The EU has recast the Energy Efficiency Directive. As politics plays a crucial role in developing future district heating markets, stakeholders within the sector should pay notice. The new Directive integrates a more significant push for 4th generation district heating and better governance, which will influence the future of European subsidy schemes, demand for Danish know-how, and solutions within 4th generation district heating.
By Carsten Østergaard Pedersen, District Energy Director, Grundfos
Rune Kaagaard Sørensen, Public Affairs, Grundfos
Asbjørn Bjerregaard Pedersen, Public Affairs, Grundfos
EU raising the bar
Important news has emerged from Brussels that everyone in the district heating (DH) sector should be aware of. As part of
the EU’s Green Deal, the Energy Efficiency Directive  has been recast in response to the climate and energy crisis. The Directive sets energy efficiency roles in achieving a 55% reduction in CO2 emissions by 2030 compared to 1990, with the goal of climate neutrality by 2050. Energy efficiency improvements play a major role in achieving these targets as the Directive sets targets of 11.7% energy savings by 2030.
This is particularly significant as we are now on track to experience global temperatures far beyond the Paris Agreement , increasing energy poverty rates and risk of sufficient energy supply in the coming winter. The heating sector, which accounts for over 40% of all energy end-use in Europe, therefore, needs to deliver energy savings quickly and move away from fossil fuels .
Denmark has played a leading role in driving the progress in DH. There is now an opportunity to build on this expertise to further improve energy efficiency levels across Europe. Danish members of the European Parliament, Danish companies,
and interest organizations have promoted an increased focus on energy-efficient DH in the recast of the Directive, which will help to deliver the energy and CO2 savings we urgently need.
With Denmark’s proven track record in energy-efficient solutions and ‘know-how’ within DH, we should be ready to meet increased demand for our energy-efficient solution and knowledge soon as the Directive is implemented into national legislations by 2024.
Most important takeaways from the Directive
The European DH industry will transform within the coming years, thanks to the implementation of a new directive and the
innovation that happens. This Directive comprises several note worthy elements that promise to revolutionize how we heat our homes and businesses.
Energy efficiency first in heating
The heating supply must now adhere to the Energy Efficiency First principle. This signifies a critical shift towards promoting energy-efficient solutions in all planning, policy-making, and significant investment processes. It means that heating solutions will be assessed based on their environmental impact, and only those that meet stringent energy efficiency standards will be encouraged.
Data centers to utilize waste heat
Data centers that consume more than 1 MW of power are now obligated to use their surplus heat unless they can prove that
it is not feasible from a technical or economic standpoint. This measure will help reduce energy wastage and thereby promote its utilization through DH networks.
4th generation heat planning
Heating plans have become mandatory in all cities with populations exceeding 45,000 inhabitants. These plans will adhere to the Energy Efficiency First principle and assess factors such as low-temperature readiness, co-generation, waste heat recovery, and renewable energy sources.
Replacing fossil fuels in the energy mix
There are stringent measures in place to phase out fossil fuels in DH. By 2027, 50% of all heat generated must come from renewable or waste heat sources. Additionally, the CO2 content of the delivered heat must follow strict guidelines, as specified
in the table below.
Increased ambitions and governance structure
The recast directive places a greater emphasis on energy efficiency, with raised ambitions to achieve energy savings of 11.7% on energy end-use by 2030, compared to a reference scenario from 2020. The governance structure in the Directive has also been strengthened, enabling the Commission to impose stronger sanctions on member states that fail to deliver these savings. These measures are set to significantly enhance the Directive’s effectiveness and drive greater energy efficiency in the member states.
What are the implications for the district heating sector
The new Energy Efficiency Directive from the EU has set the stage for swift implementation, with Member states needing to integrate the Directive’s policies by 2024. This urgency stems from the EU’s desire to reach climate targets and reduce greenhouse gas emissions, which necessitates the immediate adoption of energy-efficient solutions.
The DH sector is expected to face a surge in demand for such solutions in the short term. The Danish energy consultancy firm, EA Energianalyse, estimates that the sector’s energy-efficient exports could increase by approximately 60-80 billion DKK (€ 8-10.7 billion) by 2030 to around 260 billion DKK  (€ 34.7 billion) in total. These projections were made prior to the recent energy crisis, and as demand for natural gas-free heating technologies is rising, even higher numbers may be expected.
