European Technology Platform on Renewable Heating and Cooling
Common Technology Roadmap for
Renewable Heating and Cooling
AUTHORS
Javier F. Urchueguía Schölzel, GEOPLAT, ES - Lead Author
Luisa F. Cabeza – Universitat de Lleida, ES
Inga.Berre - Christian Michelsen Research, NO
Eija Alakangas –VTT, FI
Walter Haslinger – Bioenergy 2020+, AU
Panagiotis Grammelis - Certh, GR
Daniel Mugnier - TECSOL, FR
Gerhard Stryi-Hipp - Fraunhofer ISE, DE
Philippe Papillon – CEA-INES, FR
Roland Hellmer - Vattenfall Europe , DE
EDITOR: Secretariat of the RHC-Platform
Renewable Energy House
63-67 Rue d’Arlon
B-1040 Brussels - Belgium
www.rhc-platform.org
info@rhc-platform.org
Manuscript completed in
Brussels, © RHC-Platform, 2014
This document is available on the Internet at: www.rhc-platform.org
The European Technology Platform on Renewable Heating and Cooling (RHC- Platform) is officially
endorsed by the European Commission and its activities are supported by the 7th Framework
Programme for Research and Technological Development (GA n. 268205)
DISCLAIMER
The opinions expressed in this document are the sole responsibility of the European Technology Platform on Renewable Heating
and Cooling and do not necessarily represent the official position of the European Commission.
Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the Editor is
given prior notice and sent a copy.
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Table of contents
1. Introduction: From Vision to implementation…………………………………………………….2
2. A Common Technological Roadmap to 2020: Clustering of the 4 technology
roadmaps…………………………………………………………………………………………….6
3. Interconnection between the different RHC technologies and its link to the different demand
profiles………………………………………………………………………………………………23
4. Societal Benefits of Renewable Heating and Cooling…………………………………………38
5. Promoting private investments in Renewable Heating and Cooling…………………………49
1. Introduction: From Vision to implementation
1.1The Renewable Heating and Cooling Platform (RHC-Platform)
The Common Roadmap is the latest milestone after a series of other publications of RHC
Publication that led the Heating and Cooling sector in the last years from a vision towards an
implementation plan.
Endorsed by the European Commission, the European Technology Platform on Renewable
Heating and Cooling (RHC-Platform) today brings together over 800 stakeholders representing
all renewable energy technologies for heating and cooling from industry, research, and the
public sector from all over Europe.
The RHC-Platform’s mission is to provide a framework for stakeholders to define and
implement an innovation strategy to increase the use of renewable energy sources for heating
and cooling, and to foster the growth and the market uptake of the relevant industries.
The RHC-Platform consists of four Technology Panels which include all renewable heating
and cooling sources and technologies. Acting under the guidance of the respective Steering
Committees, each Panel is responsible for collecting and developing stakeholders’ inputs from
the respective sectors.
The scope and operational structure of the RHC-Platform ensure a balanced and active
participation of the EU stakeholders at the appropriate levels, including all interested industries,
scientific research organisations, public authorities and civil society.
2
Figure x: Structure of the RHC-Platform
1.2 The four RHC Technology Roadmaps: the pillars of the RHC Common Roadmap
Throughout the second part of 2013 and the beginning of 2014, the four RHC panels (solar
thermal, biomass, geothermal and cross-cutting) have worked and finalised their own
technology roadmaps, investigating implementation measures for the Strategic Research
Priorities for each technology. Building up on these efforts in each panel, the ‘Common
Roadmap’ aims to be a single shared Roadmap for all Renewable Heating and Cooling
technologies presenting an integrated vision of the research implementation priorities.
The common roadmap brings together each roadmap to pinpoint the specific measures for
renewable heating and cooling as a whole and how each technology’s needs fit together. It
analyzes the benefits of RHC for Europe, for example in terms of energy imports reduction and
jobs creation and it will look at how investments in the RHC could be encouraged.
1.3 The previous achievements
The report “Common Vision for the Renewable Heating and Cooling Sector in Europe” 1 is the
first official publication of the RHC-Platform. Launched in May 2011, the study identifies major
technological and non-technological challenges to the uptake of the RH&C systems and
1
Common Vision for the Renewable Heating and Cooling Sector in Europe: 2020 - 2030 - 2050.
European Technology Platform on Renewable Heating & Cooling (RHC-Platform), May 2011. Available at
http://www.rhc-platform.org/publications/
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assesses the potential of renewable energy sources to contribute to the European and national
energy needs and targets.
In 2012 the four Technology Panels of the RHC-Platform the RHC-Platform produced four
Strategic Research Priorities for Renewable Heating and Cooling in their respective
technology (RHC-Platform, 2012).2 These studies provide stakeholders with a structured view
of the potential of cross-cutting technology to enable an increasing share of heating and
cooling to be supplied by RES. A comprehensive set of research, development and
demonstration priorities was defined to support the decarbonisation of the heating and cooling
sector
Based on the work performed by the experts of the four Technology Panels of the RHCPlatform, in 2013 the RHC-Platform launched the Strategic Research and Innovation
Agenda for Renewable Heating and Cooling (RHC-SRIA)3, a milestone publication which
addresses the short, medium and longer term R&D needs of RHC technology.
The RHC-SRIA identifies state-of-the-art, research objectives and critical targets (eg in terms
of performance increase / cost reduction) to realise the potential of RHC technology. It also
sets up recommendations for R&D&D funding in the timeframe of Horizon 2020 and in line with
the wider EU 2030 Energy and Climate Framework.
The implementation of the SRIA technological and non-technological priorities will be crucial
towards a strong push for a renewable energy paradigm, providing European citizens with
affordable and sustainable heating and cooling.
Further to the RHC-SRIA , the four panels published four respective Technology Roadmaps.
By doing that, the RHC-Platform accomplished one more of its core objectives: establishing a
detailed implementation plan for the The Strategic Research and Innovation Agenda, defining
how the combined spending of public and private resources should be strategically distributed
among topics with commercial relevance in the short, medium and long term.
All R&D activities described in this document should be accompanied and supported by 2020,
however the RHC-Platform recommends that policy makers allocate the budgets of European
and national programmes according to an order of priorities which takes into account the
readiness and proven interest of EU industry and research stakeholders to take part in the
relevant R&D activities.
The Common Roadmap takes over the work done by the four individual technology Roadmaps
and explores the interconnectivity of the different RHC technologies.
2
Available at http://www.rhc-platform.org/publications/
Strategic Research and Innovation Agenda for Renewable Heating and Cooling. European Technology
Platform on Renewable Heating & Cooling (RHC-Platform), April 2013. Available at http://www.rhcplatform.org/publications/
3
4
Figure x
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2. A Common Technological Roadmap to 2020: Clustering of the 4 technology roadmaps
This chapter intends to expose the main aspects of the Technology Roadmaps of the four sectors in
which RHC technologies are split within the RHC Platform: solar, bio, geothermal and cross cutting
technologies. Our approach is to provide a general view of those technologies that, according to the
ideas developed by the different Panels, deserve priorized attention in the 2014-2020 timeframe. To
learn more in detail about the many proposed Research and Innovation actions summarized here,
the interested reader is strongly advised to consult the individual Roadmaps released by the Panels.
2.1 Solar Thermal Energy
Solar thermal energy, together with the other renewable heating and cooling technologies can be a
major source of heating and cooling in Europe. Currently within the European Union there are 28
GWth of systems in operation, generating an estimated 20 TWh of solar thermal energy. This energy
generation corresponds to savings of 2.5 MT CO2. In economic terms, solar thermal represents an
annual turnover of 2.4 billion euros and 32 000 jobs (FTE).
It is an extremely convenient heating source, based on a simple concept enhanced by cutting edge
technology. Thanks to technological progress solar thermal has become not only a better option for
more traditional applications, such as domestic hot water production, but also an attractive
alternative for new and more advanced applications such as industrial process heat.
Solar heating technology can have a strong impact in the market; however, to unlock its potential,
technological development is urgently needed. Therefore, experts from the solar heating and cooling
sector have gathered together in the Solar Thermal Technology Panel of the Renewable Heating
and Cooling Technology Platform and developed this technology roadmap that would help the sector
to provide to the market the solutions to critical societal challenges. These solutions are addressing
the retrofitting of existing installation, the new residential market and the industrial process heat.
2.1.1 Solar Compact Hybrid System (SCOHYS)
Solar Compact Hybrid System (SCOHYS) are compact heat supply systems including a solar
and a backup heating source (based on bio energy, heat pumps or fossil fuels) with a solar
fraction of at least 50% in the case of DHW SCOHYS systems (delivering only domestic hot
water) and of a solar fraction of at least 25% in typical Central European applications in the case
of combi SCOHYS systems (delivering both, domestic hot water and space heating).The
objectives of the SCOHYS roadmap pathway are a solar heat costs reduction by 50%,
increased compactness with reduced space requirements and installation time and an improved
reliability and performance and it consists of three main R&I actions: single family homes (DHW
and combi systems), SCOHYS for DHW in multifamily homes and SCOHYS for DHW & space
heating (combi systems) for multifamily homes.
The 2 first actions are divided in an applied research phase and a demonstration phase. The
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R&I actions include research tasks on different components and technical aspects and combine
them holistically. In addition, the roadmap identifies actions in the field of enabling technologies,
standards and quality, socio-economic framework and legal and administrative aspects. The
SCOHYS roadmap pathway and its sub-tasks are shown in Figure .
Figure x: Roadmap pathway for Solar Compact Hybrid Systems (SCOHYS)
2.1.2 Solar Active House
The Solar-Active-House (SAH) is a concept in line with the nearly zero-energy building, where
the limited needs for heat (domestic hot water and space heating) are provided by solar thermal
systems. The SAH roadmap pathway is focusing on cost reduction as well as optimization and
standardization of the technology for Solar-Active-Houses with about 60% solar fraction with the
aim, to develop Solar-Active-Houses as competitive solution for nearly zero-energy buildings,
which are required by the European Union by 2020.
The objectives of the SAH roadmap pathway are a solar heat costs reduction of SAH with solar
fraction of over 60% to the same level of solar heat costs of today’s combi systems with 25%
solar fraction and the development of the SAH concept through the development of the design
and the construction methods to a standard which can be used by the whole construction sector
as nearly zero-energy building concept.
