Sustainable urban heating: Renovating district heating services in eastern Europe

District heating systems in central and eastern Europe tend to perform poorly compared with those in western Europe. Ideally, refurbishment should incorporate use of waste heat from nearby power stations and industry. Using Belgrade as an example, Aleksandar Kovacevic examines the options.

District heating services throughout central and eastern Europe (CEE) are provided by huge networks supplied by large centralized sources of heat. A major study by the International Energy Agency (IEA) and Organization for Economic Co-operation and Development (OECD)1 provides an important insight into current district heating patterns in the region (see Table 1). According to an IEA/OECD report: ‘Heat losses in production, distribution and end-use in these transition economies are high compared with western Europe.’1

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A UN Development Programme (UNDP) survey2 of heating services in Serbia and Montenegro found that about 17% of consumers regularly supplemented heat from the district heating system with electrical appliances; while half of consumers had such appliances in reserve. Opening windows remains a common method of regulating temperatures in cases of overheating.

These practices result in:

  • very low utilization of district heating assets (around or less than 1000 equivalent hours per year)
  • frequent mechanical outages along pipes
  • relatively low boiler efficiencies (due to low loads).

Providers are forced to compromise between economies of scale in terms of boilers and appropriate cascading principles to meet heating loads with fluctuating network losses. In this respect, steam extraction in heat-or-power plant schemes appears an attractive proposition as electricity is an alternative product during periods of low heat demand. As the recent crises with gas, electricity and heat supply in the Russian Federation revealed, electricity and heat demand often coincide – as households are now better equipped with electrical appliances and the quality of district heating services is diminishing, so consumers have to supplement their heat supply with electricity. This is creating major shortages throughout the energy system.

Inside a district heating station in Poland. Thermal stations in eastern Europe could make use of the waste heat from power providers nearby (Bewag)
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Governments and municipalities in the CEE inherited district heating systems from a time when they were built to serve the majority of the urban population using relatively cheap fuels made available through Soviet-style planning systems. In many cases, this was at the expense of the rural and suburban poor.

Maintaining district heating services has emerged as a political priority and, as fuel prices grow more commercial, government/municipal subsides have become the only way of keeping systems working. These subsidies have an enormous impact: cheap heating makes apartments served by district heating more valuable in the new real estate markets, creating considerable social segregation and barriers to the introduction of new technologies.

Competitive threshold for DH services

From the perspective of a new home or apartment owner, district heating is one possible heating option. To make use of district heating services, the apartment needs to be equipped with appropriate heating devices such as radiators, panels and wall- or floor-heating systems. As new buildings are built to higher insulation standards, the temperatures required and the heating capacities of the heat source are becoming lower and more suitable for the application of heat pumps or the use of renewable sources of energy. Investment demands are getting lower and more affordable.

Mass production and technological advances offer simple, efficient and cheap alternatives to district heating. Heat pumps and natural gas boilers are both capable of providing domestic hot water services throughout the year and have relatively high utilization ratios.

Boiler house in the district heating project for Zlutice in the Czech Republic (Biomass Technology Group B.V.)
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Taking into account commercially available technologies, it is considered as a rule of thumb that the heat cost at source should not exceed a quarter of the electricity or half the natural gas price per unit of energy. To remain competitive, district heating systems should be able to make use of waste heat.

Waste heat storage (via hot water storage) is considered the most cost-effective form of energy storage. As traditional fuels become more expensive and with high interest rates in CEE, it is more and more expensive to store energy in the form of natural gas, oil products, coal or electricity. Furthermore, seasonal and weather-related fluctuations in energy demand affect electricity and gas markets, making prices more volatile and weather-sensitive.

Waste heat typically costs a fraction of these forms of energy and could be stored in the form of hot water in vast quantities and then used through district heating systems. This provides a potential competitive advantage for district heating as an urban heating option. It should provide the flexibility to allow cogeneration plants to follow the electricity market without too many compromises in terms of heat requirements.

For existing apartments, district heating subsidies are an in-built advantage – a sort of ‘sunk cost’. An apartment with district heating is more expensive to buy (see above). Disconnection would mean loss of that price advantage and access to public subsidies (that is, private heating at the expense of the rest of the population). Meanwhile, the capacity of the electricity or gas network could be too small to facilitate alternative solutions.

Meeting the challenges: policy options

The most difficult challenges for existing district heating systems are increasing fuel costs and liquidity shortages within the public budget (the source of subsidies). Available policy options to meet these challenges depend on understanding the problem and include:

  • improving the existing district heating system
  • establishing a sustainable urban heating system.

