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New policy paper on District Heating and Cooling systems

The EU has set ambitious climate and energy targets under its “Fit for 55” package. This package aims to reduce greenhouse gas emissions by 55% by 2030 compared to 1990 levels. A significant portion of this effort focuses on the heating and cooling sector, which accounts for 50% of the EU’s energy consumption. Currently, over 75% of heating and cooling energy is derived from fossil fuels.

To achieve these targets, the EU is promoting the adoption of District Heating and Cooling (DHC) systems. They can integrate renewable energy sources, utilise waste heat, and improve overall energy efficiency. DHC systems are centralised networks that distribute heat and cooling to multiple buildings from a single source. These systems can significantly reduce greenhouse gas emissions by incorporating renewable energy and waste heat recovery.

Within the Clean Energy cluster led by REWARDHeat, we have created a policy paper. It outlines several key concepts and recommendations to enhance the role of DHC in achieving the EU’s climate goals. The following FAQ section provides insights into these concepts and the policy recommendations outlined in the paper.

Why is heating and cooling important in the EU's energy consumption?

Heating and cooling account for 50% of the energy consumed in the European Union. Over 75% of this energy is coming from fossil fuels. Despite efforts to reduce demand, there remains a continuous need for heating and cooling energy. Improving energy efficiency and incorporating renewable and waste heat in DHC networks can significantly contribute to carbon neutrality by 2050.

What are the key policy recommendations for promoting District Heating and Cooling?

  • Increase the ambition for renewable energy in heating and cooling. We propose an annual increase of 2% for 2021-2025 and 2.6% for 2026-2030.
  • Make the 2.2% annual increase target for DHC systems compulsory rather than indicative.
  • Implement a uniform CO2 price across the heating and cooling sector to ensure fair competition.
  • Adopt a district-level approach to building renovations and energy performance assessments.

How can waste heat recovery be better utilised?

There is substantial untapped potential for waste heat as a resource for heating and cooling. Studies estimate that DHC could supply 50% of European heat demand, including 25-30% using large-scale electric heat pumps. Harnessing this resource instead of releasing it into the environment can significantly support the transition to a smart, integrated energy system.

What financial mechanisms are needed to support District Heating and Cooling expansion?

  • Leverage innovative financial instruments like blended finance (combining public and private capital) to attract private investors.
  • Establish national financing agencies and platforms for municipalities to support DHC projects.
  • Create a more flexible regulatory framework for investment funds at the EU level.
  • Utilise revenues from carbon pricing mechanisms to support the transition to sustainable heating and cooling solutions.

What role do municipalities play in promoting District Heating and Cooling?

Municipalities with populations above 45,000 are required to develop heating and cooling plans. Smaller municipalities are encouraged to do so voluntarily. To support this effort:

  • Member States should provide guidance, training, and working groups to build municipal capacity.
  • Financial and technical support should be made available through EU financing instruments.
  • Access to energy-related spatial data is crucial for effective planning.

What is sector coupling and why is it important?

Sector coupling involves coordinating DHC networks with electricity grids to enhance the overall energy system’s value. This integration is enabled by electric-driven heat pumps and digitalisation. It is further supported by thermal energy storage and allows for more efficient energy use and greater sustainability.

By addressing these key areas, the EU can accelerate the adoption of efficient, sustainable DHC systems. For more detailed information and a thorough assessment of the legislative framework, refer to the full policy paper below.