Supported by Introduction and development of the Swedish district heating systems Critical factors and lessons learned Project meeting.

Supported by

www.res-h-policy.eu

Introduction and development of the Swedish district heating systems

‑ Critical factors and lessons learned

Project meeting

London,10 March 2009

Karin Ericsson, Lund University

www.res-h-policy.eu 2

Introduction and development of the Swedish DH systems

Why is district heating interesting?

• Complex fuels─ unrefined biomass (straw forestry residues, waste wood)

─ MSW

• Deep geothermal heat• Surplus heat

─ Industrial waste heat

─ Condensing power plants=>CHP



The objectives are…

• to describe the introduction and development of the Swedish DH systems and to identify what policies/regulations and non-policy factors that have shaped this development and

• to on the basis of these factors provide lessons learned for the European arena



Heating of buildings in Sweden 1970-2006

0

20

40

60

80

100

120

140

160

1970 1974 1978 1982 1986 1990 1994 1998 2002 2006

De

live

red

en

erg

y (T

Wh

/y)

Total

Oil

District heating

Electricity

Wood fuels

Gas



Heating of buildings in 2007

0

5

10

15

20

25

30

35

40

One- and two-dwellingbuildings

Multi-dwellingbuildings

Non-residentialpremises

De

live

red

en

erg

y (T

Wh

/y)

Gas

Oil

Electricity

Firewood, woodchips, pellets etc.

District heating

10%

86%

69%



History in brief

• 1948 first public DH system in Sweden• After 1960 more rapid development• 247 of 290 the Swedish municipalities• First market: Densely populated city centres, public

buildings• More recently: also one- and two-dwelling buildings• Early drivers for building DH systems:

─ Efficient electricity production via CHP─ Economy and fuel flexibility (cheap heavy fuel oil, industrial waste heat)─ Environment (emission control)



Ownership

Municipal administrations and municipal companies

FortumSydkraft/E.on

Vattenfall

• Initially municipal administrations

• Then transformed into municipally owned companies

• Local electricity distribution

• The first DH systems involved retrofitted oil condensing power plants (reserve power and peak load) => CHP



Energy sources and fuels

0

10

20

30

40

50

60

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Dis

tric

t he

atin

g p

rod

uct

ion

(T

Wh

)

OilNatural gas, incl. LPGCoalElectric boilersHeat pumpsIndustrial waste heatPeatMSWOther biomass fuelsTall oilWood fuels



CHP

-8

-6

-4

-2

0

2

4

6

8

10

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006Ele

ctric

ity (T

Wh)

Electricity consumption in the DH sector

Electricity production in CHP plants

Net electricity production

2-5% of total electricity supply.

• Initially strong argument for DH systems

• Barriers: nuclear power and low electricity prices



Economics and costs

• DH tariffs of 0.4-0.9 SEK/kWh (0.04-0.09 EUR/kWh)• Differences in costs and philosophies on annual

returns.• Main cost drivers: fuel (45%) and capital (33%)• Costs vary between DH systems depending on:

─ Fuels used

─ Total heat load (economies of scale)

─ Linear heat density (heat supply/metre of pipe)



Linear heat density

• Settlement structure─ Urban city centres and multidwelling buildings

• Penetration rate of DH in the service area─ Competing systems may erode the market

• Heat demand of customers─ Energy conservation is a threat to the economics in a

mature DH system.



Policies and regulations that have shaped the Swedish DH sector

• Specific district heating regulation• Municipal energy planning and land-use planning• Energy and environmental taxation• Investment subsidies• Tradable renewable electricity certificates• Waste management legislation and taxes



Specific district heating regulation

• 1996 deregulation of energy markets (electricity and district heat).

• Before 1996 cost-based pricing in municipal energy companies

• After 1996 municipal companies should be operated in a businesslike fashion.

• Debated due to monopoly position of the DH supplier in each system.

• New district heating law (July 2008)• Monitoring of the DH sector by the Energy Market

Inspectorate



Energy and environmental taxation

• High taxes on oil products (1970s)• Energy tax reform (1991)

─ Introduction of carbon and sulphur tax and nitrogen charge

─ Energy and carbon taxes are levied on fuels in heat production; biomass and peat are exempted

─ Electricity is taxed at consumption level



The carbon tax on fuels in heat production

0

100

200

300

400

500

600

700

800

900

1000

1100

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Ca

rbo

n ta

x (S

EK

/ton

ne

CO

2)

R&S + DH (H-O) + CHP

R&S + DH (H-O) (no ETS)

Industry

DH (H-O) (ETS)

Industry +

Industry & CHP (ETS)

Industry (no ETS)

R&S = Residential and Service sectorDH (H-O) = District Heating (Heat-Only)CHP = Combined Heat and PowerETS = Emission Trading System



Energy and carbon taxes

• In individual heating─ Increased competitiveness of district heating, wood

pellets and heat pumps.

• In DH production─ Increased competitiveness of biomass, waste and

industrial waste heat



Non-policy factors that have shaped the Swedish DH sector

• Opportunities associated with municipal ownership• Technical standards• The forest industry and biomass supply• Public perception



Municipal ownership - opportunities and consequences

• The first customer base among public buildings─ Schools, hospitals and multi-dwelling buildings owned by

municipal housing companies

─ National housing programme – the building of 1 million dwellings in 1965-75

• Use of fuels and energy sources─ Coordination of waste management and DH production

─ Political preferences



Conclusions and lessons learned for the European arena

• Heat demand and heat density• The benefits of DH systems• Policies and regulations• Competing systems• Ownership and institutional factors• Public perception



The benefits of DH systems: utilisation of surplus heat and RES• CHP

─ Initially strong motive, then weak development in Sweden─ Most compelling argument for building DH systems in other European

countries.• Industrial waste heat

─ Supplies from the forest industry dominate in Sweden.─ Also available in refineries, chemical food processing industries and

metallurgical industries, and hence in most European countries.• RES

─ Biomass and MSW in Sweden─ Forest resources and forest industry, but also biofuel imports (up to

40% of biomass use in DH systems).─ Biomass from the agricultural sector, deep geothermal heat or solar

heat could be important in other European countries.



Policies and regulations

• Energy and environmental taxes on fossil fuels have promoted district heating and greatly influenced the use of fuels and energy sources in DH production.

• The possibility of applying such taxes in other countries depends on:─ ETS

─ Acceptance of taxes

─ Household incomes

─ The availability of indigenous fossil fuel resources



Competing systems

• Electricity - main competing system in Sweden and perhaps in other countries─ Earlier: electric boilers and direct electric heating

─ Now: heat pumps

• Natural gas─ Where there is gas supply to buildings

• The lock-in depends on the existence of central heating



Ownership and institutional factors

• In Sweden the municipalities have played an important role in the introduction and development of DH systems.

• What actors or institutions have the interest and organisational resources to do this in other European countries?



Public perception

• High acceptance for community-wide technical solutions in Sweden.

• Good reputation due to reliable supplies and competitive prices

• Acceptance and reputation depends on the cultural and political heritage─ In e.g. Eastern European countries district heating is often

associated with the Soviet era.• Certain lack of confidence has emerged in some

places in Sweden after the deregulation and as DH tariffs have increased.

Supported by Introduction and development of the Swedish district heating systems Critical factors and lessons learned Project meeting.

Documents

swedish dh systems

building dh systems

dh systems barriers

dh supplier

heat production slide

introduction of carbon

public dh system

costs dh tariffs