The first option leads to gradual efficiency improvements while the second points toward radical, albeit sequenced, change.

Gradual improvements of existing DH systems

This option focuses on improving a DH system at a speed dictated by normal or accelerated replacement requirements. Modern technologies, such as metering and heat distribution management methods developed for buildings with high thermal standards and small district heating systems based on waste heat, can be applied to large Soviet-style DH systems and ‘panel buildings’, or standardized apartment blocks (see box below).

New technologies and materials are available to improve:

  • boiler efficiency at HoB plants
  • pipework insulation
  • heat metering and management at point of use.

Sophisticated technology could be deployed to meter heat and heat distribution as well as to provide consumers with regulation valves so that their regulation of demand becomes a basis for network regulation. The idea behind this arrangement is that subsidized prices could be linked with accurate heat metering to motivate consumers to save energy. This would include minimizing heat demand during periods when no one is at home and avoiding opening windows as the main means of temperature regulation.

A CHP plant in the town of Pruszkàƒ³w, near Warsaw, provides district heat for local communities (Vattenfall)
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However, there is a limit to the effectiveness of this measure. If the inhabitants of one apartment reduce the temperature in its rooms, some heat will come in from a neighbouring apartment. In addition, mechanical stress and mould could prosper throughout the panel building. A panel building is a thermal body with properties that limit the potential for energy saving through temperature reductions. In some countries, it is possible to improve matters by adding insulation to the building itself to make its thermal properties and energy conservation capacity more suitable for regulation. In addition, energy losses from boilers and pumps could be reduced by better insulation and boiler improvements.

In this scenario, the main competitive advantages for the district heating provider remain the capital costs for the customer to shift to another heating option, the coverage in terms of customers and their political influence in ensuring that subsidy levels are maintained. It is in the best interest of both service providers and their customers to retain subsidies (and cross-subsidies) as a public expense. Although the financial means for such interventions comes from external sources, providers themselves are likely to invest to extend coverage of their system in order to increase both their customer base through new (and influential) apartment owners.

Radical change to shift existing DH systems to a sustainable urban heating option

Another reform option is applicable only to those district heating systems or parts of systems that could be served by cheap waste heat or an ‘opportunity’ fuel such as geothermal heat, biomass or municipal waste.

Dedicated software can be used to simulate the operation of these district heating systems and to examine various scenarios (temperature, wind, days in week, holidays, etc.). Immediate results from such a simulation model include:

  • detailed specification of the system and its function
  • much better maintenance management
  • shorter response times to failures.

Simulation can improve management of the system through the simultaneous use of water circulation and temperature to control heat distribution. It provides guidance on strategic improvement of the network through:

  • replacing pipes
  • adding insulation, pumps or valves
  • better management of cascading heat sources in a way that upgrading components with the largest impact will be considered first.

Subsequent steps could include:

  • heat metering at a building level
  • calculations based on volume of space instead of apartment floor area
  • replacing electrically driven pumps by engine-based mechanical drives with cogeneration
  • tuning of heat sources.

Sequencing of this radical change could be as follows:

  1. applying a simulation model to the existing system to produce a detailed specification of the entire system and to develop various practical scenarios
  2. installing heat meters at the level of the building or sub-station so the energy consumption of particular building can be determined as a basis for a more suitable billing system – where measured energy is charged to customers according to the volume of the space they use or own
  3. adjusting and calibrating the simulation model according to measured values
  4. considering real heat demand and potentially available sources of cheap waste heat
  5. identifying parts of the network that cannot be served by DH systems in a sustainable way for longer periods
  6. introducing seasonal hot water heat storage to allow utilization of various heat sources and the decoupling of heat demand and heat supply
  7. identifying and making use of most of the competitive heat sources (waste heat, geothermal, solar) and other opportunity fuels.

Optimization of the network and its operation and maintenance (O&M) would allow the connection of waste heat source(s) and seasonal heat storage.

The district heating system remains a low-cost option and can be kept at an appropriate level of technological sophistication. If supplied with cheap waste energy, it could become a competitive option for urban heating. Furthermore, as heat storage decouples the distribution system from the heat source(s), various sources could be utilized including solar energy, small geothermal sources and peak-shaving cogeneration plants. Some customers could be offered a district cooling service. District heating systems that cannot be served by such cheap sources will have to be abandoned and replaced by a more decentralized urban heating solution such as decentralized cogeneration units, heat pumps or solar systems.

Belgrade case study

Developments within the city of Belgrade’s district heating system illustrate both the patterns described above.