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The Solar-Active-House (SAH) roadmap pathway includes actions for new built single family
homes, new built multifamily homes and refurbishment of existing buildings and is shown in
Figure x
Figure x: Roadmap pathway for Solar-Active-House (SAH)
2.1.3 Solar Heat for Industrial Processes (SHIP)
The SHIP roadmap pathway includes all industrial applications with process temperatures up to
250°C, means both low and medium temperature applications and is shown in Figure .
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Figure x: Roadmap pathway of SHIP systems
2.2. Biomass
92% of all renewable heat is produced from Biomass. For this reason, bioenergy will play a key
role in reducing the greenhouse gas footprint of the heating and cooling sector. Technological
innovation is vital to the bioenergy sector in order to ensure that reliable, cost-competitive and
environmentally friendly biomass-based heating and cooling solutions are delivered to different
types of consumers in Europe. In the Biomass Technology Roadmap, the biomass panel outline
a number of actions and investments needed in the short-term (up to 2020) to implement the
biomass strategic research priorities. This document places special emphasis on ensuring the
commercial availability of reliable, cost-competitive and environmentally friendly bioenergy
heating and cooling solutions for different types of consumers.
The Biomass panel recognized the need for the entire value chain (from feedstock to end
products) to be taken into account for successful implementation, and so adopted a value-chain
approach. This integrates the different research priorities through the entire supply chain from
sourcing biomass, its transformation into heat (and electricity), and the logistical aspects needed
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to transport the biomass or energy carrier. The roadmap emphasizes also the need for efficient
and sustainable solutions which are vital in gaining public acceptance of biomass as a
renewable energy source. The biomass panel recommends the strengthening of current efforts
to deliver a clear legislative framework regarding sustainability requirements for biomass used
for heating and cooling. This will require a tangible progress towards regulatory consensus as
we approach 2020.
The Biomass Technology Roadmap consists of four selected value chains: 1) Advanced fuels
replacing coal, fossil oil and natural gas in heat and CHP production (Advanced fuels), 2) cost
and energy efficient, environmentally friendly micro and small-scale CHP (Micro and small-scale
CHP), 3) High efficient large-scale or industrial steam CHP with enhanced availability and
increased high temperature heat potential (up to 600 ºC) (High efficient large-scale or industrial
CHP) and 4) High efficient biomass conversion systems for polygeneration.
2.2.1. Advanced fuels
Through the development of standardised and sector-oriented, sustainable advanced biomass
fuels (new biocommodities, thermally treated biomass fuels, fast pyrolysis bio-oil and upgraded
biomethane), the biomass fuel supply should double when compared to its current use (~110
Mtoe in 2012). This includes the provision of adequate feedstock at competitive production
costs and also the provision of adequate feedstock at competitive production costs. Sustainable,
innovative and cost-efficient advanced feedstock procurement technologies for different
biomass sources need to be developed to meet the quality requirements for thermally treated
biomass, bio-oil and biomethane production. The feedstock span of bioenergy supply chains
should be broadened through the mobilisation of alternative biomass feedstock resources, such
as forest and agricultural residues and wastes. New and advanced fuels, as well as generally
broadened biomass feedstock require suited conversion technologies ensuring efficient and
environmentally friendly use of the supplied fuels.
Action4
from 2014 - 2020
Feedstock
30% reduction in Biomass supply costs for forest biomass and 20-30% reduction for agrobiomass
residues through the use of intelligent machinery, and supply chain and logistical optimization.
30% reduction of CO2 emissions in the biomass supply chain (forest biomass)
Commercial bio-oil production for heating applications, 20% reduced bio-oil costs through
process integration and logistical optimization
Full scale bio-oil production with plant availability > 6,500 hrs per annum
Bio-oil upgrading to higher value products demonstrated at industrial scale.
Bio Oil
Target of flexible feedstock using forest and agricultural residues and their blends
Bio-oil satisfying specifications of new EN standard (for boilers and engines) under development
by CEN (mandate accepted 10/2013). New bio-oil grades having improved quality – higher LHV,
no solids, good stability, pH > 4.
Physical upgraded bio-oil usage in small scale CHP and stationary engines demonstrated;
chemically upgraded bio-oil usage in micro-CHP and engines demonstrated (including small
4
All base values for these KPIs are detailed in the Biomass Technology Roadmap
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scale heating sector)
Commercial operation of thermally treated biomass co-firing in more than 50% of coal CHP plants
using torrefied biomass
Production Costs reduction by 5 - 10 €/MWh (1.4 – 2.8 €/GJ)
Thermally
Treated
Biomass
Fuels
Operational hours at full load of 8 000 hours/year
Overall biomass-to-thermal treatment-pellets/briquettes energy efficiencies (based on net calorific
value as received) >90%
Minimum share of agrobiomass 10%
Development of risk avoiding guidelines and MSDS as a standardised procedure
10 to 15% of annual production to have a verified in large scale a quality that can be stored
outdoors
Proven availability in EU with the trading volume of thermally treated biomass about 1 – 2 million
tons.
Diversification of raw material for biogas production with an increase of biogas yield of alternative
energy crops by 20-30%
Increased efficiency of biogas up-grading to up-grading power consumption: Ø 0.15
Upgrading
Cost reduction of biogas upgrading by 10-20%
of Biogas
Improvement of load flexibility of biogas CHP systems with part load operability of biogas CHP
to
Biomethane units > 40%
Increase of efficiency of biogas CHP systems by 10-20%
80% of all European biogas plants have implemented the use of “waste heat” from their CHP
units with GHG savings almost 14 million tons.
2.2.2. Micro and small scale CHP
Small and micro-scale CHP constitute a high energy efficient solution (total - sum of thermal and
electrical efficiency > 85 %) for flexible bio-electricity and thermal energy supply. Small and
micro-CHP are developed for various applications. Micro-scale CHP are serial products
developed for residential scale heating with electricity production (possibly grid independent,
typical P < 5 kW e) or as cogeneration systems for small industries, the service sector or in micro
grids (base heat for more than 2.000 hours/year, typical P < 50 kW e). Small scale CHPs are
plants rather than products for cogeneration in industries, the service sector or DHC (base heat
for more than 5,000 hours/year, typical Pel < 250 kW).
Micro and Small
Scale CHP
2014 - 2020
50% reduction in Electricity production costs
Minimum lifetime suitable components for bio-oil engines and turbines of 2,000 operational
hours
Proven lifetime of 20.000 h (<5 kW el) / 35.000 h / 50.000 h (>50 kW el)
Electric system efficiencies based on solid state technologies of 2%
Electric system efficiencies based on thermodynamic cycles of 7% (<5 kW el )<10% -12% (5 50 kW el)12-15 (<250 kW el)
Decrease in Investment costs solid state technologies to 10 EUR/W
Increase in investment costs thermodynamic cycle technologies to 3.5 EUR/W
Reduce emissions to 1/10 of the specifications in EN303-5 (except for NOx)
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2.2.3. High efficient large scale or industrial CHP
In 2010, about 54% of the gross inland consumption of biomass was fed into electricity and/or
heating plants, or used in industrial processes. Biomass use in industrial power plants and DHC
is expected to roughly double in 2020 through the retrofitting of previous fossil-fuelled as well as
new biomass plants. Taking into account the increasing strictness of air quality requirements (in
e.g. the IED) and the limited availability of high quality wood resources in Europe, significant
R&D efforts are required to develop high-efficient large-scale and industrial multi-fuel systems.
High Efficient
Large Scale /
Industrial
Steam CHP
New
Existing /
Retrofit
2014 - 2020
Net nominal electric efficiency34% of in clean wood boilers and 32% in wide fuel mix boilers
Steam characteristics of 600°C / 175 bar (clean wood boilers) and 563°C / 160 bar (wide fuel mix
boilers)
Total increase in CAPEX of no more than 10% over current state of the art for new technologies
Electricity production costs reduced by at least 5% in clean wood boilers and at least 9% in wide
fuel mix boilers
For Emissions, increase catalyst operating times and reach conformity with IED
30% Ash Utilization
> 50% Agrofuels thermal share in fuel mixture in wood fired units
Max. 10% reduction from nominal operational electric efficiency
For Emissions, increase catalyst operating times and reach conformity with IED
30% Ash Utilization
2.2.4. Polygeneration
Bioenergy as a storable energy source presents a real advantage when considering its
integration in the overall renewable energy system. Besides the production of heating and
cooling, CHP (combined heat and power) and CHP-C (combined heat, power and cooling or
polygeneration) technologies are able to provide intermittent electricity, balancing both daily and
seasonal changes in solar and wind electricity production and loads of boilers, increasing plant
availability, peak load duration and economy. Depending upon the season, climatic condition
and time of day, the primary function of such biomass-fuelled units may change from electricity,
heating and cooling to even bio-oil production (polygeneration, for example with integrated biooil production).
2014 - 2020
Polygeneration
>90% overall average annual efficiency
Emissions reduced (CO2, CO, NOx and SOx) by half compared to condensing power production
Efficiency in electricity production of > 30% (<10MW e) and > 40% (<200 MW e)
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2014-2016
Topic
2017-2020
Advanced fuels (non-residential, industrial and CHP)
BR
Commercial plants for
thermally treated biomass
Demo
AR
Sustainable and cost
efficient feedstock
Full use of the energy
content of biogas
AR
Demo
AR
M
Demo
M
BR
Commercial plant for
bio-oil
Demo
AR
Micro and small-scale CHP (residential)
Thermoelectrics
BR
Stirling engine
AR
Steam Cycle
AR
Demo
AR
M
Demo
ORC
Demo
M
Fuel cell
Demo
M
Micro gas turbine
AR
Gasification +IC
Demo
AR
Demo
High efficient large scale or industrial steam CHP (industrial or CHP)
High efficient large-scale
or industrial steam CHP
with enhanced availability
and increased high
temperature heat potential
AR New materials (e.g. for
superheat tubes, catalysts, etc)
AR Optimization of boiler design /
placement of heat exchange
surfaces / leaning techniques
Demo
Demonstrate fuel flexibility and optimal
efficiency under variable load at 3-4
CHP units
AR Development and testing of
suitable co-firing matrices for
problematic biofuels
AR Corrosion control (additives),
ash utilisation
Polygeneration (Industrial and CHP)
BR
Energy storage
Demo
AR
Concept developments
AR
M
3 Demonstrations in
AR
Demo
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different scales
BR
AR
Demo
M
… basic research (TRL 1)
… applied research & experimental development (TRL 2, 3, 4 and 5)
… demonstration (TRL 6, 7 and 8)
… market-ready (TRL 9)
2.3. Geothermal energy
Geothermal energy has the potential to play a crucial role in our future energy mix:
decarbonised, providing affordable energy for the society and allowing competitiveness of
European industry. Geothermal H&C can supply energy at different temperatures (low or high
temperature), at different load (it can be base load and flexible) and for different demand (heat
and cold: less than 10 kW th to tenth of MW th). Geothermal has the potential to be a key energy
source both in smart cities and in smart rural communities, based on local resources being able
to supply both H&C and electricity as well as solutions for smart thermal and electricity grids via
underground thermal storage.
