Analysts point to potential cost gains from district heating

Underground pipework for district heating scheme

Analysis from Lux Research says district heating’s potential can be better exploited and can deliver cost gains of up to 74% over conventional distributed heating, if obstacles are overcome.

Benefits will vary with technologies, fuels and climate, according to Lux.à‚ The sector is worth $10 billion annually, but efficiency and technical sophistication of systems varies from region to region, with Europe currently leading the way.

The researchers claim that new technologies — coupled with a range of alternative fuels — will enable more efficiencies, lower carbon output, and enhance the economic viability of district heating for a wider range of geographies, notably the Northeast United States, Spain, Poland, South Korea and Japan.
Heat network builders
“Despite being a clear winner, district heating systems face structural hurdles. Given the long-time horizon of such a network, it is dependent on future building development — a municipally controlled variable,” said Alex Herceg, Lux Research Analyst and the lead author of the report titled, “Heating for the Future: Identifying Global Hotspots for District Energy.”

“Investment costs of greenfield district heating (DH) development are high and gap financing for construction is hard to obtain,” he added.

Analysts evaluated six proven alternative heat generation methods for district heating, and their viability in the continental US, the European Union and East Asia. Among their findings:

  • Natural gas has widest application. Withà‚ incremental gains in combustion efficiency, natural gas-fired DH producesà‚ the most consistent total cost of operations (TCO) reductions across allà‚ three building types — residential, multi-residential and commercial. Costà‚ savings range between 47% and 74%, better than those derived from biomassà‚ and waste-to-energy (WTE). Even in the worst-case scenario, gas-firedà‚ delivers savings of 47% for residential whereas WTE slides to 21% andà‚ biomass to 27%.
  • Legacy differences determine gains. DH hasà‚ compelling TCO reductions in regions such as Scandinavia because ità‚ displaces high-cost electric heating that, for example, costs $0.40/kWh.à‚ Similarly, it is a cost-effective alternative to fuel oil in Japan, Spainà‚ and Poland.
  • Renewable mix is best for Asia. In Asia-Pacific,à‚ the most promising technologies are Ground Source Heat Pumps (GSHPs),à‚ biomass and solar thermal. Each can drive down TCO by 10%-20%. In Southà‚ Korea, the GSHPs can realize a higher 30% cost reduction while China’sà‚ commercial segment alone is viable for Waste-to-Energy (WTE).

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