25 Apr 2023, 13:26
Carolina Kyllmann

Operators face ‘massive financing problem’ converting district heating to renewables – report

Clean Energy Wire

Germany’s district heating networks should be planned more efficiently in the long term and operators need better financial incentives to convert the infrastructure, so that the technology can fully contribute to the decarbonisation of the heating sector, researchers in the government-supported project Ariadne found. Municipal heat planning, the transformation of grids, and the digitalisation of consumption should all be interlinked as district heating makes the switch to non-fossil energy sources, the authors recommended. However, there is a “massive financing problem” for the necessary network conversion, they added. On average, reducing grid temperature – required to efficiently increase the share of renewables in the system or to use waste heat – leads to costs of around 135 million euros for a district heating utility in a city. Energy suppliers will require around 13 billion euros nationwide to convert district heating networks to renewable energy, the authors calculated. Until now, “heating network operators must bear 90 percent of the conversion costs themselves and cannot compensate for them through subsidies or price increases” for their customers, they wrote. However, investment costs can be reduced through network densification, digitalisation, and consistent, accelerated and area-wide municipal heating planning.

Germany will have to employ different technologies and solutions to get the heating sector to climate neutrality, as the country’s regions have vastly varying conditions to start with, a report by Fraunhofer Institute for Solar Energy Systems (ISE) found last year. Germany’s building sector has missed its emission reduction targets three years in a row, as the majority of homes are heated with fossil fuels and modernisation of the existing building stock is lagging. Germany plans to de facto ban the installation of new fossil fuel run heating systems from 2024 as the country takes steps towards its target to become climate neutral by 2045.

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