Currently, geothermal energy sources provide more than 4 Mega tonnes oil equivalent (Mtoe)
per year for heating and cooling in the European Union, equivalent to more than 15 GW th
installed capacity, where geothermal Heat Pump systems contribute to the largest part. But still
the potential is huge for residential and tertiary sectors, as well as for the industry. Following
current trends, in European Union (EU-28), the contribution in 2020 may amount to around 40
GW th installed corresponding to about 10 Mtoe. In addition, Enhanced Geothermal Systems
(EGS) development, by substantially enlarging the geological areas in which geothermal energy
may be profitability extracted, will provide further opportunity for CHP systems.
The technological challenges for an accelerated deployment of geothermal H&C across Europe
are to develop innovative solutions especially for refurbishing existing buildings, but also for
zero and plus energy buildings, as the system is easier to install and more efficient at low
temperature for both H&C. Secondly, to develop geothermal District Heating (DH) systems in
dense urban areas at low temperature with emphasis on the deployment of EGS. Finally, the
third goal is to contribute to the decarbonisation of the industry by providing competitive
solutions for H&C.
2.3.1 Shallow geothermal technologies
The quantitative development of the European geothermal H&C market in the next ten years is
expected to be fuelled mainly through the introduction and consolidation of shallow geothermal
systems, with a quite mature market in Sweden and Switzerland and well developed markets in
Austria, Norway, Germany and France. In other emerging European markets, a high growth is
possible and is expected over the next years (Italy, Spain, United Kingdom, Hungary, Romania,
Poland and the Baltic states). The aforementioned mature market countries will see a steady
increase, mainly stimulated by sales in the renovation segment, while in all other countries, a
significant growth is to be expected. Fast development for geothermal heat pumps illustrates
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how shallow geothermal energy resources, previously often neglected, have become very
significant, and should be taken into account in any energy development scenario.
The main Key Performance Indicators and Objectives for Ground Source Heat Pumps are:
SG1. A Seasonal Performance Factor in the order of 5 for 2020.
SG2. A Hellström-efficiency (a measure of the impact of borehole thermal resistance) of about
80% in 2020.
SG3. A further decrease in energy input and reduced costs for operating the geothermal heat
pump system.
The interlink between the different proposed actions in the Geo Roadmap and the above listed
KPI’s is highlighted in the following table.
R&D Program area title
Ground coupling technologies
Improved vertical borehole drilling technologies to enhance safety and reduce
cost of BHE installations - Improved installation technologies and geometries for
ground Heat Exchange technology.
European-wide Geoactive Structures Alliance.
Development a network of laboratories to create 4 testing sites.
Improved pipe materials for borehole heat exchangers (BHE) and horizontal
ground loops. New pipes for higher temperatures. Better thermal transfer fluid.
Systems, integration and environment
Creation of a new European wide database to map conductivities and potential
(to 100 m depth) and feasibility of vertical BHE systems
Development of geophysical tools for Shallow reservoir potential estimation –
enhanced TRT methods for non-conventional systems.
Integration of design of the shallow geothermal system and building energy
system with regard to optimum thermal use and operational strategy.
System concepts and applications for geothermal large scale and medium scale
cooling in warm climates – hybrid systems, new high temp pipe materials and new
short term storage materials and concepts.
Campaign to support 50 demonstration plants
Development of ground coupling technologies and installation techniques for high
capacities through hybrid systems and integration with other RES sources.
Campaign to support 50 demonstration plants
Non-technical provisions: measures to increase awareness, harmonization of
shallow geo- standards, shallow geothermal installer EU wide training certificate,
shallow geothermal Smart City deployment policy along the line of previous
projects
KPI’s
TRL
SG3
5->6
SG1, SG2,
SG3
SG1, SG2
5->6
SG3
7->9
SG3
4->6
SG1, SG3
7->8
SG1, SG2,
SG3
3->7
SG1, SG3
7->8
3->4
8->9
2.3.2 Deep geothermal technologies
Promising areas are the development of smart thermal grids (1st generation) with the building of
new district H&C networks (Geothermal District Heating & Cooling, with ca. 5 €-cent/kWh, is one
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of the most competitive energy technology), optimization of existing networks, and the increase
of new and innovative geothermal applications in transport, industry and agriculture.
During the next 10 years, new geothermal combined heat and power (CHP) plants with low
temperature installations and Enhanced Geothermal Systems will be developed. The sector
forecasts to reach 3-4 GWe in EU-27 of geothermal electricity installed capacity in total by 2020.
A typical EGS plant today has a capacity of 3-10 MW e, but future commercial plants will have a
capacity of 25-50 MW e and 50-100 MW th (producing from a cluster of 5 to 10 wells, as
nowadays found in the oil & gas industry). CHP installations could provide heating representing
2 Mtoe by 2020 at high temperature, suitable for energy intensive industry. The main KPI’s and
2020 Objectives for Deep Geothermal Technologies are:
DG1. Improved exploration of geothermal resources and creation of a European geothermal
resource database, based on the target that not a single project should need to be
abandoned after the decision to go ahead with drilling.
DG2. Reduce cost for drilling and underground installations by at least 25 % compared to the
situation today.
DG3. Novel, improved production technologies to increase efficiency and reduce operation and
maintenance cost by at least 25 %, improve system reliability and energy efficiency of
operation, in particular by decreasing energy consumption of production pumps by at
least 50 %.
DG4. Innovative solutions and components for improved surface systems for heat uses in DHC
(including CHP) and industrial processes, developed with the target of providing optimum
heat transfer from the ground system to the distribution system, can increase heat
exchange efficiency by 25 % and component longevity in the thermal water circuit by 40
%.
DG5. An Enhanced Geothermal Systems (EGS) design with reliable performance parameters,
such as flow rate, temperature and thermal and electrical power, will, ultimately, establish
EGS as a technology applicable almost everywhere for both heat and power production.
Related to these KPI the geothermal roadmap has been structured in a number of R&I which
are listed below in tabular form, considering, separately, shallow and deep geothermal
technologies.
R&D Program area title
KPI’s
TRL
Deep Geothermal Resources
Create a European Geothermal resource database.
Exploration technologies (geochemical and geophysical exploration campaigns),
characterization and assessment of geothermal reservoirs
DG1
DG1
5->7
3->5
DG1
6->7
DG2
DG2
4->5
3->7
DG2
3->5
European campaign of slimholes: new technologies & drilling campaign
Deep Geothermal Drilling
Improve current drilling technologies
Develop novel drilling technologies by 2020: in laboratories (by 2015), on site (by 2017), on a
demonstration plant (by 2020)
New drilling concept: horizontal, multi-wells, closed loop systems
Deep Geothermal Production
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Reservoir engineering: Well design & completion, reservoir stimulation and management.
DG3
3->7
New Materials: corrosion, scaling
HT/HP tools, high temperature production pump
Surface systems equipment: low temperature systems, heat pumps, turbines, cooling
generation (via heat absorption)
EGS Flagship Program
Establish network of complementary 5-10 European EGS test laboratories.
DG3
DG3
DG4
2->3
5->6
6->7
DG3,
DG5
DG1,
DG3,
DG5
DG5
5->6
Demonstration sites in different geological settings (3 plants of 5 MWe-10MWth), and upscale
(1 plant=10 MWe-20MWth & 1 plant=20 MWe-40MWth).
Training and education of new geothermal professionals specialized in EGS.
Public acceptance: microseismicity, stimulation, environmental impact, emissions
Grid flexibility: Flexible and base load electricity production from EGS plants, test on
dispatchability, design regional flexible electricity system.
DG5
DG5
R&D:
3/4>6
D: 3>6
2.4. Cross-cutting technologies
In order to realise the potential of Renewable H&C, it is necessary to exploit synergies among
the renewable energy production, distribution and consumption, by investing in “Cross-cutting
technology”.
The “Cross-cutting technology” concept represents any energy technology or infrastructure
which can be used either to enhance the thermal energy output of a RES, or to enable a greater
fraction of the output by the system to be used, or to allow the exploitation of RES which would
be difficult or impossible to use in building-specific applications. So Cross-cutting-technology is
seen as the key driver to enable the transition towards a RES landscape.
Four key energy technologies have been identified that fit the definition above.




District Heating and Cooling
Thermal energy storage
Heat pumps
Hybrid renewable energy systems and priorities with generic impact on RHC
applications in the residential sector
In the next sections, a brief overview of the roadmap for these four key energy technologies is
provided.
2.4.1 District Heating and Cooling
District H&C (DHC) provides the broad platform for the integration of RES into the heat market.
It increases the overall efficiency of the energy system by recycling heat losses from a variety of
energy conversion processes. Heat which otherwise would be unutilised is recovered and used
to meet thermal demands in buildings and industries. Renewable sources which otherwise
17
would be difficult to use, such as many forms of biomass and geothermal energy, can also be
exploited. By aggregating a large number of small and variable heating and cooling demands,
DHC allow energy flows from multiple RES to be combined while reducing primary energy
demand and carbon emissions in the community served. So DHC will facilitate the boosting of
the 3 other key technologies by integrating them into its grid system.
