The European Commission released yesterday the REPowerEU communication setting out a detailed plan to phase out imports of Russian gas to Europe before 2030.
Following up on the Communication published early March, the new REPowerEU package reflects a growing awareness of the Commission in the ability of our sector to cut gas use on the heat market.
The plan builds on four pillars: energy savings, diversification of energy supplies, substituting fossil fuels and accelerating Europe’s clean energy transition and combining reforms and smart financing.
Please see below for the complete list of measures. Key wins for district heating include:
Under the section dealing with the need to boost renewables, the documents says: ‘Member States can accelerate the deployment and integration of large-scale heat pumps, geothermal and solar thermal energy in a cost-effective way by:
- developing and modernising district heating systems which can replace fossil fuels in individual heating;
- clean communal heating, especially in densely populated areas and cities;
- exploiting industrial heat whenever available.’
Under Energy Saving, the Commission distinguishes between short-term measures (awareness raising and incentives) and mid-to-long term measures. The bunch of proposed new measures includes a legislative proposal to increase the energy efficiency 2030 target which could trigger new opportunities for our sector as the Commission also suggests measures such as phasing out subsidies for fossil fuel boilers and support for connection to DH and deployment of heat pumps. The Commission also announced it will propose new eco-design requirements to ban new fossil fuel boilers from the market starting in 2029.
Under financing, the new guidance document on RFF references the use of funds for DH using renewable and waste heat. In spite of this positive reference, we will need to work further on a simpler access to funding for our projects, as our members have reported problems to make RRF work for the growth and modernisation of systems.
Europe has known in the past some energy supply crises. The current events have led to new measures to accelerate the pace of the energy transition. The good news in this situation is the proven ability of our sector to phase out individual gas boilers with efficient and renewable solutions – RES heat, waste heat, CHP and power-to-heat solutions including large heat pumps and thermal storage.
The Secretariat will keep liaising with Commission services and work together with members to exploit opportunities that will arise from the implementation of REPowerEU.
Annex: REPowerEU measures (most relevant for our sector)
- Incorporation of REPowerEU priorities in the National Climate and Energy Plans as well as in the European semester framework (coordination of economic policy)
- Legislative proposal to increase the target in the Renewable Energy Directive to 45% by 2030, up from 40% in last year’s proposal
- A dedicated EU Solar Strategy to double solar photovoltaic capacity by 2025 and install 600GW by 2030. The strategy covers heating: ‘To reach the EU 2030 targets, energy demand covered by solar heat and geothermal should at least triple’ .
- A Solar Rooftop Initiative with a phased-in legal obligation to install solar panels on new public and commercial buildings and new residential buildings.
- Doubling the rate of deployment of heat pumps, and measures to integrate geothermal and solar thermal energy in modernised district and communal heating systems.
- A Biomethane Action Plan sets out tools including a new Biomethane Industrial Alliance and financial incentives to increase production to 35bcm by 2030, including through the Common Agricultural Policy.
- A Commission Recommendation to tackle slow and complex permitting for major renewable projects, and a targeted amendment to the Renewable Energy Directive to recognise renewable energy as an overriding public interest. Dedicated ‘go-to' areas for renewables should be put in place by Member States with shortened and simplified permitting processes in areas with lower environmental risks.
- Target of 10 million tonnes of domestic renewable hydrogen production and 10 million tonnes of imports by 2030, to replace natural gas, coal and oil in hard-to-decarbonise industries and transport sectors. To accelerate the hydrogen market increased sub-targets for specific sectors would need to be agreed by the co-legislators. Additional funding of €200 million to be provided for research, and the Commission commits to complete the assessment of the first Important Projects of Common European Interest by the summer.
- Guidance to facilitate Power Purchase Agreement
- Legislative proposal to revise the level of ambition under EED – from 9 to 13% reduction of energy consumption, and suggestion of additional measures under EED that could be picked up by co-legislators – phasing out of subsidises for fossil fuel boilers, connection to District Heating, deployment of heat pumps.