Germany has already planned its own Energy Efficiency Act, which, according to leaked documents, closely aligns with the Energy Efficiency Directive. However, since the Directive represents the minimum requirements for national legislation, Germany has ample room to elevate its energy-saving ambitions further.
Therefore, it is crucial that the sector advocates for higher ambitions as the Directive is implemented in Member states, which will lead to even more significant climate mitigation impacts and demand for energy-efficient solutions. Additionally, the new Directive will heavily influence the future of large subsidy schemes for DH in Europe.
Any national subsidy schemes must comply with the new demands outlined in the Directive and gain approval from the EU. For example, Germany’s 3 billion € DH scheme, which is applicable only for energy-efficient DH running on waste heat or renewable energy and runs until 2028, aligns with the new Directive .
Demand-driven temperatures as a key enabler
As we strive toward a greener future, low-temperature DH zones have emerged as a key focus area. Therefore, we warmly welcome the integration of mandatory municipal heating plans that assess low-temperature readiness in the Directive.
This is an important step towards reducing CO2 emissions, increasing energy efficiency levels, and integrating more waste heat and renewable energy sources into our DH energy mix.
The amount of waste heat in the EU is almost equal to the needed energy for Europe’s residential and service sector buildings , illustrating the vast potential. However, to fully unlock this potential, we must focus on lowering temperatures to a maximum of 70 degrees C.
Lower temperatures are more efficient for utilizing renewable energy and waste heat in DH grids, making low-temperature DH one of the cheapest technologies for achieving 100% renewable heating . This is an important step in combatting the rising
energy poverty rates, with the ability to lower the energy needed for supplying heat. Grundfos estimates that up to 800,000 homes in Europe can be supplied with “free” heat if the existing DH grids run by a maximum of 70 degrees C temperature.
That’s why we’re promoting the need for low-temperature ready buildings in the recast of the Energy Performance of Buildings Directive. By increasing focus on building readiness, we can achieve a cost-efficient roll-out of energy-efficient heating technologies like 4th generation DH or heat pumps. Therefore, we strongly encourage the European Union to integrate regulations that promote a zonal approach for building renovation to low-temperature readiness. This will drastically increase the ability for energy-efficient improvements in Europe’s DH grids.
It’s time for governments, municipalities, heat planners, and utilities to implement concrete plans to roll out low-temperature DH zones. For example, The Albertslund Municipality in Denmark is leading the way, already starting this transition years before the new Directive was implemented. Their ambitious plan to deliver only low-temperature DH to municipal residents by 2026  is an excellent example of how we can lower heat losses and integrate waste heat and renewable energy sources already today.
Enough talk. Time for implementation.
The time for action is now. After a lengthy process of recasting the new Energy Efficiency Directive, we must swiftly move toward its implementation. Climate change is not slowing down, and neither should we. It’s crucial that we rapidly increase the sustainability of the heating sector. Thankfully, both the sector and its users are embracing this opportunity for change, recognizing its positive impact on the delivery of heat to Europe’s population. Let’s take this chance to strengthen the role of district heating in promoting a greener and more sustainable future for all.
For further information please contact: Carsten Østergaard Pedersen, firstname.lastname@example.org
 EU (2023), https://energy.ec.europa.eu/topics/energy-efficiency/energy-efficiency-targets-directive-and-rules/energy-efficiency-directive_en
 023), https://www.ipcc.ch/report/sixth-assessment-report-cycle/
 IEA Heating (2022), https://www.iea.org/reports/heating
 EA Energianalyse (2021), Analyse af betydningen af mere ambitiøse EU klimamål frem mod 2030 for dansk eksport af energiteknologier (synergiorg.dk)
 EU State Aid (2022) https://ec.europa.eu/commission/presscorner/detail/en/ip_22_4823
 Danfoss (2023), “The worls largest untapped energy source – excess heat”
 IEA (2021), “Low-temperature district heating: heating our homes at lower cost”, https://www.iea.org/articles/low-temperature-district-heating-heating-our-homes-at-lower-cost
 Albertslund Municipality (2023), https://fjernvarme.albertslund.dk/fjernvarme/lavtemperaturfjernvarme