and 
influences their ability to invest. 

High temperature processes 

In many industrial processes heat is essential. Due to product quality standards as of yet only certain technologies 
can applied. To reduce emissions from fossil fuels in high temperature processes new technologies need to be found 
and made economically viable. Today heating technologies can be applied in lower temperature ranges. Therefore, 
emissions from high temperature processes are rather hard to abate. 

Hight temperature processes that need to be electrified are: steam crackers, cement kilns, iron ore sintering, steel 
reheating  furnaces,  and  high  temperature  steam  production.  Potential  technologies  are  plasma,  induction  and 
microwave heating 

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7.2. Iron and steel industry 

 Decarbonisation of the Steel Industry: the Role of State Economic Policy (Glushchenko 2020)  

Summary and main findings  

This study analyses the potential areas of decarbonisation of steel production in order to propose government policy 
measures  for  reducing CO2  emissions.  The  key  measures  are  carbon  capture  and  storage,  carbon  capture  and 
utilisation and prevention of emissions. Decarbonisation measures including melting steel in electric arc furnaces, 
replacing  coke  with  charcoal,  using  hydrogen  in  a  blast  furnace  and  for  direct  reduction  of  iron  and  employing 
electrolysis  of  iron  are  analysed.  Instruments  of  economic policy  for  accelerating  the decarbonisation  of  the steel 
industry are identified. It is concluded that decarbonisation without state participation is impossible, due to the lack of 
competitive advantages for the companies.   

Decarbonisation strategy  

Most  scientific  publications  study  decarbonisation  of  the  electric  power  industry,  but  there  are  also  studies  of 
decarbonisation  of  industry  (especially  the  steel  industry).  The  main  focus  is  on  the  effectiveness  of  various 
instruments of economic policy. Most studies focus on restrictive measures (e.g., taxes, emission limits).  

Current policies in EU and China  

  EU  launched  the  Emissions  Trading  System  (ETS),  setting  a  limit  on  greenhouse  gas  emissions  for 

enterprises.  

  China closed obsolete facilities and reduced levels of activity proportionally to the industry emissions.  

Barriers for decarbonisation of steel industry  

  CO2 emissions occur at different process stages, each of them requiring different decarbonisation methods.  

  High  process  temperatures  (over  500  °C)  are  required,  which  reduces  the  number  of  alternative 

technologies.  

  The process stages are highly integrated with each other, requiring changes in the full production chain.  

  High capital investments are needed to implement new decarbonisation technologies.  

  Using low-carbon technologies leads to an increase in production costs and a reduction in competitivity.  

Decarbonisation strategies for the steel industry  

 

carbon capture and storage (CCS) or carbon capture and use (CCU)  

  melting reduction using one production unit and thus concentrating CO2 emissions  

  using electric arc furnaces can reduce CO2 emissions to zero if renewable electricity is used  

 

replacing coke by charcoal, provided biomass availability  

  use of hydrogen for direct reduction of iron ore, where natural gas is often used as reducing agent  

 

Iron electrolysis, requiring high temperatures (1600 °C). This is still at the stage of laboratory research.  

The most promising methods to prevent CO2 emissions are electric arc and hydrogen-based direct reduction.  

Decarbonisation policies  

An active state policy to accelerate the decarbonisation of the steel industry should include the following measures:   

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  Develop long-term inter-sectorial plans for decarbonisation and required infrastructure.  

  Reduce import tariffs on equipment needed for decarbonisation to reduce capital expenses and increase 

import restrictions for highly CO2 -intensive products.  

  Limit exports of raw materials for low-carbon technologies, to cover domestic demand and avoid price surge.  

 

Increase  carbon  dioxide  emission  charges  and  develop  product  standards  that  allow  only  low  CO2 
emissions.  

  Simplify patent procedures for decarbonisation technologies, and state-fund decarbonisation projects (e.g., 

grants, loans, interest rate compensation).  

  Build qualified staff capacity and find jobs for employees dismissed during the “green transition”.  

 Technology innovation system analysis of decarbonisation in the EU steel industry 
(Skoczkowski et al. 2020)  

Summary and main findings  

This paper  analyses the development of technology in the EU I&S industry and identifies potential avenues of its 
decarbonisation. They argue that it is not possible to decarbonise this sector without new breakthrough technologies. 
Therefore, research and development “play a key role”. 

The focus lies on the barriers and drivers to find innovative new technologies that enable the sectors decarbonisation. 
The authors name challenges and drivers for innovations in the EU steel industry.   

Decarbonisation strategy & instruments 

Research and development are necessary to find green-steel technologies. This needs to be financed as it is very 
cost intensive. Without government support businesses cannot produce steel in a competitive manner. 

As there is little demand for green steel businesses that produce green steel would face losses as the production 
costs are  higher.  Therefore, demand  for  green  steel  needs to  be created by  setting  up a green  steel  market  and 
introducing a quota or material requirements for large consumers. 

When  instruments  address  the  pollution  limits  of  businesses  they  need  to  be  set  at  a  realistic  height.  Otherwise, 
businesses could not reach these limits. 

Guarantee  suitable  energy  prices  and  an  emission  free  electricity  is  necessary  to  reduce  emissions  and  also 
guarantee the competitiveness of the European steel industry. 

As green-steel prices are above the ones for conventional steel unfair import of non-green steel products needs to 
be hindered. 

Barriers 

Businesses need certainty about political support of the decarbonisation path. If the policy framework bears a risk of 
change, incentives are not sufficient and support is lacking, businesses will not engage in R&D and the change of 
their production processes. 

The  same  can  be  said  for  the  uncertainty  of  the  EUs  climate  policy.  Businesses  are  insecure  about  the  future 
development of climate policies, e.g. if they will continue ambitiously or only moderately. The level of ambitions also 
has an effect on the potential decarbonisation. 

Businesses depend on their sales. Currently there is only little demand for green steel. A change in technology would 
lead to losses as production could only be sold partly. 

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Industrial infrastructure shows high capital costs and long lifetimes. New investments in green technologies therefore 
are only possible when the existing infrastructure has reached the end of its life. 

Research  and  development  are  connected  to  high  costs  and  not  all  businesses  may  have  access  to  capital  for 
investment in green technologies. 

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7.3. Chemical industry 

Low carbon energy and feedstock for the European chemical industry, study commissioned by 
the European Chemical Industry Council (DECHEMA 2017b)  

Scope and methodology of the study  

“The objective of this study is to explore options towards a carbon-neutral European chemical industry. This entails 
the  description  of  pathways  for  a  transition  of  production  processes  towards  low-carbon  production,  by  further 
exploiting  energy  and  resource  efficiency  measures,  increasingly  by  using  alternative  carbon  feedstocks  i.e. 
renewable raw materials (biomass) and CO2, which can replace fossil feedstocks and leverage a lower overall carbon 
footprint,  and  by  exploring  possibilities  to  use  electricity-based  processes  that  can  benefit  from  a  progressive 
decarbonisation of the power sector.” (DECHEMA 2017a) 

The potential impacts of new technical options to produce ammonia and urea, methanol, ethylene, propylene, chlorine 
and the aromatics benzene, toluene and xylene are described  based on four deployment scenarios with different 
ambition levels: 

  business-as-usual  (BAU),  assuming  no  implementation  of  new  technology  options  and  no  further 

advancement of efficiency measures, 

 

intermediate (Interm), describing a moderate level of ambition and slow but continuous deployment of low-
carbon technologies, 

  ambitious (Amb), depicting a high level of ambition and strong support of all stakeholders to overcome any 

constraints, 

  maximum (Max), describing the theoretical potential, i.e. upper limit of possible CO2 reductions. 

Summary and main findings 

Implementation of the technologies investigated in this study allow for a reduction of CO2 emissions up to 210 Mt 
annually (max) in 2050. In the considered range of ambitions, between 70 Mt (Interm) and 101 Mt (Amb) CO2 can be 
mitigated, corresponding to 59 % to 84 % of the anticipated emissions in 2050. 

20  to  30  Mt  CO2  of  these  emission  savings  can  be  achieved  by  further  efficiency  measures  and  plant  retrofits, 
transition  to  a  power-based  heat  and  steam  generation  and  recuperation  of  waste  heat.  The  main  share  of  the 
additional savings is  enabled by  chemical  production  of  ammonia  using hydrogen  from low-carbon  electricity  and 
production of methanol, olefins and BTX from hydrogen and carbon dioxide. These processes benefit from avoided 
fossil  emissions  and  a considerable amount  of carbon  from  CO2  built  into  the products,  thereby  enabling  a  CO2 
recycling and avoidance of fossil feedstocks. 

Barriers for the decarbonisation of the chemical industry 

“A main hurdle to overcome is the relatively high production cost of the target building blocks in case of the low-
carbon  technologies.  While  power-based  steam  generation  and  heat  recuperation  by  steam  recompression  are 
technologies that already seem competitive in terms of costs, the production costs for ammonia, methanol, olefins 
and BTX are currently 2 - 5 times higher than the fossil alternatives. This is related to high feedstock cost (in the case 
of biomass) and high cost of electricity (in the case of hydrogen based processes).” (DECHEMA 2017a) 

Policy and measures for the decarbonisation of the chemical industry 

Based on the main findings, the following key actions are recommended: 

  Realisation of a large and ambitious R&I program to further investigate the potential of new technologies, 
including  low-carbon  hydrogen  production,  CO2  utilisation,  lignocellulosic  biomass  use  for  chemical  and 
biochemical synthesis and advanced concepts for waste heat recovery; 

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  Public-Private-Partnerships  (PPPs)  to  focus  RD&I  efforts  and  to  enable  risk  sharing  for  investments  for 
demonstration of innovative technologies; fast realisation of demonstration plants at scales beyond 5kt/a 
with lighthouse character are a prerequisite; 

  Enhanced  cross-sectorial  collaboration  and  exploration  of  industrial  symbiosis  opportunities  creating 

synergies and improving energy and resource efficiency beyond sectorial boundaries; 

  A dialogue with policy makers to point out the barriers and constraints and to facilitate market-uptake. 

  Generation of a central European database of CO2 sources and infrastructures that would provide potential 
for industrial symbiosis, including e.g., emitters below the threshold for reporting to the European Pollutant 
Release and Transfer Register; likewise, a database on the available sustainable biomass and a central 
database for lifecycle data. 

High temperature processes 

Power-to-Heat  technologies  (electrical  heat  pumps)  should  be  further  developed  to  extend  operating  window  to 
temperatures > 250 °C. 

DECHEMA and FutureCamp (2019), Roadmap Chemistry 2050 – On the way to a greenhouse gas 
neutral chemical industry in Germany (German title “Roadmap Chemie 2050 – Auf dem Weg zu 
einer treibhausgasneutralen chemischen Industrie in Deutschland”) (DECHEMA; FutureCamp 
Climate 2019)  

Scope and methodology of the study  

The  study  commissioned  by  the  German  Association  of  the  Chemical  Industry  describes  a  possible  path  for  the 
transformation of the German Chemical Industry towards industry towards greenhouse gas neutrality. The production 
processes and raw materials of the  Chemical Industry, which are particularly energy- and emission-intensive, are 
examined in detail. In the study, both the greenhouse gas emissions, that occur in the production process itself, as 
well  as  the  emissions  resulting  from  the  purchase  of  electricity  and  heat  (steam)  are  taken  into  account.  As  an 
important novelty, the roadmap also includes the carbon content of chemical products as a source of CO2 for the first 
time. In addition to the emissions, the costs for reduction of greenhouse gas emissions are also considered. 

The roadmap describes the path to greenhouse gas neutrality from 2020 to 2050 in three paths with different levels 
of ambition: 

  Reference path (path 1): The companies continue to produce exclusively with today's technologies. 

  Technology pathway (pathway 2): It is shown how far the chemistry can achieve climate protection, if it also 

invests in new production technologies for basic chemicals such as ammonia and methanol. 

  Greenhouse gas neutrality pathway (pathway 3): All conventional basic chemical processes are completely 
replaced by alternative processes to achieve greenhouse gas neutrality. It is determined which technologies 
and investments are required and how much electricity is needed to achieve zero emissions in 2050. 

Summary and main findings 

Reference path (path 1): By 2050, reduction of greenhouse gases by 27 % compared to 2020 through coal 
phase-out and increased efficiency. 

Electricity demand in the chemical industry will decrease by around 10 % by 2050 compared to 2020. 

Technology path (path 2): By 2050, reduction of greenhouse gases by 61 % compared to 2020 through higher 
investments for new processes and a significant increase of electricity demand in 2050. 

The  electricity  demand  in  the  German  Chemical  Industry  will  increase  to  around  220TWh/a  from  2040.  This 
corresponds roughly to the current electricity consumption of the entire German industry. 

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Greenhouse  gas  neutrality  path  (path  3):  Nearly  zero  greenhouse  gas  emissions  through  maximum 
investments for alternative processes and a dramatic increase of electricity demand in 2050. 

New  methods  of  recycling,  CO2-free  hydrogen  production  and  the  use  of  CO2  as  a  raw  material  make  climate 
neutrality in the chemical industry possible. The new electricity-based processes will increase the electricity demand 
of  the  chemical  industry  to  685 TWh/a  from  the  mid-2030s,  which  is  more  than  the  total  electricity  production  of 
Germany in 2018. 

Barriers for the decarbonisation of the Chemical Industry 

High additional costs for alternative processes compared to older and already depreciated assets;  given the prices 
for basic chemicals on the world market, it is currently hardly possible to pass them on to the customer. 

Policy and measures for the decarbonisation of the Chemical Industry 

An  important  prerequisite  for  almost  all  new  technologies  is  the  availability  of  renewable  electricity  in  very  large 
quantities from today's perspective and at low costs of 4 cents per kilowatt hour. 

The current relief and carbon leakage rules alone will not be sufficient to ensure internationally competitive electricity 
prices for the chemical industry and further measures will be necessary to curb the cost of electricity for industry. 

Government funding and support for research and development of new electricity-based processes. 

There is a need for rules to protect European production sites if global competitor regions do not make comparable 
climate policy efforts. 

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(43), pp. 340–347. DOI: 10.32983/2222-0712-2020-1-340-347. 

ICF Consulting; Fraunhofer ISI (2019): Industrial Innovation: Pathways to deep decarbonisation of Industry, Part 

2: Scenario analysis and pathways to deep decarbonisation. In: ICF Consulting Services Limited and 

Fraunhofer Institute for Systems and Innovation Research (ISI). Online available at 

https://ec.europa.eu/clima/sites/clima/files/strategies/2050/docs/industrial_innovation_part_2_en.pdf, last 

accessed on 11 Sep 2020. 

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Transformation 2050, Towards an Industrial strategy for a Climate Neutral Europe. Institute for European 

Studies. Brussels, 2019, last accessed on 8 Oct 2021. 

Madeddu, S.; Ueckerdt, F.; Pehl, M.; Peterseim, J.; Lord, M.; Ajith Kumar, K.; Krüger, C.; Luderer, G. (2020): The 

CO2 reduction potential for the European industry via direct electrification of heat supply (power-to-heat). In: 

Environmental Research Letters 15, last accessed on 28 Sep 2021. 

Rehfeldt, M.; Worrell, E.; Eichhammer, W.; Fleiter, T. (2020): A review of the emission reduction potential of fuel 

switch towards biomass and electricity in European basic materials industry until 2030. In: Renewable and 

Sustainable Energy Reviews 120, p. 109672. DOI: 10.1016/j.rser.2019.109672. 

Skoczkowski, T.; Verdolini, E.; Bielecki, S.; Kochański, M.; Korczak, K.; Węglarz, A. (2020): Technology 

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Policy Support for Heating and 
Cooling Decarbonisation 

Meta study 

Part 3: Technologies and infrastructures 

176 

 
 
 
 
 
 
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9. Introduction to Part III 

This  section  presents  part  III  of  the  meta  study,  reviewing  recent  works  addressing  energy 
carriers and infrastructure for the decarbonisation of heating and cooling. The meta-study was 
conducted between January 2020 and September 2021. Error! Reference source not found. 
1 provides an overview of the studies contained in this part of the meta-study. 

Chapter 2. provides a synthesis of the analysis of the studies. Chapter 3 includes summaries 
of the individual studies. 

Table 3  

Overview of studies 

RES technologies 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

12 

Support to key activities on the European Technology Platform on Renewable 
Heating and Cooling  (Mazzucchelli et al. 2019) 

Renewable power-to-heat: Innovation landscape brief (IRENA 2019) 

Heat Pumps – Integrating technologies to decarbonise heating and 
cooling(European Copper Institute 2018) 

METIS Studies - Study S6: Decentralised heat pumps: system benefits under different 
technical configurations (Artelys 2018) 

Power-to-heat for renewable energy integration: Technologies, modeling approaches, and 
flexibility potentials (Bloess et al. 2017) 

Heat pumps in existing residential buildings – results from the 
research project “WPsmart im Bestand” (Fraunhofer Institut für Solare 
Energiesysteme 2020) 

The decarbonisation of the EU heating sector through electrification: A parametric analysis 
(Thomaßen et al. 2021) 

Heating without the hot air: Principles for smart heat electrification (Rosenow and Lowes 
2020) 

Advancing District Heating & Cooling Solutions and Uptake in European Cities - Overview 
of Support Activities and Projects of the European Commission on District Heating & 
Cooling (Celsius 2021) 

The Future Role of Thermal Energy Storage in the UK Energy System (UKERC 2014) 

A new perspective on global renewable energy systems: why trade in energy carriers 
matters (Schmidt et al. 2019) 

Mapping and analyses of the current and future (2020 - 2030) heating/cooling fuel 
deployment (fossil/renewables)  

Work package 1: Final energy consumption for the year 2012 (Fraunhofer ISI et al. 
2016b) (Fraunhofer ISI et al. 2016b) 

177 

 
Work package 2: Assessment of the technologies for the year 2012 (Fraunhofer ISI et al. 
2016a) (Fraunhofer ISI et al. 2016a) 

13  Vision for deep geothermal 

14 

EU biomass use in a net-zero economy (Material Economics 2021) 

15  The role of biomass gasification and methanisation in the decarbonisation 

strategies (Mantulet et al. 2020) 

16 

ReuseHeat – WP 2: Market and stakeholder analysis (Reuseheat 2019) 

New fuels for heating 

17 

18 

19 

The National Hydrogen Strategy [Germany] (BMWi 2020) 

Hydrogen: a renewable energy perspective (International Renewable Energy Agency 
2019)  

Spatially Resolved Optimisation for Studying the Role of Hydrogen for Heat 
Decarbonisation Pathways (Jalil-Vega and Hawkes 2018) 

20  Potential for hydrogen and Power-to-Liquid in a low-carbon EU energy 

system using cost optimization (Blanco et al. 2018) 

21 

22 

23 

A review of four case studies assessing the potential for hydrogen penetration of the 
future energy system (Chapman et al. 2019) 

Trends in design of distributed energy systems using hydrogen as energy vector: A 
systematic literature review (Fonseca et al. 2019) 

Handbook of Climate Change Mitigation and Adaptation, Second Edition. Ch. Power-to-gas 
(Chen et al. 2017)  

Sector integration and infrastructure 

24 

Sector Coupling in Europe: Powering Decarbonisation(Bloomberg Finance L.P. 2020) 

25  Sector coupling: how can it be enhanced in the EU to foster grid stability and 

decarbonise?(Trinomics 2018a) 

26 

27 

Decarbonising the EU heating sector: Integration of the power and heating sector 
(Kavvadias et al. 2019) 

Influence of heat pumps on renewable electricity integration: Germany in a European 
Context (Bernath et al. 2019) 

Gas infrastructure 

28 

29 

The role of trans-European gas infrastructure in the light of the 2050 decarbonisation 
targets (Trinomics 2018b) 

Impact of the use of the biomethane and hydrogen potential on trans-European 
infrastructure (European Commission 2019) 

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EUROPEAN COMMISSION 

30 

31 

The future of gas in Europe: Review of recent studies on the future of gas (CEPS 2019) 

The optimal role for gas in a net zero emissions energy system (Navigant 2019b) 

32  Gas Decarbonisation Pathways 2020–2050 (Gas for Climate and Guidehouse 2020) 

33  Decarbonisation of heat in Europe - Implications for natural gas demand (Honoré 2018) 

34 

Demystifying natural gas distribution grid decommissioning: An open-source approach to 
local deep decarbonization of urban neighborhoods (Zwickl-Bernhard and Auer 2022) 

179 

 
 
 
 
10.  Synthesis of findings 

This part of the meta-study covers studies addressing key technologies for renewable heating 
as well as the corresponding infrastructures.  

