Thermal Energy Tariffing Model for
Energy Efficiency
Ernad Bešlagić’1 Kenan Varda1, Kemal Veledar’2
University of Zenica, Mechanical Engineering Faculty
2
Public Utility Company “Grijanje” Zenica
Bosnia and Herzegovina
Corresponding author’s e-mail: ernad.beslagic@unze.ba
1
ABSTRACT
The district heating system can be considered the healthiest, the most economical and environmentally friendly alternative in densely populated urban areas. District heating tariffing in Western Balkans is often based on
the heated area instead of actual energy consumption, making any energy efficiency measure irrelevant. The
costs are not calculated or charged. One of the significant challenges in these systems is the correct energy
cost distribution, especially in collective residential buildings. The pressure consumers and consumer protection associations put towards the thermal energy distributors, asking to enable the measurement of delivered
thermal energy, is justified.
Distance heating of urban and suburban parts of Zenica, B&H, began in 1967. Most residential buildings have
common heating installations, making the installation of direct meters of supplied heat energy technically and
economically inefficient and even impossible. It is possible to enable fairer thermal energy cost distribution by
installing a common thermal energy meter for the entire building. However, the question of how to distribute
the costs of supplied energy to individual household units remains open.
This paper also presents possible ways of allocating the thermal energy costs applied in the cities and countries
facing the same problems. A pilot project implemented by the local heating distribution company for using
central heat meter as one of the ways of cost allocation is presented. The paper points out the advantages and
disadvantages of the cost distribution methods.
Keywords: Energy Efficiency, Tariffing, District Heating, Cost Distribution.
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INTRODUCTION
The whole world is facing great challenges in order to bring negative climate
changes under control. This goal was quantified by the Paris Agreement in such a
way to keep the increasement of global temperature below 2° C, with maximum
efforts to keep it at 1.5° C. As greenhouse gases (GHG) emissions recognized
as main cause for climate changes, first, the European Union (EU) pledged to
reduce greenhouse gases emissions by at least 20% below 1990 level, and do so
by 2020, while improving energy efficiency by 20% and increasing the share of
renewable energy sources up to 20%.
In October 2014, the EU approved the Energy and Climate Framework. The aim
of this framework is to continue to reduce greenhouse gases emissions by at
least 40% below 1990 level by 2030, while setting new goals for both: renewable
energy sources and energy efficiency. The goal of 40% by 2030 was the starting
point for the EU before the international climate talks in Paris in December 2015,
where a global climate agreement was agreed. Within the framework of the Paris
Agreement, in November 2018, the European Commission also agreed a strategy
for a climate-neutral economy until 2050.
To achieve the above-mentioned goals for 2020, 2030 and 2050, the EU has taken
several concrete actions, while encouraging other countries and regions to do the
same. As someone who is responsible for approximately 10% of global greenhouse
gases emissions, the EU is acting a leading role in those processes, knowing the
fact that Eu is in a transition to an economy with net-zero greenhouse gases
emissions.
One of the seven gases that are classified in the group of greenhouse gases
according to the agreement from Kyoto (Kyoto Protocol) is CO2. At the end of
2010, the city of Zenica Mayor signed the Covenant of Mayors Agreement, which
voluntarily commits districts, cities and regions to reduce CO2 emissions in their
whole area above the set goal of 20%. As part of the activities prescribed by
this agreement, the city of Zenica developed and published in early 2013 the
Sustainable Energy Action Plan (SEAP) [1]. The action plan provided precise
and clear guidelines for the implementation of energy efficiency projects and
actions and methodology about how to use renewable energy sources at the city
level, which by 2020 should have resulted in a reduction of CO2 emissions by
48% compared to the reference year of 2006. That is significantly more than
the planned 20%. According to this plan, as much as 38% reduction of CO2
emissions should have been achieved through the implementation of actions and
activities in the building sector, of which more than two thirds were actions
related to the distance heating system in city of Zenica. Almost half reduction of
this 27% reduction of CO2 emissions, is related to Energy efficiency increment by
replacement of fuel in the distance heating system.