- Launch, in cooperation with Member States, a high-level European Energy Efficiency Financing Coalition with the financial sector, based on the successful Energy Efficiency Financial Institutions Group (EEFIG);
- Examine possible additional measures to trigger further private investments, e.g. through mortgage portfolio standards or pay-for-performance schemes
- Curtailment: EU coordinated demand reduction plan
- Revised Recovery and Resilience Facility proposal close to EUR 300 billion (225 bn loans+
up to 72 bn grants) accompanied with new guidance to align with REPowerEU priorities
- TEN-E: Integrated EU-wide infrastructure gaps and needs assessment
for gas, electricity and hydrogen
- New CEF call
- Adoption of a new regulation on gas storage (storages to be filled up at 80% of capacity by next winter)
- Pooled purchase of gas
For more information, please contact [email protected] Head of Policy and EU Affairs
This publication is also available here in PDF format.
The tragic events occurring in the eastern part of the continent have severely threatened EU energy security, due to the high dependency of many countries on Russian natural gas. To break free from fossil fuel imports and accelerate the decarbonisation of Europe's heating sector, we must massively deploy homegrown and sustainable heating solutions. Locally owned and a flagship of the European energy industry, district heating is a critical piece of the equation.
Until the next winter, the strongest options available lie in changing consumer behaviour to reduce heat demand and strengthening the EU and international energy solidarity. Nevertheless, much can be achieved in the next 2 to 5 years to modernize and expand district heating networks, accelerate the deployment of new projects and integrate larger shares of renewable and waste heat in district heating and cooling.
Why is DHC important for REPower EU?
District heating has immense potential to grow in Europe: recent research underlines that it could supply 50% of Europe’s heat demand by 2050. The remaining 50% are met with heat pumps in areas with a lower density of population.
District heating and cooling is the gateway to renewable heat: the seven European countries with the highest national shares of renewable heating and cooling also have the highest shares of district heating in their heat markets (See Annex II on Iceland, Sweden Estonia, Finland, Latvia, Denmark, Lithuania).
District heating is a proven solution to phase out fossil heating (natural gas, oil and coal): Renewable and waste heat sources represent nearly a third of the energy supply used in the DH sector and can grow much further. Up to the 25% of district heating could be supplied by industrial waste heat and more than 10% of the EU’s total energy demand for heating and hot water could be met by heat from data centers, metro stations, tertiary buildings, and waste-water treatment plants. A recent assessment by Agora Energiewende with the support of Artelys, TEP Energy and Wuppertal Institute found that district heating has a technical potential to achieve around 125 TWh (≈12.5 bcm) in gas savings by 2027.
District Heating supports a more stable and integrated energy system: District heating unlocks new flexibility sources by fostering synergies between technologies, energy carriers, infrastructure, and sectors. For instance, coupled with a large heat pump, DHC networks can absorb large amounts of renewable electricity, providing cost-efficient balancing and storage to the grid. Heat networks can also connect nearby buildings with local waste heat and cold sources.
Relying on local sources allows district heating customers to be shielded from energy price volatility, as fossil fuels are priced at a global level. District heating is also generally a more affordable solution than individual fossil-fired solutions.
In the near term, behavioural change is critical as well as strengthening Europe’s internal and international energy security.
In the near term – from now until next winter, the key actions to cut gas consumption are mostly related to customer behaviour and necessary increased cooperation at EU and international levels to secure diversified and alternative energy sources. The capacity for operators to switch fuels is limited in reality, as new supplies would require establishing in a rush new supply routes and storage facilities (e.g. switch to biomass or to solid fossil fuels).
In the next 2-5 years, we can roll out massively sustainable district heating & cooling systems, accelerating the decarbonisation of Europe’s heating sector and cutting gas dependency.