The District Heating and Cooling roadmap is summarized in x
Research and Innovation
Priorities
Predominant
type of
activity
Large scale demonstration of
Smart Thermal Grids
Demonstration
Booster Heat Pump for DHC
Develop and roll-out DHC
driven white goods and low
temperature solution for
domestic hot water
preparation
Demonstration
Development/
Demonstration
Priority
Timeline
TRL
20142016
47
20142016
47
20182020
Optimised integration of
renewable energy sources in
DHC systems and
enhancement of thermal
energy storage at system
level
Development
The average electricity consumption of
white goods is reduced from 850 kWh/y in
2012 to 153 kWh/y in 2020
36
Substations’ manufacturing cost is
reduced from 5.000 to 10.000 € in 2012 to
4.000 to 6.000 € in 2020
Average electricity consumption of
substations for residential buildingis
reduced from 4.380 kWh/year in 2012 to
2.600 kWh/year in 2020, while the number
of “smart substations” has a marketshare
of 80%
20182020
Demonstration
Cost of heat with 50% renewable decrease
from 200 €/MWh in 2012 to 50€/MWh in
2020
The reference sCOP value compression
HP increases from 3.5 in 2012 to 5 in 2020
while the heat generation costs is reduced
by more than 30 %
47
20162018
Improved, highly efficient
substations for both present
and future lower temperature
networks
KPI
46
The reference heat cost is reduced from
50-200 €/MWh in 2012 to 40-90€/MWhin
2020, while the energy efficiency of DHC
systems is increased by 10 %
Table x: District Heating and Cooling Roadmap
2.4.2 Thermal Energy storage
Thermal energy storage is the solution for a key bottleneck against the widespread and
integrated use of RES, since the renewable supply does not always coincide with the demand
for H&C. Numerous technologies in sensible, latent or thermochemical form both in on-site and
18
large scale applications can time-shift renewable energy supply to periods of greatest demand,
each of them characterised by different specifications and specific advantages.
The Thermal Energy storage roadmap is summarized in Error! Reference source not found..
Research and Innovation
Priorities
Next generation of Sensible
Thermal Energy Storages
Improving the efficiency of
combined thermal energy
transfer and storage
Increased storage density
using phase change
materials (PCM) and
thermochemical materials
(TCM)
Improvements in
Underground Thermal
Energy Storage (UTES)
Optimised integration of
renewable energy sources in
DHC systems and
enhancement of thermal
energy storage at system
level
Predominant Priority
TR
type of
Timeline
L
activity
Development
Research /
Development
20142016
38
20182020
36
20162018
Research
Demonstration
28
20162018
20182020
Demonstration
46
KPI
1000 litre tank cost (excluding insulation and
VAT) is reduced from 400 - 900 € in 2012 to
300 - 700 € in 2020, while the heat loss is
reduced from 150W – 200W to 56W
New fluids for thermal energy transfer and
storage allows a reduction of annual electricity
consumption for pumping from 75 kWh in 2012
to 50 kWh in 2030, while the energy density is
increased by 30%
Stable, micro encapsulated salt hydrate PCM
cost reduced from 8 €/kg in 2012 to less than 2
€/kg in 2030
Energy seasonal solar TCM storage increased
from 60 kWh/m3system in 2012 to 250
kWh/m3system
Energy efficiency increased from 60 %in 2012
to 75% in 2020
Lifetime of the UTES at elevated T increased
from 10 years in 2012 to 20 – 30 years in 2020
The reference heat cost is reduced from 50-200
€/MWh in 2012 to 40-90€/MWhin 2020, while
46
the energy efficiency of DHC systems is
increased by 10 %
Table x: Thermal Energy Storage Roadmap
2.4.3. Heat pumps and sorption cooling
Heat pumps transform thermal renewable energy available at low temperatures from natural
surroundings to heat at higher temperatures. The heat pump cycle can be also used to provide
cooling. Heat pumps use aerothermal, hydrothermal and geothermal energy, and can be
combined with heat from other RES in hybrid systems (see below). These sources might be
renewable in origin or waste energy from industrial processes and exhaust air from buildings.
Heat pumps can be highly efficient, although their overall primary energy efficiency depends on
the efficiency of the electricity production (or other thermal energy source) they use.
19
The Heat Pumps roadmap is summarized in Error! Reference source not found.Error!
Reference source not found..
Research and Innovation
Priorities
Predominant
type of
activity
Priority
Timeline
20142016
Cost competitive heat pump
kit for houses with existing
boiler
Optimisation of thermally
driven heat pumps and their
integration in the boundary
system
Development of a heat pump
for near-zero energy
buildings (single family
house)
High capacity heat pump for
simultaneous production of
cold and hot water for
heating/cooling the building
Sorption cooling systems
driven by hot water at
moderate temperature
Enhanced industrial
compression heat pumps
Development
20142016
Development
Development
Development
Demonstration
20182020
20162018
20162018
20182020
Development
20142016
Process integration,
optimisation and control of
industrial heat pumps
Demonstration
Improvement of sorption
cooling from renewable
energy sources
Development /
Demonstration
20182020
TRL
KPI
PER of the heat pump and gas boiler
system referred to primary energy increased
from 0.8 (gas boiler only) to 1.7 in 2020
47 Reference average cost of 4-8 kW HP in the
range 4-8 kW, including installation, reduced
from 6.000 – 8.000 € in 2012 to 4000 – 5500
€ in 2020
Reference thermal system SCOP (e.g. for
air source) increased from 1.15 in 2012 to
47
1.4 in 2020
Reference specific unit cost reduced from
450 €/kWth in 2012 to 350 €/kWth in 2020
SCOP (for heating and cooling) increased
from 3.5 in 2012 to 6 in 2025
46
Contribution to the production of DHW
higher than 40% in 2025
46
sCOP of air-to-air HP increased from 7 in
2012 to 10 in 2020
Refrigerant charge lower than 0.1 kg/kW
driving temp for absorption today 95°C ->
60°C
37
Reference sCOP (water cooled) increased
from 0.5 in 2012 to 0.8 in 2020
Carnot efficiency increased from 0.3 in 2012
to 0.4 in 2025
36
Production cost of the heat pump unit
reduced from 300 €/kW in 2012 to less than
200 €/kW in 2025
Reference sCOP compression HP (at T =
35 K , Tevap = 40 °C) increased from 3.5 in
2012 to 5 in 2020
47 Reference sCOP absorption HP increased
from 1.1 in 2012 to 1.5 in 2020
Average system cost reduced from 500-600
€/kW in 2012 to less than 400 €/kW in 2012
Cost for absorption chiller reduced from 160
47
€/kWc in 2012 to 100 €/kWc in 2025
Specific weight reduced from 7 kg/kWc in
20
2012 to 5 in 2025
New concepts for industrial
heat pumps
20162018
Temperature of the delivered heat increased
from 100°C in 2012 to more than 200°C in
24 2020 with a temperature lift higher than 70K
Payback time reduced from 5 years in 2012
to less than 3 in 2020
Research
Table x: Heat Pumps Roadmap
2.4.4 Hybrid systems
Hybrid renewable energy systems, combining two or more energy sources into a single system,
can overcome the limitations of individual technologies. This is true for small scale applications
such as heating and cooling systems for single family houses as well as for large scale systems
suitable for district heating and cooling or industrial processes. The combination of RES
available at different times within the system is especially useful if a more constant demand for
heat exists, with the overall efficiency of the system depending strongly on the way the different
sources are combined.
The Hybrid systems roadmap is summarized in xError! Reference source not found..
Research and Innovation
Priorities
Automation, control and long
term reliability assessment
Predominant
type of
activity
Development
Priority
Timeline
T
R
L
20142016
37
Next generation of highly
integrated, compact hybrid
systems
Development/
Integration, automation and
control of large scale hybrid
systems for non-residential
buildings
Development/
20182020
36
20162018
46
KPI
Reference system customer price (for Central
Europe) reduced from 800 – 1,500 €/kW in
2012 to 640 – 1,200 €/kW in 2020
Primary Energy Ratio of a reference system
reduced from 0.8 in 2012 to 0.65 in 2020
Increase in the system efficiency as a result of
the integration of smart controllers higher than
20% in 2020
Renewable fraction of the reference hybrid
system increased to more than 75 % in 2030
Reference system customer price (for Central
Europe) reduced from 800 – 1,500 €/kW in
2012 to 500 – 1000 €/kW in 2025
Primary Energy Ratio of a reference system
reduced from 0.8 in 2012 to 0.5 in 2020
Average increase to the payback time,
compared with conventional alternatives
reduced to 5 years in 2020 and to 1 in 2025
Table x: Hybrid Systems Roadmap
21
Below are some items of relevance to all types of residential heating and cooling from RES that
will help to improve system efficiency and ease of installation. These issues are related to the
system level rather than to the single component level. While components often are tested and
certified with specific procedures (e.g. the solar key mark for solar thermal collectors), such
certification practices and schemes do not exist for overall heating and cooling systems.
Research and Innovation
Priorities
Predominant
type of
activity
Priority
Timeline
TRL
KPI
Developing standards for the
overall system design and for
hydraulic and electrical
interconnections of different
building components
Development
20162018
Installation time is reduced by 30%
Material cost reduction for the end-user
Applicable to
of 20% (cfr CCT.3)
all TRLs
20% reduction of human interventions
for maintenance / reparation.
Elaborating standards, tests,
and benchmarks for system
efficiency
Development/
20142016
Establishment of harmonised test
procedure(s), recognised among
industry, research and standardisation
bodies in EU, in order to test different
RHC systems
The harmonised test procedure(s)
should be tested in at least 5 EU
countries by relevant research and/or
standardisation bodies
Applicable to
all TRLs
22
3. Interconnection between the different RHC technologies and its link to the different
demand profiles
The complexity of developing Renewable Heating and Cooling technology is first of all a matter of
classification, since, due to the immensely large number of ways and forms heat can be produced,
transported, stored and delivered, and the many different profiles of end users, it is difficult to draw
exact boundaries between the different technological options. In the RHC Platform, this duality
between the need for clarification and identification and the inherent relationship between the
different forms of heat was dealt with by means of the constitution of an all-embracing Cross Cutting
Panel beneath the three source-oriented solar, bio and geothermal Panels.
The present chapter is intended to clarify the interlink between the technological progress which is
needed to further develop the different renewable sources of heat, described in the previous
chapter, and the progress needed in the different Cross Cutting technologies (CCT). A clear
conclusion from its reading is the fact that progress in some source based technology or CCT alone
will not bring the desired results. Both have to go together.
3.1 Interconnection between cross cutting technologies and source oriented technologies
3.1.1 How Solar thermal is linked to Cross-cutting technologies
House owners don’t want to buy heating components like solar collectors, water storage,
backup-heater and other equipment, they want to buy a solution for domestic hot water (DHW)
and/or space heating and/or cooling (such as Combisystems).
One of the most relevant components for which strong R&I work is required is thermal energy
storage (TES). Solar thermal systems solutions require (in almost all cases) a heat store. This is
due to the mismatch between solar radiation and heat demand profile, usually a thermal energy
storage system is needed to make solar thermal energy useable. Depending on the scale of the
mismatch and the desired solar fraction, TES is designed to bridge the gap for only a few hours
or days, up to some weeks or months. However, to store solar thermal energy means additional
investment costs and additional thermal losses, which are increasing with storage size and
duration.