With a six-year delay compared to the deadline defined by this plan, in 2021
the construction of a new heating plant will be completed and, according to the
reference inventory of CO2 emissions from 2006, CO2 emissions will be reduced
by about 13%. However, in the meantime, there has been a significant reduction
in the number of users of distance heating system services in the city of Zenica
and it is necessary to take additional actions to ensure that the replacement of
fuel in the distance heating system really gives the expected results.
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HEATING METHOD OF RESIDENTIAL BUILDINGS IN THE CITY OF
ZENICA
The delivery of thermal energy for heating the residential buildings and business
premises of the city of Zenica began in 1967. In the same year, the heating of
urban and later suburban local communities began. The company that distributes
thermal energy has gone through various forms of organization and since
2008 has been operating under the name public company for production and
distribution of heating energy “Grijanje” Zenica. Although its name states that it
produces thermal energy, the company has been engaged only in the distribution
of thermal energy since its establishment, while the producer and supplier of
thermal energy was the “Željezara Zenica”, the ironworks company, and today
that is ArcelorMittal Zenica. The boiler plant for the production of thermal energy
has deteriorated, which is why there are frequent interruptions in its work. This
is, along with the dilapidated warm and hot water network, the main reason
for the poorer quality of heating, which has led to an increase in the number
of dissatisfied consumers who use the services of heating company “Grijanje”
Zenica. In addition, in most residential buildings and business premises, common
heating installations are installed, which makes it difficult to measure delivered
heat energy because the installation of direct heat measurements devices is
technically and economically inefficient and sometimes impossible.
Poor heating quality and the inability to pay the actual costs of the heating service
are the main reasons why there has been a trend of increasing disconnected
consumers from the distance heating network in the last ten years. According
to available data, out of 1,040,000 square meters of residential buildings and
business premises that can be heated by a distance heating system, 16% were
disconnected from the network in 2010, while that percentage increased to 40%
in 2020. Such a high disconnection rate is not unique to the city of Zenica and
Bosnia and Herzegovina. The situation is similar in most Central and Eastern
European countries in the post-communist transition period [2]. According to
the available data in the heating company “Grijanje” Zenica, about 94% of the
heated space consists of multi-apartment buildings, so it is very important which
alternative heating methods in these buildings are used by heat consumers who
have been disconnected from the distance heating system. Inadequate heating of
the space adjacent to the space heated by the distance heating system additionally
affects the poorer quality of heating, which then further increases the number
of people disconnected from the network. This process seriously threatens to go
out of control and to lead to the collapse of the distance heating system in the
city of Zenica. The existing distance heating system of the city of Zenica, which
is designed on the principle of one boiler plant and a very diverse hot water
and warm water network in the length of 120 BAM and with most consumers in
multi-apartment buildings, does not allow the less thermal energy purchase in
proportion to disconnected consumers. Since that a significant part of thermal
energy passively heats even disconnected consumers, approximately the same
amount of energy is needed regardless of the active area that is heated, whether
it is 650 or 850 thousand square meters.
During the creation of the Action Plan for Energy Sustainable Development, a
research on which source of thermal energy is used by consumers who have been
disconnected from the distance heating system was done. This research presented
that the majority of excluded spaces in multi-apartment buildings are heated by
electricity. This method of heating poses a great risk for electrical installations
in buildings that are not designed for that level of electricity consumption. In
addition, the question arises whether the use of electricity for heating in multiHealthy engineering
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apartment buildings is a contribution to reducing CO2 emissions or the situation
is slightly different.