10.1. Heat pumps 

Heat pumps can provide efficient heating and cooling and can improve energy efficiency of 
both the residential sector and district H&C, where multiple heat and cold sources can be linked 
(European  Copper  Institute  2018).  Moreover,  waste  heat  (including  low  temperatures)  or 
underground  sources  can  enhance  the  application  of  heat  pumps    (Bernath  et  al.,  2019). 
However,  the  extension  of  their  use  to  some  high-temperature  industrial  processes  may 
require further development.  

Recent studies show that heat pumps can be used and operated efficiently in existing buildings 
even  if  they  are  not  fully  refurbished  to  an  ambitious  level  (Fraunhofer  Institut  für  Solare 
Energiesysteme  2020):  the  monitoring  study  shows  that  air-source  heat  pumps  achieved  a 
seasonal performance factor of 2.5 – 3.8 (average 3.1) and ground source heat pumps had a 
seasonal performance factor of 3.3 – 4.7 with an average of 4.1. The key factor for applying 
heat  pumps  in  existing  buildings  is  the  required  heating  circuit  temperature  (depends  on 
specific  heat  demand  and  installed  heat  transmission  system).  The  results  show  that  deep 
renovation is  not  necessarily  needed  for  an  efficient  and emission  saving  operation  of  heat 
pumps  in  existing  buildings.  Temperatures  in  the  heat  transmission  systems  can  often  be 
reduced due to over-dimensioning in the past. For efficient operation, good planning covering 
the  heat  source,  the  system  integration  of  the  heat  pump  and  the  whole  heat  transmission 
system in the building especially in old buildings is essential. 

Together  with  thermal  storage,  heat  pumps  can  play  a  crucial  role  in  the  flexibility  of  the 
electricity  system  through  smart  operation  (Fraunhofer  Institut  für  Solare  Energiesysteme 
2020;  Artelys  2018; Thomaßen  et  al.  2021).  A field test  with 450  heat  pumps finds that the 
most suited shifting intervals are 15 – 50 minutes and the losses are below 17 % as back-up 
heaters are not used. Smart operation and demand shifting measures can help to reduce peak 
demand and increase the heat pump capacity that can be deployed without further changes to 
the electricity system.   

The impact of a large-scale deployment of heat pumps on the electricity system is discussed 
in several contributions. A large-scale deployment is favoured in countries with mild climate, 
large shares of low-carbon heat as well as a high level of installed firm capacity. According to 
the  modelling  work  by  (Thomaßen  et  al.  2021),  additional  heat  pump  capacity  of  around 
1.1 – 1.6  TWth  can  be  deployed  based  on  the  existing  firm  power  capacity,  which  would 
correspond to a heat pump share of 29 – 45 % in space heating. 

A key barrier for the deployment of heat pumps is the fact that heat pumps are more expensive 
than other heating and cooling technologies, due to the lack of carbon pricing on fossil fuel use 
and comparatively lower investment costs for combustion-based technologies (UKERC, 2014). 
However, it is indicated that the higher the achieved levels of decarbonisation and renewable 
electricity,  the  more  competitive  heat  pumps  may  become  in  heating  grids  (Bernath  et  al., 
2019).  Moreover,  incentives  for  deployment  of  heat  pumps  and  a  change  in taxation  levels 
may reduce the costs of heat pumps and spread their use for simultaneous heating and cooling 
(IRENA 2019). 

10.2. District heating 

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EUROPEAN COMMISSION 

Several studies highlight the important role of district heating in the transition of the heating 
and cooling sector and for sector integration (Celsius 2021; Mazzucchelli et al. 2019; UKERC 
2016; Fraunhofer ISI et al. 2016a; ETIP-DG 2018; Reuseheat 2019).  

While  several  successful  examples  for  positive  energy  districts  based  on  efficient  district 
heating  and  cooling  systems  have  been  implemented,  key  priorities  for  research  and 
development to support large-scale deployment remain. This includes novel approaches for 
low-temperature  district  heating,  the  integration  of  renewable  energies,  and  waste  heat  in 
district heating and cooling, scaling up the use of large-scale heat pumps for district heating 
and  cooling,  the  development  and  deployment  of  digital  technologies  as  well  as  the 
introduction of local planning. 

Heat  storage  may  allow  for  bridging  the  temporal  gap  between  the  existence  of  sufficient 
generation load and the moment when consumption loads needs to operate (the moment of 
heat demand), thus facilitating the integration of renewables (UKERC, 2014). 

10.3. New fuels and gases for heating 

In today’s energy system, natural gas is the most important fuel for heating. Given the presence 
of extensive natural gas infrastructure and a large number of buildings with gas-based heating 
systems, the future  use of these  assets  combined  with  the  use  of renewable or  low-carbon 
gases is a fiercely discussed and highly controversial topic in the literature.  

The most important types of ‘clean’ gases are hydrogen and non-fossil methane, where the 
former can be low-carbon hydrogen produced from Steam Methane Reforming combined with 
CCS or renewable hydrogen produced through electrolysis of water using renewable electricity 
and the latter is mostly produced from biogas (through upgrading) or through the methanation 
of  hydrogen  (power-to-methane).  In  many  cases,  biogas  can  also  be  used  locally  in  CHP 
installations or in boilers to satisfy local heat demand (without the need for transport via public 
gas grids), where upgrading to biomethane is not necessary. 

There is a wide range of estimates on the production potential for biogas and its availability for 
the  heating  sector.  Biogas  and  biomethane  are  biobased  fuels  which  are  in  principle  well-
suitable  for  heating  purposes.  Biogas  is  usually  derived  from  anaerobic  digestion  of  wet 
biomass, which results in a mixture of methane and CO2. This biogas can be used locally for 
heating purposes, but if it is to be transported over larger distances to end-users further away 
from the production source, the biomass first needs to be upgraded into biomethane, which 
complies  with  the  gas  quality  criteria  applicable  in  the  gas  grid.  This  also  means  that 
biomethane can be used directly in conventional gas boilers.  

Lastly, there might be a (niche) role for the use of liquid biofuels for heating. This can especially 
be a solution in remote areas that are not connected to the gas grid. However, liquid biofuels 
are relatively expensive and therefore these are more likely to be used in transport. Also, in 
most  cases  other  stand-alone  heating  solutions  such  as  heat  pumps  or  biomass 
stoves/gasifiers are likely to be a more cost-efficient solution than boilers using liquid biofuels.  

Electricity-based  hydrogen  produced  with  renewable  electricity  is  not  dependent  on  the 
constrained  supply  of  sustainable  biomass  and  could  therefore  potentially  be  produced  in 
much higher quantities. Important advantages of hydrogen are that electrolysers can be used 
as a solution to balance the electricity system and hydrogen offers one of the few solutions to 
the seasonal energy storage challenge, as it can be stored in large volumes in salt caverns 
and potentially in depleted gas fields.  

There are, however, several challenges related to electricity-based hydrogen, where the high 
costs are amongst the most important barriers. These high costs are related to the high capital 
cost of electrolysers, but also to the relatively high variable costs related to the use of electricity 

181 

 
 
as an energy input. Another disadvantage from an energy efficiency point of view is that the 
electrolysis comes with an energy loss of 20 – 40 % and as such it is leads to a loss of energy 
efficiency when compared to the direct use of electricity. However, from an energy systems 
point of view it is also important to mention that given the intermittent character of renewable 
electricity sources, the storage properties of hydrogen are also important to take into account 
when assessing system efficiency. In other words, even though when it is most efficient to use 
electricity for heating directly, excess electricity may be available in some moments when it 
cannot be used directly. In those moments, conversion of electricity into hydrogen at a limited 
energy loss can still be considered energy efficient from a systems point of view. Furthermore, 
putting the electrolysers in smart locations also enables the recovery of the lost heat to utilise 
it for heating purposes. It should be noted though that the intermittent use of electrolysers (so 
only operating with a limited load factor over the year) poses additional challenges to the cost-
effectiveness of H2 production. 

Considering that hydrogen is still a rather expensive energy carrier and given the availability 
of  more  cost-effective  alternatives  for  space  heating,  hydrogen  decarbonisation  of  heat 
demand is most likely to focus on decarbonisation of industrial process heat. It is unlikely that 
renewable hydrogen will be used on a large scale for space heating applications, although it 
might be used in some specific locations, where local conditions make it the most attractive 
decarbonised energy source. In most cases, however, the deployment of individual heat pump 
systems or district heating networks based on renewable engergies will be a more cost-efficient 
solution for decarbonising space heating. Hydrogen can be introduced in low concentrations 
in  the  existing  natural  gas  network  without  the  need  to  adapt  the  equipment.  When  higher 
concentrations are to be transported, changes to the gas infrastructure are needed and this 
would also require adaptations to the end-use equipment. 

While a range of carbon-free heating solutions is available for the space heating sector, the 
options are much more limited when it comes to the decarbonisation of industrial process heat, 
especially for high-temperature processes, the number of decarbonisation options available is 
more  limited  and  hydrogen  is  one  of  those  options.  In  steelmaking,  hydrogen  is  one  of  the 
energy carriers that could be used to replace the existing coal-based production process and 
the first pilot projects to experiment with this are ongoing in Sweden and Austria. Furthermore, 
renewable hydrogen can also play a role as a renewable energy-based feedstock, for example 
in  fertilizer  industry.  The  prioritisation  of  the  use  of  hydrogen  to  decarbonise  industrial 
processes is also reflected in Germany’s national hydrogen strategy.  

Instead  of  using  renewable  hydrogen  directly,  it  is  also  possible  to  convert  it  into  methane 
through  the  incorporation  of  carbon  derived  from  CO2  –  a  process  called  methanation, 
producing  synthetic  methane.  Conversion  into  methane  has  the  advantage  that  it  can  be 
directly  used  in  existing  natural  gas-based  processes  and  it  can  serve  as  a  renewable 
feedstock for organic chemistry. However, the conversion of electricity-based hydrogen into 
synthetic methane involves some additional energy losses and also adds to the overall costs. 
To  be  sustainable,  it  is  important  here  that  this  CO2  is  derived  from  a  biogenic  source  or 
captured from the atmosphere. The latter process is still very costly and as such this is a barrier 
to the production of hydrogen-derived synthetic methane (or other synthetic fuels). Similar to 
the production of synthetic methane, hydrogen can also be used to produce a wide variety of 
other carbohydrate fuels  (methanol,  butanol,  synthetic kerosine  etc.),  but  the  same barriers 
apply  as  with  the  need  for  a  non-fossil  CO2-source.  Furthermore,  since  the  entire  goal  of 
energy system decarbonisation is to decouple it from CO2 emissions, it only makes sense to 
turn  hydrogen  into  synthetic  carbohydrate  fuels  when  the  carbon  is  really  needed  in  the 
process (e.g., in the synthesis of organic chemicals).  

Even  though  hydrogen  production  using  renewable  electricity  is  the  preferred  production 
process,  producing  hydrogen  from  natural  gas  using  the  conventional  steam  methane 
reforming process, combined with carbon capture and storage could serve as a steppingstone 
to  promote  hydrogen  demand  in  different  end-use  sectors  and  develop  the  market,  while 
keeping  the  production  costs  manageable.  The  disadvantage  of  this  fossil-based  hydrogen 

182 

 
 
EUROPEAN COMMISSION 

with  carbon  capture  is  that  it  is  not  completely  free  of  CO2  emissions,  as  the  CO2  capture 
efficiency is not 100 %. Self-evidently, fossil-based hydrogen with carbon capture should not 
replace or postpone the deployment of electrolysers, but could rather be deployed in parallel 
to  scale-up  hydrogen  production  faster,  without  being  restrained  to  installed  electrolyser 
capacity  or  the  required  renewable  electricity  generation  capacity.  On  the  long  term,  fossil-
based hydrogen with carbon capture hydrogen production needs to be fully phased out in order 
to achieve the GHG targets  

The implications of the use of new gaseous fuels for heating on the future of the gas grid are 
discussed controversially. There are numerous studies addressing potential pathways for the 
future use of gas for heating (Trinomics 2018a; European Commission 2019; Gas for Climate 
and Guidehouse 2020; CEPS 2019), however the projected use of gas differs largely in the 
different scenarios. While the demand for gas is expected to decrease due to improvements 
of the efficiency of buildings and the use of renewable heating, the technological, economic, 
and regulatory implications for the future of the gas grid are discussed controversially. 

183 

 
 
 
11.  Summary of studies 

11.1. RES-H&C technologies 

Support to key activities on the European Technology Platform on Renewable Heating and 
Cooling (Mazzucchelli et al. 2019) 

Overview 
This  document  provides  an  overview  of  a  study  awarded  to  the  secretariat  of  the  European  Technology  and 
Innovation Platform on Renewable Heating and Cooling (RHC-ETIP) based on the following tasks: 

  The  monitoring  of  the  implementation  of  five  technology  roadmaps  (biomass,  solar  thermal, 
geothermal,  cross-cutting  technologies  and  common  implementation  roadmap)  published  by  the  RHC  -
ETIP in 2014 in order to see how the technologies have advances with respect to the Key Performance 
Indicators (KPIs) proposed in the roadmaps. The 2020  KPIs for each technology differ, thus a separate 
analysis  per  technology  was  undertaken.97  These  generally  were  based  on  cost,  improved  efficiency, 
increased  production,  longer  lifetimes    and  improved  use  or  design  of  materials  for  specific  sub-
technologies within each roadmap. 

  The  analysis  of  the  H&C  industry  at  EU-level  with  a  focus  on  the  potential  of  RHC  technologies  in 

comparison to incumbent, fossil fuel-based technologies.  

  The  analysis  of  the  consumers  in  the  H&C  sector  at  EU-level  with  an  emphasis on  factors  that can 
encourage the uptake of H&C technologies and proposing policies to address barriers for adoption. 

Monitoring of the implementation of technology roadmaps 
The report finds that for some technologies (geothermal, biomass) the KPIs proposed in 2014 are adequate and the 
sectors are on track to fulfill them. However, in other cases the research and innovation priorities and KPIs should 
be updated to better reflect the new information gathered during the analysis and the new priorities and needs of the 
sectors.  In  the  case  of  heat  pumps,  the  R&I  priorities  set  in  the  roadmap  have  not  yet  been  taken  into  proper 
consideration  by  research  programmes  at  either  national  of  EU  level.  This  is  the  case  for  both  direct  calls  and 
dedicated funding schemes. Likewise, the indicative budget for R&I in solar thermal technologies set in the roadmap 
turned out to be much higher than the amount of finance actually allocated to the technology so far. With regard to 
district heating, the report suggests that more attention needs to be paid to intelligent planning and operation of DHC 
networks through smart metering and load management systems. Furthermore, more applied research should be 
carried  out  on  smart  thermal  grids  connecting  diverse  types  of  buildings  and  industrial  processes.  More  R&D  is 
needed on low-temperature substations. In the case of thermal energy storage, it was found that some KPIs for e.g. 
underground thermal energy storage are difficult to verify as, for example, energy storage efficiency (a KPI) is based 
on parameters that depend on specific conditions. The analysis also concludes that since hybrid system structures 
and their interactions differ, new KPIs must be proposed to allow for uniform comparison. 

Industry 
Sector 

Analysis of the EU H&C industry 
The key results from the analysis of the EU H&C industry are summaries in the table below. 
Key performance figure for the EU H&C industry in 2014. Information taken from RHC ETIP. 
Turnover 
Sale 
from 
heat 
GW/y 
distribution 
of 
fuel 
sourcing 
EUR b/y 

Employment 
in 
industry 
FTE/y 

Industry 
turnover 
EUR bn/y 

Stock 
installed 
GW 

Stock 
installed 
TWh/y 

Employment 
in 
heat 
distribution 
or 
sourcing 
FTE/y 

fuel 

Solar 
Thermal 

23 

35 

2.1 

3.2 

37, 000 

97 See the technology roadmaps for details on the KPIs: https://www.rhc-platform.org/publications/ 

184 

 
 
                                                 
 
 
EUROPEAN COMMISSION 

Heat Pumps 

70 

Geothermal 

23 

74 

19 

11 

6.5 

55,000 

1.1 

1.6 

25,000 

District 
Heating 

400 

327 

0.6 

2.4 

19,000 

26.0 

195,000 

Biomass 

578 

436 

Fossil fuels 

4,050 

3,300 

20 

132 

4.2 

21.3 

23,000 

223,000 

10.8 

305 

174,000 

Consumers in the H&C sector 
The  two  major  aspects  identified  in  the  decision-making  of  consumers  were  economic  savings  and  reliability  of 
performance. Other important factors identified included social factors, technological usability factors and ecological 
factors.  Building-ownership  needs  to  be  considered  in  understanding  the  consumer’s  decision-making,  as  it 
determines  who  are  the  main  intermediaries  and  whether  split  incentives  will  be  a  factor  in  the  final  purchasing 
choice. Installers and building professionals were identified among the most influential actors (gatekeepers) having 
an  impact  on  the  decisions  of  the  consumer.  However,  installers  were  found  to  often  have  a  negative  opinion 
regarding RHC technologies, likely based on their lack of familiarity with the technology and unwillingness to reskill. 
Thus, current practices among installers were deemed to constitute a major barrier to RHC adoption. Other barriers 
identified  included:  high  investment  costs,  lack  of  adequate  awareness  among  consumers  and  the  disruption  of 
routines associated with installing a new technology. Furthermore, the window of opportunity for RHC installation 
was found to be an obstacle based on the short decision time available after the breakdown of an existing system. 

Renewable power-to-heat: Innovation landscape brief (IRENA 2019)   

Summary and main findings 

  Converting solar and wind power to heat can help transform the power sector, increasing its flexibility 

  A regulatory support, incentives for renewable energy use in buildings and industry, and a specific market 

design that allows revenue stacking are needed 

  Heat pumps, electric boilers and thermal storage serve to convert electric power into efficient heating or 

cooling in a flexible way. 

  Electrification of the  heating sector  is  feasible  in  the  short term as  most  of  the  required infrastructure  is 
already in place and the electrical grid already reaches most demand points: buildings, houses, commercial 
sites, and industrial factories. 

  The  transmission  and  distribution  network  would  probably  need  additional  investments  to  increase  its 

capacity. 

  Centralized  heating  systems  use  large  boilers  or  heat  pumps  consuming  electricity  from  the  grid,  and 

providing heat to several buildings 

  Decentralised heating systems use small scale boilers and heat pumps using electricity from the grid or 

local generator, and providing heat locally (e.g. industry) 

  Power-to-heat  systems  can  help  integrate  greater  shares  of  renewable  energy,  and  use  the  excess 

electricity supplied from these sources to address heating needs 

 

In decentralized systems, consumption can be switched from high-demand time intervals to low-demand 
time intervals, thus reducing peak load 

  Thermal storage can store energy for days or months to help address seasonal variability in supply and 
demand,  thus  decoupling  heat  and  cold  generation  from  consumption  and  allowing  use  of  surplus 
renewable heat 

185 

 
 
 
 
 
 
 
 
  The thermal inertia of well-insulated buildings can be used as the storage 

Key policies and measures:   

 

Incentives for deployment of heat pumps, support additional storage that helps lowering heat pumps cost, 
and spread the use of heat pumps for simultaneous heating and cooling  

  Limiting the use of fossil fuel boilers and introducing requirements for new buildings to include renewable 

energy sources for supplying heat  

  Change in  taxation  levels,  reducing  the  burden  of  using electricity,  increasing  the  levy  on  fossil energy, 
eliminating the “right to be connected to the gas grids” for new buildings, ending subsidies on fossil fuels  

 

Incentivising energy efficiency  

  Policies that enable the interconnection of heating and electricity markets should be implemented.  