Therefore, the challenge is to achieve a specific goal, which could be low solar thermal heat
costs or high solar fraction, with an optimized system design by optimizing collector size,
storage volume and other criteria.
Besides, the concept of Solar Compact Hybrid System includes the solar system and the
backup-heater in one compact unit. There are already today in the market such system
combining solar thermal and heat pumps. This concept can also be enlarged to other
technologies, exploring further the hybridization of RHC technologies.
23
3.1.2 How Biomass is linked to Cross Cutting technologies
Since the majority of the renewable heat production in the EU is produced and will continue to
be produced by biomass, it can be expected that the interactions between the various bioenergy
technologies for RHC with CC technologies will be high.
DHC networks throughout Europe often use the heat produced from biomass heating and/or
CHP units as a primary supplier. Technologies that improve the management of small and
variable heating and cooling demands from customers or minimize thermal losses have a direct
impact on the supply side as well, e.g. by allowing more customers to be connected to an
existing grid or by allowing a better dimensioning of the supply side during the design phase.
Moreover, large-scale demonstration activities of the Biomass Technology Roadmap, such as
those of the “High efficient large-scale or industrial steam CHP with enhanced availability and
increased high temperature heat potential (up to 600°C)” priority can be coupled with
demonstration activities of the CCT Roadmap, e.g. “CCT.17 Large scale demonstration of
Smart Thermal Grids”. This way, the efficiency and environmental performance of new or
retrofitted large-scale CHP units can be tried in the actual operating conditions of a smart
thermal grid for DH.
TES technologies are a common supporting feature of several bioenergy heating systems in the
residential or DH sector, mostly for short-term storage. Improvements in thermal energy storage
technologies will allow bioenergy heating units to manage their heat production more efficiently,
e.g. by avoiding shut-downs or abrupt load changes. For CHP units, this means an increase in
their heat output, thus increasing their total efficiency. At domestic scale, sensible heat stores
already play a major role today. In combination with firewood boilers, as well as with solar
thermal systems, the sensible heat stores are the most diffused elements of residential
renewable heating systems and will remain so in the future. Next generation (cost effective and
efficient) of sensible TES (CCT.6), but also PCMs and TMs (CCT.8) will be a relevant
component for small and micro scale CHPs as well and are highly relevant for consideration in
the automation and control system of hybrid energy systems.
Heat pumps are a versatile technology, utilizing low temperature waste heat from various
sources. Such low temperature streams are produced by bioenergy heating systems of all
scales. The improvements in heat pump technologies will allow for the utilization of such
streams and will contribute to the increase of the overall total efficiency. Biomass combustion
systems may substitute natural gas in the field of thermally driven heat pumps (CCT.2).
Hybrid renewable energy systems include a number of technologies that will allow for the
combination of two or more energy sources in a single stream. Since bioenergy is the most
common technology for RHC, it can be expected that most hybrid systems will include some
type of bioenergy system. For example, “CCT.3 Automation, control and long term reliability
assessment” allows for improved load control; this leads to better dimensioning of the capacity
of CHP units in the design phase, allowing them to operate as close as possible to full load and
24
thus higher efficiencies and lower emissions. A major role of successful deployment of CCT.3
will be for packaging purposes of integrated hybrid renewable energy systems. Pellets burners /
biomass micro CHPs may also be an element (first attempts already on-going) of next
generation of highly integrated, compact hybrid systems (CCT.5) in order to ensure
independence of electricity.
From our Strategic Research agenda, RHC.1 & 2 are absolutely necessary for all RHC
technologies at residential scale and may strongly favor packaging solutions, which may gain
substantial relevance in the future.
3.1.3 How Geothermal is linked to Cross Cutting technologies
There is a structural link between shallow geothermal technologies and Heat Pumps, since the
heat pump is a structural element in any shallow geothermal application, enabling the system to
exchange heat between the underground and the building HVAC (Heating, Ventilation & Air‐
Conditioning) system. Any progress in HVAC components (better efficiency, lower cost,
adaptation to temperatures delivered by geothermal systems) and in particular HP components
will thereof benefit the overall geothermal system. Additionally, shallow geothermal applications
are often found in combination with other sources of renewable heat. These forms of
hybridization (solar – geothermal, air source – geothermal, etc…) play a key role in adjusting the
demand profile in many applications to the characteristics of the different heat sources,
optimizing the balance between cost competitiveness and efficiency. This is particularly true in
high capacity non-residential applications with unbalanced heating/cooling demand, in which the
thermal equilibrium in the soil can only be reestablished by means of supplementary heat
sources and sinks. Here, the development of optimized hybrid schemes and control appliances
is key.
Sensible Underground Thermal Energy Storage (UTES) for low temperature applications (at
less than 40 °C), either using groundwater-bearing layers (ATES) or wells into the ground water,
or using borehole heat exchanges (Borehole Thermal Energy Storage (BTES)), uses the same
type of installation procedures and technologies that make up the core of the shallow
geothermal systems. These areas are thus closely interlinked. In the 40-90 °C heat storage
temperature range for ATES and BTES systems a breakthrough would be needed that would
open up shallow geothermal systems to a wider range of applications in non-residential and
industrial areas.
In the DHC sector, there are two relevant technologies that are closely interlinked with the GEO
roadmap topics. On the one hand, as mentioned before, technologies using the ground as a
vast heat store or sink through UTES, with shallow geothermal technology principles. On the
other hand, deep geothermal energy production by means of direct heat supply by thermal
water production and reinjection, or also using other technologies like deep borehole heat
exchangers (BHE) or heat from geothermal CHP plants. The capacity of such installations can
start from about 0,5 MW th (in particular deep BHE) and may achieve values in excess of 10
MW th. The heat could be fed directly into a district heating system, if production temperature
25
matches the required supply temperature, or be used as a heat source for large heat pumps
(including absorption heat pumps, engine-driven compression heat pumps, etc.). Also cold
production is possible with absorption chillers driven by geothermal heat. Further development
in DHC technologies (including cascading and storage) will make it possible to use geothermal
heat more efficiently.
26
3.2 Contribution to application-oriented solutions
As clearly expressed in the Common Strategic Research Agenda of the Renewable Heating and
Cooling Platform, there has been an increased effort to structure the Research and Innovation
actions increasingly taking into account the point of view of the demand or final users. This makes
sense taking into account that from the point of view of heating and cooling demand profile, supply
temperatures, costs and relevant technologies, there are markets with completely different
characteristics and needs. Four main demand profiles were identified that are meant to cover
substantially the most important user groups leading into the proposed classification into residential,
non-residential, industrial and district wide (or Smart city) users.
In this subchapter, the different R&I actions will be linked and related to this four application
domains to highlight the fact that, from the point of view of technology and research, different
solutions and paths have to be found depending on the market and demand profiles to be
addressed.
3.2.1 RHC Research and Innovation in the Residential Sector
The needs of the residential market can be divided into two main segments: retrofitting and new
built. While the majority of the market needs solutions that can be easily integrated into existing
buildings, new buildings require holistic solutions in line with the nearly-zero energy building
concept. Today, in Central and North Europe – as well as in many climatic areas in the
Southern European Countries - space heating is responsible for more than 80% of the heat
demand in residential buildings, less than 20% is needed for DHW heating. Thus, although the
space heating demand will decrease due to improved insulation and improved façade air
tightness by refurbishment and in new buildings, even if the demand on space heating would be
reduced by 75%, still heating demand would be of the same size than the demand for DHW
heating.
Contribution from Solar thermal Technologies
Today, manufacturers are selling
solar systems as units with a high grade of prefabrication. But usually solar heating systems
must still be combined with an external backup-heater by the installer on-site in the building.
Manufacturers offer solar systems combinable with a huge variety of heating system designs.
However, this diversity increases complexity, costs and risk of mistakes at the time of
installation and the risk of suboptimal operation due to conflicts between the controller of the
solar system and the backup-heater.
This challenge can be solved by the Solar Compact Hybrid System (SCOHYS), which includes
the solar system and the backup-heater in one compact unit. SCOHYS will be a compact
solution at reduced costs due to simplified design, only one control unit (including both control
and monitoring functions), high grade of prefabrication and reduced installation effort. Due to
optimized combination of components and prefabrication in a smart way, the performance and
reliability will improve.
27
In line with the nearly-zero energy building concept, for some time there have been efforts in
developing a solar active house (SAH), concept that has been growing in relevance. A relevant
contribution of solar energy to space heating requires an increase of the solar fraction per
building, which is the share of solar energy on the overall heat demand for DHW and space
heating. Today, in Central Europe combi systems for DHW and space heating have a size of
typically 10 to 15 m2 collector area and can provide a solar fraction of about 25%, depending on
the size and the efficiency of the building and the climate conditions on site. Since in Central
and North Europe the level of solar radiation is in winter time much lower than in summer time,
a solar fraction close to 100% requires the shift of a significant amount of solar heat generated
during the summer to the heating season and the installation of a very large seasonal storage
water tank. However, based on improved insulation standards for buildings and improved solar
heating technology, the SAH with a solar fraction of about 60% was developed as a good
compromise of high solar fraction at acceptable storage volume. In Central Europe a typical
single family SAH needs a collector area of 30 to 40 m2 and a water storage tank of only 5 to 10
m3. More than 1300 of such Solar-Active-Houses are already built.
The final goal of the solar sector is to provide SAH at low solar heat costs. The SCOHYS and
the SAH roadmap pathways are different paths to achieve this goal by 2030.
Figure x show the SCOHYS roadmap pathway (SCOHYS roadmap (rm)) and its result (cost
reduction by 50% for the same solar fraction) and SAH roadmap pathway (SAH rm) and its
result (increased solar fraction at the same solar heat costs) for the year 2020 in the solar
fraction to solar heat cost diagram. Based on the technological progress beyond 2020, until
2030, the goal of a Solar-Active-House with low solar heat cost and high solar fraction can be
achieved.
Figure x:
Solar heat costs for different applications in 2013, 2020 and 2030 (the fields with year
dates stand for the average heat costs at that year) and the result of the SCOHYS and SAH roadmaps
regarding solar heat cost reduction and solar fraction increase for residential applications (costs for typical
systems in a specific area, Central Europe), SAH 2030 represents the roadmap between 2020 and 2030.