CO2 EMISSION FACTORS OF MULTI-APARTMENT BUILDINGS
HEATING ENERGY SOURCES
If it is assumed that the rooms in multi-apartment buildings are heated only
by a distance heating system and by electricity, then it can be said that in these
buildings all CO2 emissions related to heating occur in two ways. The first is
direct through the combustion of fuel used in the city heating plant, while the
second is indirect using electricity. Emission from fuel combustion is determined
by multiplying the emission factor of that fuel and the consumed energy. For
emission from electricity there is the emission factor, which is calculated based
on the electricity produced during a certain period of time and the CO2 emissions
from the plant for its production in that period.
The data from the Sustainable Energy Action Plan were used to define the
emission factors shown in Table 1. In the heating plant through which the city of
Zenica was heated until 2021, coal was mainly used as fuel, with the addition of
a certain percentage of natural gas. The Action Plan lists data from 2006. This
data can be considered as now days data since the source of thermal energy has
not changed since that year. From 2021, the city will be heated by a new heating
plant that will use blast furnace, coke and natural gas. The emission factor of the
new heating plant is assumed on the basis of available data according to which
the total CO2 emissions of the new heating plant on an annual level will be 11%
lower than the total emissions of the existing heating plant. The emission factor
of electricity shown in Table 1 is calculated on the basis of electricity produced in
BiH for the period 2005-2010 and CO2 emissions from all thermal power plants
in BiH.
Table 1: Emission factors.
Energy source
Electric energy
District heating – coal and natural gas
District heating – blast furnace gas, coke oven gas and
natural gas
Emission factor
[tCO2/MWh]
0,763
0,328
0,292
(assessment)
If only the emission factors are compared, it can be concluded that the negative
effects on the environment of the use of electricity for space heating in multiapartment buildings will be more than two and a half times higher than if a
distance heating system with a new heating plant would be used. However, this
can be claimed only in those cases when electricity is converted into thermal
energy in a ratio of 1:1. Such ratio is present when convectors are used as heating
elements, which in the best case have conversion of electricity into thermal
energy of 95% degree. However, if air conditioners are used as heating elements,
then the ratio between the consumed electricity and the obtained thermal energy
can even reach a ratio of 1:4, which makes electricity a more acceptable solution.
In the first years of mass disconnection of consumers from the distance heating
system, convectors were mainly used as alternative heating elements, while in
the last few years the installation of air conditioners began. The reason why
convectors were initially purchased is a smaller initial investment and the
possibility of installing a heater in every room. After the citizens were convinced
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that a larger initial investment in the purchase of air conditioners began to pay
off after only two years, their massive installation began. However, due to the
impossibility of heating the entire apartment with one air conditioner, the best
solution for apartments that have been disconnected from the distance heating
system is the combined use of these two heat sources. This ultimately leads to the
loss of positive effects of installing an air conditioner.
MEASUREMENT OF DELIVERED THERMAL ENERGY
The commissioning of the new heating plant will ensure satisfactory heating
quality and will eliminate the main reason why consumers were disconnected
from the distance heating network. In this way, consumers who planned to
disconnect themselves from the distance heating network, could invest the
financial resources needed to purchase air conditioners and/or convectors into
thermal insulation of multi-apartment buildings in which they live. However,
if citizens are not stimulated to invest in increasing the energy efficiency of
their building, it is difficult to expect that, in the situation like is in Bosnia and
Herzegovina, they will do so. One of the ways to stimulate citizens to invest into
increasing energy efficiency is to create preconditions for reducing heating costs.
The current tariff structure does not provide sufficient financial incentive for
building owners to invest in heat savings (similar to the case described in [3]).
The integration of meters and sensors with existing building energy management
systems (BEMS) is critically appraised [4]. Therefore, it is necessary to change
the tariff system according to which the delivered thermal energy is charged in
the city of Zenica. This tariff system must provide the possibility of charging
for the delivered thermal energy, which can be determined by direct or indirect
measurement. There are a large number of different tariff systems that can be
found in areas that are or have been in a similar situation as the city of Zenica.