  Targets for more renewable energy-based heating and cooling. 

Heat Pumps – Integrating technologies to decarbonise heating and cooling (European Copper 
Institute 2018)   

Overview 
The study discusses the potential of heat pumps to contribute to the decarbonisation of the heating and cooling 
sector. Heat pumps can be operated to provide heating by using ambient heat, waste heat or heat in the soil. 
Some heat pumps are reversable and are able to operate in cooling mode or heating mode. Another aspect in 
which heat pumps can differ is in their means of heat distribution, which can be done through hydronic or air-based 
distribution system or a mix of both.  

The fact that heat pumps produce heating and cooling simultaneously means that there is also an opportunity to 
combine the two and thus further increase energy efficiency. As an example, the heat extracted from buildings by 
air conditioners in summertime can be used for the hot water supply, thereby removing the need for a separate 
water heater. Such linkages can also be achieved at a larger scale where multiple heat and cold sources are linked 
via heat and cold distribution grids. 

Heat pumps as flexibility options 
Heat  pumps  can  also  play  an  important  role  in  balancing  the  electricity  system  through  load  shifting  and  the 
realisation of smart grids. By combining heat pumps with a well-insulated building envelope, thermal storage and 
potentially also battery storage, heat pumps can optimise the time of energy consumption. In well-insulated houses, 
superheating can be done before people get home and when the electricity demand is still low, decreasing the energy 
demand during peak hours. Similarly, thermal storage can be used for heat grids or in buildings. This flexibility can 
also  be  used  in  demand  side  flexibility-based  service  models:  the  end-user  uses  the  heat  pump  as  part  of  a 
heating/cooling as a service model, where a private company owns the heat pump and is responsible for its optimal 
operation. In this model the heat pump is used by a grid operator as a flexibility tool. 

Heat pumps in industry 
Heat pumps can also be used in industry, including heating, cooling, and dehumidification. When it comes to heating, 
commercially available heat pumps can only provide heating up to temperatures of around 100°C, heat pumps in the 
temperature  range  of  120 - 140°C   are  currently  in  the  pilot/demonstration  phase,  but  heat  pumps  achieving 
temperatures above 150°C  are still in the research and development stage. There is, however, a significant share 
of industrial processes in the temperature range that can be provided by heat pumps. 

Market uptake 
Up to now, market uptake of heat pumps has been very heterogeneous across different European countries, with 
the Scandinavian countries being frontrunners, together with France. In general, the study considers that a positive 
attitude  to  electricity  as  an  energy  source  for  heating  and  a  limited  availability  of  natural  gas  (including  gas 
infrastructure)  are  factors  that  are  contributing  positively  to  a  high  uptake  of  heat  pumps.  The  same  holds  for 
countries  that  have  stimulatory  policies  in  place,  such  as  financial  support  schemes,  institutional  support  via  the 
provision of information, clear decarbonisation policies and targets for the H&C sector or support for the development 
of required infrastructure (e.g., heat grids). For financial support mechanisms to be effective it is important that these 

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are transparent regarding the total amount of funding available and the duration of the funding program. Furthermore, 
it is essential that the availability of funds is budget-independent, to ensure continuity and long-term availability, it 
should support various applications and the support levels should be high enough to substantially affect total cost of 
ownership.   

In order to facilitate market development for heat pumps it is important that the total cost of ownership is taken into 
account, including system design,  installation  costs,  maintenance  and  fuel costs.  Comparison  with  other  heating 
technologies is crucial in this respect. In many markets, heat pumps are still a more expensive option due to the lack 
of carbon pricing for fossil fuel use and the comparatively lower investment costs for combustion-based technologies. 

METIS Studies - Study S6: Decentralised heat pumps: system benefits under different technical 
configurations (Artelys 2018) 

Summary and approach 
Space heating has a share of approx. 70 % in the total final energy demand and is mainly generated by 
technologies using/ burning fossil fuels like gas, oil or coal. With an increasing share of fluctuating renewable 
electricity generation in the power mix, electric heat generation could play an important role in the decarbonisation 
of the space heating sector. The most commonly known power-to-heat technology are electric radiators. However, 
their efficiency is comparably low (close to 100 %). Heat pumps can provide the heat with a much higher efficiency 
(coefficient of performance (COP) of 3 – 4 (state of the art ground source heat pumps up to 5). They are usually 
combined with a back-up heater to avoid over-dimensioning. The goal of the study is the evaluation of system 
benefits of decentralised heat pumps in the EU under different technical configurations. Technical information for 
different power-to-heat technologies was gathered and more technical and economic parameters were collected 
for heat pumps. Different topics were furthermore addressed: 

  Assess benefits of heat pumps over conventional boilers 

  Estimate the flexibility offered by heat pumps with thermal storages 

  Analysis of profitability of heat pumps with gas-fired back-up boilers 

These options were assessed for two EU power system scenarios, a business-as-usual scenario and a more 
ambitious, further decarbonised 2050 scenario with a renewable share of 65 % in power production and high CO2 
prices (522 €/tCO2). In order to perform the analysis, the EU power system model METIS was extended in order to 
be able to model the hourly functioning of heat pumps (varying temperature profiles, heat production of heat 
pumps coupled with electric or gas back-up heater) adequately. 

Main findings 
The results show that heat pumps are an efficient technology to decarbonise the heating sector. The effect is higher 
with an increasing share of renewables in the electricity mix. A challenge is still the profitability of mono-energetic 
heat pumps at least in 2030 in the business-as-usual scenario due to the high investment costs and the need for 
additional peak power generation. In 2050, monetary savings from avoided CO2 emissions from gas boilers offset 
the needed additional investment leading to a high profitability from a system’s point of view. The main advantage 
of heat pumps in combination with thermal storage in combination with real-time pricing is the flexibility they offer for 
the electricity system. Gas-boilers as back-up heaters are seen as a promising compromise to curb potential peak 
loads in the electricity system and thus reducing the need (and cost) for peak generation units. Furthermore, a smart 
operation of heat pumps helps to integrate more fluctuating renewable electricity generation and thus reduce the 
overall CO2 emissions in both scenarios assessed by several million tons per year. The monetary savings achieved 
by smart operation sum up to approx. 6bn€/year, which is about 3 % if the whole power production costs in the EU28. 

Power-to-heat for renewable energy integration: Technologies, modeling approaches, and 
flexibility potentials (Bloess et al. 2017) 

Summary and main findings 
This  study  provides  a  literature  review  of  model-based  analyses  of  the  contribution  of  flexibly  coupling  the 
electricity  and  heating  sectors  to  both  renewable  energy  integration  and  decarbonisation.  Focusing  on 

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residential heating, the study compares the geographic and temporal areas of research and highlights the latest 
analytical model formulations. 

In general, the results show that power-to-heat technologies can contribute cost-effectively to the integration of 
renewable  energy,  the  substitution  of  fossil  fuel  and  decarbonisation.  In  particular,  heat  pumps  and  passive 
thermal storage are favourable options. 

Main findings:   
A  systematic  literature  review  of  46  studies  published  between  2007  and  2016  is  presented.  The  reviewed 
papers  are  analysed  according  to  their  research  scope;  methods  and  modeling  approaches;  and  research 
questions and findings. 

  Regarding the research scope, the study provides an overview of the time frame, spatial coverage and 
technologies considered. It is identified that most papers focus on European case studies. Broadening 
the scope of sector coupling, especially the combination of power-to-heat and power-to-X, could shed 
light on the comparative attractiveness of power-to-heat and provide further insights into alternative or 
complementary decarbonisation and flexibility potentials. 

  Regarding the research methods and modeling approaches, the study provides an overview of general 
methods,  the  type  of  program,  time  resolution  and  endogenous  investments.  Additionally,  explicit 
formulations  for  heat  pumps  and  heat  storage  equations  are  presented.  It  is  identified  that  most 
reviewed  papers  are  based  on  optimisation  models.  Future  research  could  broaden  the  focus  by 
considering the behavior and incentives of consumers, regulators or policymakers. 

 

In terms of research questions and results, the study analyses cost effectiveness, integration of variable 
renewable  electricity,  decarbonisation,  electricity  prices  and  demand  for  power-to-heat,  heat  supply 
structure and impact of method choice. Although numerical results vary depending on location, time, 
and assumptions about cost, policy, and technology availability, it can be generally stated that power-
to-heat  applications  are  cost-effective 
to  renewable  energy  integration  and 
in  contributing 
decarbonisation.  Heat  pumps  and  electric  boilers  in  particular,  have  a  central  role  in  the  literature. 
Although electricity demand increases when electricity is used for heating, electricity price spikes can 
be prevented if the heating sector is sufficiently flexible through the flexible operation of power-to-heat 
options or heat storage. 

Heat pumps in existing residential buildings – results from the research project “WPsmart 
im Bestand” (Fraunhofer Institut für Solare Energiesysteme 2020) 

Summary 
The project is the latest of several monitoring projects monitoring and analysing heat pumps under real operation 
conditions “in the field” conducted by Fraunhofer ISE. It focused on two main research questions: 

  Question  1  –  efficiency:  “What  efficiencies  do  electrically  driven  heat  pumps  achieve  in  differently 

retrofitted older buildings under real operating conditions in the field?" 

  Question 2 – flexibility: “What is the flexibility that heat pumps can deliver to the power system?” 

Efficiency: For answering the question a total of 56 heat pumps were monitored including 32 air source heat 
pumps, 9 combined systems (two heat pumps in the system using different heat sources), 13 ground source 
heat pumps and 2 heat pumps using an ice storage as heat source. Most heat pumps are installed in single-
family  buildings  (42; average heated  floor  area 172 m²).  The  others  are  installed in  buildings  with  up  to  four 
dwellings.  The  average  heat  floor  area  of  all  buildings  was  183 m².  More  than  half  of  the  heat  pumps  were 
installed in buildings built before 1979 and around one-third in buildings constructed between 1980 and 1995. 
For  most  of  the  buildings  a  detailed  assessment  of  the  energetic  quality  of  the  buildings  in  the  original  and 
current  state  could  be  conducted.  Most  of  the  older  buildings  were  already  at  least  partly  refurbished 
(replacement  of  windows  (89 %  of  buildings), and/or  insulation  of  roof  (86 %  of  buildings),  and/or significant 
improvement of external walls (57 % of buildings)). Not all buildings could be monitored in all project years. In 
the first monitoring period from July 2018 to June 2019 29 ambient air heat pumps used for space heating and 
domestic hot water were analysed. 

Flexibility: The question was answered by extensive simulation studies. The simulation evaluates a heat pump 
pool dimensioned according to current standards and controlled by smart grid (SG)-Ready signals. 

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Main results:   
Efficiency:  Heat  pumps  can  be  used  and  operated  efficiently  in  existing  buildings  even  if  they  are  not  fully 
refurbished to an ambitious level. In the first monitoring period air heat pumps achieved a seasonal performance 
factor of 2.5 – 3.8 (average 3.1). The maximum supply temperature was 45.4 °C and the average temperature 
for space heating was 36.9 °C. Some air source heat pumps even achieved higher efficiencies (4.1 and 4.6). 
Ground source heat pumps had a seasonal performance factor of 3.3 – 4.7 with an average of 4.1. the supply 
temperatures were slightly higher than in the systems with air source heat pumps. The achieved CO2-emission 
reductions in 2018 compared to a gas condensing boiler are between 19 % and 47 % (air source heat pumps) 
and between 39 % and 57 % (ground source heat pumps). Anticipating further decarbonisation of the electricity 
generation until 2030 leads to even higher emission reductions of up to 80 %. The key factor for applying heat 
pumps in existing buildings is the required heating circuit temperature (depends on specific heat demand and 
installed heat transmission system). The results show that deep renovation is not necessarily needed for an 
efficient  and  emission  saving  operation  of  heat  pumps  in  existing  buildings.  Temperatures  in  the  heat 
transmission systems can often be reduced due to over-dimensioning in the past. For an efficient operation, 
good  planning  covering  the  heat  source,  the  system  integration  of  the  heat  pump  and  the  whole  heat 
transmission system in the building especially in old buildings is essential. 

Flexibility:  A pool of around 250 heat pumps shows a robust response of the whole system to grid signals. 
Each unit has an electrical shifting potential of 0.18 – 10.68 kWh per unit and operation cycle. Depending on the 
SG-Ready control signal one million heat pumps can provide a shifting potential of up to 4  – 14 GWh hourly. 
The shifting potential decreases for shifting periods of more than one day to 3- 8 GWh. The shifting potential 
strongly depends on the season. During summer the potential is neglectable compared to transition periods and 
winter. The most suited shifting intervals are 15 – 50 minutes and the losses are below 17 % as back-up heaters 
are not used. Losses increase with longer shifting intervals to up to 70 %. The field test showed that only few 
controlled heat pumps of the first-generation SG-Ready heat pumps showed the expected behavior. 

The decarbonisation of the EU heating sector through electrification: A parametric analysis 
(Thomaßen et al. 2021)  

Summary 
The article analyses the electrification of the heating sector using heat pumps as a decarbonisation strategy in 
the EU Member States. It discusses its effectiveness and assesses its impact on the power system. As a 
basis, the article describes the energy mix in the heating sector in the EU Member States and decomposes 
the power demand for different end-use purposes including heating and cooling. The study finds that 
electrification can reduce the total energy-related emissions by up to 17 %, if paired with simultaneous 
expansion of low-carbon electricity. The article finds that most national power systems could cope with higher 
heat-electrification rates and identifies three main factors that are beneficial for electrification: 1) mild climate; 
2) large share of low-carbon heat ; 3) high level of installed firm capacity. The study finds that an additional 
heat pump capacity of around 1.1–1.6 TWth can be deployed based on the existing firm power capacity, which 
would correspond to a heat pump share of 29 – 45 % in space heating. Based on their current power capacity, 
12 Member States are prepared for even full electrification scenarios, whereas three Member States could get 
their power system stressed if 40 – 60 % of all fossil-fuelled technologies are substituted. The upper end of the 
capacity can be reached by introducing demand shifting measures, such as those relying on the thermal 
inertia of the building stock. To this end, regulators should ensure that this flexibility is available to the market. 
For example, transmission-system operators can contract heat pump capacity, acquiring a large portfolio of 
interruptible loads available. Another option on the demand side is to enable smaller consumers to react to 
price signals from the wholesale market, requiring the rollout of smart meters and the implementation of real-
time metered electricity tariffs for households and other small consumers. 

Heating without the hot air: Principles for smart heat electrification (Rosenow and Lowes 
2020) 

Overview 
Given that currently, in Europe, 31 % of the overall energy consumed is used for space and water heating, 
and that 75 % of this energy comes from fossil fuels, the decarbonisation of the heating sector is of paramount 
importance to achieve the target of net-zero emissions by 2050. Electrification of the heating system together 
with efficiency improvements in buildings currently represent some of the most relevant tools to achieve the 
desired decarbonisation of the sector. The electrification of the heating system should be planned by 

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considering the heating and power sectors in parallel, as part of the wider energy system, in order to maximise 
system flexibility and minimise costs. Furthermore, on the demand-side, energy efficiency can facilitate the 
lowering of heat demand and increase the performance of heating systems. Considering the interactions 
among the heating systems, power sector and demand-side flexibility can maximise the benefits of heat 
decarbonisation. The recently published (08/07/2002) EU Strategy for Energy System Integration further 
highlights the importance of an energy system approach. The report aims to provide smart heat policy 
recommendations, where “smart” is understood as an approach to optimise heat decarbonisation across 
sectors and maximize the benefits of the available technologies. The scope of the report includes space 
heating and hot water provision, it does not include industrial heat. 

Options for heat decarbonisation 
The paper argues that heat production using zero-carbon electricity sources (e.g. solar, wind, electricity) 
represents a key solution for heat-decarbonisation and that heat pumps can be used to maximise system 
efficiency. Solar thermal technologies can play an important role in particular for the provision of hot water. 
Options for low-carbon heat provision include combustion technologies such as bioenergy and waste. 
However, in many cases the potential scale of bioenergy may be limited by availability of resources and the 
issue of land use sustainability and GHG reduction potential. Regarding the use of hydrogen for heating, 
uncertainty remains about production methods, transmission, its performance as a heating fuel and costs of 
production.  Furthermore, considerations on how to best use a high-value resource such as hydrogen need to 
be taken into account since low-grade heat provisions will, at least in the short and medium term, compete 
with applications ranging from industry to long-distance transport and power generation. Conversion 
efficiencies, the amount of renewable electricity required to produce one unit of usable heat, should be 
considered in the selection of different technologies. Many uncertainties remain regarding which technologies 
will be most suitable in a particular context. These include future technology costs, further innovation, power 
system change and consumer uptake.  Nonetheless, the paper already identifies five key issues which are 
already clear today: 

7.  All  technology  options  will  require  substantial  improvements  in  the  energy  efficiency  of  the  existing 

building stock 

8.  Options that combine energy efficiency with low-carbon heat supply are likely to be more economic 

and feasible as opposed to those that rely only on one of the two approaches.  

9.  Rapid progress needs to be made now.  

10.  It is critical to learn how different low-carbon heating technologies perform in different types of buildings 

with different occupants in other to make informed policy choices in the future.  

11. The  embodied  carbon  emissions  of  most  low-carbon  technologies  are  significantly  lower  to  the 

operational emissions of heating systems based on fossil fuels. 

Advancing District Heating & Cooling Solutions and Uptake in European Cities - Overview of 
Support Activities and Projects of the European Commission on District Heating & Cooling 
(Celsius 2021)   

Summary and main findings 
The report provides an overview of the findings of a variety of projects addressing district heating and cooling 
solutions.  It  focuses  on  the  Horizon  2020  Programme  for  Research  and  Innovation  (2016 - 2020),  including 
projects funded under the LIFE programme.  

  The report provides an overview of existing lighthouse-projects, where positive energy districts have 

been realised using innovative district heating and cooling approaches.  

  Low-temperature  district  heating  is  a  key  solution  for  efficient  system  integrating  renewable  heat 
sources.  The  report  reviews  projects  that  address  such  systems,  including  the  development  of 
innovative business models and regulatory frameworks. 

  The integration of renewable energies in district heating and cooling is addressed in several projects, 
focussing  on  the  one  hand  on  advancing  geothermal  technologies  and  their  market  uptake  and  on 
combining different renewable sources in district heating and cooling. 

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  The  use  of  waste  heat  in  heat  networks  is  addressed,  focussing  on  industrial  waste  heat  and  on 
unconventional urban sources. In addition to technical innovations, business models, market uptake 
measures and support to stakeholders are addressed.  

  The  report  further  summarised  projects  addressing  large-scale  heat  pumps  for  district  heating  and 

cooling networks. 

  The  digitalisation  of  District  Heating  &  Cooling  Networks  and  Smart  Energy  System  Integration  are 
subject to several projects, dealing with the smart connection and/or optimisation of different energy 
networks. 

  Another priority area covered in the report are local heat planning studies and tools, reviewing several 
projects  that  provide  data  and  reliable  models  for  supporting  heating  and  cooling  mapping  and 
planning. 

  Finally,  the  report  addresses  project  involving  accompanying  measures  such  as  standardisation, 

awareness-raising and communication, market uptake measures or policy dialogues. 