Under this time horizon, the District Heating sector can bring a strong contribution with the densification of existing networks and converting existing plants to alternative renewable and waste-heat sources.
- Densify and modernize existing DHC networks: The prolongation of existing infrastructure to connect new areas and buildings can be implemented relatively quickly. Countries with developed DHC networks such as Denmark, have already announced that 50% of households heated with gas would be connected to district heating by 2028.
- Phase-in new projects for renewable and waste heat: The development of new networks - including the planning, permitting, construction and commissioning – can be achieved in a couple of years depending on local contexts.
- The introduction of alternative renewable sources into an existing installation using natural gas can also happen within this time horizon. For instance, sustainable biomass can be phased in third generation networks, without additional investment in the pipe network. In areas where the heat density is not suitable for district heating, the switch to heat pumps will provide a way to decrease demands for natural gas but may require strengthening electricity grids (see Annexes I and III for examples).
The adoption of ambitious provisions on heating and cooling within the Fit for 55 Package – in particular RED, EED, ETS, EPBD – will be critical in driving the expansion and modernisation of efficient DHC in the next 5 years. Nevertheless, concrete additional measures can be undertaken to further unlock the potential:
- The REPower EU plan must foster the deployment of both residential and large-scale heat pumps. We are concerned that the current proposal does not acknowledge the role of large-scale heat-pumps to boost renewable district heating systems. For example, the new district heating system in Heerlen, the Netherlands, is based on a few large-scale geothermal heat pumps which power large office buildings and residential heating and cooling needs thereby replacing imported fossil gas. On other markets for instance in Nordics, large heat pumps are already an important and growing share of District Heat production (over 1GW installed capacity for Sweden alone).
- Member States must identify Flagship Efficient DH projects that can be accelerated with dedicated EU funds and/or quicker procedure (access to regional funds, State aid notification approval). In many countries the potential to develop new Efficient DH, as well as expanding and modernizing existing schemes is largely untapped. The proposal is to ensure these projects get off the ground within the next five years. This can be achieved by triggering new investment decisions for efficient and sustainable DHC where the potential has been identified, or by accelerating ongoing DHC projects being commissioned or built.
- The Do Not Significant Harm Principle Guidelines underpinning the implementation of the Recovery and Resilience Facility (RFF) should allow funding to Heating infrastructure associated to Efficient DHC1 and those systems – not yet Efficient – where the operator provides a roadmap to reach climate neutrality in relation with the national Energy and Climate plan. In Finland a RFF-funded scheme to replace the remaining 120k oil boilers with Efficient DHC was not accepted by the Commission in spite of the anticipated benefits in terms of increased security of supply and decarbonization. In some cases, the upgrading DHC networks is a pre-requisite to integrate larger shares of renewables and waste-heat into a fossil-based DHC system. To avoid creating a decarbonisation bottleneck for DHC, such investments should be allowed despite the fossil nature of the existing installation.
- Introduce mandatory heat planning for cities. Making heat planning mandatory will provide cities across Europe with the right tools and information to make the best use of their resources and be less dependent on energy imports. It is not news, that cities with proper heat plans in place, have often been identified heat networks as the most efficient and cost optimal options to achieve full decarbonisation, particularly in densely populated urban areas, due to their capacity to improve energy efficiency, reduce emissions and enable fuel flexibility.
- The Commission could highlight the role of taxation, in particular the role of reduced VAT that can support the connection of new DH customers – as allowed by Council Directive 2022/542. On markets which are still very much dependent on individual gas boilers, such a tool could provide an extra boost to convince customers to switch to district heating.
- Dedicated envelop under Horizon 2020 for innovation in the heating sector. Adequate funding through dedicated and specific calls and topics for renewable H&C is critical to develop future-proof district heating technologies. Specifically, there is a need for self-standing topics for the DHC sector (particularly for distribution infrastructure and cooling, which are missing).
