The trade-off between urban building stock retrofit, local renewable energy production and the roll-out of 4G district heating networks


Urban retrofit is a major field of action for realising the European Union’s energy and climate goals. The challenge laying ahead is complex: there is a wide variety of solutions that can be applied in different mixes, the related costs are high, and the social impact of the needed interventions is considerable. With a view on identifying optimal urban retrofit strategies from both an environmental and an economic point of view, EnergyVille/VITO conducted a study to analyse the trade-off between increasing the energy efficiency of the existing building stock on the one hand and supplying it with renewable energy and/or sustainable district heating on the other hand. Realizing higher levels of energy efficiency indeed allows to reduce the remaining sustainable energy needs and vice versa. But how to prioritize them? This Expert Talk gives a summary of the findings.

Optimizations can lead to different choices depending on whether one focuses on reducing energy consumption, carbon emissions or costs. Moreover, the scale level at which these questions are being addressed matters. A solution that is optimal at the individual building scale level may not be so at the district scale and vice versa. It is therefore important to understand where optimal solutions at the district level differ from those at the individual building level. In order to model and subsequently assess these complex trade-offs, different urban retrofit scenarios have been simulated. The results of the simulations regarding urban retrofit lead to the following conclusions:

Carbon lock-in

Without any tax or price incentives (including market price increases for fossil fuels), low carbon solutions will rarely be developed on the single basis of cost effectivity. Compared to business as usual or light retrofit scenarios where no district heating networks are being rolled out, only low cost, high temperature district heating network solutions may be competitive, and this only in certain urban areas. In the latter case, the district may thus become carbon-neutral if the district heating source is carbon-free, but it will at the same time continue to consume considerable amounts of energy. This implies that at current price levels for fossil fuels and with present tax distribution shares over electricity versus gas and heating fuel, there remains a deep societal lock-in for energy and carbon intensive functioning.

When explicit carbon emission reduction goals are set as a boundary condition, the picture changes substantially and shows a diversified palette of possible scenarios coming forward as feasible solutions. Hereby there appears to be no basic rule like ‘always perform deep retrofit’ or ‘always roll out district heating networks in urban areas’. Temperature level and cost of the district heating source, as well as urban density, play an important role for distinguishing the options with the lowest total cost of ownership.

Where energy savings are targeted, it is obvious that only increasing energy efficiency brings real relief and hence deep retrofit of the building stock will be the best option – coming at a high cost however. In a second order, heat pumps may deliver additional energy efficiency as they rely only partially on accounted energy (the needed electricity) and for the rest utilize (unaccounted and for free) environmental heat. However, in order to be effective, these heat pumps need to operate in a context of low energy demand.

A general and major barrier for intervention is the high cost of building retrofit. Energy savings may however be an important parameter for solving the regional ‘energy puzzle’, see below, and thus be necessary in any case.

Options for a low carbon future

If the intention is to avoid deep and expensive retrofit of the building stock while still realizing low carbon goals, the challenge is in providing sufficient amounts of sustainable or renewable energy for such approach. There are 3 possible scenarios: 

1. Stand alone: the evident option, which is not considered in this study, is an individual biomass boiler for every building. For reasons of air quality and local availability of biomass, this solution must however be considered as the exception rather than the rule. The second option would be a heat pump, but given the high energy demand of the building this will come with technical challenges and/or high electricity uses. Biogas (supplied through the original natural gas network) will only occur in limited cases for reasons of limited biomass availability. For the majority of the buildings, low carbon stand alone will only work well through deep retrofit and a switch to all-electric functioning with heat pumps. The deep retrofit measures help moreover to limit the increase of the electricity demand by the heat pumps, and hence the need for grid reinforcements. 

2. High temperature district heating: this is the most profitable scenario, as far as a carbon-free high temperature district heating source is available. Such source may be based on biogas or biomass (on a large scale, deployed with fume cleansing), solar heat, industrial waste heat or deep geothermal heat. These sources are only available at certain locations and/or in limited quantities, compared to the average societal heat demand. Moreover, and as the concerned buildings will typically not be deeply retrofitted to minimize the total cost of ownership, the heat demand remains high. This scenario is interesting but will in practice often have to be reserved for areas with no other feasible solution, e.g. heritage areas. 

3. Low temperature district heating: buildings connecting to the network need to rely on a booster heat pump for upgrading the temperature level of the incoming heat. The operational cost of this scenario becomes very important, even to such level that the total cost of ownership of the solution is higher than for any scenario with deep retrofit – deep retrofit combined with a heat pump as much as deep retrofit with a connection to a district heating network. Moreover, as electricity use for this scenario is substantial and adds up to the existing consumption of household appliances, the current electricity grid may require substantial reinforcing as well. The grid operator will recover these reinforcement costs from the end user. It will result in the individual building owner paying twice: once for the high electricity consumption and once more for upgrading the grid infrastructure.

