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Cities are strengthening the business case for district energy

London, UK and Copenhagen, Denmark are both implementing DES

Local government and utilities shared experiences on how they have been strengthening the business case for district energy in Banja Luka, Copenhagen and London during a webinar co-organized by ICLEI and UN Environment under the Global District Energy in Cities Initiative.

UN Environment highlighted the importance of accounting district energy multiple benefits, such as energy security and decreased exposure to fossil fuel’s prices volatility. Illustrating this point, oil price increases since 1996 did not reflect on the district heat prices in Güssing, Austria, as the increased use of renewable energy resulted in decoupling of prices.

District energy is a key technology to achieve the Mayor of London’s 25% decentralized energy production target by 2025, and the new Mayor’s very ambitious pledge for London to be carbon neutral by 2050. Buildings’ heating is responsible for 30% of London`s CO2 emission, being the biggest emitter. London has a liberalized energy market and infrastructure ownership is dispersed. “Without market signals, coordination and leadership in this area it will be very difficult, if not impossible, to have systems operating at optimum performance.” said Peter North, Senior Manager for Sustainable Energy Programme Delivery, Greater London Authority (GLA). The London Plan is instrumental in mobilizing the 32 Boroughs to plan for district energy. Local capacity building and engagement has provided the evidence base to support decision making in the energy master planning process and promote a competitive heat network. The investment opportunity to achieve 25% decentralized energy by 2025 was estimated in 5-7 billion pounds, corresponding to a 10 fold increase in production capacity. GLA has been working to remove barriers to private sector investment in district energy schemes seizing low-carbon energy sources and waste heat. The public sector also has been playing a key role in providing incentives and facilitating engagement of private actors such as developers and energy service companies (ESCOs). Under the EU ELENA technical assistance facility, GLA helped to deliver 100 million pounds of projects to market, of which about 25% are operational and others are in the procurement phase.

The City of Copenhagen aims to become the first CO2-neutral capital city in the world by 2025. This ambitious target is in large part enabled by district energy. District heating has been in place in the city for about 90 years and 99% of all buildings in the city center are connected to district heating. This has been possible thanks to the experience accumulated over the years and a stable regulatory framework favorable to community energy, explained Kristian Honoré, Energy Planner at Hofor – Greater Copenhagen Utility. District heating production consists mostly of large cogeneration and incineration plants to deliver 35PJ/year over 50 km. Carbon neutral district heating will be achieved through:

  • conversion of cogeneration plants to biomass, mostly wood pellets and wood chips;
  • conversion of steam-based network still used in the oldest part of the city to low temperature district heating by 2021 and
  • support customers to reduce consumption from the demand side. Regulation requires district heating companies to realize savings every year both on the supply and demand sides. Hofor’s district heating business is not-for-profit, meaning that profit needs to be reinvested.

In addition, several options are being explored to reach 100% renewable energy later on, such as connection of district energy to geothermal energy, large heat pumps, electric boilers and surplus heat.

Although Copenhagen is in a Northern Country, the demand for cooling is increasing as building standards become more stringent, resulting in air conditioning proliferation in office buildings, banks, hotels, etc.. Ten years ago Hofor decided to seize this opportunity and created a new company to explore the district cooling business, under market conditions. The dedicated company now serves numerous emblematic buildings of the city and has a 20 km long network. “District cooling can deliver up to 40% financial savings by avoiding servicing of stand-alone cooling machines and through the use of sea-water’s free cooling. This reduces CO2-emissions by about 70% contributing a good part of the goal to be CO2-neutral in 2025” said Hamdi Sarac, Customer relations and procurement at Hofor. Other benefits to the customer that contribute to the viability of district cooling include price certainty, lower maintenance and operation costs, no noise or condenser units on the roof or facades making building more attractive for rental, high service reliability and high energy efficiency, almost a “plug and play” solution. Hofor’s district cooling customers registered a 20% annual growth in the last 5 years.

Banja Luka has district heating since 1970, originally based on heavy fuel oil, a low cost fuel at the time. The supply was interrupted due to civil war. In 2000, after reestablishing heat energy production, 40% of consumers disconnected because of low service quality and inability to pay. In addition, “procurement of heavy fuel oil during the heating season when the price was more than double, created a huge debt which increased with every heating season until 2012” said Dusan Rodic, Chief of Development and Investment Department at Toplana a.d. Banja Luka’s district heating utility. Improvements in operations in recent years enabled significant savings that are replicable to any existing district heating system, particularly for “refurbishing” cities. These improvements included switching to a 24h work regime when average daily temperatures are lower than +2°C (resulting in 18-20% fuel savings and circa 2.000.000eur/year cost savings), network balancing (400.000eur/year cost savings and reduction of reclamations and unpaid bills) and hot water leakage reduction from 1500m3/day to 200m3/day. In 2014, the district heating company installed 3 biomass boilers with a total installed heat production capacity of 16 MW, covering about 20% of customers. Still more that can be done to bring additional savings including modernization of network and heat substations, tariff model review and exploration of additional renewable energy sources. In addition, the building sector also needs to be considered. Some of the building stock is very old and inefficient with energy consumption reaching up to 160kWh/m2 and with impoverished residents that cannot pay their energy bill. The insulation of buildings can bring energy savings of up to 40-50%. “It must be understood that residential buildings are part of the district heating system and have great influence on its operational costs.”

The local strategies to support district energy should consider the current status of district energy in the city: to start district energy the focus on high density priority zones to demonstrate viability; to expand district energy the city can leverage land use and urban planning policies to promote high-density mixed-use zones and optimize investments on energy infrastructure; cities with consolidated district energy systems have paid most of the capital expenditures and can start to connect less dense neighborhoods and interconnect systems; and finally cities with systems in need of refurbishment typically focus on maintaining high level of customer connection to be able to distribute the costs of interventions over a higher number of consumers.

ICLEI hosts this webinar series as part of the Global District Energy in Cities Initiative. Updates are provided here. To learn more or to join the initiative, please contact Ms. Ana Marques at

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