Contribution from Biomass Technologies
Biomass based technologies can
serve almost any residential application either as individual biomass only solution, or as part of
28
hybrid packages providing heat, hot water and ventilation and air conditioning / cooling to
residential buildings. As for solar thermal (and probably all other RHC technologies) the
development of package solutions reducing the diversity of system solutions and reducing the
potential for mistakes in the practical installation of the systems is a main requirement for
technical solutions for the residential RHC sector. Whilst firewood will remain the most relevant
fuel for the individual room heating systems, upgraded and new fuels will gain importance in
automatically fired boilers and stoves.
In the existing building stock the most relevant short term markets and applications are the
modernization of the existing stock 5 of individual biomass room heating appliances and
biomass boilers, as well as the substitution of existing oil boilers in the existing building stock.
Whereas the former measure must lead to a substantial increase in resource efficiency and
decrease of environmental impacts, the latter is a substantial contribution to saving GHG
emissions. Both measures should be demonstrated in a real-life environment to guide
respective policy measures. The biomass technology solutions required are advanced
residential scale biomass combustion appliances, possibly equipped with secondary measures
to reduce emissions. Moreover, upgraded standardized refurbishment sector fuels with
characteristics tailored for low PM emissions need to be available and heat demand driven
micro CHPs shall be developed to be integrated into the existing building stock.
The biomass based technology solutions for the are widely identical with the solutions for the
existing building stock. For single family homes nominal capacities of offered technologies are
lower and solutions for low temperature heating systems are introduced by flue gas
condensation technology. Biomass based technologies will particularly be attractive for multifamily buildings with biomass boilers and biomass micro-CHPs providing the base heat and hot
water demand either as individual systems or in hybrid packages with other RHC technologies.
In the new building market, biomass technologies will serve the new building market mostly
with back up technologies (individual room heaters, possibly with water heat exchangers, in any
case with advanced heat storage opportunities) or with base load supply technologies (in case
of multi-family homes or a number of flats connected with a micro-grid). The latter is offered by
boilers or micro-CHP technologies. As far as pre-fab buildings are concerned biomass burners
are a component of hybrid HVAC packages developed around the heat storage as central and
enabling technology component.
Contribution from Geothermal technologies
In the residential sector, the main
geothermal technology to cover heating and cooling demand is the shallow geothermal heat
pump system. This technology is suitable for small, individual houses as well as larger multifamily houses or groups of houses. Capacities range from under 10 kW th to over 500 kW th. The
depths of geothermal heat exchange ranges from a few meters to more than 200 m, depending
upon technology used, geological situation, demand profile, and other design considerations.
Geothermal heat pumps can deliver all thermal energy required for living: space heating and
, including harvesting, transport and biomass processing
more than 50% of existing installations is more than 15 years old.
29
cooling as well as domestic hot water (DHW).
For space cooling, in certain regions with moderate climate, direct cooling from the ground via
cooling ceilings etc. is possible, allowing for space cooling with minimum energy input. In
warmer regions with higher cooling demand, the heat pump can be used in cooling mode. For
well-insulated houses with a forced ventilation system, geothermal energy can contribute to preheating or pre-cooling ventilation air while it passes through intake pipes buried in the ground.
The R&I actions more directly addressing the European residential geothermal sector are based
on the objectives and KPI’s related with shallow geothermal technologies, mainly, increasing the
efficiency of systems (new materials, better integration and design), allowing a better
characterization of suitable areas and applications and decreasing installation costs through
different techniques (improved drilling or other types of heat exchangers, such as geoactive
building structure elements). Like in many other areas, a special mention has to be done to the
development of measures to increase awareness, harmonization of shallow geo- standards,
shallow geothermal installer EU wide training certificate, shallow geothermal Smart City
deployment policy along the line of previous projects.
Contribution from Cross Cutting technologies
All priority I actions in the
residential housing are seen as development activities. Heat pumps advance should focus in
developing cost-competitive heat pump kits for houses with existing non-electrical boilers, an
essential tool for refurbishment of existing European housing stock, and in the optimisation of
thermally driven heat pumps and their integration in the boundary system to support the market
penetration of such equipment, enhancing the efficiency and the long-term stability and by
reducing their size, weight and cost. Within the development of new generation hybrid systems,
special attention should be paid to the automation and control of systems; the scope of this
research should be to develop an integrated control platform with the necessary technical
developments on control monitoring and automation to improve the quality of the systems.
Finally, development on sensible thermal energy stores should focus on significantly reducing
heat losses, increasing exergy efficiency, efficient charging and discharging characteristics and
high flexibility to adapt it to and integrate it in existing buildings with limited space for storages.
The need for standards in design and implementation is greatest. End users here do not have
sufficient knowledge to judge design and implementation quality. Standards and standardised
test procedures need to be developed to ensure renewable heating and cooling systems are
satisfactory in all aspects.
As priority II, research is needed to increase storage density using phase change materials
(PCM) and thermochemical materials (TCM) in order to enable the implementation of TES in
applications with less available volume and to enable the cost-effective long-term storage of
renewable heat.
In the long term, with priority III, the development of a heat pump for near-zero energy buildings
(single family houses) is expected; this aims to the development of a small capacity reversible
heat pump (around 3-4 kWth), with low cost, easy installation, operation and maintenance for
30
the new low-energy consumption houses of the EU with optimal integration with the ventilation
heat recovery, cooling, dehumidification and domestic hot water production. Development and
demonstration efforts should be put into developing compact/prefabricated hybrid systems with
improved efficiency, inexpensive and simplified installation to reduce damage, and adapted to
the various configuration of heating systems and climates. Finally, further development and
improvement of fluids that combine the heat transfer function with thermal energy storage is
outlined; these will lead to smaller required storage volumes, an increase in heat transfer
efficiency and a reduction in auxiliary energy for pumping.
3.2.2 RHC Research and Innovation in the Non-Residential Sector
Non-residential or service buildings require in general a different approach compared to
residential buildings due to two main differentiating aspects: the demand profile is substantially
different and includes under circumstances large cooling loads (even in Northern or Central
European buildings) and systems tend to be much larger and highly integrated, whereby
hybridization of different technologies, as well as CCT concepts are usually widely applied. The
complexity in the design and installation of such systems is higher and, safety requirements are
more demanding (e.g. by dealing with steam in the system in the case of solar thermal
applications).
Contribution from Solar Thermal technologies
Developments in solar heating and
cooling solutions for residential buildings are also relevant for the non-residential sector. The
service sector requires larger solar thermal systems, which allow economies of scale but also
imply customized planning. The efficiency of the solar thermal system depends a lot on the
demand curve and the temperature requirements, e.g. solar thermal systems are well suited to
supply the high volume of hot water consumed during the whole year by hotels, hospitals and
homes for elderly people.
Solar cooling solutions for stronger requirements, as it is the case for the non-residential sector,
are also a good option. Even more considering that most of the demand for cooling in the
service sector is currently supplied by electrical systems, causing problematic consumption
peaks already today. Thermally driven cooling technologies constitute promising alternatives
and are set to play a key role in the efficient conversion of energy in the field of building
airconditioning and refrigeration, especially in southern Europe. Today, these technologies are
used largely in combination with waste heat, district heat or co-generation units. Thermally
driven cooling cycles can be efficiently run with solar thermal energy too, thus producing solar
airconditioning and refrigeration. In climates where cooling is not required all year round which
constitutes the majority of European areas, these systems can be used for cooling in the
summer season and for space / DHW heating out of the cooling season.
R&D priorities for solar heating and cooling systems in non-residential buildings aim at
simplifying installation, improving integration, increasing stability, reliability and long-term
performance to lead to cost competitive solutions. The identification of the best applications and
cases suited for solar cooling and heating in non residential sector will be decisive. The
31
improvement of thermally driven cooling components deserves special attention.
Contribution of the Biomass technologies
Small scale CHPs and fuel flexible
boilers shall be developed for reliably providing the base heat loads for non-residential
buildings, services and grids for a relevant time span of the year under competitive conditions.
In the field of non-residential buildings these may be integrated into smart package solutions
with other RHC technologies. Specific high temperature applications shall be identified to allow
for tailor-made biomass technology developments and a proper segmentation of the heat
market amongst the RHC technologies. Thermal (biomass based) cooling technologies shall be
developed for applications where this is deemed to be economically competitive. The bigger the
application, the more relevant will be the supply chain management of either locally available
fuels or of retailed upgraded fuels.
Contribution from the Geothermal technologies
In the services sector,
shallow geothermal energy systems (ground source heat pumps or underground thermal energy
storage) is the most relevant technology, ranging in capacity from some 10 kW th for small
businesses or offices, to 1 MW th or more for larger projects. The ability to provide both heat and
cold is the major asset for shallow geothermal technologies in this sector. Systems will generally
be more complex than those for the residential sector, and the geothermal system in most
cases will be combined with other technologies, creating hybrid systems. In the case of shallow
geothermal systems, the economy of plants is usually better, as a significant demand for cooling
adds to the running time of the system, and also scale effects reduce specific first cost to less
than 70 % of the specific cost of smaller, residential systems. Generally less than 50 % of the
cost goes into the underground works on these shallow geothermal installations.
From the point of view of research, there are a number of programs in the geothermal roadmap
specifically addressing non-residential applications, such as areas dealing with larger systems
(development of solutions for cooling and high capacities) and programs which emphasize
design, integration and also the use of shallow geothermal Aquifer systems (ATES
technologies) which are mostly suitable in larger applications.
Also deep geothermal energy (i.e. from boreholes deeper than 400m, or from high enthalpy
geothermal resources) might be applicable in cases with higher heat demand (thermal spas,
large offices, hospitals, etc.).
Contribution of Cross Cutting technologies
Development with priority II is
needed in the non-residential sector. First, development of a high efficiency, high capacity heat
pump solution for heating and cooling of buildings with simultaneous production of hot water for
space-heating and chilled water by automatically changing the refrigerant circuit in order to
reject/take the necessary heat to/from the air or water from a geothermal loop(air and water
versions of the heat pump). Additionally, the heat pump should preferably employ a low GWP
refrigerant and offer competitive cost, high reliability, optimized control and easy integration with
other systems. Second, integration, automation and control of large scale hybrid systems for
non-residential buildings are needed. Finally, development of sorption cooling systems driven by
32
hot water at moderate temperature, for instance solar is needed. In this case the expected
outcome includes the development of optimized solutions for the heat rejection, fully reliable and
automated operation, and easy integration with other systems.