- Develop an integrated strategy to secure the provision of critical materials and train a skilled energy workforce: As for several clean energy technologies, DHC supply chains have been affected by the pandemic. The ongoing conflict in Ukraine is also impacting the ore supply that is used to produce some types of steel pipes. Similarly, the lack of a qualified work force may limit the capacity of utilities to develop these projects.
20 years is a more appropriate timeframe to achieve the complete phase-out of fossil fuels on the heating market.
The focus of this paper is the contribution of our sector in the mid-term. As demonstrated by some countries (e.g. Nordics), a solid policy framework for sustainable district heating can phase out the use of imported fossil fuels thanks to the use of renewable and waste heat combined with efficiency measures. Austria is a recent example where policies have driven the uptake of renewable heating – the evolution of the share of buildings connected to DH 2000-2019: +120 %. A full overview of the scale of the challenge, and the necessary investment costs were provided in the above-quoted Heat Roadmap Europe project (2019).
Annex I: Evolution of the fuel mix in Swedish District Heating
Annex II: Correlation between the national shares of renewable heat (gross final energy consumption) and District Heating (market share)
Annex III: Snapshot of two projects developed in 2 years
Greenfield development - Geothermal project in Arcueil /Gentilly (Paris region)
- Two-year project from City decision to energy supply (2013-2015)
- Project designed on 60% RES supply, with geothermal and heat pump replacing the average installation (fuel oil and natural gas individual heating)
- 15 MW capacity geothermal energy, supplying renewable heat to 10 000 households
- Secondary circuit optimisation: three-pipe areas allowing to use the return water from old buildings to supply new buildings (the latter require lower temperature)
- 120 substations and 16km infrastructure (supply and return pipes)
Conversion to sustainable biomass in Riga (Rigas BioEnergija Ltd.)
- Two-year project from planning to energy supply: 2015-2017
- Sustainable local wood chips replacing natural gas
- 48 MW capacity, supplying renewable heat to 25-30000 households
- Agora Energiewende, March 2022, Regaining Europe energy sovereignty – 15 priority actions for REPowerEU, https://static.agora-energiewende.de/fileadmin/Projekte/2021/2021_07_EU_GEXIT/253_Regaining-Europes-Energy-Sovereignty_WEB.pdf
- Eurostat, 2020, https://ec.europa.eu/eurostat/fr/web/products-eurostat-news/-/edn-20220211-1
- The legacy of Heat Roadmap Europe, Scenarios, recommendations and resources for decarbonising the heating & cooling sector in Europe and complementing the strategic long-term vision of the EU, https://heatroadmap.eu/wp-content/uploads/2019/02/HRE_Final-Brochure_web.pdf
- ReUseHeat project report "Accessible Urban Waste Heat”: https://www.reuseheat.eu/project-documents-newsletter/
- The competitiveness of district heating compared to individual heating, 2018 https://www.danskfjernvarme.dk/-/media/danskfjernvarme/gronenergi/analyser/03052018-the-competitiveness-of-district-heating-compared-to-individual-heatingv2.pdf
Euroheat & Power signed an open letter together with more than 124 business leaders and 27 associations to call on the EU Commission to strengthen energy security by accelerating green transition, ahead of the publication of the REPowerEU Plan. The letter, an initiative from the Corporate Leaders Group (CLG), addresses the President of the Commission Ursula von der Leyen and recommends to:
- Accelerate measures to reduce energy consumption through energy efficiency improvements for both households and industry;
- Accelerate the move away from fossil fuels and towards renewable and fossil free sources for industry, transport, heating and cooling and buildings;
- Ensure an inclusive and fair transition.
In order to make this happen the letter highlights the need to provide the right financial incentives and instruments to accelerate investments by investors, companies and households, mobilise existing EU funds and accelerate the provision of new training schemes.
Regarding the decarbonisation of heating and cooling, the letter calls on to connect buildings to efficient DHC and ensure that electric and low carbon thermal options are cheaper to run than fossil-fuel alternatives.