Figure 1: Breakdown of total cost of ownership among cost type (30 years investment horizon, 3% discount rate, 50% attribution of the envelope retrofit cost to the energy related aspects) for a low-cost high temperature or low temperature district heating source with 100% connection rate to the district heating network, compared to no presence of a district heating system.

By conclusion, when high carbon emission reductions are required, the only alternative for deep retrofit exists where (low cost) high temperature carbon-free district heating can be rolled out. If the district heating source becomes more expensive, the competitiveness of this solution slightly reduces. The feasible non-district heating variant using such source is individual heating with a biomass boiler. This solution should however not be promoted.

Conclusions from the building perspective

From the perspective of the individual building owner, reverting to light renovation may often come forward as the most attractive option. This is a fortiori the case with low cost, high temperature district heating available. However, if the EU policy goals of 80 to 95% reduction of carbon emissions must be achieved, near 100% renewable energy input becomes mandatory. As a substantial share of the related thermal energy inputs will come at low temperature levels, there are only two major options for buildings:

  • Perform deep retrofit and thus have the building fit for low temperature heating through a heat pump or through low temperature district heating. The retrofit operations can be performed stepwise, based on a building roadmap, in order to make investments more feasible. In this way these investments can moreover coincide with natural intervention moments such as sale of the building, necessary repairs or general renovation. A building roadmap is hereby strongly advisable in order to avoid sub-optimal interventions (lock-in). It must be noted that deeply retrofitted buildings are also more comfortable and healthy; furthermore they are better prepared for the use of heat pumps and demand response in a dynamic renewable energy provision context;
  • Perform light retrofit and revert to the use of a booster heat pump to provide for both domestic hot water and space heating at the required high temperature level (65°C). Although this leads to savings on the building envelope retrofit costs, it leads at the same time to substantial electricity use and thus increased costs over the total life cycle. Total costs will finally outweigh the costs of deep retrofit scenarios.

If light retrofit would be performed as a first step towards later deep retrofit, it should be envisaged in such way that, both from the technical and financial point of view, no lock-in is created. 

Conclusions from the district heating network perspective

Rolling out (low temperature, 4th generation) district heating is not an evident option when being considered on an investment horizon of 30 years. This adds to the need to consider district heating and cooling networks as assets in which society decides to invest based on a longer time horizon (typically starting from 40 years) and with particular goals in mind – the low carbon society and 100% renewable energy input in particular. 

The influence of the connection rate to the district heating network is dependent of the type of network: high temperature versus low temperature. This is mainly due to the chosen set up of the scenarios, whereby badly insulated buildings need booster heat pumps to connect to low temperature district heating systems. Resultantly, for high temperature district heating cases, the total cost of ownership only slightly increases with decreasing connection rates. The business cases are thus not fundamentally altering between a 50% and 100% connection rate. It means that once the district heating network has been rolled out, the advantage of connecting more homes exists but is limited, at least from the point of view of the total cost of ownership for society and not in terms of the business case for the district heating network operator. In urban areas, stand-alone, all-electric deep retrofit always remains more expensive except where buildings are systematically deeply retrofitted and at the same time only for 50% connected to the district heating system: this scenario is clearly a waste of means by sub-optimally introducing a ‘double’ solution. 

For low temperature district heating cases, the total cost of ownership increases with increasing connection rates, especially where expensive booster heat pumps are needed for the business as usual or lightly retrofitted buildings. The contra-intuitive conclusion that more connections bring on a worse business case, is fully due to the situation that staying with a stand-alone, fossil-fueled home is cheaper than connecting it to a district heating system for which it is not prepared. Together with the high electricity price, this leads to a financial punishment for connecting to the district heating network. It remains however a solution that may make sense for lowering the overall carbon emissions. For all scenarios it must be kept in mind that the availability of high temperature district heating will be the exception rather than the rule, for the following reasons:

  • Availability of waste incineration as a cheap high temperature source will reduce over time as the circular economy takes shape. Waste heat shall in this perspective often be considered as a transition source. It will kick start the roll-out of district heating systems, after which upgrading to other 4G sources will be made easier. A similar reflection could be made for a particular case in Flanders, the city of Antwerp, where a huge industrial waste heat potential is available from the petrochemical industry (an estimated 1000 MW at 80 to 120°C or more). We see an exceptionally good case for high temperature district heating roll-out, but with possible switches away from traditional fossil fuel-based production towards bio-based products, the future availability of this source may come under threat.
  • Compared to the societal heat demand, biomass is only available in limited quantities especially if one adopts sustainability criteria implying that waste streams are the norm for energetic use of biomass and that virgin biomass shall in a principle not be used for energy production;
  • In a similar vein deep geothermal energy can only be applied at given geographical locations and comes with higher costs and challenges as source depth increases;
  • Solar boilers provide an attractive source but are expensive and equally limited in capacity (or need large deployment surfaces in order to provide heat in sufficient quantities);

