1. 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

2. Introduction and development of the Swedish DH systems www.res-h-policy.eu2 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

3. Introduction and development of the Swedish DH systems www.res-h-policy.eu3 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

4. Introduction and development of the Swedish DH systems www.res-h-policy.eu4 Heating of buildings in Sweden 1970-2006

5. Introduction and development of the Swedish DH systems www.res-h-policy.eu5 Heating of buildings in 2007

6. Introduction and development of the Swedish DH systems www.res-h-policy.eu6 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)

7. Introduction and development of the Swedish DH systems www.res-h-policy.eu7 Ownership Municipal administrations and municipal companies Fortum Sydkraft/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

8. Introduction and development of the Swedish DH systems www.res-h-policy.eu8 Energy sources and fuels

9. Introduction and development of the Swedish DH systems www.res-h-policy.eu9 CHP 2-5% of total electricity supply. Initially strong argument for DH systems Barriers: nuclear power and low electricity prices

10. Introduction and development of the Swedish DH systems www.res-h-policy.eu10 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)

11. Introduction and development of the Swedish DH systems www.res-h-policy.eu11 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.

12. Introduction and development of the Swedish DH systems www.res-h-policy.eu12 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

13. Introduction and development of the Swedish DH systems www.res-h-policy.eu13 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

14. Introduction and development of the Swedish DH systems www.res-h-policy.eu14 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

15. Introduction and development of the Swedish DH systems www.res-h-policy.eu15 The carbon tax on fuels in heat production

16. Introduction and development of the Swedish DH systems www.res-h-policy.eu16 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

17. Introduction and development of the Swedish DH systems www.res-h-policy.eu17 Investment subsidies A number of state subsidies and favourable loans over the past 40 years. Replacement of oil and direct electric heating in buildings. Biomass-based electricity production (1991-1996, 1997-2002) Local investment programmes (LIP) and climate investment programmes (KLIMP)

18. Introduction and development of the Swedish DH systems www.res-h-policy.eu18 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

19. Introduction and development of the Swedish DH systems www.res-h-policy.eu19 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

20. Introduction and development of the Swedish DH systems www.res-h-policy.eu20 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

21. Introduction and development of the Swedish DH systems www.res-h-policy.eu21 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.

22. Introduction and development of the Swedish DH systems www.res-h-policy.eu22 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

23. Introduction and development of the Swedish DH systems www.res-h-policy.eu23 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

24. Introduction and development of the Swedish DH systems www.res-h-policy.eu24 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?

25. Introduction and development of the Swedish DH systems www.res-h-policy.eu25 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.