Based on their experiences, it can be concluded that this is not an easy job. But
no matter what the tariff system is, if you want to motivate consumers to pay
for what they have spent, it is necessary to meet the technical conditions for
measuring the delivered thermal energy. According to the estimate stated in the
action plan for energy sustainable development of the city of Zenica, the cost
of installing tools for delivered thermal energy measurement would be about 7
million euros, which would take 7 years to be done. As it is not realistic to expect
the realization of this project in the next period, it is necessary to find some
other acceptable solutions.
PILOT PROJECT OF CUMULATIVE DELIVERED THERMAL ENERGY
MEASUREMENT
At the beginning of 2021, public company “Grijanje” Zenica launched an internal
pilot project of the delivered thermal energy measuring in four almost identical
residential multi-apartment buildings located in one city local community. This
paper explains the advantages of thermal insulation. Some studies said that the
annual energy consumption can be reduced by 57% via retrofitting of existing
buildings [5]. Two residential buildings were thermally insulated in 2020, while
the remaining two were not.
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Figure 1: Appearance of one of the analyzed buildings during and after the completion
of the thermal insulation procedure. Retrieved from https://www.skyscrapercity.com/
threads/zenica-%D0%97%D0%B5%D0%BD%D0%B8%D1%86%D0%B0-developmentnews-2020.2234552/page-4.
One cumulative measuring tool for delivered thermal energy is installed in each
building. The tenants in those buildings were not informed that this pilot project
was being implemented, so they kept the habits of “saving” thermal energy that
they had until then. Although there was not enough time that has passed to be
able to give adequate conclusions, the data obtained after three and a half months
can be used to observe certain phenomena.
Table 2: Active and inactive residential areas heated in the four analyzed buildings.
Num
Building address
Thermal
isolatedobject
Active
areas [m2]
Inactive
areas [m2]
Percentage
of inactive
areas [%]
1
Jalimamov put 14
No
1.628,88
1.116,45
41
2
Sejmenska 10
No
1.729,65
1.013,85
37
3
Bul. E. E. Arnautovića 12
Yes
1.194,39
1.496,00
56
4
Bul. E. E. Arnautovića 8
Yes
1.818,97
862,30
32
The percentage of residential areas that are disconnected from the distance
heating system ranges from 32% to 56% (Table 2 and Figure 2). It is convenient
for the research subject that these two extremes referred to buildings that are
thermally insulated so it will be possible to clearly see the impact of passively
heated spaces on the total amount of delivered thermal energy.
Figure 2: Ratio of active and inactive residential areas heated in the four analyzed buildings.
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MEASUREMENT DATA ANALYSIS
Table 3 represents the total quantities of delivered thermal energy for each of the
four analyzed buildings in the period from January to the end of April 2021. The
total billing period is 3 and a half months.
Based on the specific consumption of thermal energy per square meter of heated
space, the expected reduction can be observed in buildings that are thermally
insulated. In order to get an answer as to whether this reduction has the expected
value, a longer period of time is needed than the one currently being observed.
What is characteristic for both: insulated and non-insulated buildings, is the
higher specific consumption in buildings with a higher percentage of areas that
are temporarily disconnected from the distance heating network. This supports
the theory that part of the thermal energy is also used for passive heating of the
disconnected spaces.
Thermal
isolated
object
Active
areas
[m2]
Percentage
of inactive
areas
[%]
Delivered
thermal
energy
[kWh]
Specific
consumption
per area
[kWh/m2]
Table 3: Thermal energy delivered in the period January-April 2021.
1
Jalimamov put 14
No
1.628,88
41
183.593
112,71
2
Sejmenska 10
No
1.729,65
37
163.229
94,37
3
Bul. E. E. Arnautovića 12
Yes
1.194,39
56
99.867
83,61
4
Bul. E. E. Arnautovića 8
Yes
1.818,97
32
132.814
73,02
Num
Building address
Although we have only two samples on the basis of which it is not possible to
occur an adequate dependence, it can still be assumed that reducing the number
of disconnected consumers would reduce the specific consumption of thermal
energy. Its value can be expected in the range of 60 to 65 kWh/m2.