The city of Belgrade and its suburbs are served by one of the largest district heating systems in CEE. Its main characteristics are:

  • a consumption area of about 230,000 apartments with 13 million m2 of heated area and more than 3 million m2 of business premises
  • more than 2000 GWh heat energy delivered
  • about 2500 MW HoB installed capacity including 18 plants and 98 boiler installations
  • about 200,000 tonnes of mazut (heavy fuel oil) equivalent consumed per winter, 80% of which comes from natural gas and 3% from lignite.

The equivalent capacity utilization is less than 1000 hours per year; about 140 kWh per m2 are produced and delivered to the system at the average winter temperature of +4.6à‚ºC for a price less than €5 per m2 per year. At current natural gas prices and without taking into account seasonal fluctuations and take-or-pay clauses, the fuel cost alone for heating the same area would be almost €9 without subsidies. O&M expenses, overstaffing and amortization of capital including civil works and rights also need to be taken into account, so the total cost will be even higher.

Figure 1. Simulation model of heat-or-power scheme at the Obrenovac A power plant
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An ongoing energy-efficiency programme financed by international donors and creditors such as the Swedish International Development Agency (SIDA), KfW (development bank owned by the German government) and the European Bank for Reconstruction and Development (EBRD) offers considerable potential for improvement in terms of the efficiency of the network. However, these gains are likely to be limited as heat production in HoBs from traditional fuels and at low utilization rates is likely to remain expensive.

The Belgrade district heating system is not sustainable without considerable subsidies from the public budget. However, these subsidies are directed at consumers who are in much better social position than most of the rest of the population of Serbia: there is no social or poverty justification for such subsidies. Further increases in natural gas and crude oil prices in comparison with a stagnant gross domestic product (GDP) in Serbia make district heating even less affordable both for those that are connected and for public budgets.

Figure 2. Schematic for the utilization of waste heat at Obrenovac A – a true cogeneration of heat and power
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The response of district heating operators to these problems is to seek to increase the number of consumers (social coverage), subsidies and HoB capacity. The immediate consequence of such developments is the need to adjust natural gas supply to the enormous seasonal winter demand and security of supply required by HoBs serving the Belgrade district heating system. The Government is now considering investment in large underground storage for natural gas, which is several times more expensive per unit of energy than equivalent hot water heat storage.

Ongoing network efficiency improvements provide an opportunity for better network management, interconnections and heat distribution based on water flow management – all prerequisites for the introduction of a source of energy based on waste heat from nearby large power plants in the suburb of Obrenovac.

A radical change pattern could be introduced in a small segment of the Belgrade district heating system in Obrenovac, where there is a major lignite-fired power plant with 2 x 210MWe and 4 x 309 MWe units. The first two units are a standard Soviet LMZ design and the other four are built around a BBC/Alstom turbine. The Obrenovac district heating system is fed from the first two units via simple steam extraction. The main cost of the process is lost electricity generation.

A simulation model was used to optimize this extraction so as to minimize the costs associated with the lost opportunity to generate electricity that make it unique in the market. A team from Tekon TechnoConsulting was employed to improve the efficiency of the Obrenovac network through use of a simulation model. Their task was then extended to provide an optimization tool for the heat source.

The network simulation revealed a number of pipeline sections that could be improved or adjusted, and identified measures to improve the company’s O&M practices. Finally, the loss of electricity generation at source was minimized during the recent winter season and comfort levels significantly improved throughout the network. All customers are now considered to be served at designated comfort levels at any weather condition at optimal cost.

The various parties involved believe that the project could follow the radical change option described above. In addition, the huge amount of waste heat available in Obrenovac’s power plants could be used to provide a sustainable district heating solution for the entire city of Belgrade.

Between 1987 and 2004, about 80 studies into the feasibility of bringing heat from the Obrenovac A power station to the main part of Belgrade were carried out. These studies were based on the assumption that heat is available only through extraction of steam from turbines at the expense of electricity generation. When energy losses in transmission, pumping and capital expenditures are taken into account, comparisons with existing HoBs almost exclusively depend on the cost difference between natural gas/electricity and lignite. The various studies therefore came to different conclusions and there was no consistent decision about the project. Some facilities were built, including a bridge for the pipeline across Sava River, but they remain out of use for the time being, as final decision on the project was delayed due to fuel price fluctuations that are changing project feasibility.

A conceptual design was prepared to make use of waste heat from the power station instead of the original steam cycle.4 The capacity of the source is such that available waste heat peaks at over 2000 MWt while total energy could be over 10000 GWht per year – which is a few times above Belgrade’s current consumption. It is already cost-effective to transport that energy to the city of Belgrade as the availability of the waste heat alone would make it cost-effective.

