by Linda Bertelsen
Lower CO2-emissions with energy transition

With lower system temperatures, it is cost-efficient to use renewable heat sources and waste heat. The slow takeoff can be seen as a chicken or egg dilemma. What should come first? Investments to lower temperatures -allowing efficient use of renewable heat sources and waste heat- or renewables or waste heat- rendering low system temperatures cost-efficient?

By Kristina Lygnerud, Energy department manager, Swedish Environment, Research Institute (IVL) and Associate Professor in Industrial and Financial Economics at Halmstad University

Since 2018, a team has built a guidebook on implementing low-temperature district heating (LTDH) (work of Annex TS2, IEA-DHC). Together, we have tossed and turned existing knowledge around to condense all relevant information into a guidebook to facilitate implementation. When we started the writing process, we defined Fourth Generation District Heating (4GDH).

Now, three years later, our definition of 4GDH applies to all new technological features and concepts using low temperatures, which are considered best available from 2020 onward. As experienced in previous technology generations, a wide diversity of technology choices in 4GDH is expected.

Hence, cold district heating systems are also included in our definition of 4GDH. The corresponding technology comprises all heat distribution technologies that will utilize supply temperatures below 70°C as the annual average. 4GDH technology is a family of many different network configurations for heat distribution. Notably, cold and warm networks are
siblings in this family of configurations.

Figure 1. Economics of LTDH

Returning to the book, finalized this Spring, it covers several things: what to do in the building and in the district heating system to allow the low temperatures. Early installations have been identified and analyzed in-depth, generating hands on experiences. Last, but not least, we have dedicated two chapters of the book to the economics and competitiveness of low-temperature district solutions. At lower distribution temperatures, the economic benefits of renewables and recycled heat are based on efficiency gains stretching from heat supply to the buildings, illustrated below.

More specifically, the main efficiency gains are:

  1. More heat extracted from geothermal wells since lower temperatures of the geothermal fluid can be returned to the ground
  2. Less electricity used in heat pumps when extracting heat from heat sources with temperatures below the heat distribution temperatures since lower pressures can be applied in the heat pump condensers
  3. More excess heat extracted since lower temperatures of the excess heat carrier will be emitted to the environment
  4. More heat obtained from solar collectors since their heat losses are lower, thereby providing higher conversion efficiencies
  5. More heat recovered from flue gas condensation since the proportion of vaporized water (steam) in the emitted flue gases can be reduced
  6. More electricity generated per unit of heat recycled from steam combined heat and power (CHP) plants since higher power-to-heat ratios are obtained with lower steam pressures in the turbine condensers
  7. Higher heat storage capacities since lower return temperatures can be used in conjunction with high temperature outputs from high-temperature heat sources
  8. Lower heat distribution losses with lower average temperature differences between the fluids in heat distribution pipes and the environment
  9. Ability to use plastic pipes instead of steel pipes to save cost

(CRGs) were defined and explored using lower temperatures in heat distribution networks for various heat supply options. They concluded that the cost reduction gradients for new heat sources (e.g., heat pumps, solar collectors, geothermal heat, and low-temperature excess heat) are approximately five times higher than those for traditional combustion in CHP
plants. This is shown in the table below.

Table 1: Overview of assessed economic effects, indicated with the cost reduction gradient (CRG) in euro/(MWh∙°C), of reduced system temperatures

The table discloses the chicken and egg problem or the catch22 if you prefer. In countries with a district energy tradition and CHPs, boilers, or short and low term storage, the CRG is in the range of 0.16-0.07 euro/ MWh ˚C. Not until these countries lower temperatures AND start using low-temperature heat sources like geothermal, solar, or waste heat, the CRG becomes appealing and in the range of 0.68-0.51 euro/MWh ˚C.

During the guidebook’s writing process, we also identified that companies engaging in low-temperature installations focus on technology – dealing with the business model aspects later. A paper was written based on the analysis of six Low Temperature District Heating (LTDH) cases (Lygnerud, 2019).

This paper addresses the following research question: Do district heating companies that implement low-temperature solutions develop their business models simultaneously as they make the shift in technology?

The answer to this question is no. The main conclusion is that none of the six studied cases upgraded the business model or logic. Instead, the high-temperature context was applied to the low-temperature solution, leading to the loss of the potential value created in the low-temperature context. The central values made but not capitalized on, are related to:

  1. The customer value when offering a differentiated, green district energy solution.
  2. The prosumer relationship is long-term and generating a profit for both sides.
  3. Increased flexibility in the heat supply.

Including low temperatures in the district heating portfolio can increase competitiveness, but it necessitates a shift in the business logic. When discussing business models, it is relevant to consider the one component that generates revenue: price.

Motivational tariffs are being applied notably in Denmark and Sweden; however, the dilemma is how significant the motivations should be. And when to reduce them so as not to erode the benefit of the district heating provider (once the customer has become an efficient actor in the network). When printing the book, there was no consensus on building the best motivational tariff for low-temperature installations – this needs further research.

In sum: tangible and appropriate technologies and methods are available for the implementation of low-temperature district heating. Early adopters have tested and implemented lower temperatures in both existing and new heat distribution networks. Thus, buildings can and should adopt the utilization of lower temperatures in the future. Reductions in specific heat demand will also facilitate the use of lower temperatures.

Current technologies and methods can be further elaborated and refined by research and development. The most significant barrier to undertaking LTDH investment is that it is not business as usual.

One crucial factor explaining the limited interest in futureproof LTDH technology is that the risk of limited heat supply in 2050, when fossil fuels are not available, has not yet become apparent for most end-users and heat providers. While the economic benefit of low-temperature district heating can reduce the LCOH from future district heating systems, the benefit in current systems remains limited.

Hence, this benefit alone is not currently strong enough to push the transition towards more decarbonized district heating systems. Carbon pricing, or other efficient policy drivers, must be used. It can be a solid, parallel economic driver for incentivizing decarbonization.

Old institutional rules must also be appropriately revised for better alignment with low-temperature district heating. To conclude, old habits die hard. In combination with lock-in effects from the application of current technology and a lack of understanding of how to efficiently link stakeholders to each other, it is difficult to escape the paradox of catch 22.

For further information please contact: Kristina.Lygnerud@hh.se

References and links

International Energy Agency Technology Collaboration Programme on District Heating and Cooling, https://www.iea-dhc.org/
References: Averfalk, H., & Werner, S. (2020). Economic benefits of fourth generation district heating. Energy, 193, 116727. doi:https://doi.org/10.1016/j.energy.2019.116727
Lygnerud, K. (2019). Business Model Changes in District Heating: The Impact of the Technology Shift from the Third to the Fourth Generation. Energies, 12(9), 1778.

“Lower temperatures, lower CO2 emissions, and higher profitability” was published in Hot Cool, edition no. 2/2021. You can download the article here:

meet The Author

Kristina Lygnerud
Energy department manager, Swedish Environment, Research Institute (IVL) and Associate Professor in Industrial and Financial Economics at Halmstad University