The Future Role of Thermal Energy Storage in the UK Energy System (UKERC 2014) 

Summary and main findings 
This study  aims at: (i) characterising the main areas of heat use in the UK; (ii) reviewing research on thermal 
energy storage systems; (iii) describe the main characteristics of available thermal energy storage 
technologies; (iv) identify key application areas for thermal energy storage in the UK based on a national 
target for an 80 % reduction in greenhouse gas emissions by 2050. Two case studies of applications are 
analysed: (i) domestic heating of a dwelling in Derby; ii) district heating scheme in London. The development 
of more effective storage technologies, balancing heat peak load with decarbonised heat pumps and low 
emission heating approaches will be essential to achieve the emissions targets. 

Heat use in UK 

 

Just under half (45 – 47 %) of total final energy consumption in the UK is currently used for heating 
purposes, of which approximately 80 % comes from fossil fuels. Space and water heating account for 
63 % and 14 %. 

  Of the 18 % of heat supplied for industrial processes, 6 % is for high temperature process, 9 % for low 

temperature process and 3 % for drying and separation. 

Thermal storage technologies 

  Sensible heat storage is by far the most utilised and mature form of heat storage. Although latent heat 
and thermochemical heat storage systems may provide greater energy storage per volume, they are 
still at lower technology readiness levels. 

  Store volumes range in size from domestic hot water tanks for few hours to systems with volumes up 

to 75,000 m3 for inter seasonal storage. 

  There  are  four  main  types  of  large  scale,  low  temperature,  thermal  energy  stores  available:  tank 
thermal energy stores, pit thermal energy stores, borehole thermal energy stores and aquifer thermal 
energy stores. Large inter-seasonal stores are only sized for a maximum of a few hundred buildings 

  Since the annual heat load profile is not constant, thermal storage can be combined with large scale 
deployment of electric air source heat pumps to balance peak grid load. If the heat pumps are operated 
with  decarbonised  electricity  supply  and  district  heating,  large  scale  heat  pumps  may  prove 
advantageous over combined heat and power. 

  Thermal storage has not been observed to increase the society sense of community, but may have an 
impact  on  society’s  behaviour,  by  encourage  users  to  use  energy  with  more  flexibility  or  use  more 
energy.  

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Barriers and challenges 

  The  provision  of  heat  during  the  transition  to  a  low  carbon  economy  is  a  significant  challenge  as 

currently less than 2 % of UK's space heating is provided by heat networks. 

  Wide-scale adoption of air source heat pumps for space  heating will require significant investments 
due to the seasonal variation and magnitude of peak winter loads, as well as increased pressure on 
electricity grid. 

  Without the development of more effective latent or thermochemical heat storage systems, the storage 

volumes required will be large and difficult to integrate into a domestic context. 

Key policies and measures 

  The achievement of national emission reduction targets will require low emission heating approaches. 

  The  introduction  of  a  thermal  store  will  require  new  skills  to  be  developed  among  technicians  and 
engineers, including specialist knowledge in maintaining the system effectively and efficiently.  

  Unless the system undergoes a radical transformation improving thermal efficiency, space heating will 

remain the main heat user. 

A new perspective on global renewable energy systems: why trade in energy carriers 
matters (Schmidt et al. 2019) 

Summary and main findings 
This study identifies four drivers that facilitate trade of renewable energy carriers: (i) new land-efficient 
technologies for renewable fuel production; (ii) regional differences in social acceptance and land availability 
for energy infrastructure; (iii) economics of renewable energy systems; and (iv) reduction of stranded 
investments in the fossil fuel sector by switching to renewable fuel trade. Consequences derived from these 
drivers should be considered for a future development of global renewable fuel trade streams. Although all 
current modelling studies suggest a decline of long-distance trade in energy carriers in future global renewable 
energy systems, this conclusion may be due to the under-investigation of the impact of these drivers on trade 
in renewable energy carriers. 

Prediction of future global renewable energy systems 

  Current models tend to predict very high shares of electricity generation from renewable sources as 

the best scenario for future use of renewable energy. 

  Models  usually  foresee  highly  renewable  energy  systems  as  largely  regional,  showing  a  decline  in 
intercontinental trade of energy carriers as electricity generation from renewable sources increases. 

  However,  the  identified  drivers  put  into  question  the  currently  dominating  view  that  renewables 

expansion will cause a decline in long-distance trade in energy commodities. 

Potential of renewable carriers’ trade 

  New  land-efficient  ways  of  producing  renewable  fuels may become  cost-competitive until  2050  and 

may allow long-distance trade of renewable energies. 

 

If renewable fuels are made compatible with the existing infrastructure for liquid and gaseous fuels, 
they would allow avoiding stranded costs in the fossil fuel sector. 

  The costs of imported renewable fuels may be lower than local production. 

Barriers 
Several factors may hinder the advent of trade in renewable fuels: 

  Deploying  renewable  energy  generators  on  large  scale  may  be  incentivised  only  under  strict 

greenhouse gas emission limits. 

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  The global community may not agree on far-reaching mitigation measures and trade in renewable fuels 
may be seen by the importing countries as a continuation of the current dependency on oil and gas 
exporters. 

  Sourcing renewable fuels from the Global South may cause adverse effects on local populations. 

Future strategies 

  A  major  effort  in  the  energy  research  community  is  necessary  to  better  understand  possible  future 

trajectories of global energy systems 

 

Improve understanding of the scientific and technological fundamentals of renewable fuel production, 
its  associated  economics  along  the  whole  supply  chain,  social  conflicts  with  energy  infrastructure 
expansion, and preferences of actors in open or closed global energy systems. 

  Global and bilateral agreements on free trade may have a strong impact on the opportunities for trade. 

  Trade in renewable solar and electric fuels may become a major option in the coming decades. 

Mapping and analyses of the current and future (2020 - 2030) heating/cooling fuel 
deployment (fossil/renewables)  
Work package 1: Final energy consumption for the year 2012 (Fraunhofer ISI et al. 2016b) 
(Fraunhofer ISI et al. 2016b) 
Work package 2: Assessment of the technologies for the year 2012 (Fraunhofer ISI et al. 
2016a) (Fraunhofer ISI et al. 2016a) 

Overview 
The aim of the study is to provide a detailed overview of the heat and cold supply as well as use in Europe in 
2012. The study covers all 28 EU Member States plus Iceland, Switzerland and Norway. It is composed of five 
reports and a complete dataset. The reports are: 

  Report 1: Work package 1: Final energy consumption for the year 2012  

  Report 2: Work package 2: Assessment of the technologies for the year 2012 

  Report 3 and 4 (published in one document): Work package 3: Scenarios for heating & cooling demand 

and supply until 2020 and 2030; Work package 4: Economic Analysis 

  Report 5: Work package 5: Barriers, Best Practices and Policy Recommendations 

In the following report 1 and 2 are described in detail. The other reports can be found in the respective sub-
chapters by following the link given above. 

The report on work package 1 provides a full data-set on heating and cooling consumption in the base year 
2012, the first ever such data set looking at final, primary and useful energy consumption in heating and 
cooling in buildings (space heating/cooling) and industry (process heating divided into three temperature 
bands of low, medium and high temperature). The study was the first also providing a full data set of district 
heating and cooling energy consumption by quantity and fuel types in all assessed countries. The report on 
work package 2 provides an overview of the heating and cooling technologies installed in the assessed 
countries in terms of installed numbers and capacities. The dataset distinguishes between different capacity 
classes and also provides the most relevant technical (efficiency, technical lifetime) and economic (investment 
and operation and maintenance costs) parameters. 

Results 
Energy and fuel consumption in 2012 (Fraunhofer ISI et al. 2016b) 
For gaining detailed information about the energy and fuel consumption, different statistics on European and 
national level are assessed. Furthermore, a method to derive useful energy demands is developed and 
applied. The analysis shows that the final energy for heating and cooling accounted for about 51 % of the 
total final energy consumption of approx. 12,800 TWh in 2012, which corresponds with a final energy 
consumption of 6,497 TWh. The most relevant heating end-use in 2012 was space heating (52 % of the 
total final energy demand for heating and cooling, which is about 3,350 TWh). With about 2,000 TWh process 

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heating follows (approx. 30 %). Water heating (domestic hot water;10 %), cooking in the residential sector 
(3 %) and cooling uses (5 %) played smaller roles in 2012. The different demand sectors (private households, 
tertiary sector, industry) differ strongly in the importance of the mentioned end-uses. While the residential 
sector is dominated by space and water heating (76 % and 16 % respectively; cooking (7 %) and space 
cooling (1 %) only play minor roles) the industry sector is dominated by process heating (share of approx. 
81 % in total heating and cooling demand). In the tertiary sector, space heating also has a large share 
(61 %). Other end-uses with relevant shares are water heating (14 %), process cooling (10 %) and space 
cooling (9 %). 

The major energy carrier for heating and cooling sector is natural gas with a share of approx. 45 % 
(2,660 TWh). The other end energy carriers have similar shares (electricity, fuel oil and biomass 12 % each 
coal 9 % and district heating 8 %). Waste, solar energy, ambient heat and geothermal only play a minor 
role with a share of 1 % or less each. Fossil fuels had a share of about 66 % and 20 % were supplied by 
secondary energy carriers (electricity and district heat). Renewables had a share of only 14 %. 
The primary energy demand of approx. 8,000 TWh in 2012 was mainly met by natural gas (45 %) 
followed by coal (15 %), biomass and fuel oil (11 % each), nuclear (7 %) and other renewables (5 %; wind, 
PV and hydro). The other renewables (solar thermal, geothermal, ambient heat) together only had a share of 
1.5 % in the primary energy consumption in 2012. All renewables together had a share of 18 %, fossil 
fuels accounted for 75 %. From the 6,500 TWh final energy demand approx. 5,100 TWh are used (useful 
energy). About 21 % of the final energy is dissipated/ lost during the conversion process to useful energy. 

Installed capacities in 2012 (Fraunhofer ISI et al. 2016a) 
The main heat and cooling supply technologies installed in Europe in 2012 were assessed in detail. The 
technology stock (installed capacities, number of installed units, age distribution) was assessed and described 
in detail. Furthermore, technical, and economic parameters were described (efficiency, lifetime, investment 
and operation and maintenance costs. 

Three major end use categories were distinguished: 

  Technologies in buildings, 

  Technologies for industrial processes, 

  Technologies for district heating and cooling. 

In 2012, the space heating and cooling sector was dominated by fossil fuel burning technologies 
(natural gas, oil, and coal boilers). They account for 61 % of the installed thermal capacity and 50 % of the 
installed units (if small CHPs and direct electric heating would be counted as “fossil”, the share would even 
be higher: 74 % of capacity and 62 % of units). The proportion strongly differs amongst member states 
and is highly depending on local conditions like available domestic energy carriers. In countries with natural 
gas resources, the share of gas boilers can be above 80 % (UK) or even above 90 % (NL) with respect to 
installed capacities. Countries without own sources or even without a connection to the European gas 
infrastructure, natural gas is not used at all and the share of oil boilers is high instead. In Sweden, Estonia, 
and Finland the shares of installed fossil fuel fired technologies is only 7 %, 10 % and 13 % respectively. In 
these countries, biomass, district heating and in Sweden also heat pumps play an important role. Heat pumps 
have an overall share of 7 % in the installed capacity and 12 % in the installed units in the assessed countries. 
However, in some national statistics cooling devices are counted as heat pumps even though they are not 
used for heating purposes (e.g. Italy). In total, heating technologies with a capacity of 1,747 GW th in more than 
217 million units were installed in 2012. 

Most heating technologies in buildings were installed after 1992: with respect to capacities 71 % and with 
respect to units 74 %. Especially renewable technologies are comparably new (76 %) while fossil technologies 
are generally older (only 69 % installed after 2012). The oldest technologies installed are coal fired boilers 
(58 % installed before 1992) and the newest are aerial heat pumps (99 % installed after 2002). 
In the process heating and cooling sector technologies directly using generated heat (e.g. furnaces) and 
technologies indirectly using heat via e.g. steam were differentiated. The assessed technologies cover 85 % of 
the total process heat demand in the analyzed countries in 2012. Steam boiler statistics are only available on 
European level from Eco-design-pre-studies and only cover boilers with a thermal capacity between 1 and 
50 MWth. Therefore, for the country breakdown additional statistics and assumptions had to be used. The 
estimated steam boiler stock was approx. 68,000 units with a capacity of roughly 770 GW th in 2012 and most 
of the boilers (two-thirds) were installed in Germany, Italy, France, UK, and Spain. About 71 % of the boilers 
were gas-fired and approx. 17 % oil-fired. Biomass and electricity steam generators only had a share of 4 – 
5 % each (biomass predominantly in Sweden). Besides boilers, there are also CHP-plants installed for steam 
generation (lower temperatures than boilers). However, the data availability was found to be weak and 
different sources (mainly Eurostat and PLATTS database) provide different values. A large share of furnaces 

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was installed in the iron and steel industry in 2012, in which coal (products) are the dominant energy source 
used. Capacities are usually not provided in thermal units, but in production capacities (e.g. kt steel). Other 
sectors, in which high shares of furnaces are installed are the cement and glass industry. Biomass, 
alternative fuels, and electricity were only used in a small proportion of the installed furnaces. Besides 
heat generators, also cooling units in the industry were assessed. The study assumes that approx. 73,000 
cooling systems were installed for process cooling in 2012. 
The countries with the highest installed thermal capacities in district heating systems are Poland (58 GW), 
Germany (49 GW), Czech Republic (24 GW) and Denmark (23 GW). Most CHP units used for district heating 
supply were steam turbines (72 %) followed by gas turbines (13 %) and combined cycle units (11 %). In terms 
of installed units, internal combustion engines were the dominating technology in 2012. In 47 % of the installed 
CHP plants natural gas is used as a fuel and 20 % use coal. Renewable energies together have a share of 
18 % in the final energy use in CHP plants. 

Vision for deep geothermal (ETIP-DG 2018) 

Overview 
Deep geothermal energy is defined as thermal energy extracted from the earth’s subsurface at depths larger 
than 500 m. To date, the majority of deep geothermal energy plants are used for electricity generation, 
representing an installed capacity of 2.5GWEl
an installed capacity of 4.8GWth.  Up to now the investment levels in R&D for deep geothermal energy has 
been relatively limited compared to other renewable energy technologies. 

 and the remainder functioning as heating plants, representing 

98

Geographical aspect of the geothermal energy potential 
Geothermal reservoirs are unevenly spread over Europe. Heat sources with temperatures exceeding 90°C are 
relatively scarce. Areas possessing such sources are the places where most of the existing geothermal energy 
production capacity is located. However, advancements in low-temperature heating systems, energy efficient 
buildings and fourth generation heat grids enable the use of heat sources with much lower temperatures 
(50 - 90°C), which greatly expands the use potential as such sources are geographically more abundant. 

Geothermal energy and district heating 
Geothermal sources can be used as a sustainable heat source for district heating grids. Geothermal energy 
plants produce heat at a continuous basis. As heat demand can fluctuate, demand-side response strategies or 
thermal energy storage can be applied to match supply and demand. In order to utilise low-temperature heat 
sources for supplying heat to high-temperature grids it is also possible to upgrade the heat to the right 
temperature using a large-scale heat pump. High-temperature heat sources can also be used for industrial 
processes requiring medium-temperature process heat. In this context, cascading heat use, where the 
geothermal energy is in several subsequent processes with progressively lower temperatures is an 
economically attractive option. 

Sector coupling and integration with other renewables 
Geothermal energy can also play a role in coupling of the electricity and district heating systems and balancing 
the intermittent nature of wind and solar energy. In this context, combined cooling, heating and power (CCHP) 
is an interesting option. The option to produce power can be utilised when electricity generation from other 
renewable sources is inadequate and the system can switch to heat production when other renewable 
electricity sources are sufficiently available. Excess heat from cooling or other processes can be used in the 
summer for injection into the ground for later use thereby extending the useful lifetime of the heat source.  

Breakthroughs driving deployment of deep geothermal energy 
Several breakthroughs are expected to contribute substantially to a faster deployment of deep geothermal 
energy, namely: high-resolution imaging and modelling techniques to assess the underground, improved 
borehole designs and sustainable flow enhancement, innovative technologies for efficient heat utilisation, 
hybrid systems and responsiveness to energy demand. 

98 Note that the electric output capacity is rather small compared to the thermal input (~10%) 

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EU biomass use in a net-zero economy (Material Economics 2021) 

Overview 
The study considers biomass use in the EU across all sectors in the context of the transition to net-zero 
greenhouse gas emissions by 2050. It analyses the costs, resource requirements, and CO2 impacts of 
different options for using biomass both for materials and energy uses. 

Biomass demand and supply 
The study analyses the projected demand of biomass in several net-zero scenarios and finds that the demand 
projections  largely  exceed  the  expected  supply.  While  the  biomass  demand  varies  largely  between  the 
scenarios, the average demand foreseen is about 50 percent higher than can be covered by EU resources. The 
study lists several reasons why future biomass supply is scarce: 1) Increasing imports of biomass would likely 
come at the expense of environmentally damaging conversion of land; 2) The potential to increase supply from 
EU forests, waste and residue streams is limited, as it is expected that an increase of more than 10–15% leads 
to major trade-offs with environmental impacts or faces practical and economic constraints; 3) Increases in EU 
biomass supply from the cultivation of new energy crops would entail a major remake of EU landscapes. 

Prioritisation of end uses 
The study provides a framework for prioritising the use of biomass across different end uses and concludes that 
bio-based  materials  are  typically  the  applications  with  highest  value  in  the  net-zero  context.  By  contrast,  it 
concludes that biomass is not competitive for low-temperature heat applications where heat pumps are suitable. 
The study estimates that biomass at 2–4 EUR/GJ could compete, whereas the actual supplies at scale have 
estimated costs of about 6–8 EUR/GJ. Regarding low-temperature heat, the study thus concludes that biomass 
is competitive primarily in niches where local stranded resources, co-benefits, or amortised infrastructure can 
compensate. Regarding high-temperature heat applications, the study finds that bioenergy can be competitive 
in some industrial heat applications at around 6–8 EUR/GJ and highlights the role of hybrid solutions to back up 
electricity or hydrogen. 

Net-zero scenario with lower biomass demand 
The study develops scenario projections for a net-zero transition by 2050 that use considerably less biomass 
than  the  existing  net-zero  scenarios.  By  comparing  the  “high-value”  scenario  (with  low  biomass  use)  with  a 
business-as-usual scenario, the study finds that the capex and opex of meeting the required energy services 
and materials production are 36 billion EUR per year lower in 2050 in the high-value scenario than in the BAU 
scenario, with average abatement costs being 85 EUR/t CO2 lower. Furthermore, the land-use requirements are 
90 per cent lower in the high-value scenario. Furthermore, the study estimates that around 144 million tonnes 
of  CO2  are  avoided  in  the  high-value  scenario,  as  the  production  and  extraction  of  biomass  can  lead  to 
substantial release of CO2 that would otherwise be stored in vegetation and in soils. Key enablers for meeting 
net-zero in line with the biomass demand of the high-value scenario include a considerable reduction of costs 
for hydrogen as well as the transition of electricity supply to renewable sources as well as considerable increases 
in resource and energy efficiency. 

Policy recommendations 
The study points out that the policy framework in the EU and its Member States does not sufficiently take into 
account  new  findings  regarding  the  limited  growth  potentials  for  biomass  use.  Examples  include  the  “zero 
carbon” rating of biomass combustion and the CO2 price in the EU ETS as well as a variety of national measures 
fostering the use of energy for heating and electricity generation. The study suggests that renewable energy 
policies both at EU as well as national level need to prioritise other renewable energy sources to avoid that the 
ongoing increase of biomass use in heating and electricity production continues. On the other hand, the study 
highlights the importance of supporting the deployment of biomass in certain niche applications (e.g. industrial 
heat in hybrid systems). 