The heat bridge in Obrenovac was intended to deliver heat to Belgrade but still remains out of use
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Considerable fluctuations in electricity generation and heat demand require significant heat storage capacity. A nearby abandoned strip mine provides sufficient volume for the very large hot water storage required, while the volume of the pipeline to Belgrade allows transfer of up to 3000 MWt at peak periods. The existence of the heat storage capacity makes it possible to use steam from the original steam cycle during periods of low electricity demand, providing for steady operation of boilers and therefore higher efficiency. The design of the heat storage and transmission systems use treated river water and gas-engine-powered pumps with heat utilization. At the receiving point in Belgrade, heat is removed from the water stream using exchangers and heat pumps, while the water is returned to the river.

The concept is open to additional heat sources such as peaking plants within the city, heat from refrigeration processes or combined-cycle plants envisaged for the city of Belgrade. Furthermore, there is enough capacity for extensions of the district heating network once the urban heating concept becomes competitive. This could improve the feasibility of all new or additional heat sources, offering a significant opportunity to make use of municipal waste, distributed generation and solar energy. The concept is now being discussed by various stakeholders and professional organizations.


Each urban agglomeration throughout CEE requires innovative solution for its existing district heating systems in order to minimize capital and operating costs. The principles outlined above could be used as a guideline for what is a major challenge in the transition of these countries toward sustainable energy practices – sustainable urban heating.

Aleksandar Kovacevic is an energy consultant based in Belgrade. Fax: +381 11 3444 615 E-mail: kovac@beotel.yu


  1. IEA/OECD, Coming in from the Cold – Improving District Heating Policy in Transition Economies (2004).
  2. UN Development Programme (UNDP), ‘Stuck in the Past – Energy, Environment and Poverty in Serbia and Montenegro’ (2004),
  3. Bertaud, A. and Bertrand, R., Cities Without Land Markets: Location and Land Use in the Socialist City, World Bank (1995).
  4. Kovacevic, A. Re-Thinking Obrenovac Lignite Complex, UNECE (2004),

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District heating systems serving apartment blocks

District heating systems consist of sources of heat, a heat distribution network and heat delivery to the customer. The sizes of these components depend on the lowest expected external temperatures at the site and the highest potential heat demand taking into account insulation, network losses, building properties and consumer behaviour. There are two typical heat sources: heat-only boilers (HoB), and heat-or-power plants (HoPP).

In a heat-or-power plant, heat is typically extracted at very high temperatures from the medium/low-pressure stage of a conventional steam turbine. This results in some loss of electricity generation capacity while producing relatively large amounts of lower temperature heat via simple heat exchangers. Waste heat from the condensing cycle and exhaust is not utilized. A heat-only boiler normally burns fuel to produce low-grade heat by means of simple heat exchangers.

There is a trade-off between environmental risks and the length of hot water delivery pipelines. More ‘environmentally friendly’ fuels such as natural gas or heavy fuel oil are utilized in those plants situated near human settlements. Coal or lignite is used in plants located away from urban areas. Because all the countries in CEE have a relatively low density of energy use, there is enough space to operate such a policy as long as cumulative environmental effects are not taken into consideration.

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Heat demand is dominated by so-called ‘panel buildings’ – standardized apartment blocks that surround the traditional suburbs of cities built in the planned economies of former communist countries of CEE.3 Heat conductivity is one of the most difficult thermal properties of such buildings. Heat moves through the building structure from room to room and through the concrete frame, making it difficult to separate parts of the building in thermal terms. There are mechanical movements of the building components related to the temperatures of the material and the poorly insulated panels mean that heat conservation is limited, leading to energy contingencies during very hot or very cold days.

To cope with such complex heat demand characteristics, the heat delivery system has to be able to deliver plenty of heat through relatively limited heating surfaces and to remain capable of increased heat transfer in line with a fall in outside temperatures. These requirements dictate how the circulating water temperature is regulated. Temperature differences can increase thermal stress, water leakage from pipelines and demand peaks: the same volume of water leaking at a higher temperature results in higher heat losses, requiring a higher energy input to maintain comfort levels.

Heat demand and its configuration normally depend on a number of exogenous factors such as whether it is a weekend or not, wind direction, outside temperatures, consumer intervention along networks and technical failures. It is very difficult for district heating providers to maintain an appropriate level of service to the entire heating area; some apartments will be overheated and others will be too cold.

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