Figure 3: Comparative overview of the percentage of inactive consumers and
specific heat consumption.
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DELIVERED THERMAL ENERGY COSTS
Based on the known heated area, the known billing period, the measured total
delivered thermal energy and the applicable tariff system, it is possible to make
a comparison between the price of delivered thermal energy if the payment was
made in a lump sum per heated area and the price if the payment was made on
basis of measured thermal energy. Existing decision of delivered thermal energy
price for heating residential buildings and business premises in the city of Zenica
in the heating season 2020/2021, provides the possibility of payment in both of
these ways.
In accordance with this Decision, the price of heating residential buildings in
which a heat meter is not installed is 2,40 BAM/m2 per month, or 0,07869 BAM/
m2 per day (month = 30 days), without value added tax and it is paid during the
delivery of thermal energy. The product of the area of the apartment (m2) and
the unit price (2,40 BAM/m2), i.e., the product of the area of the apartment and
the unit-daily price (0,07869 BAM/m2) and the number of days in the month,
increased by the value added tax represents the monthly price, i.e., the monthly
debt paid by the consumer.
The price of delivered thermal energy for heating a residential building in which
the amount of delivered thermal energy is measured with a heat meter, is 94,36
BAM/MWh without value added tax. The total monthly price of residential
building heating in this case is the sum of the price of delivered thermal energy
measured with a meter and a fixed cost of 10% of the unit price of heating (2,40
BAM/m2) and living space, increased by value added tax and paid during the
delivery of thermal energy.
Total delivered thermal energy
[kWh]
Jalimamov put 14
No
1.628,88
183.593
13.682,59 18.692,09
2
Sejmenska 10
No
1.729,65
163.229
14.529,06
Building address
Heating
costs per
amount
[BAM]
Active areas
[m2]
1
Num
Heating
costs per
area
[BAM]
Thermal
isolated
building
Table 4: Apartment building costs calculated in two ways.
16.855,19
3
Bul. E. E. Arnautovića 12
Yes
1.194,39
99.867
10.032,88 10.426,74
4
Bul. E. E. Arnautovića 8
Yes
1.818,97
132.814
15.279,35 14.060,26
Figure 4: Comparative presentation of residential building heating costs
calculated in two ways.
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Table 4 and figure 2 show the total heating costs for the four analyzed buildings.
The billing period that was taken into account while determining the price of
delivered thermal energy according to the area of the heated space was 3 and a
half months.
If we analyze two buildings that are not thermally insulated, it can be concluded
that, according to the current tariff system and current prices, consumers are not
stimulated in any way to start creating conditions for paid heating costs according
to the actual amount of heat supplied. And if the high costs of installing meters
were ignored, which of course is not possible at all, consumers would, despite the
application of maximum savings measures, pay a higher price for heating than
they pay now.
In the case of buildings that are thermally insulated, this unfavorable difference
in price is not present, but there are no significant reasons why someone would
engage in the process of installing heat meters. If consumers in an isolated
building in which the number of disconnected consumers is more than 50%
would maintain the level of comfort they had so far (which is the goal of energy
efficiency measures), they would have even higher costs than they have now. Only
in the second isolated building, where the number of disconnected consumers is
lower than the average, there are savings that would have to be even greater in
order for the investment in the installation of heat meters which would be paid
off in a reasonable period of time.
PROPOSALS FOR CREATING CONDITIONS FOR PAYMENT OF
ACTUALLY CONSUMED THERMAL ENERGY
The best way to meet the conditions “the more you spend, the more you pay” is to
install an individual heat meter for each user. It has already been mentioned in the
paper that this option is technically, time-consuming, and therefore financially,
very demanding. Although this ultimate goal should not be abandoned, some other
more acceptable methods of charging should be defined as a transitional solution
until the conditions for individual measurements are met. This especially refers
to buildings for which insisting on this condition is completely economically
unacceptable.