The role of biomass gasification and methanisation in the decarbonisation strategies 
(Mantulet et al. 2020) 

Summary and main findings 

  The study explores the future development of biomass uses across different climate policy scenarios 

and under different biomass supply availability and technology performances.  

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  The role of green gas energy carriers (biomass gasification and methanisation) in the decarbonisation 

is evaluated.  

  The future of bioenergy depends mostly on countries’ bioenergy supply and demand. 

  Most of modern uses of gas fuel will be possible with a biomass transformation through the gas vector. 

 

Implementing climate policies boost the deployment of biomass methanisation and gasification by 2 to 
3 times, and implementation of carbon capture and storage accelerate even more their use. 

  Electricity and heat valorisations are prominent in northern countries while biofuels are prominent in 

developing countries. 

  Methanisation develops earlier than gasification because the process is more developed and profitable. 

Both technologies will provide flexibility to the gas vector, and they can be transformed into heat, electricity or 
both or upgraded to biomethane. 

Approach 
Inputs: the projected population, Gross Domestic Product (GDP) by region, oil and gas resources, technology 
costs and performances. 

Decarbonisation strategies 

  High value carbon taxes that penalise fossil fuels drive biomass valorisation for electricity and fuels 

conversion.  

  Combining  bioenergy  with  carbon  capture  and  sequestration  is  a  key  technology  to  generate  the 

negative emissions needed for the climate commitments. 

  Technology  development  is  not  enough,  as  field  competitiveness  in  decreasing  CO2  emissions 
depends  a  lot  on  people’s  behaviour.  These  technologies  can  raise  resistance  (e.g.  noise,  smell, 
explosion risk, increase of traffic to fuel digesters, flies invasion). 

  Better communication is key to remove concerns and launch these technologies at a bigger scale. 

ReuseHeat – WP 2: Market and stakeholder analysis (Reuseheat 2019) 

Overview 
Recovery of urban waste heat bears the potential to increase overall system efficiency and reduce dedicated 
heat production needs of district heating (DH) systems, but up to now the use of urban waste heat sources 
has been very limited. This study analyses the main barriers for increased use of urban waste heat as well as 
solutions to overcome these barriers, through the consultation of relevant stakeholders in eight EU Member 
States, namely: Sweden, Romania, Italy, Spain, Germany, Denmark, France and Belgium. The stakeholder 
groups consulted in the study were DH companies, owners (suppliers) of waste heat, customers, policy 
makers and investors. 

Barriers for urban waste heat recovery and use 
Numerous  barriers  for  increased  use  of  urban  waste  heat  were  identified  in  the  study  including  economic, 
financial, technical, and cognitive barriers. The most important barriers that were identified in this study are: 

  Low maturity of existing solutions (at system level); 

  The absence of a legal framework; 

  The absence of standardised permits and contracts; 

  The absence of a common methodology to evaluate the value of waste heat; 

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  The low temperature of most urban waste heat sources (and hence low value); 

  The competition with incentives for renewables and CHP. 

From the stakeholder analysis it became clear that the utilisation of urban waste heat as a heat source for 
district heating is still very uncommon. The economics of heat recovery are often poor, due to a combination of 
the low temperature of the heat, the relatively high costs of the required technologies such as heat exchangers 
and heat pumps, especially compared with other heating technologies. The fact that the profitability of urban 
waste heat recovery (WHR) projects is often poor reflects how important it is to take non-financial benefits 
equally into account when evaluating an investment, which highlights the role of the public sector in making 
urban WHR projects feasible. Another aspect that is important for projects to succeed is that the continuity of 
both the heat supply and the demand are ensured, to reduce the investment risks. 

Country-specific findings on barriers and ways forward 
Sweden -     Limited experience, low number of suppliers, difficult to match a waste heat source with users. 
Lack of economic incentives. Tax incentives for data centres could be adjusted to promote the use 
of waste heat using heat pumps.  

Romania –  The need for feasibility studies was emphasised, which could be combined with the introduction of 
economic incentives. From the consumer’s point of view it is important that the continuity of the 
heat source is ensured contractually. 

Italy  –              For  investors  the  complexity  of  urban WHR  projects  compared  to  other  low-carbon  technology 
investments,  combined  with  the  need  for  maintenance,  often  leads  investors  to  invest  in  other 
technologies. Furthermore, the lack of a legal framework and economic incentives was mentioned 
as a barrier.  

Spain -        In Spain, investments in WHR are often not profitable for existing heating networks, due to the low 
costs of fuels used in the existing heat supply installations. Furthermore, the relatively low heating 
demand makes it more difficult to earn back investments. Changes in the policy framework are 
required to make investments in urban WHR projects attractive, e.g. through changes in the energy 
taxation scheme or through the introduction of incentives. 

France –      A lack of expertise on verification, measurement and proper estimation of the heat resource is 
mentioned  as  an  important  barrier,  as  uncertainty  about  the  quality  of  the  heat  resource  often 
prevents investments from taking place. The “Fond chaleur” (Heat fund) can in principle be used 
by  project  developers  of  WHR  projects,  although  it  does  not  specifically  address  urban  WHR. 
Independent studies  on project  feasibility  can  be  supported  too.  Directions  for  possible  policies 
include: an obligation to assess waste heat recovery potentials, a guarantee fund for waste heat 
recovery projects amongst others. 

Germany –  The required technologies often have high investment costs compared to other sustainable heating 
technologies. The German tax system was also perceived to be prohibitive to the investment in 
WHR projects. It was also mentioned that a mapping exercise to identify relevant urban waste heat 
sources is needed, to identify WHR opportunities. Electricity price components need to be lowered, 
to  incentivise  the  use  of  heat  pumps  for  low-grade  heat  upgrading.  The    recently  introduced 
German Wärmenetz 4.0 instrument, was the only instrument identified in the study that explicitly 
targets low-temperature DH investments. Still, local economic incentives are needed as well. 

Denmark –  There is already experience with several projects that implement urban WHR as a heat source for 
DH. The two most important barriers mentioned for implementing such projects were the fact that 
waste heat suppliers often want to make a profit on the heat sales, which is not always in line with 
the value of the heat. Secondly, the current tax system is perceived as a barrier. 

Belgium –    Smaller projects are less attractive to invest in for banks. Project developers often do not provide 
the  correct  information  to  the  bank,  with  too  much  focus  on  technical  details  and  too  little 
information on existing experience with comparable projects. Gas-based heating is very dominant 
in the country and the existing infrastructure and low gas prices are a barrier to DH development. 
Also, high taxes on electricity present a barrier. 

11.2. Hydrogen and e-fuels 

The National Hydrogen Strategy [Germany] (BMWi 2020) 

Overview 

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With the National Hydrogen Strategy published in 2020, the German government aims at developing a coherent 
framework  for  the  generation,  transport  and  use  of  hydrogen.  The  strategy  summarises  the  status  quo  of 
hydrogen use in Germany, outlines the governance for the national hydrogen strategy and develops an action 
plan covering the following elements: 

  Hydrogen production 

  Fields of application 

 

Infrastructure/supply 

  Research, education, innovation 

  Need for action at European level 

 

International hydrogen market and external economic partnerships 

Hydrogen production 

 

In  addition  to  the  adopted  carbon  pricing  scheme  starting  in  2021,  the  government  will  explore  the 
possibility of additional reforms of the price components induced by the state in order to ensure a viable 
business environment for companies operating plants for the production of green hydrogen in Germany 
(e.g.  exemption  for  electricity  used  for  the  production  of  green  hydrogen  from  taxes,  levies,  and 
surcharges, in particular from the EEG surcharge). 

  Explore possibilities for new business and cooperation models for operators of electrolysers and for 
grid and gas network operators in line with the principle of regulatory unbundling (results expected in 
2020). 

  Support  the  switchover  to  hydrogen  in  the  industrial  sector  by  providing  funding  for  investments  in 
electrolysers  (implementation  starts  in  2020).  Exploration  of  potential  tendering  schemes  for  the 
production of green hydrogen, e.g. to help decarbonise the steel and chemical industries. 

  Development of framework for supporting offshore wind as a key technology for the production of green 
hydrogen,  e.g.  designation  of  additional  areas  that  can  be  used  for  offshore  production  of 
hydrogen/PtX, the infrastructure necessary for this, and the potential for additional auction rounds for 
the production of renewables. 

Fields of application (heat) 
The German Hydrogen Strategy covers measures in the fields of transport, industry and heat, where priority is 
given to fields in which the use of hydrogen is close to being economically viable in the short or medium term, 
in which no major path dependency is being created, or in which there are no alternative options for 
decarbonisation. The present summary only focuses on the measures proposed in the heat sector. 

  Continuation and possibly expansion of Energy Efficiency Incentive Programme for highly efficient fuel-

cell heating systems (in place since 2016). 

  Exploration  of  possibilities  of  providing  funding  for  ‘hydrogen  readiness’  installations  under  the 

Combined Heat and Power Act. 

Infrastructure/supply 
The strategy includes several measures addressing the adaption of existing infrastructure and initiating the 
construction of new elements of the supply infrastructure: 

  Assessment  of  the  need  for  long-term  action  within  the  transformation  process  together  with  the 
relevant stakeholders, both for dedicated hydrogen infrastructure as well as parts of the natural gas 
infrastructure that can be adjusted and backfitted to make it H2-ready. Preparation of regulatory basis 
for the construction and expansion of a hydrogen infrastructure. 

  Continuing efforts to better link up the electricity, heat, and gas infrastructure, considering the potential 

of the existing hydrogen infrastructure whilst also ensuring its compatibility in the EU context. 

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Research, education, innovation 
Creation of new funding initiatives for research and innovation along the entire hydrogen value chain, in 
particular within the 7th Energy Research Programme. Key measures are: 

  Development of a roadmap for the German hydrogen industry together with the science and business 

communities and civil society 

  Setting up demonstration projects on green hydrogen with the help of research being conducted into 
international supply chains, including the development of supply and technology relations, testing of 
robust  and  modular  solutions  globally,  inclusion  of  production  sites  located  in  the  partner  countries 
under the German development cooperation. 

  Cross-ministry research campaign entitled ‘hydrogen technologies 2030’ as strategic bundling together 
of research activities into hydrogen-related key-enabling technology, including the following elements: 
1)  ‘regulatory sandboxes for the energy transition’ that aim to bring up PtX technologies that are close 
to  market  to  an  industrial  scale  and  accelerate  the  process  of  innovation  transfer;  2)  Large-scale 
research projects entitled ‘hydrogen in the steel and chemical industries’, paving the way for climate 
neutrality; 3) Feasibility studies and atlases of potential to help pinpoint economically suitable global 
locations  for  a  future,  green  hydrogen  industry,  taking  into  account  future  developments  of  energy 
needs and of the natural resources available in the various countries; 4) International networks and 
R&E cooperation to prepare new markets for German technology exports; 5) Establishment of a new 
research  network  on  hydrogen  technologies  to  foster  networking  and  an  open  dialogue  between 
business and science that can inform public funding policy. 

  Development  of  a  pro-innovative  framework  paving  the  way  for  the  market  entry  of  hydrogen 
technologies, including assessments of measures such as research and experimentation clauses that 
could test the market entry of hydrogen technologies and facilitate their transfer into practice. In this 
context, a pioneering project for scientific policy advice is to be set up with the aim of laying the basis 
for practical work to further develop the national and European legal framework to allow for a large-
scale roll-out of applications for the production, storage, transport, and use of hydrogen and for related 
business models that are economically viable. This includes the development of a quality-assurance 
infrastructure that meets all the security requirements, complete with an assessment of the systems’ 
and installations’ efficiency,  and  of  a  billing  system  that is  in  compliance  with calibration law  and is 
based on reliable metering procedures. Any obstacles existing under the national or European legal 
framework must be identified and proposals for its development made. 

  Fostering  education  and  vocational  training  nationally  and  internationally:  Imparting  knowledge  and 
skills to the staff that are to produce, operate, and do maintenance work in fields where hydrogen has 
so far played no more than a minor role; Cooperation between training and research, for instance by 
setting  up  centres  of  excellence  at  non-university  research  institutions  and  institutes  of  higher 
education; Work with  export markets to foster cooperation on vocational training and strengthen efforts 
for capacity building with special programmes, for instance for PhD students. 

Need for action at European level 
The strategy highlights the intention of making use of the German EU Council Presidency in the second half of 
2020 to proactively progress key hydrogen-related dossiers, e.g. in the context of the preparations for the 
legislative package on sector coupling and gas market design, including the Hydrogen Action Plan and the 
strategy on Smart Energy System Integration. 

  Set  reliable  sustainability  standards  and  develop  quality  infrastructure  for  green  hydrogen  and  its 
downstream  products  at  European  level,  including  support  for  the  development  of  European 
regulations, codes and standards in the various fields of application. In parallel to this, Germany plans 
to  intensify  the  dialogue  on  common  standards  with  other  countries  to  pave  the  way  towards  a 
universalisation in international organisations. 

 

Intensify investment in research, development and demonstration of green hydrogen at EU level, e.g. 
by creating a new Important Project of Common European Interest (IPCEI) for the field of hydrogen 
technologies and systems as a joint project with other Member States, focusing on the entire value and 
use chain for hydrogen (generation, transport, distribution, use).  

  Support for the drafting of the EU Hydrogen Strategy 

  Explore  the  possibility  to  establish  a  European  hydrogen  company  to  promote  and  develop  joint 

international production capacities and infrastructure. 

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International hydrogen market and external economic partnerships 
The strategy outlines measures to build up and intensify international cooperation on hydrogen at all levels, 
both for the development of hydrogen technologies and markets and for possibilities and opportunities to 
convert production and the export of fossil fuels to hydrogen. The following measures are specified: 

 

Integration of hydrogen into existing energy partnerships and the establishment of new  partnerships 
with strategic exporting and importing countries 

  Progress the cooperation with partner countries in the context of a hydrogen alliance along the entire 

value chain in coordination with EU initiatives.  

  Strengthen the existing international activities, particularly in the context of the energy partnerships and 
of multilateral cooperation, such as that of the International Partnership for Hydrogen and Fuel Cells in 
the  Economy  (IPHE),  the  International  Renewable  Energy  Agency  (IRENA)  and  the  International 
Energy Agency (IEA). Compilation of atlases of potential for the generation of green hydrogen and its 
downstream products to help with the identification of future countries of destination and opportunities 
to export installations.   

  Pilot  projects  in partner  countries  to  explore  whether  and  how  green  hydrogen  and  its  downstream 

products can be produced and marketed on a sustainable and competitive basis. 

 

Intensify dialogue with current exporters of fossil fuels with a view to a gradual global energy transition 
including hydrogen. 

Hydrogen: a renewable energy perspective (International Renewable Energy Agency 2019) 

Summary and main findings 
This report provides an in-depth perspective on the nexus between hydrogen and renewable energy, on 
hydrogen supply economics in light of the rapidly falling cost of renewables and the role of hydrogen in the 
energy transition towards decarbonisation. The existing challenges that have hindered hydrogen development 
to date are reviewed and provide guidelines for strategic considerations and future hydrogen commodity trade. 

Current situation of hydrogen 

  Today, further acceleration of efforts is needed to ensure a significant share of hydrogen in the energy 

systems in the coming decades. 

 

In recent years, two key developments have boosted hydrogen use: (i) the cost of renewable hydrogen 
supply has decreased; and (ii) the urgency of greenhouse gas emission mitigation has increased. 

  As a consequence, the automotive industry, energy-intensive industries, trucks, aviation, shipping and 

heating applications have shifted their interest for decarbonisation towards hydrogen.  

  Ensuring a low-carbon, clean and affordable hydrogen supply is essential.  

  Hydrogen  sources:  (i)  fossil  fuel-based  hydrogen  (grey  hydrogen);  (ii)  fossil  fuel-based  hydrogen 
production with carbon capture, utilisation and storage (blue hydrogen); and (iii) renewable hydrogen 
(green hydrogen). 

  Green hydrogen is expected to grow rapidly in the coming years. Today it is technically viable and is 
quickly approaching economic competitiveness, driven by the drop in costs of renewable power and 
by systems integration challenges due to rising shares of variable renewable power supply. 

  Blue hydrogen has some attractive features, but it is not carbon-free and public acceptance can be an 
issue. If used for global hydrogen commodity trade, transparency on verification and certification to 
account  for  non-captured  CO2  emissions and  retention  of  stored  CO2  will  be  crucial.  Although  blue 
hydrogen may serve as a transition solution, this poses challenges in terms of production upscaling 
and supply logistics. 

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  Currently, the efforts are on reducing electrolyser costs and supply chain logistics. Electrolysers are 
scaling up quickly, and their costs are expected to decrease by 50 % by 2040 - 2050, becoming soon 
the  cheapest  clean  hydrogen  supply  option.  However,  no  radical  technological  breakthroughs  are 
expected. 

  Synergies may exist between green and blue hydrogen deployment. 

Barriers 

  A hydrogen-based transition will need time and a dedicated new supply infrastructure. 

  Hydrogen supply costs per energy unit are 1.5 to 5 times those of natural gas.  

  Currently, significant energy losses occur in hydrogen production, transport and conversion. 

Policies and strategy 

  Hydrogen should not be considered as the only solution, but instead, a complementary solution with 

electrification for countries with ambitious climate objectives. 

  Decarbonisation of a significant share of global emissions will require green and blue hydrogen. 

  Policy  makers  should  create  legislative  frameworks  to  facilitate  hydrogen-based  sector  coupling, 
utilising the synergies between hydrogen and renewable energy. Hydrogen can increase renewable 
electricity market growth, broaden the reach of renewable energy to industry, and be used for seasonal 
energy storage. 

  Existing hydrogen pipelines may be refurbished for hydrogen transport, thus reducing investment cost. 

 

It  is  unclear  if  the  solution  is a  radical  natural  gas  replacement  or  gradually  introducing mixtures  of 
hydrogen. 

  The trade of energy-intensive commodities produced with hydrogen (e.g. ammonia) needs to overcome 

cost and efficiency barriers. 

Spatially Resolved Optimization for Studying the Role of Hydrogen for Heat Decarbonisation 
Pathways (Jalil-Vega and Hawkes 2018) 

Summary and main findings 

  An  optimisation  approach  to  investigate  the  role  of  hydrogen  networks  in  heat  decarbonisation 

pathways through 2050 

  Two  case  studies:  (i)  with  independent  hydrogen  network,  (ii)  by  retrofitting  the  gas  network  into 

hydrogen 

  Best pathway  for average  hydrogen  price:  heat  networks supplied by  a combination of  district-level 
heat  pumps  and  gas  boilers  in  the  domestic  and  commercial  sectors  and  hydrogen  boilers  in  the 
domestic sector 

  Best  pathway  for  low  hydrogen  price:  retrofitting  the  gas  network  into  hydrogen,  replacing  gas  by 
hydrogen  boilers  in  the  commercial  sector  and  a  mixture  of  hydrogen  boilers  and  heat  networks 
supplied by district-level heat pumps, gas, and hydrogen boilers for the domestic sector. 

Approach 

  Modification of HIT model (mixed integer linear program that minimises total system cost for investment 

and operation of heat and electricity supply technologies and infrastructure). 

  Region spatially disaggregated in zones. 

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 

Inputs: heat and electricity demands; gas, heat and electricity network infrastructure costs, heat supply 
technology parameters, fuel, electricity and carbon prices 

  Outputs:  size  and  location  of  heat  supply  technologies,  operation  in  each  time  slice,  electricity 

generation/consumption. 

Decarbonisation strategies 

 

Independent hydrogen network: gas boilers replaced in time by heat exchangers and air-source heat 
pumps. No participation of hydrogen technology in the commercial sector.  

  Retrofitted gas network: no contribution of gas boilers by 2050.  