Finally, the annex to the letter provides some concrete solutions that are already implemented by some of the signatories, including EHP members, to reduce dependency on Russian fossil fuels.
For more information, please contact Pauline Lucas – [email protected]
Following the publication of the ‘fit for 55 package’, the European Parliament and the Council of the EU have been working on their positions.
The European Parliament Committee on Environment, Public Health and Food Safety (ENVI) is leading the work on the revision of the EU Emissions Trading System Directive and provides an opinion to the lead Committee on Industry, Research and Energy (ITRE) on the revision of the Renewable Energy Directive, regarding the biomass aspects.
During the past month, members of the ENVI committee negotiated ‘compromise amendments’ that could be supported by a majority of political groups during the vote in committee. This was an intense and difficult work resulting for instance, in 33 compromise amendments over more than 200 pages, covering many aspects of the EU ETS. There were some deep divisions between the political groups. For instance, one important aspect for the sector, the EU ETS2, introducing a separate, self-standing emission trading system for buildings and road transport adjacent to the current ETS system, was heavily negotiated, given its potential social impact.
On 16 and 17 May 2022, the ENVI Committee adopted it draft report on the European Commission proposal on the revision of the EU ETS of the and its opinion on the biomass aspects in REDIII.
ENVI voted in favour of the inclusion of municipal waste incineration into the ETS as of 2026 with an assessment to be done by the European Commission, by 31.12.2024. The impact assessment should focus on possible measures to avoid diversion to landfill including considering the inclusion of landfill into the EU ETS. This agreement between political groups was found rather early and broadly supported, despite this provision not being included in the Commission’s initial proposal and thus not included in the impact assessment for RED.
Regarding the EU ETS2, the ENVI Committee adopted a watered-down approach, product of a compromise with left leaning groups that were first opposing the ETS2. According to the ENVI position, ETS2 would be first introduced for commercial heating from 2025 and then for households from 2029, pending a positive assessment of the European Commission looking at energy poverty, cost pass on mechanism, investment. Member states would have the possibility to opt in the residential sector before 2029. Another key point of the compromise is the introduction of a 50% limit to pass on the costs of allowances to customers for residential sector. Last but not least, a transitional price cap of 50€/ton CO2 is proposed to be introduced, with possibility to reassess the situation in 2029. The rapporteur was unsatisfied about the distinction and delay in implementing the ETS2 for household but expressed his satisfaction to have ‘saved the ETS2’.
EHP will further work with MEPs ahead of the Plenary vote in the European Parliament on 7 June and with the Council to obtain a meaningful price signal while encouraging member States to protect the most vulnerable citizens with additional measures.
Regarding the opinion on REDIII concerning biomass, the ENVI Committee went much further that the Commission, putting stark limitations on the use of woody biomass for energy, by 1/ banning subsidies for primary biomass, 2/ preventing primary biomass to count towards the renewable target (only to mention the most worrying measures). As it is proposed to be defined by ENVI, primary biomass encompasses all wood obtained from removals, including branches, roots, stumps and burls, except removals due to wildfire prevention and pest.
EHP will further work with MEPs ahead of the Industry Committee vote (lead) in the European Parliament on 13 July and with the Council to balance the ENVI position and prevent damaging provisions to make it to the final text.
For more information, please contact Pauline Lucas – [email protected]
In an article published in the Euroheat & Power International Magazine’s latest edition, Giulia Forgnone and Pauline Lucas provide an overview of the challenges and opportunities for the district heating and cooling sector under the Fit for 55 Package and, specifically, on the proposals to revise the Renewable Energy and Energy Efficiency Directives (RED & EED). They outline the potential implications these texts could have on the EU DHC sector.
To read our full analysis click on the link below. Enjoy the read and get in touch with Pauline Lucas – [email protected] for RED related questions and Giulia Forgnone - [email protected] for information on the EED.