Two other cases studied at EnergyVille illustrate this context:

  • In a recently delivered climate action plan for the city of Roeselare, which has one of Flanders’ most extensive urban district heating systems in place, the available maximum heat potential that could be delivered from the waste incineration plant feeding the network would amount to some 130 GWh per year. For comparison, the present heat demand from the built environment in Roeselare amounts to about 680 GWh per year (depending on the severity of winters)23.
  • In the framework of the EU FP7 project City-zen and under the coordination of TU Delft, development scenarios for urban retrofit in Amsterdam have been analysed24. At present, the city already imports waste per ship (e.g. from the United Kingdom) in order to feed its waste incinerator and the connected district heating network. When assessing potentials into more detail, it soon became obvious that high-temperature heat sources must be strictly reserved for those applications where they are the only viable solution. One such context was the historic city centre, listed as UNESCO patrimony, and where hardly any retrofit interventions are allowed. Wherever possible, turning to low-temperature heat sources must be pursued. If low-temperature heat is available at low cost, this still implies retrofit for those buildings that do not have a good thermal performance. In practice this means that the low temperature source must be combined with a certain degree of retrofit.

Another important boundary condition relates to the seasonal heat balance. Heat sources like waste heat and solar heat lead to a seasonal balancing challenge: the heat production is continuous over the year or peaks in the summer whereas the demand peaks in the winter, causing the need to buffer heat over long periods. When buildings are not being renovated, the buffered heat shall moreover be available at high temperature which increases the challenges and related costs. At present the costs of buffering e.g. solar heat have been included in the heat cost (storage at an investment cost of 25 €/m³ in water-based heat buffers is feasible) but two other parameters nevertheless remain critical: the surface of solar collector fields needed, and the size of the related buffers. These have important spatial impacts and the available land or space may not be sufficient to fill in the demand when no reduction measures for the energy demand are being taken. Other factors like aesthetic objections are also expected to interfere. 

Conclusions from the societal energy demand perspective

The current heat demand of the building stock is so high that in many cases sustainably supplying all required (carbon-free) heat for a non-retrofitted building stock will appear to be impossible, even if this supply is stretched to its technical limits (and thus making abstraction of limiting factors like the current spatial planning regulations regarding renewable energy production). Moreover, the use of heat sources like waste heat and solar heat leads to a seasonal balancing problem which needs a specific (and costly) address, cf. supra. All of these factors will push back to at least a partial retrofit of the building stock, be it for technical, spatial or financial reasons. Given the dependency on context, and more in particular the availability of sufficient low carbon district heating resources, only a case by case trade-off will reveal the real possibilities in situ. 

In general, we can conclude that the real challenge does not reside at the level of the individual district, but at the urban or regional scale. It is at the higher scale level that the supply and demand of available (heat) resources command the viable options. Within those boundary conditions, sources and interventions must be allocated depending on every single context at the district levels. A similar challenge appears for electricity: as on the one hand more PV is installed and on the other hand more heat pumps come into operation, the risk of daily or seasonal imbalance on the grid sharply increases. Again, this is a problem that must be solved at the higher scale levels and by bringing in additional features such as local electricity and heat storage. 

Once the regional energy balances have thus been considered, decisions can be made to choose the lowest total cost of ownership solutions at the level of the individual urban districts. Depending on the location with its renewable energy potential, the urban density and the state of the building stock, switching to stand-alone and all-electric deep retrofit or to varying degrees of retrofit combined with district heating provision will come forward as the best option from a combined technical and financial point of view.

General conclusions

The above observations lead to the conclusion that, independent of the presence of district heating and cooling networks, it is in the long term recommended to perform a deep retrofit on all buildings except for those cases where, for particular reasons like heritage conservation or the close and ample availability of high temperature heat, reverting to a high temperature district heating network is the preferred option. The incentive for deep retrofit of the building stock is however not only a matter of energy, but also of health, comfort, real estate value and future-proofedness. The influence of the assignment rate of building envelope retrofit costs on the preferred choices is considerable. The adopted perspective on building investments (and hence, the adopted building roadmaps) is steered by multiple and strongly connected values. Whether we consider an intervention as just an ‘energy burden’ or as an investment in the building as a whole value asset, makes a substantial difference.

District heating networks must be considered as a solution that helps to realise the EU climate goals from a long term investment perspective. A careful local analysis must clarify where they will be preferably rolled out. Well-prepared heat zoning plans will therefore greatly support such strategy.

Han Vandevyvere

Project Manager Smart Energy and Built Environment at EnergyVille/VITO

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