  Most district heat networks are supplied by a combination of natural gas district boilers and district-
level  air  source  heat  pumps.  No  hydrogen  boilers  are  observed,  showing  that  the  lower  hydrogen 
carbon emissions do not offset its higher price compared to natural gas. 

  Cost-effective decarbonisation pathway is achieved by a mixture of energy carriers and heat supply 

technologies. 

Potential for hydrogen and Power-to-Liquid in a low-carbon EU energy system using cost 
optimization (Blanco et al. 2018) 

Summary and main findings 

  Objective: evaluate the Power-to-X options and integration between sectors and the optimal capacities 

needed to achieve a low-carbon system.  

  The current EU policy framework does not hinder hydrogen development, but it does not provide strong 

support either. 

  Competition between all sectors (residential, commercial, industry, power and transport) for hydrogen 
use, and between alternative sources of fuel (e.g. hydrogen, methane, XtL,7 electrofuels and biofuels) 
is considered. 

  The three largest drivers for hydrogen are limitations on CO2 storage, low biomass potential and low 

technology cost. 

  Hydrogen  complements  electricity  as  a  main  energy  carrier  and  enables  the  downstream  liquid 

production through PtL.  

  Hydrogen use grows as more constraints are added to the system. 

  PtL acts as a complement to biofuels rather than a competing alternative. 

Approach 

 

Inputs:  demand  for  services  and  materials,  fuel  prices,  technology  costs,  efficiencies  and  lifetimes, 
technologies’ evolution over time, maximum flows for all energy sources for each country, associated 
mining costs for fossil fuels for each country, interconnection between countries. 

  Software: TIMES (The Integrated MARKAL-EFOM System) 

 

Includes: investment, fixed, annual, decommissioning and operational cost, and taxes, subsidies and 
salvage value in the objective function.  

  Each process is represented by its efficiency (input-output), cost (CAPEX and OPEX) and lifetime.  

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  Several  policies  are  included:  CO2  tax,  technology  subsidy,  regulations,  targets,  energy  efficiency, 

feed-in tariffs, emission trading systems and energy security 

  23  possible  scenarios  from  combination  of  fuels  (methane,  biomass,  coal,  electricity),  technologies 
(reforming,  gasification,  electrolysis and  variations  therewith  and  carbon capture),  size  (centralised, 
decentralised) and storage alternatives (underground, centralised and distributed tank) 

  4 delivery options: hydrogen compression, transmission, natural gas blend, or liquefaction 

Decarbonisation strategies 

  Policies should target hydrogen distribution, besides mere production. 

  Action  is  needed  to  cover  applications  like  steel  and  heavy-duty  transport,  and  close  the  gap  in 

deployment. 

  Without applying further regulatory instruments, CO2 storage would prolong the use of fossil fuels. 

  Policy adoption on CO2 storage and biomass availability will define the future of power-to-liquid options. 

  A regulatory framework needs to set targets that promote hydrogen use in various sectors. 

  A specific technology subsidy scheme is needed to improve the business case in early stages, as well 

as initiatives with stakeholders to overcome the infrastructure barrier. 

  Research and demonstration of CCS is needed. 

A review of four case studies assessing the potential for hydrogen penetration of the future 
energy system (Chapman et al. 2019) 

Summary and main findings 
This study reviews four case studies assessing the potential for hydrogen penetration in the future energy 
system. The future potential of hydrogen as an energy carrier and future areas of research to help lower 
economic barriers for hydrogen adoption are assessed. Simulation models were used to investigate four case 
studies that provide a global view augmented with specific national examples. 

Current situation of hydrogen 
Hydrogen is an energy carrier that allows the decarbonisation of transport, industry, and space heating as well 
as storage of intermittent renewable energy generation. 

Case studies 
Four case studies were selected to exploit existing data while providing a global view augmented with specific 
national examples, and provide guidance for a future research roadmap to lower the development cost. 

  Case  1  -  Global  energy  model:  assesses  the  potential  penetration  of  hydrogen  in  a  global  energy 
system model if it is used only for fuel cell vehicles, as a city gas alternative, co-firing in natural gas-
fired power plants, and methanol production. 

  Case 2 - Social welfare economics evaluation: focus is on the social cost of the emitted carbon (SCC), 
and  the  impact  on  climate  change  if  hydrogen  could  be  efficiently  produced  from  nuclear  energy, 
renewable energy, or fossil fuel plus carbon capture and storage systems. 

  Case 3 - Hydrogen as an energy carrier for road vehicles in US: analyses the use of hydrogen to cover 
existing energetic requirements for road vehicles and transportation sector, defining requirements if 
hydrogen was produced via electrolysis using renewable energy resources. 

  Case  4  -  Decarbonising  the  gas  grid  using  hydrogen:  accounts  for  the  introduction  of  hydrogen  for 
heating of the households in UK, where so far the main focus has been on the electrification of heat. 

Main findings 

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  Hydrogen  has  the  potential  to  account  for  approximately  3 %  of  the  global  energy  consumption  by 

2050. 

  The  increasing  use  of  hydrogen  can  provide  significant  energetic  benefits  while  decarbonising  the 

global energy system. 

 

In the US, using hydrogen for road transportation would result in a reduction of waste energy of nearly 
10 % and a 30 % reduction in CO2 emissions. 

  Hydrogen might provide the least cost alternative to decarbonise space heating in the UK. 

  With  the  current  levels  of  technological  maturity,  the  implementation  costs  remain  still  a  significant 

barrier for the transition to a hydrogen economy. 

 

Implementation costs come largely from two sources: (i) the cost of producing, storing, and transmitting 
hydrogen is high, and there is still potential for significant cost reduction in these processes; (ii) the 
transition to hydrogen will require a dedicated effort to construct new hydrogen infrastructure, being a 
significant challenge in infrastructure projects globally. 

  The widespread abandonment of nuclear power, considering it a prominent carbon-free energy source 
from  the  global  mix  and  a  source  for  large-scale  production  of  hydrogen,  can  impose  a  significant 
challenge for investment in alternatives. 

 

If fuel cell vehicles penetrate the market as identified, and city gas can be replaced with hydrogen there 
is a potential to account for approximately 3 % of energy consumption from hydrogen by 2050 in the 
OECD nations. 

Trends in design of distributed energy systems using hydrogen as energy vector: A 
systematic literature review (Fonseca et al. 2019) 

Summary and main findings 
This study presents a systematic literature review of distributed energy systems involving hydrogen as energy 
carrier. The study comprises a mapping of energy sources, a detailed revision of hydrogen-related 
technologies, the identification of hydrogen end-uses, and the objectives evaluated during the design, plan 
and operation of systems using hydrogen, with the aim of identifying how hydrogen is used and which criteria 
(i.e. economic, technical, social and environmental) are evaluated in the literature. The results constitute 
baseline information that can be used for the preliminary stages of research and project planning of distributed 
energy systems involving hydrogen. 

Main findings 

  A significant interest on the transformation of energy systems has emerged as the result of the need 
to develop an energy framework independent of fossil fuel reliance, the concerns about climate change 
and air quality, and the need to extend the supply of electricity. 

  The deployment of power plants located close to end users and using multiple energy sources and 
carriers, and the increasing share of renewable energies, suggest the need for the design of distributed 
energy systems. 

  Designing distributed energy systems is challenging due to the simultaneous goals and constraints to 
be considered, the incorporation of different energy carriers, and the establishment of the relationships 
and inter-dependence level among them. 

 

In the design, plan or operation of hydrogen-based distributed energy, different scales of the application 
cases are considered (e.g. household, neighbourhood, buildings, universities, current power plants). 

  When  it  comes  to  technologies,  electrolysers  are  prevalent  over  fuel  cells,  although  reforming, 

gasification and methanation processes have also been studied.  

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  The installed capacity of electrolysers is larger than for fuel cells. 

  For  small  systems  (<20  kW),  the  size  of  electrolysers  is  more  influenced  by  the  intermittence  of 
renewables and therefore a higher capacity with respect to the peak demand may be required. 

Strategies for the future 

  A more integrated approach, including all the hydrogen supply chain stages and project stakeholders, 
is needed to address issues like the energy system’s safety, which may generate consumer rejection. 

  Most  of  the  publications  have  considered  the  application  of  hydrogen  as  a  storage  medium  for 
mitigating  renewable  production  fluctuations.  However,  the  hydrogen  use  as  fuel  in  cars,  scooters, 
boilers or combined heat and power units (alone or in blend with natural gas), and as raw material for 
the industry have also been addressed. 

  The design and analysis of distributed energy systems including hydrogen has been predominantly 

focused on techno-economic issues. 

  There is a lack of approaches including data uncertainties for weather conditions, prices and demands. 
As a consequence, future work to include social aspects, and considering specific context conditions 
(e.g. sources availability, weather) and the uncertainty of model inputs should be explored in order to 
improve the decision-making process for planning this type of energy system. 

Handbook of Climate Change Mitigation and Adaptation, Second Edition. Ch. Power-to-gas 
(Chen et al. 2017) 

Summary and main findings  
This chapter presents an overview of the storage technology ‘power-to-gas’ for the decarbonisation of all 
energy sectors. Power-to-gas and power-to-x enable decarbonisation by neutralising the CO2 footprint of all 
energy services. Renewable electricity converted into chemical energy carriers can use the existing vast fossil 
infrastructure with sufficient storage and transport capacities. A technical pathway of decarbonisation including 
costs is described for Germany and necessary policy frameworks are derived. 

Storage technologies  

  All  flexible  energy  systems  need  storage  for  energy  security  and  to  match  the  consumption  loads, 

especially when renewable resources need to be integrated.  

  Each energy transition requires a storage transition.   

  Charging, storing and discharging can happen in one system, or be distributed to different sectors.   

  Among energy storage options (electrical, electrochemical, chemical, mechanical and thermal) thermal 

energy storage is still the cheapest option, but it is not suitable for electricity storage.  

  Pumped hydro, batteries, and compressed air can be used as infrastructure  to store wind and solar 

power.  

Power-to-gas  

  Power-to-gas (producing hydrogen or synthetic natural gas from water electrolysis by using electricity) 

is a type of chemical storage, which is more cost-efficient than batteries.   

 

In  the methanation  process,  CO2  is  consumed  as a  reactant,  which  ideally  can come  from  residual 
biomass or residues as biogenic sources (biological methanation). The exhaust heat from the process 
can  be  used  to  increase  efficiency  and  improve  the  carbon  footprint.  Methane  is  easier  to  store, 
compress and transport, but this process requires additional energy.  

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  Admixture of up to 1.5 % hydrogen in natural gas is possible, without needing further research needs 

and equipment adjustment requirements.  

 

In  deficit  times  due  to  fluctuating  renewable  energy,  hydrogen  can  be  converted  to  electricity  via 
especially adapted gas turbines.  

  The  efficiency  of  pure  Power-to-gas  hydrogen  storage  systems  is  5–12  %  higher  than  with 

methanation.  

  Coupling of the power and gas grid makes storage of great volumes of energy possible and allows for 

the spatial separation of storing and usage of renewable methane.  

Decarbonisation strategies  

 

Infrastructure for the generated gas includes aboveground storage (short-term buffer), underground 
storage, and salt caverns (long term). These are technologically ready for all sectors (i.e. completely 
developed for methanation, and some existing for hydrogen that may need further development).  

  Supporting policies should remove subsidies for fossil energy and market barriers for new technologies, 
interlink the electricity, gas, heat, and transport sectors, merge energy markets via energy storage and 
energy transmission, and build up strategic renewable reserves and limited tax exemptions. Storage 
or electromobility should be cross-financed with CO2 funds, fossil fuel savings, and cheap renewables.  

  Power-to-Gas and Power-to-X are essential technologies that save costs by using existing fuel storage 
and  transmission  infrastructure,  and  are  essential  to  decarbonise  electricity,  heat  and  the  chemical 
industry.  

  Policy makers need to make society aware of the need of an energy transition including storage. 

11.3. Sector integration  

Sector Coupling in Europe: Powering Decarbonisation (Bloomberg Finance L.P. 2020) 

Summary 
The report examines the impact of sector coupling on the power system. First, a possible path for sector 
coupling in "northern European archetypes" until 2050 is described. Then, based on this path, the implications 
of sector coupling for the electric system are analysed. Finally, the report identifies how policymakers and 
regulators might address some of the biggest challenges related to sector coupling and its impact on the 
power system. 

Main findings 
The described pathway for sector coupling in "northern European archetypes" until 2050 shows the following 
results: 

  The described scenario shows that the electrification of transport, buildings and industry would make 
a  significant  contribution  to  climate  goals.  Electricity  could  supply  a  significant  share  of  the  energy 
consumed in Europe by 2050, displacing fossil fuels. Emissions from transport, buildings and industry 
could be reduced by 60 % over the period 2020-2050 through sector coupling. 

  Sector coupling is a huge undertaking that will not succeed without policy action. For successful sector 
coupling, incentives are needed to reduce emissions, early efforts must be supported, and a market 
for green hydrogen must be created. 

The main findings related to the impact of sector coupling on the power system are as follows: 

 

Increasing electricity demand due to sector coupling requires a much larger power system. 

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  Due to the coupling of the transport and building sectors, the intraday and seasonal load profiles will 
become higher and steeper. These changes require a more flexible power system. However, sector 
coupling will also create new sources of flexibility. 

  How the power grid-related issues are handled is critical to the success of sector coupling. 

  As more hydrogen produced by electrolysis is fed into the gas grid, the electricity and gas systems 

become more integrated. 

  Energy consumers and civil society will play a key role in enabling smooth sector coupling for the power 

system. Their commitment and participation cannot be taken for granted. 

The key findings related to the decisions of policymakers and regulators are as follows: 

  Flexible  electricity  tariffs  lead  to  minimisation  of  net  peak  demand.  Policymakers  must  ensure  the 
availability and acceptance of flexible electricity tariffs that provide strong incentives for all consumers. 

  Government support and regulatory changes are needed to ensure that the electric grid can handle 

the impacts of sector coupling. 

  Regulators  and  policymakers  play  a  crucial  part  in  facilitating  the  integration  of  electricity  and  gas 

systems. 

  Policymakers will likely need to modify capacity mechanisms or create additional revenue streams to 

maintain the pace of power system decarbonisation. 

Sector coupling: how can it be enhanced in the EU to foster grid stability and decarbonise? 
(Trinomics 2018a) 

Overview 
The study focuses more broadly on sector coupling (SC) including opportunities for SC, ways in which SC can 
be achieved and barriers and bottlenecks to SC. In this study, SC is considered from both the end-use 
perspective (e.g. coupling of sectors such as heating and transport) and the supply-side coupling (e.g. 
integration of electricity and gas sectors through e.g. power-to-gas technologies). Two sections of the report 
are relevant for heating: Section 2.4. discusses coupling of RES deployment to the energy demand for H&C in 
buildings. Section 3.1.2. briefly addresses high-temperature (HT) heat demand in industry. 

Solutions for space heating 
The paper identifies two main solutions to decarbonise energy consumption for heating:  

a)  end-use sector coupling through heat pumps and (to a lesser extent) electric boilers and  
b)  cross-vector integration through the production of hydrogen and synthetic methane, which can be used 
for heat production in CHP for large buildings or district heating, or hybrid heat pumps or gas boilers in 
individual buildings.  

The two solutions can be complementary (e.g. heat pumps and RE district heating with a CHP installation; the 
former can operate during times of low electricity prices and the latter during high electricity prices). Combining 
power-to-heat options (heat pumps and electric boilers with heat storage) allows for producing heat when 
electricity is available in excess. 
The most cost-effective decarbonisation technology depends on local conditions, such as the climate. 

Solutions for high-temperature heat demand in industry 
Technology solutions mentioned to decarbonise high-temperature (>200°C) heat include electric boilers for the 
combustion of biomass, renewable methane or hydrogen in industrial boilers. Heat pumps for HT energy use 
are being developed but are not commercially available at the moment. 

Seasonal energy storage 
Hydrogen and synthetic methane can be a solution for seasonal energy storage allowing for usage of 
abundant solar energy in summer and reducing the peak electricity demand in winter. 

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Decarbonising the EU heating sector: Integration of the power and heating sector 
(Kavvadias et al. 2019)  

Overview 
The report focuses on the integration of the heat and power sectors and how such an integration can 
contribute to the energy efficiency and climate change mitigation targets.  It presents a detailed analysis of the 
energy breakdown by types of use and fuel shares in the heating sector, costs, efficiencies, emissions, and 
their links to the power system. The study focuses on two main energy transition pathways: 1) electrification of 
heat and 2) centralised co-generation and district heating networks. The option of using renewable and low 
carbon gas is acknowledged but not further examined in this report. 

Findings and conclusions 
An analysis of the electrification of heat pathway finds that: 

  Replacing all fossil-based heat generation technologies by heat pumps overnight would result in a 16 % 
reduction of emissions in the EU from the heat and power sectors combined. Percentages per Member 
State range from 65 % (FR) to 4 % (PL, EE) depending on the current and projected mix in the power 
and heat sector. 

  Without additional “clean” capacity, the additional electricity demand for heating will likely come from 
dispatchable sources, which usually have higher emission rates compared to the average electricity 
generation mix. In a future, decarbonised power system the emission reduction gains could amount to 
25 % even without considering additional clean capacity.  

  Replacing all fossil-based heat generation technologies by heat pumps overnight would represent an 
additional  26 %  of  the  total  electricity  demand,  representing  526  TWh.  The  increase in  winter  peak 
demand could range between 20 % and 70 % with an average of 41 %.  

  Firm power capacity of the current power system starts to become inadequate for electrification rates 
above 32 %, representing about a 60 % replacement of fossil-fuel heat. Beyond this threshold, flexibility 
measures will play a more relevant role. 

An analysis of the centralised co-generation and district heating pathway finds that: 

  The present power plant fleet could satisfy 58 % of the European space heating demand. The utilisation 
of  this  CHP could  result  in  the  reduction of  costs  of  the  total  energy  system by  17 %  and  20 %  for 
current and future scenarios respectively.  

  The overall efficiency of the energy system would increase significantly if all current and future steam-
based power plants were to operate in CHP mode connected with district heating networks. Efficiency 
gains could be as high as between 63 % and 76 % in the current scenario and between 73 % and 80 % 
in the future scenario.  

  Operating thermal power plants in CHP mode increases the curtailment of renewable energy by ~ 1 to 
9 % for the current scenario and 6 to 10 % for the future one. This could be alleviated by enhanced 
interconnections or storage capacity. 

Influence of heat pumps on renewable electricity integration: Germany in a European 
Context (Bernath et al. 2019)    

Summary and main findings 
This study assesses how heat pumps in district heating grids contribute to renewable electricity integration. 
The study considers interdependencies with other sectors such as the heating and transport, techno-economic 
optimisation model that minimises the costs of generation, transmission and storage of electricity for Europe. 
The energy system in Germany is examined in three scenarios in a European context for the year 2050. A 
sensitivity analysis of CO2 and gas prices complements the analysis. 

Methodology 

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  Enertile (Fraunhofer Institute for Systems and Innovation) provides an integrated modelling approach 
to the electricity and heating sectors, considering decentralised heat pump systems and district heating 
grids with multivalent heating. 

  The Enertile model optimises capacities and dispatch of electricity and heat generation simultaneously, 
considering  the  interdependencies  between  heating  and  electricity  generation.  It  has  an  hourly 
resolution which makes it possible to consider fluctuating renewable electricity generation. 

  The modelled regions include all Member States of the European Union, plus Norway and Switzerland, 

and countries in North Africa and the Middle East. 

  The  objective  function  contains  all  costs  incurred  by  the  major  infrastructures:  conventional  power 
plants,  renewable  energy  technologies,  combined  heat  and  power,  cross-border  transmission 
capacities, storage technologies, and centralised heating technologies in heating grids. 