3.2.3 RHC Research and Innovation for Industrial applications
The heat demand for industrial applications in the EU was estimated by IEA to be 165 Mtoe in
2010. Most of this demand is covered by well-established fossil-fuel based systems, resulting in
significant impact on the greenhouse gas emissions of the industrial sector. From the point of
view of research, RHC technologies for industrial applications have very specific characteristics
since the delivery temperatures vary completely from case to case, being much higher than in
the building related sectors in many of the most relevant applications.
Contribution of the Solar Thermal technologies
Solar Heat for Industrial
Processes (SHIP) is currently at a very early stage of development. Less than 120 operating
SHIP systems are reported worldwide, with a total capacity of over 40 MW th (>90,000 m²). Most
of these systems are pilot plants with a relatively small size. However, there is great potential for
market and technological developments, as 28% of the overall energy demand in the EU27
countries originates in the industrial sector, majority of this is heat of below 250°C.
Solar industrial process heat costs depend to a great extent on the type of application and
especially on the temperature level needed. Up to now, several solar thermal process heat
systems are realised in Europe with heat costs between € 38 and € 120 per MWh.
According to a study (Ecoheatcool 2006), around 57% of the total industrial heat demand is
required at temperatures below 400°C and 30% at temperatures below 100°C. The heat
demand below 100°C could theoretically be met with SHIP systems using improved and
adopted current technologies, if suitable integration of the solar heating system can be
identified. With R&I and technological development, more and more medium temperature
applications, up to 250°C, will also become market feasible. The objectives of the SHIP
roadmap pathway are the achievement of cost optimal SHIP systems and its integration in
relevant industrial applications, as well as the development of next generation SHIP systems
with increased solar fraction and its adaptation to industry machinery standards (including new
ways to feed in solar heat into the industrial processes).
In several specific industry sectors, such as food, wine and beverages, transport equipment,
machinery, textiles, pulp and paper, the share of heat demand at low and medium temperatures
(below 250°C) is around 60% (POSHIP 2001). Tapping into this potential would provide a
significant solar contribution to industrial energy requirements.
Contribution of the Biomass technologies
Biomass covers almost 12% of the
industrial heat demand, being therefore the most important renewable energy form for the
sector. Its main advantage lies in its being a well-established technology, capable of providing
heat at all temperature levels. In addition, certain types of biomass heat are cost competitive
with the fossil fuel alternatives, even without the need for subsidies.
33
Large-scale biomass heat units for industrial applications are already capable of reaching high
thermal efficiencies; therefore, the RHC Platform highlights the importance of promoting largescale biomass CHP units for industrial applications, since they can produce bio-electricity, an
important value-added product, with a lower subsidy level compared to biomass power plants.
The advantage of the industrial CHP units is the presence of an existing heat market which in
many cases is not subject to seasonal demand variations, as is the case with DH networks. In
addition, large-scale industrial units have a higher degree of fuel flexibility, which will allow for
the mobilization and effective utilization of biomass resources that remain mostly unexplored,
such as many types of agricultural residues.
R&D needs for industrial biomass applications are targeted towards increasing the fuel flexibility
as well as increasing the electrical efficiency component of the total CHP plant efficiency.
Furthermore, large-scale applications will require new technological solutions for reducing the
environmental impact of biomass-to-energy schemes, e.g. through the reduction of gaseous
pollutants, as well as the identification of new utilization routes for process residues, such as
biomass fly ash.
Contribution of the Geothermal technologies
Geothermal
energy
can
provide heat in the low temperature range (less than 95 ºC including cooling) and, because
geothermal energy has definite base-load characteristics and is always available when required,
it matches perfectly with stable demand patterns of most industrial processes. The annual fullload hours can be rather high, and thus the return on investment for the geothermal installation
favourable. In this form, geothermal heat is already used in agriculture/aquaculture (e.g.
greenhouses), drying processes in the food industry, etc.
Another geothermal technology useful for industrial applications is underground thermal energy
storage (UTES). In particular UTES at 40-90 °C can directly supply heat for low temperature
industrial needs such as batch processes or seasonal industries (e.g. sugar refineries), where
periods of heat (and/or cold) demand are followed by phases of inactivity.
Geothermal heat can also be used as operating energy for absorption chillers, to supply cooling
to industrial processes. R&D priorities for UTES and absorption cooling are included among the
cross-cutting technologies presented in this Chapter.
In the medium temperature range (95-250 °C) geothermal energy can provide heat above 95 °C
from deep geothermal resources and from high-enthalpy geothermal resources. High enthalpy
resources, some of which show temperatures over 250 °C, are used almost exclusively for
electric power production. Use of the heat for industrial purposes is also feasible. R&D will be
required to provide for the right matching and adaptation of the geothermal heat source to the
specific characteristics of the industrial process concerned.
For the heat source as such, most R&D needs are the same as for deep geothermal in DHC, as
long as temperatures below about 120 °C are considered (cf. Chapter 5). As the temperature of
the geothermal fluid increases, other problems need to be solved, like degassing of the fluid
34
(pressure control), corrosion, and insufficient pump technology.
Important to mention here is also the possibility of using Enhanced Geothermal Systems (EGS)
to feed the heat requirements of many industrial processes or DHC in combination with
electricity production (cogeneration or poly-generation).
All these developments require the support for a range of R&I actions and programs to enlarge
our understanding of deep geothermal resources (mitigating the financial risks inherent in these
types of projects), improve and decrease the cost of deep drilling, improve also the surface
systems and the launch of EGS flagship program to demonstrate the possibilities of this
technology on a wide scale.
Contribution of the Cross Cutting technologies
Demonstration activities as
priority I are needed for process integration, optimisation and control of industrial heat pumps.
The work should focus on the development and demonstration of electrically and thermally
driven heat pumps in individual industrial applications as well as in combination with district
heating and cooling networks including thermal energy storage.
As priority II, demonstration activities to improve Underground Thermal Energy Storage (UTES)
are encouraged (in the same context as mentioned in the geothermal program). Improvement
should address system concepts and operational characteristics of UTES systems, investigation
of optimum integration of UTES into industrial processes and DHC systems. Research on new
concepts for industrial heat pumps should look for exploring alternative thermodynamic cycles
for heat-pumping and heat-transforming for different industrial applications, with the goal to
increase the operating window of industrial heat pumps so that they can deliver heat at medium
pressure steam levels (around 200°C).
Priority III activities are the development of advanced compression refrigeration cycles based on
novel working fluids for use in medium temperature industrial applications (condensation
temperatures up to 150 °C and evaporation temperatures up to 100 °C), and the Improvement
of sorption cooling from renewable energy sources. In this last topic Development is required for
conversion technology for heat into cold adapted to the characteristics of the renewable
resource, e.g. to improve efficiency of low-temperature absorption chillers and decrease the
necessary source temperature to activate the chiller.
3.2.4 RHC Research and Innovation for DHC/Smart cities
Cities and districts concentrate most of the European demand for heating and cooling for
residential and non-residential uses and it is clear that the extension and deployment of District
Heating Systems will play a key role in reaching the objectives of an increased use of RHC
resources instead of fossil fuels. In DHC applications the issues of cost, integrability and
flexibility as well as storage are primary and RHC technologies must still evolve substantially to
become a suitable choice in many cases.
35
Contribution of Solar Thermal technologies
In Europe there are around 195
large-scale solar thermal plants for heating and cooling (≥ 500 m²; 350 kWth) in operation with a
total installed capacity of approximately 320 MWth. The largest plants are located in Denmark
with more than 25 plants exceeding 7 MWth (10,000 m²) of capacity, while the largest as an
installed capacity of 23.3 MWth (33,300 m²). These large-scale systems are mainly used for
solar district heating which, in most countries, is a small and undeveloped niche market.
Solar heat costs for district heating systems vary a lot from about € 40 to € 190 per MWh,
depending on the existing district heating infrastructure, e.g. due to the high share of district
heating in Denmark the costs to connect solar thermal systems is low. The solar fraction has an
impact on system’s cost, which will be relatively lower if no additional hot water storage is
needed for the solar system at small solar fractions and higher in solar thermal district heating
systems with significant solar fraction and a very large central hot water storage of several
thousand cubic meter water content.
Only 1% of the solar collector surface is currently connected to district heating systems, but a
couple of central pilot solar heating plants with seasonal storage - mainly built in Scandinavia
and Germany - have proved that these types of system can reach high solar fractions
(approximately 50%). With the expected growth of district heating systems in densely populated
urban areas, solar thermal systems will be able to cover a higher share of the heating demand
in urban areas.
Contribution of Biomass technologies
Sustainable, innovative and cost-efficient
advanced fuel feedstock supply, High efficient large-scale or industrial steam CHP with
enhanced availability and increased high temperature heat potential (up to 600°C), High efficient
biomass conversion systems for polygeneration…
To be developed – Contribution to follow ASAP, time constraints have dictated here
unfortunately.
Contribution of the Geothermal technologies
Deep geothermal energy production
is the relevant technology in this sector, mainly with direct heat supply by thermal water
production and reinjection, but also using other technology like deep borehole heat exchangers
(BHE) or heat from geothermal CHP plants. The capacity of such installations can start from
about 0,5 MWth (in particular deep BHE) and may achieve values in excess of 10 MWth. The
heat could be fed directly into a district heating system, if production temperature matches the
required supply temperature, or be used as a heat source for large heat pumps (including
absorption heat pumps, engine-driven compression heat pumps, etc.). Also cold production is
possible with absorption chillers driven by geothermal heat. Take advantage of further
development in DHC technologies (including cascading and storage) will make it possible to use
geothermal heat more efficiently. These technologies are not only suitable in combination with
DHC networks, but can also be used for large individual buildings in the services sector or for
industrial purposes.
36
From the point of view of R&I actions needed, progress in geothermal DHC systems shall
benefit from all the measures mentioned in the context of industrial applications.
Contribution of the Cross Cutting technologies
All applications, including DHC and
smart-cities, will benefit from priority I actions such as the large scale demonstration of smart
thermal grids. Advanced district heating and cooling systems must be developed that are able to
deal with both centralised and decentralised, hybrid sources (e.g. solar thermal, biomass,
geothermal, heat pumps, waste heat, waste-to-energy, excess renewable electricity, storage). In
addition, smart metering and load management systems are needed for the integration of
thermal and electrical grids into a liberalised energy market. Such smart thermal grids have an
important potential to meet the load balancing needs of combined heat and power production in
a liberalised market for electricity. Also demonstration of electrically driven industrial heat pumps
in district heating and cooling networks has been highlighted. Heat pumps are used to upgrade
heat from low temperature sources to temperatures high enough for direct use in a DH network.
