Decarbonisation Pathways for District Heating Sector: A Policy and Private Business Perspective.

DISTRICT HEATING refers to a central supply of heat to fulfil the space heating and hot water demand of buildings. District heating network comprises of central production units along with distribution network and occasionally, a transmission network for larger district heating networks. District heating offers many local environmental and economic benefits like reduced air pollution by eliminating individual heating at houses, utilising local energy resources, flexibility in choice of heat production technology, creating more jobs, and eliminating energy poverty[1]. At a national level, high penetration of district heating makes the whole energy system more efficient and increasesthe share of renewable energy, as evident from the experiences of Denmark and Sweden [2], [3]. While the penetration of district heating is very high in Nordic countries of Denmark, Sweden, and Finland, a substantial potential of district heating expansion exists in other European countries where about 50% of heat demand at the European level can be supplied by district heating to achieve decarbonisation that is affordable [4].

The district heating sector faces the challenge of decarbonisation just like the whole energy sector. Furthermore, the reduced heating demand resulting due to temperature increase and investment in energy renovations of buildings due to ambition policy push [5] threaten the profitability of existing district heating companies in the future. In this study, a comprehensive assessment of the future development of the district heating sector is conducted from the perspective of a whole energy system. This study tackles the challenges concerning future optimal fuels and technology shifts to achieve decarbonisation in future when heat demand is expected to reduce. The implications of future development in the district heating sector on policymakers and district heating companies are discussed.