Constraints/Hypotheses and scenarios 
The  study  assumes  that  demand  of  electricity,  heating,  and  hydrogen  in  every  region  is  met  at  all  times, 
decentralised heat pump systems are modelled as buildings with defined demand, a heat pump, and storage, 
unlimited electricity exchange is possible. 

Scenarios 

  GERMANY scenario: Germany in isolation without considering its neighbouring countries. 

  EUROPE scenario: Germany in a European context integrating industrial heating grids. 

  EUROPE LIMITED: scenario restricts network expansion for cross-border transmission capacities 

Strategies 

  Reducing CO2 emissions requires the substitution of fossil fuels with renewable energies. 

  Replacing fossil fuels in electricity production reduces the CO2 intensity of electricity generation, and 
in turn, sector coupling provides additional flexibility by fostering the integration of renewable energies 
for other processes. 

  Heat pumps play a major role in the investigated range of fuel and CO2 price developments. 

 

It is concluded that the higher the achieved levels of decarbonisation and renewable electricity, the 
more competitive heat pumps become in heating grids. 

  Considering  other  flexibility  options  such  as  industrial  heating  grids,  electric  mobility  and  hydrogen 
production could reduce the contribution of heat pumps to the integration of renewable energies. 

  Heat sources like industrial waste heat or underground sources can enhance the application of heat 

pumps. 

  Renewable  heating  technologies  (e.g.  geothermal,  solar  thermal  energy)  are  main  competing 

technologies. 

  When  limiting  the  modelled  region  or  the  grid  expansion,  the  share  of  heat  pumps  decreases  as  it 

becomes more difficult to exploit the potential of low-cost renewables. 

  The higher the achieved levels of decarbonisation and renewable electricity, the more competitive heat 

pumps become in heating grids. 

11.4. Gas infrastructure 

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The role of trans-European gas infrastructure in the light of the 2050 decarbonisation 
targets (Trinomics 2018b) 

Overview 
This study analyses and summarises existing European and non-EU decarbonisation storylines which depict 
possible futures for the trans-European gas infrastructure up to 2050. On this basis the authors  developed 3 
own storylines: (1) “Strong electrification” (2) “Strong development of methane (CO2-neutral)” and (3) “Strong 
development of hydrogen”. 

All three storylines predict a decreasing gas demand for heating (-50 % and more) due to significantly 
enhanced building insulation. In (1), most of today’s gas-based heating systems are substituted by more 
efficient all-electric heat pumps or by district heating systems. Large parts of today’s heating related gas 
infrastructure are decommissioned in this storyline. In storylines (2) and (3) a strong electrification in heating 
is foreseen in households not connected to gas distribution grids today. Even though the overall amount of 
gas needed for heating and flowing in the grid is reduced, the number of users stays almost constant and gas 
grids are further used. In (3) the substitution with hydrogen is more complex and requires the adaption of 
the distribution grids as well as the conversion of end user equipment. 

Assessment of existing storylines 
Focusing on heating related gas infrastructure, most storylines predict a decreasing gas demand for heating 
due to significantly enhanced building insulation and the substitution of most of today’s gas-based heating 
systems by more efficient all-electric heat pumps using ambient, low-temperature heat and electricity or by 
district heating systems based on renewable heat. However, both, the assumptions and the results on the 
share of gas-fueled technology versus electricity-based technologies in the heating sector vary widely across 
storylines. 

Overall, for the whole energy system, the analysed storylines do ascribe a future key role to gas infrastructure 
due  to  its  ability  to  store  and  transport  energy  efficiently,  at  large  scale,  over  long  periods  of  time,  and 
flexible to varying demand.  

The study does emphasise that many storylines point to the fact that structural differences develop between 
energy systems designed with a -80 % GHG reduction ambition (often still a lot of natural gas in use) and with 
a  -95 %  ambition  (less  importance  of  gas).  Many  solutions  for  -80 %  may  not  be  viable  for  a  simple 
extrapolation to -95 %. 
Moreover, the authors state that a one-size-fits-all solution for all Member States seems unlikely. While 
some EU countries pursue approaches and policy priorities that aim at decarbonising the gas grid by 2050, 
others still focus mostly on security of supply for natural gas and a substitution of coal by fossil natural 
gas to reduce CO2 emissions. 

Development of three own storylines 

Storyline 1 – Strong electrification 
There  is  only  a  small  role  for  gas.  The  amount  of  gas  in  the  European  pipeline  system  is  halved  by  2050 
compared to today. The utilizstion of the gas system drops. Significant shares of the distribution and transport 
grid  are  decommissioned.  However,  some  gas  infrastructure  is  still  crucial,  especially  gas  storage, 
transport,  and  re-electrification  units.  Gas  provides  a  large  share  of  the  flexible  peak  power  production 
capacity  as  well  as  long-term  and  strategic  energy  storage.  An  increased  share  of  the  gas  might  be 
transported twice through the system, 1) after production from renewable sources to a seasonal storage and 
2) after withdrawal from the seasonal storage. The study highlights the importance of ensuring that all relevant 
infrastructures remain available to the energy system throughout the transformation process. 

H&C: 
Gas  demand  for  heating  is  significantly  reduced  due  to  strong  insulation  (-50 %  in  average),  increased 
efficiency of heat production (e.g. condensing boilers) and due to a fuel switch from gas to electricity for the 
majority  of  today’s  gas  users  for  heating  (75 %  -  versus  10 %  today  -  of  heating  provided  from  electricity). 
Consequently, large parts of the gas distribution grid are not in use anymore and are decommissioned. 
Remaining gas customers will be concentrated in single (island) grids which were able to be kept operational 
as they are located close to CO2-neutral gas sources e.g. in rural areas with a high availability of required 
feedstock (e.g. biomass for methane) or close to renewable surplus electricity for hydrogen production.  

Even  if the gas demand of individual gas consumers decreases due to refurbishment measures, the absolute 
cost contribution (grid fees) for the low-pressure distribution grid remains constant or rises due to more or less 
constant  total  costs  for  the  grid  section.  For  those  remaining  distribution  grids,  the  cost  spiral  could  be 

211 

 
 
 
 
 
 
 
 
 
stopped, which is that high (grid) costs lead to high energy costs causing additional customers to switch fuels. 
The  small  grids  will  likely  require  their  own  gas  storage  for  short-  and  long-term  storage  or  need  to  be 
connected to a gas transport pipeline including reverse flow technology. 

Storyline 2 – Strong development of methane (CO2-neutral) 
In sectors such as heating and industry, gas (increasing share of (bio)methane) will be used until and beyond 
2050 widely using existing gas infrastructure. For security of supply, large gas storages will be in operation, 
required less for the reason of seasonality (lower gas-for-heating demand and drastically increased gas demand 
by transport sector) but more for provision of flexibility in electricity generation. 

H&C: 
In  the  heating sector  the scenario  foresees  a  strong  electrification  of  buildings  (50 %  of  heating  demand 
versus  10 %  today).  However,  electricity-based  heating  technologies  are  mainly  used  for  buildings  in  areas 
without gas grid. The relevance of gas in the heating sector will remain strong, at a 50 % level throughout 
the period until 2050. 

While the overall demand of gas is halved due to increased insulation of buildings and increased efficiency of 
heat production, the total number of gas users stays relatively constant. Some new consumers (e.g. former 
oil heaters) are connected to the existing gas distribution grid (fuel switch), while other  consumers switch to 
electricity.  Investments  into  the  distribution  grid  are  limited  to  small  adaptions  and  replacements.  New  low 
pressure distribution grids are not built due to missing economic feasibility due to increased insulation and low 
per capita gas demand. The costs for this part of the gas grid will remain constant as the number of users 
remains constant.  

Storyline 3 - Strong development of hydrogen 
This storyline depicts a rather slow growth and slow market penetration of electricity-based technologies. At the 
same time, hydrogen technologies are being developed with increasing speed.  

H&C: 
According to this storyline, the heating sector will undergo similar developments as in the previous storyline. 
Increased insulation of buildings, strong electrification of buildings without gas grid connection (50 % of heating 
demand), significantly reduced gas demand in the low-pressure distribution grids. The main difference is that 
hydrogen will be used to substitute natural gas in the grid. This substitution with hydrogen is more complex 
than with methane as it requires the adaption of end user equipment due to the different burning properties 
of  the  gases.  It  will  be  necessary  at  some  point  to  convert  the  distribution  grids  and  the  user  heating 
appliances to hydrogen use.  

Implications of the storylines for transmission system operators  
The study depicts, that for TSOs the CAPEX are expected to remain at a high level in all three storylines, 
due to high investments in the past which must still be depreciated to a large extent. The investment levels will 
slightly decline in the next decade, despite some specific investments needed after 2030 to refurbish grids 
to accommodate H2 in storylines 1 and 3, and for reverse flows of renewable gas mainly in storyline 2. 

The OPEX is expected to  remain at a high level in all three storylines too. These costs are mainly fixed. 
Falling transported gas volumes would not lead to a proportionate cost decrease.  

For most gas infrastructure assets Third-Party Access (TPAs) tariffs apply. In storylines 1 and 3 falling gas 
volumes might have an increasing impact on grid tariffs, which might in the long term decrease the 
affordability and competitiveness of gas. Storyline 2 would probably lead to the lowest grid tariffs. 

Policy recommendations 
The study bases the following recommendations on the analysis of three national regulatory regimes (Denmark, 
France and Poland). 

  An  EU  wide  carbon  tax  or  levy  on  all  energy  uses  is  suggested,  as  it  improves  the  economic 

feasibility of renewable gas and reduces the need for specific support. 

  Facilitate injections of renewable gas into the grid by more harmonised technical specifications and 

by including priority dispatch in national legislation.  

  Support joint initiatives to upscale and reduce the cost of the treating of renewable gas to meet grid 

quality requirements. 

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 

Implement an EU wide system of guarantees of origin (GOs) for all types of renewable gases to 
facilitate the production and trade, and to allow proper counting of the share of renewable gas in the 
energy mix. 

  The  procedure  of  granting  GOs  should  avoid  double  counting,  as  renewable  energy  will  be 

increasingly converted in subsequent processes (e.g. power to gas to power). 

 

 

Implement  longer  validity  periods  (today:  6  months  validity  after issuing) for  gas  related  GOs for 
renewable gas to allow for longer storage times. 

Implement cost-reflective and non-discriminatory grid tariffs and connection charges e.g. only 
charging direct connection costs to production facilities while socialising indirect upstream investment 
costs. 

  Policies should focus on investments in future-proof assets avoiding devalued or stranded assets 

while enabling the gradual replacement of natural gas with carbon-neutral gas. 

  Revise depreciation rules for gas infrastructure assets to reflect specific risks due to changing gas 

demand and supply patterns. 

  National  regulations  and  tariffs  for  connection  to  gas  infrastructure  should  be  assessed  and 

adapted where necessary, to facilitate the decarbonisation of the gas supply. 

  Consider  cross-subsidisation  or  subsidies  for  gas  infrastructure  to  keep  gas  grid  tariffs 
affordable. This might have distortive impacts. Principles of economic efficiency, transparency and 
non-discrimination should be accounted for. 

  Provide financial support for renewable gas only temporarily and phase out gradually to avoid that 
subsidy  schemes  harm  the  competitiveness  of  industrial  end-users  exposed  to  international 
competition. 

Impact of the use of the biomethane and hydrogen potential on trans-European 
infrastructure (European Commission 2019)   

Summary and main findings  
This study analyses the impact of the use of biomethane and hydrogen potential on the gas infrastructure. 
First, the technical potentials for biomethane and renewable hydrogen within the EU are assessed. Second, 
three scenarios are developed, each focuses on strong end-use of one of the three energy carriers: electricity, 
methane, or hydrogen. The three scenarios serve to analyse the impact of increasing use of biomethane and 
hydrogen on the gas infrastructure. Finally, recommendations for facilitating the deployment of renewable gas 
are presented. 

Main findings 
Potential availability of biomethane and hydrogen in the EU and neighbouring countries 
The technical potential for both biomethane and renewable hydrogen vary significantly by Member States.  
Overall, the considered scenarios in this study show that the potential for renewable hydrogen in the EU by 
far exceeds the gas consumption in 2050. Whereas the technical potential of biomethane is not sufficient to 
meet the EU’s gas demand. 

Technical  and  economic  impact  of  increasing  injection  of  biomethane  and  hydrogen  into  gas 
infrastructure 
The implication of increasing use of biomethane and hydrogen for the existing networks vary between the 
three scenarios. The blending of biomethane causes hardly any technical or regulatory barriers. In contrast, 
hydrogen can  only  be  fed into  the  existing gas infrastructure  up  to  a certain  limit.  For  higher  feeds, new 
infrastructure  and  technical  modifications  are  necessary.  In  addition,  there  is  no  consistent  regulatory 
framework for increasing hydrogen admixture to the gas network. 

From an economic perspective, the hydrogen-focused scenario achieves the lowest system costs. 

Impact of considered scenarios on TSOs and DSO 

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The  reconfiguration  of  gas  flows  in case  of  a  large  change  in  the cost  of service  or  transported  volumes 
would  cause  the  most  significant  long-term  risks  to  TSOs.  In  particular,  cross-border  transmission 
investments would lead to increasing transmission tariffs, especially if dedicated hydrogen networks need to 
be developed. 

Gas  transmission  investments  prior  to  2030  could  result  in  stranded  assets  and  re-evaluations  of  the 
regulatory asset base, given the uncertainty regarding OPEX levels and regulatory framework until 2050.  
DSOs will face similar risks, but the magnitude of the impact will be different and vary much more across 
regions. 

Readiness of the regulatory regimes to support decarbonised gases  
A  variety  of  incentives  exist  to  promote  renewable  gases,  but  these  vary  widely  from  Member  State  to 
Member  State  with  few  addressing  grid  connection  and  access.  In  contrast,  the  planning  and  regulatory 
frameworks for gas networks in the Member States have many similarities. 

TEN-E and CEF regulations have contributed to the development of well-integrated and secure gas markets.  

The following changes could now be considered to better support the use of hydrogen and biomethane in 
gas networks:  

  Update of the TEN-E priority corridors, areas and eligibility criteria for PCI and CEF 

  broadening the scope to include distribution projects and those that facilitate sector coupling 

 

inclusion of innovation and robustness to uncertainty in the selection criteria 

In addition, there is a lack of coherence between national hydrogen blending frameworks, which could hinder 
the development of a unified European approach and thus the cross-border transport of hydrogen. 

Recommendations of the study 
The study provides the following recommendations for facilitating the deployment of renewable gas: 

  Technical standards and specifications for hydrogen introduction should be developed; 

  A stepwise development of "islands" of 100 % hydrogen networks should be investigated; 

  Planning  for  new  energy  infrastructure  should  be  more  integrated  and  clear  guidance  from 

policymakers is expected 

  The  TEN-E  and  CEF  regulations  should  support  projects  that  facilitate  the  integration  of  gas  from 

renewable energy sources and contribute efficiently to the energy transition 

  A regulatory framework for power-to-gas that removes barriers to investment and further considers the 

role of TSOs should be developed 

  A regulatory framework for dedicated hydrogen networks should be established in a timely manner; 

 

Incentives for renewable gases are required; 

  Measures to mitigate the potential negative impact of declining gas demand and changing gas flows 

on network operators and network users should be considered. 

The future of gas in Europe: Review of recent studies on the future of gas (CEPS 2019) 

Overview 
The report summarises 23 recent studies on the future of gas in Europe with their different outcomes and 
projections for 2030 and 2050. The role of gas and gas networks for heating and cooling is not the central 
focus but part of the report. 

Outcomes and projections (heating and cooling) 
Building sector 

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Energy efficiency and building insulation measures will reduce the overall energy demand and thereby the 
gas demand in buildings. Today, 38 % of total gas consumption in the EU is for heating buildings. Gas demand 
is expected to decline by 1.2 % per year on average. 

According  to  the  report,  heat  pumps  are  likely  to  be  the  preferred  solution  for  heating  and  cooling  new 
buildings, as they are more efficient than boilers, delivering up to three times more useful heat than electricity 
consumed. 

The study considers hydrogen and biomethane as potential cost-efficient options for the heating systems of 
existing buildings, as, in some cases, the installation of heat pumps comes along retrofitting interventions with 
higher initial costs. However, sufficient quantities of renewable methane and hydrogen would have to be 
produced in order to maintain the current gas grid, which is projected to be unlikely.  

Technically, hydrogen injections in the gas grid could be used in the short- and medium-term strategy to 
reduce natural gas consumption, while biogas and biomethane could provide an alternative to some of the 
methane used for heating. 

According to the report, hybrid heat pumps using both electricity and gas could also provide competitive 
solutions for buildings connected to the gas grid and ensure heating during periods of peak demand on colder 
winter days. All these installations would need to use renewable electricity and renewable methane for their 
operation.  
Most of today’s district heating systems in Europe use natural gas or coal as fuel. Hydrogen and renewable 
methane for renewable gas-fired CHP plants are considered likely to compete with large-scale heat pumps, 
geothermal energy, biomass, and with sector-coupling solutions such as residual industrial heat.  

Industrial sector 
Electrification can be a solution for low temperature heat provision to industry. For essential high temperature 
heat processes, hydrogen and biomethane will be needed.  

Gas networks 
The  demand  for  renewable  methane  and  hydrogen  and  their  production  potential  will  have  important 
implications for gas networks. Today’s European gas network consists of around 260,000 km of high-pressure 
pipelines  operated  by  transmission  system  operators  and  1.4  million  km  of  medium-  and  low-pressure 
pipelines operated  by  distribution  system  operators.  As demand  for  gas  is  expected  to  decrease and  the 
costs associated with the production of biomethane and hydrogen are high,  the gas network is likely to be 
downsized. This smaller future grid must be capable of accepting biomethane or hydrogen, or a mixture of both. 
This may require adjustments or complete replacements. A likely transition that does not require major technical 
upgrade  of  the  existing  infrastructure  would  be  the  switch  to  biomethane.  However,  projections  show  that 
insufficient quantities of renewable methane will be produced to maintain current grid capacity. As a medium-
term strategy, hydrogen could be injected into the current gas grid. However, there are limits to the extent 
hydrogen can be mixed with methane in the pipeline. Current research shows that blending hydrogen in small 
concentrations  of  up  to  10 – 20 %  can  be  done  safely  without  larger  infrastructural  upgrades.  Regulatory 
standards would need to be reviewed, as for today, EU countries allow concentrations of hydrogen injections 
into the grid varying from 0.1 % to 12 %. 

A complete switch to hydrogen would require dedicated pipelines. This would cause high additional costs. It 
might prove to be more cost-efficient for hydrogen applications on a local or regional basis. Furthermore, the 
future  potential  for  green  hydrogen  production  will  be  a  determining  factor  for  the  extent  to  which  long-
distance networks transporting hydrogen will be developed. 

As the choices which product will be transported through pipelines is likely to be local rather than national, 
and will vary across regions, the choices made by distribution companies might be the most consequential for 
the EU. However, as distribution networks and long-distance transmission networks are intertwined, the 
refurbishment of transmission grids would most probably require the refurbishment of all the distribution 
networks they supply.  

Potential future modifications of the current gas networks are also depending on the demands for low and 
zero-carbon gaseous fuels in other sectors than buildings/H&C, i.e. power, industrial and transport sectors. 
Costs, convenience, availability, acceptability, and the infrastructure choices of the EU and its member states 
will likely influence the development. The report assumes an increasingly decentralised management of 
distribution. 

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Gas for Climate. The optimal role for gas in a net zero emissions energy system (Navigant 
2019a) 

Overview 
When it comes to H&C, this study for “Gas for Climate” focuses on space heating and excludes the potential 
use of renewable gas for hot water and cooling. The promoted “optimised gas” scenario for 2050 mainly 
suggests keeping the gas distribution network in use for all buildings connected to the grid today but changing 
from natural gas-powered boilers to hybrid heat pumps. These shall be running with biomethane and some 
hydrogen on peak demand winter days. Other buildings use all-electric heat pumps or renewable district 
heating. The gas grid shall be adapted for biomethane and hydrogen distribution instead of being 
decommissioned, with an overall saving of € 217 billion annually across the energy system by 2050 in 
comparison with their “minimal gas” scenario. 