Another way of charging that would be more acceptable for consumers in multiapartment buildings is the installation of a central meter of delivered thermal
energy for the entire building and the installation of heat distributors-allocators.
In this way, the percentage part of each heating element in the total heat
consumption can be determined. Although this way of distributing the costs of
thermal energy is theoretically very simple, in practice it has proven to be very
questionable. The first problem is that it requires the consent of all individual
consumers in the shared multi-apartment building and the installation of an
allocator on each heating element. This has proved to be an almost unsolvable
problem in the surrounding countries that have tried this method of distribution
and which are very similar to the mentality and habits of people very similar
to Bosnia and Herzegovina. In addition, the tariff system that accompanies this
method of payment is very complex and has not proved to be good in practice.
The most recent example is the problems that arose in Zagreb, where very soon
after the implementation of such a project, there were requests to return to the
old billing system per square meter, until a better way is found.
The third way of charging the delivered thermal energy is that the total delivered
thermal energy, which is determined by the central meter, is divided among each
consumer in proportion to the area of the space used by the consumer. In this
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way, a completely correct distribution of the consumed thermal energy is not
achieved, but it is much more correct than when the payment is made in a lump
sum.
CONCLUSIONS
Poor quality of heating and inadequate way of charging for used thermal energy
are the main reasons why an increasing number of users of the services of public
company “Grijanje” in the city of Zenica are disconnected from the distance heating
system. These consumers use electricity as an alternative source of heat, which,
contrary to popular belief, does not have a more favorable impact on greenhouse
gas emissions than heating through distance heating systems. Procurement of
new boilers in the plant that produces thermal energy for the needs of the city of
Zenica, guarantees good heating quality from the next heating season. It is now
necessary to create conditions as soon as possible that will attract disconnected
consumers to reconnect to the distance system. This is possible by creating a more
favorable tariff system that will stimulate consumers to use the central heating
system. Public company “Grijanje” is conducting a pilot project of measuring
the total consumption of thermal energy for four almost identical buildings, two
of them are thermally insulated. Based on the first data collected in insulated
buildings, it can be concluded that, even if the method of distribution of total
consumption according to the heated area is applied, sufficient savings will not
be achieved that will stimulate consumers to invest in thermal insulation. This
could be achieved by reducing the price of MWh of thermal energy compared to
the current one. Suburban settlement Nemila is heated by a heating plant that
uses biofuel (wood and wood waste) and all consumers who use the heating
service of this heating plant pay 1MWh of thermal energy 76,00 BAM. The price
of thermal energy in the city of Zenica, which would be in line with the price
paid by consumers in Nemila, would be a serious incentive for consumers to use
the services of distance heating and to invest their funds in increasing energy
efficiency. Although efforts are being made to raise citizens awareness of the
far-reaching consequences of increasing energy efficiency, financial constraints
are still high to make that awareness prevail. Therefore, to expanding district
heating, it is necessary to rely on experiences from other countries, which of
course should be adapted to the specific local environment according to culture,
technological capabilities, existing energy structure, institutions, regulations,
policies, etc. [6].
REFERENCES
Muhamed Hrustemović et.al (2013). Sustainable Energy Action Plan of Municipality Zenica, ZEDA
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Gorroño-Albizu, L., & de Godoy, J. (2021). Getting Fair Institutional Conditions for District Heating
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Drysdale, D. (2020). District heating tariffs, economic optimisation and local strategies during
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Muhammad Waseem Ahmad, Monjur Mourshed, David Mundow, Mario Sisinni, Yacine Rezguia
(2016). Building energy metering and environmental monitoring – A state-of-the-art review and
directions for future research, Cardiff University [4]
Zhihua Zhou, Shuzhen Zhang, Chendong Wang, Jian Zuo, Qing He, Raufdeen Rameezdeen (2015).
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