Purpose and Approach 
The study’s purpose was to investigate the potential role and value for renewable gas used in the existing gas 
infrastructure in a net-zero emissions EU energy system, compared to a scenario in which a minimal quantity of 
gas is being used. 

Therefore, a “minimal gas” scenario and an “optimised gas” scenario were compared. Both scenarios arrive at 
a net-zero emissions EU energy system by 2050. 

Comparison of the “minimal gas” and “optimised gas” scenarios with focus on H&C 
Buildings  
In both scenarios most buildings will be heated by all-electric heat pumps by 2050, and both scenarios assume 
increased levels of district heating. 

In the “minimal gas” scenario, all-electric heat pumps (80 %) are complemented by district heating (20 %). As 
a  result,  electricity  demand  in  the  “minimal  gas”  scenario  is  390  TWh,  while  renewable  and  low-carbon  gas 
demand is zero for the space heating of buildings. 

In the “optimised gas” scenario, all-electric and hybrid heat pumps (80 %) are the most important technologies 
for supplying heat in buildings, complemented by 20 % district heating. The share of hybrid heat pumps (37 %), 
using biomethane and some hydrogen during periods of peak demand, is restricted by the existing connections 
to the gas grid. The study assumes that all buildings that currently have a gas connection will still use it by 2050. 
New  buildings  (constructed  between  2016 – 2050)  will  mostly  use  all-electric  heat  pumps  and  some  district 
heating. All buildings without gas connections will switch to all-electric heat pumps or to a lesser extent district 
heating. The deployment of these technologies leads to a renewable gas demand of 231 TWh, from which 185 
TWh is biomethane, 46 TWh is hydrogen. The demand for renewable electricity for heating in the “optimised 
gas”  scenario  lies  at  399  TWh.  It  remains  higher  compared  to  the  “minimal  gas”  scenario  due  to  a  lower 
refurbishment rate of buildings and therefore higher overall space heating demand.  

Hybrid heat pumps 
For buildings with an already existing gas connection the “optimised gas” scenario promotes the use of hybrid 
heat pumps due to the following arguments: 

  They make use of the existing gas infrastructure, reducing the required expansion of electricity grids. 

This makes their introduction fast and cheap.  

  They deliver peak demand at limited additional cost as the equipment is relatively low cost, because 

the expensive part of the heat pump capacity is replaced with low-cost gas boiler capacity. 

  They require less consequent insulation of buildings compared to all-electric heat pumps, which leads 

to high cost savings per unit of energy. 

The application of hybrid heat pumps does not necessarily require deep insulation of buildings, which leads to 
decreased insulation costs (€ 21 billion until 2050). However, this leads to higher total energy demand in 2050 
(1,026 TWh) compared to the “minimal gas” scenario” (787 TWh).  

Biomethane 
In the “optimised gas” scenario, the heating of buildings with an existing gas connection will mainly be done with 
biomethane. The scenario foresees 228 large-scale thermal gasification plants generating about 1/3 and 31,000 

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small biogas digesters producing about 2/3. Parts of the biomethane production (~ 1/5) take place more than 
15 km from the nearest gas grid. The study suggests transporting it as bio-LNG, which can afterwards be used 
for shipping.  

Hydrogen 
Using  hydrogen  in  buildings  requires  adjustments  to  the  gas  distribution  infrastructure.  The  necessary 
requirements  to  upgrade  or  replace  parts  of  the  distribution  network  to  use  100 %  hydrogen  are  still  being 
assessed in several projects. In certain areas where supply of biomethane is limited, the use of hydrogen could 
be  a  viable  option  for  the  space  heating  of  buildings.  20 %  of  the  gas  used  for  heating  of  buildings  in  the 
“optimised gas” scenario is hydrogen, either used in pure form or mixed with biomethane. 

The study assumes, that  blue hydrogen could still be in use in 2050 besides green hydrogen, as the costs 
could be similar by 2050. In order to replace blue hydrogen as quickly as possible with green hydrogen in the 
H&C sector as well, additional renewable electricity generation capacity must be constructed as fast as possible. 
Another option would be for policymakers to limit the use of blue hydrogen by 2050. 

However, it should be kept in mind that any large scale-up of green hydrogen production prior to the moment 
when  all  direct electricity  demand  is  covered  by  renewable energy  will  lead  to an    indirect  increase  in fossil 
electricity generation. 

Industrial sector 
In  both  scenarios,  industrial  low  temperature  heat  will  be  based  on  direct  electricity.  High  temperature 
industrial heat is mainly provided by hydrogen, plus some biomethane and hydrogen as industrial feedstock. 
In  the  “minimal  gas”  scenario  69  TWh  of  biomethane  are  used  for  high  temperature  industrial  heat  and 
feedstock. 

In “minimal gas” green hydrogen is produced at industrial sites, not requiring gas infrastructure. In “optimal gas” 
green hydrogen is produced close to large-scale (offshore) electricity generation and transported to demand 
hubs using gas infrastructure. 

Imports 
It is considered feasible to generate all required energy in both study scenarios domestically within the EU by 
2050. Biomethane is produced throughout the EU, so far mainly in states with a lot of woody and agricultural 
biomass  (e.g.,  Germany,  France,  Poland,  Italy,  Sweden,  Finland,  Romania).  The  study  expects  that  each 
Member State can produce sufficient biomethane to meet demand in buildings themselves by 2050. However, 
importing renewable energy is portrayed as an attractive alternative. This could include imports of solid biomass 
in the “minimal gas” scenario or imports of green hydrogen in the “optimised gas” scenario.  

Gas networks / Gas grid 
Gas infrastructure is currently used to distribute 20 % of EU’s primary energy consumption (5,000 TWh). 

In the “minimal gas” scenario only small amounts of biomethane or natural gas would need to be transported 
to industrial sites in transmission pipelines for high industrial heat generation or blue hydrogen production. 
Most EU countries have legislation requiring the natural gas grid to be decommissioned when no longer in use. 
Consequently,  most  of  the  existing  gas  transmission  infrastructure  and  the  entire  gas  distribution 
infrastructure would need to be decommissioned.  

In this minimal gas scenario, seasonal peaks in demand would be covered by biomass power plants. 

In the “optimised gas” scenario, the existing transmission grid would be used for intra-regional and cross-
border transport of hydrogen and mainly intra-regional transport of biomethane. The existing distribution grid 
would be used to distribute modest quantities of renewable gas to buildings, with high net system cost savings 
per cubic meter of gas. According to the study, the gas grid is very helpful in coping with  seasonal and daily 
fluctuations  of  energy  demand  as  there  is  no  technical  minimum  threshold  below  which  the  gas  network 
cannot be operated. For the heating of buildings some inter-seasonal storage for biomethane is needed too. 
The scenario suggests blending methane and hydrogen in coming years while gradually creating dedicated 
biomethane  and  hydrogen  grids  via  using  the  largest  part  of  today’s  infrastructure  for  biomethane  and 
retrofitting  part  of  the  existing  gas  infrastructure  for  hydrogen  with  a  limited  need  for  additional  hydrogen 
pipelines.  

Due to expected high development and maintenance costs, the study does not suggest two complete parallel 
grids,  but  rather  a  dense  methane  grid  and  a  less  dense  hydrogen  grid  connecting  industrial  areas  and 
hydrogen fuel stations to a backbone along major routes. 

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Oil pipeline system could be used to transport gas  
The 33,000 km of oil pipelines through many EU Member States could be repurposed for hydrogen transport, if 
no longer used for liquid oil products in 2050.  

Costs to maintain or decommission the current gas grids 
For the necessary decommissioning of the gas infrastructure, the study calculates costs of around 30 % of 
the costs initially required to build the infrastructure. While the costs for the maintenance of the existing 
infrastructure, their adaptation and expansion regarding the “optimised gas” scenario would cost around 60 % 
more than the decommissioning by 2050, the study claims that the additional capacities needed in terms of 
electricity transmission and distribution infrastructure in the minimal gas scenario are higher. In addition to 
these lower additional energy system costs, the study stresses further non-cost related benefits of the 
“optimised gas” scenario namely the promotion of rural employment from additional biomethane production as 
well as potentially higher societal acceptance due to less necessary overhead powerlines. 

Gas for Climate. Gas Decarbonisation Pathways 2020–2050 (Gas for Climate and 
Guidehouse 2020) 

Overview 
This study of “Gas for Climate” builds on Navigant’s 2019 study and analyses decarbonisation pathways from 
2020 to 2050 based on the “optimised gas” scenario.  

The study suggests the heating of today’s buildings connected to the gas distribution network via hybrid heat 
pumps mainly using biomethane, while other buildings will be using all-electric heat pumps or renewable 
district heating. Today’s natural gas grid shall gradually be developed into two separate grids for biomethane 
and hydrogen distribution. 

Purpose and Approach 
Gas for Climate’s 2019 study pictured different options of 2050 net-zero emissions energy systems without 
explaining the exact path to get there. This study aims at providing such pathways for the transition towards a 
climate neutral “optimised gas” 2050 energy system including implications for the gas infrastructure and 
policy recommendations. 

The central pathway of the study is called “Accelerated Decarbonisation Pathway”. It is based on the EU 
Green  Deal  target  of  55  %  GHG  reductions  by  2030  compared  to  1990  levels.  It  depicts  a  path,  on  which 
renewable and low carbon gases as well as todays gas grid contribute to the decarbonisation of the energy 
system, including the buildings sector and H&C. For this main pathway, the study assumes, that governments 
and companies withing the EU drive the decarbonisation, and necessary gas production can be scaled up in the 
EU, not depending on other parts of the world.  

Buildings 
The  study  refers  to  the  “optimised  gas”  scenario,  summarised  above.  It  again  stresses  the  importance  of 
combining the use of gas and electricity in the heating of buildings until 2050 and beyond, as it reduces 
societal cost and increases optionality. The study suggests the use of modest electric heat pumps added to 
the  existing  gas  boilers  in  all  buildings  connected  to  the  gas  grid  today.  With  a  smart  control,  they  can  be 
operated as hybrid heat pumps. As buildings get better insulated, the heat pumps take up a higher share of 
the  heating.  In  2050 still 37 %  of  the  EU building  stock  would be heated  in  this manner.  This  would  reduce 
insulation  costs  (fewer  deep  renovations),  heating  technology  costs  (smaller  heat  pumps  and  no  low 
temperature floor heating needed) and would also reduce stress on the electricity infrastructure on cold winter 
days.  The  authors call  their  pathway  “robust”,  as  the installations  of  the  heat  pumps,  the  insulations  of the 
buildings, and the decarbonisation of the electricity and gas systems can take place independently. 

Today’s  application  of  hybrid  heat  pumps  is  very  limited.  Energy  renovations  are  needed  for  almost  all 
buildings, even for hybrid heating solutions in order not to produce higher stress on the energy infrastructure. 
The  refurbishments  need  to  happen  at  a  higher  annual  renovation  rate  than  today’s  1 %.  Increasing  the 
renovation  speed  and  depth  after  2030  to  compensate  for  the  lack  of  renovations  before  2030  will  be  very 
challenging.  

However, if things develop along the lines of the “optimised gas” scenario and the “Accelerated Decarbonisation 
Pathway” the amount of gas used for heating and hot water in the EU will decline from  today’s 1,600 TWh 
(almost all natural gas), towards 1,300 TWh in 2030 to the end state of 400 TWh in 2050, all biomethane and 
hydrogen in hybrid heat pumps by then. 

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Cooling 
As demand for cooling usually correlates well with the availability of renewable electricity for solar PV, 
the  pathway  does  not  expect  any  gas  to  be  used  but  rather  electric  cooling  appliances.  Short-term 
electricity  storage  will  help  to  bridge  diurnal  peaks  of  cooling  demand  in  moments  with  less  availability  of 
electricity form solar PV, e.g. in the evening. 

Biomethane (infrastructure) 
In order to satisfy future gas demand (including heating) the pathway depicts a rapid increase in generation of 
biomethane from biomass waste and residues. The study suggests an increase in the supply of biomass from 
sequential  cropping  and  carbon  farming,  mainly  from  the  southern  half  of  the  EU.  Furthermore,  large 
biomethane gasification units shall be built at industrial locations and biogas digesters become a common 
sight in the European countryside. 

For  large  biomethane  plants  feeding  into  small  distribution  pipes  in  regions  with  little  gas  demand  it  will  be 
necessary to ensure that biomethane can flow upwards towards grids with higher pressure. Therefore, reverse 
flow technologies will have to be deployed.  

Gas networks / Gas grid 
The “Accelerated Decarbonisation Pathway” assumes a rapid scale up of biomethane and renewable hydrogen 
production capacities. It does not suggest the decommissioning of gas infrastructure, but rather describes its 
further  usage and  upgrading  which  is portrayed  as  adding  energy  security  within  an  integrated  energy 
system.  

The  study  expects  the  need  of  two  separate  gas  grids  for  methane  and  hydrogen  to  be  balanced  out  by  a 
decreasing total gas demand which leads to no need of extensive additional gas infrastructure.  

Mentioned exceptions are additional gas distribution networks needed mainly in central and eastern Europe, 
where the coal phase out is expected to result in an increased demand of gas fired power plants. However, 
these expansions of gas infrastructure are not directly linked to H&C but rather to electricity generation.  

H&C related additional gas infrastructure, projected by the study, are certain dedicated hydrogen pipelines 
needed for a comprehensive pan-European hydrogen backbone infrastructure. Furthermore, hydrogen 
storages might be needed as the share of intermittent electricity increases. The study suggests making 
existing salt caverns available and assessing the need for additional ones as soon as possible, as their 
creation takes much time. 

Policy recommendations 
First, the study points out, that current EU policies (EU-ETS, EU Clean Energy package, RED II) and NECPs 
are insufficient to decarbonise gas by 2030 and 2050, in heating and overall. According to the authors, they lack 
structural drivers for the scale-up of renewable gas supply during the 2020s, as well as for higher renovation 
rates of buildings, which slows down the deployment of all-electric heat pumps and leads to a long period in 
which large amounts of natural gas are still being used for heating, with only some increased grid injection of 
biomethane and almost no hydrogen. 
In order to steer towards the “optimised gas” scenario the study suggests the following policies: 

General but relevant for H&C: 

  Provide  more  long-term  certainty  and  incentives  via  the  EU  Green  Deal  by  providing  a  stable 
framework  (e.g.  via  Innovation  Fund,  increasing  EU  ETS  prices  e.g.  € 100/tCO2  by  2030  and 
€ 150/tCO2 by 2040 in combination with targeted and time-bound Contracts for Difference).  

  Building  up  European  hydrogen  and  biomethane  value  chains  supported  by  EU  and  national 

stimulus packages  

  Follow a stepwise approach, seizing investment opportunities for a cost-effective decarbonisation 

  No  fiscal,  financial,  or  legal  measures  that  harm  the  security  of  the  supply  of  current  gas 

networks in order not to risk removing a building block of an integrated energy system 

  Foster an integrated energy system by coupling the sectors electricity, gas, and heat by linking 
their  markets  and  infrastructures  in  a  more  coordinated  way  and  by  applying  integrated  network 
planning for electricity and gas networks 

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  Stimulate  the  supply  of  hydrogen  and  biomethane  by  a  binding  mandate  for  10 %  gas  from 

renewable sources by 2030 

  Foster cross-border trade of hydrogen and biomethane, e.g. by a “Guarantee of Origin” system 

  Clarify market rules for green and blue hydrogen including hydrogen transport 

  Classify certain investments as sustainable under the EU taxonomy rules: Investments in reverse flow 

technology, repurposing of gas infrastructure, new hydrogen infrastructure 

  National policies should remove potential hurdles for the reuse of infrastructure for hydrogen 

 

“Connecting  Europe  Facility”  (CEF)  and  “Trans-European  Network  in  the  field  of  Energy”  (TEN-E) 
regulations shall support the integration of renewable gas 

  A long-term policy framework should offer incentives for biomethane gasification (EU Innovation 
Fund  providing  funding  for  industrial  scale  biomass-to-biomethane  gasification  plants,  European 
Standard setting body CEN working on standards for grid injection, Member States financing additional 
large biomethane plants and incentivising the building of methanation units added to existing biogas 
plants, a large program of Biogasdoneright piloting) 

for H&C:  
According  to  the  study,  current  central  EU  policies  driving  decarbonisation  in  the  building  stock  (Energy 
Performance  for  Buildings  Directive  (EPBD),  Energy  Efficiency  Directive  (EED),  and  Long-Term  Renovation 
Strategies (LTRS)) fall short in delivering the renovation speed we need. Furthermore, incentives for hybrid 
heat pumps are rare. The authors point out, that in policy studies,  hybrid heating solutions are often not 
mentioned, but it is usually assumed, that by 2050 buildings will be heated with electric heat pumps or by district 
heating. This study therefore suggests implementing the following H&C focused policies and measures (as part 
of the EU Green Deal): 

 

 

set ambitious binding targets for energy renovations of buildings regarding depth and speed 

increase the required minimal energy performance level of existing buildings 

  provide  long-term  policy  certainty  and  more  ambitious  political  and  regulatory  frameworks  to  foster 

private investments and energy renovations 

  organise energy renovations as step-by-step process of smaller renovations in individual renovation 

roadmaps to avoid lock-ins and lost opportunities 

  unburden  building  owners  (provide  standardised  solutions,  support  financing  options,  guarantees, 

renovation roadmaps) 

 

 

 

 

 

foster standardisation and innovation in the buildings industry to reduce costs 

include the option of hybrid heating solutions in policy studies and scenarios and plans (e.g. renovation 
wave plans) 

raise consumer awareness for hybrid heating solutions via EU and national programmes 

increase knowledge of installers of how to transform a gas-fired heating system into a hybrid heat pump 

support and create a sustainable market for hybrid heat pumps 

Decarbonisation of heat in Europe - Implications for natural gas demand (Honoré 2018) 

Summary of main findings 
In view of the important role of the decarbonisation of the heating sector for meeting the energy and climate 
targets, the study discusses the implications for natural gas demand. The study finds that most of the 
considered scenarios assume a modest decline in gas consumption for heating until 2030, which will be 
mainly concentrated on space heating in buildings. These projections can mainly be attributed to efficiency 
gains from thermal refurbishments and minimum energy performance requirements for buildings and the 

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associated lower demand for space heating. The study further concludes that pathways until 2050 differ 
largely and that it is uncertain what technological innovations will be developed by then, opening up more 
options for decarbonisation. The authors conclude that the gas industry needs to develop a strategy not only 
for the electricity sector but also for the heating sector in order to remain in its current form in the long term. 
Cooperation with electricity and the use of hydrogen and biogas may also be further options. 

Demystifying natural gas distribution grid decommissioning: An open-source approach to 
local deep decarbonisation of urban neighbourhoods (Zwickl-Bernhard and Auer 2022) 

Overview 
The study investigates the decommissioning of a local distribution grid of natural gas in the heat supply of an 
urban district in Vienna, Austria. Currently, almost the entire heat demand of the district is supplied with 
national gas. The decommissioning includes the disconnection of the devices at the end-user's level. Based 
on an open-source modelling approach, the study considers two different local deep decarbonisation 
pathways, namely, electrification of all energy services and an expansion of the district heating network. 
Several indicators are assessed to compare the different decarbonisation options.  The study concludes that 
alternative scenarios of lower/zero-emission energy service provision possible and its economic advantage 
increases in the longer term with increasing CO2 prices. 

221 

 
 
 
 
 
 
 
 
 
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