As priority II, development of improved, highly efficient substations for both present and future
lower temperature (below 70 ºC) networks, looking at harmonizing substations standards,
reducing materials cost, investing in the automation of manufacturing methods, and achieving
good performances. DHC networks need new harmonised EU standards for the overall system
design and for hydraulic and electrical interconnections of different building components.
A topic with priority III is the demonstration projects to show the feasibility of using in-house
appliances which directly use thermal energy from the thermal district energy system, including
an evaluation of different possibilities of DHW preparation (e.g. additional heating or direct
heating without storage) considering the local energy systems framework needs to be made.
Finally, further research activities at demonstration level are needed to allow DHC networks to
efficiently integrate all types of RES without jeopardising the quality of the service provided to
the consumers.
37
4. Societal Benefits from Renewable Heating and Cooling
Current trends in energy supply and use are unsustainable from the economic, environmental
and social point of views. Heating and cooling, representing today nearly half of the European
Union’s final energy consumption, is not an exception. According to EURO¨//STAT,6 in 2011 gas
accounted for 42.8% of the fuel mix for heating in the Union, while petroleum and derived
products of some 6% and coal and peat 28%. As a result, the sector is a major contributor to the
costly fossil fuel imports into Europe as well as to high greenhouse gas emissions.
This trend, however, could be reverted with countless benefits. The RHC Common Vision has
shown how in 2020 over 25% of heat consumed in the EU could be generated with
renewable energy sources. The large majority of renewable heating will still be produced from
biomass sources, although alternatives will gain ground. Increased requirements on the energy
performance of buildings make the use of renewables necessary for new buildings, both onsite
or nearby, and push the growth of geothermal, solar thermal, and biomass, including through
district heating networks, as well as of geothermal, aerothermal, hydrothermal heat pumps.
These technologies will benefit from reduced investment cost at given or even increasing
efficiencies. Improved thermally driven cooling systems (e.g. from solar or heat pump
technologies) could make it possible to cover around 5% of cooling demand from the service
and residential sectors by 2020.
This chapter explores some of the short-term societal benefits resulting from the implementation
of the present Common Roadmap and thereby from a greater development of RHC
technologies.
4.1 Saving EUR 21.8 billion annually in reduced fossil fuel imports
Security of energy supply was the main driver of the EU’s energy policy in the mid-1990s in the
move towards renewable energy. This concern has further increased over recent years as
domestic conventional gas production in EU Member States, mainly originating from mature
production basins, has decreased by 25% over the last decade. In the same period the overall
EU gas consumption has increased by 10%7. As shown in Figure X overleaf, the result has
been a steadily increasing dependency rate for natural gas from 47.1% in 2001 to 65.8% in
2012. Without additional measures imports will continue rising dramatically.
6
EU Energy in figures, Statistical Pocketbook 2013,
European Commission, “Member States’ Energy Dependence: An Indicator-Based Assessment”,
Occasional Papers 145, April 2013, p. 14.
7
38
Natural gas dependency rate, EU-28,
2001-2012 (%)
80
70
60
50
47.1
50.9
52
53.6
63.4 62.1
60.3 59.5 61.7
57.1
67.1 65.8
40
30
20
10
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: EUROSTAT
Repeated crises, such as the 2006, 2008-9, and 2014 Russia-Ukraine’s gas disputes, and the
2011 war in Libya, clearly demonstrate the limits of Europe’s energy dependency. Such a
dependency contributed not only to weaken the EU’s geopolitical influence on the international
arena but fuelled the dramatic GDP-leakage with the EU Member States having spent €545
billion or 4.2% of their GDP on importing fossil fuels in 2012 alone.8
A very significant part of that imported fuel is used in the form of natural gas and heating oil for
heating the continent’s houses, service spaces, and offices or for industrial purposes. 9 In these
sectors, however, readily available renewable energy solutions, combined with energy efficiency
measures, are a practical and versatile option to alleviate fossil fuels dependency. According to
the European Commission, the avoided costs of imported fuels, replaced by biomass used for
heating -most of which domestically produced, already amounted to € 12.2 billion in 2010.10
In 2012 the consumption of heating and cooling from renewable energy in the EU amounted to
82.4 Mtoe representing 15.6% of the total heat consumption 11 . According to the National
Renewable Energy Action Plans (NREAPs), in 2020 RHC will make a total contribution of 111.2
Mtoe, or 21.4% of the total heat consumption projected for that year. Assuming this additional
renewable energy consumption substituted imported natural gas, the EU would reduce its fossil
fuel imports from third countries by the equivalent of 28.7 Mtoe annually from 2020. With current
8The
EU has a strong trade deficit in trade in energy products with non-EU countries, which reached EU
421 billion (3.3% of EU GDP). Exports in this category amounted to € 124 billion. European Commission,
Directorate-General for Economic and Financial Affairs, “Energy Economic Developments in Europe”,
European Economy 1/2014, (2014a), p.112.
9 Natural gas is mainly used two sectors, i.e. ~ 40% for heating of buildings (185 Bcm) and ~ 30% in
industrial processes (142 Bcm) and to a lesser extent in power plants (~ 25% or 112 Bcm)
10 European Commission (2014a), p.116
11 EUROSTAT, SHARES 2012.
39
average import prices ($11.5/ MMBtu or EUR 8.4/MMBtu)12, this would save the EU some EUR
9.6 billion.
However, it is worth highlighting that the NREAPs are less ambitious than the RHC Common
Vision, according to which in 2020 it would be possible to generate 148 Mtoe from RHC
technologies representing 25% of the total heat demand. By the end of this decade we could
therefore produce some additional 65 Mtoe from RHC compared to 2012. By applying the same
assumptions as above, the EU could save every year as much as € 21.8 billion in reduced fossil
fuel imports compared to the year 2012.
The results of the NREAPs and RHC Common Vision scenarios are depicted in Figure XX
below: The evidence is overwhelming: RHC technologies, together with energy efficiency,
stand out as a key factor to ensure security of energy supply, reducing foreign energy
dependency.
Avoided fossil fuel imports caused by RHC
160.0
148,83 Mtoe
545
120.0
111,2 Mtoe
100.0
540
535
82,4 Mtoe
80.0
530
60.0
525
40.0
520
20.0
515
0.0
Gas imports in EUR bn/y
RHC consumtion in Mtoe
140.0
550
RES H&C NREAPs
RES H&C Common Vision
Fossil Fuel Imports (bn EUR/y)
NREAPs
Fossil Fuel Imports (bn EUR/y)
Common Vision
510
2012
2020
4.2 Providing affordable and stable solutions to the consumer
According to European Commission’s analysis, the price of electricity and fossil fuels has been
rising over the last years and are set to increase dramatically in the next decades. Industrial and
household natural gas prices have been rising between 2004-2011, aside from a decreasing
trend between 2008 and 2009. In percentage terms, average household gas prices have
increased by 77% over the same period against 50% for electricity, whereas average industrial
process have more than doubled against a 53% increase in industrial electricity prices. In
12
In January 2014; Source: World Bank.
40
households almost all Member States experienced an increase in the price of natural gas, 13
increasing the latent problem of energy poverty.
Under a business-as-usual scenario fossil fuels and electricity will become even more
expensive in the future: between 2010 and 2020 oil and gas prices for heating will increase by
38% and 47% respectively, while average electricity prices are projected to increase by 31 per
cent in real terms between 2010 and 2030, from 131 to 172 €/MWh.14
Against this background RHC technologies are the solution against volatile and costly
alternatives and will provide stable and affordable options to European consumers. Unlike the
case of electricity, however, it is very complicated to compare the cost of heat supply
technologies as costs of the same technology can greatly vary depending on the following
factors:

Heat (or cold) load required: depending on factors such as climate, temperature level
desired (low, medium, or high temperature), building insulation and other;
 Predominant heating system, heat distribution system and energy supply infrastructure;
 System lifetime and performance under required operating conditions;
 System acquisition and operating costs;
 Fuel costs;
 Requirements and costs of backup energy sources.
For this reason, a range of levelised costs of heat supply (LCOH) is considered to be a more
acceptable option. Indeed, one of the most recent and accurate attempts to compare the costs
of heat supply technologies was carried out following this approach in the 2011 Special Report
of the IPCC on Renewable Energy Source and Climate Mitigation (p. 10). The results15, adapted
and converted into Euro, are available in Figure XX overleaf and clearly show that currently
available RES H&C technologies are already competitive today with fossil fuel
alternatives.
Nevertheless, the LCOE approach does not often capture the specificities of the heat sector.
However the reality is more complex. Here it is the consumer, in combination with the installers,
planners and energy consultants, who makes the choice, not only on when to make use of a
service (as for electricity), but also regarding the technology and, if applicable, the fuel to be
used. For this reason, “energy price” and “return on investment” appear to be more appropriate
concepts in the heat sector. Similarly to the LCOH however, it is difficult to compare the return
on investment of different heat supply technologies on a European scale.
13
European Commission, (2014a), pp.58-59
European Commission, “Impact Assessment on energy and climate policy up to 2030”, SWD(2014)15,
(2014b), pp.28-29.
15 For solar thermal it was instead used data from the SRIA RHC, p.15.
14
41
Range Oil & Gas
based heating
cost
Figure XX: Range in levelised cost of heat supply EUR/GJ for selected commercially available RHC
technologies in comparison to recent non-renewable energy costs. Source: Own adaptation based on
Special Report of the IPCC on Renewable Energy Source and Climate Mitigation16 and for solar, on the
Strategic Research and Innovation Agenda, 201317.
It is nevertheless worth highlighting that the cost of producing energy and its value are still
largely disconnected entities in the current business environment. Energy market price signals
remain distorted in favour of fossil sources. This is even truer when comparing heating and
cooling technologies. Indeed, in many EU Member States there is some level of state
intervention to satisfy different distributional preferences in industrial and societal policies.
Additionally, it should be noted that ninety per cent of the heat sector is made of installations
below 20 MW and is therefore outside the EU Emission Trading Scheme, while in most EU
countries there is not any carbon price in non-ETS sectors. The main consequence is that
the end-user price of conventional sources of energy is always lower than the real costs to
society.
In summary, the cost of fossil fuels increases and we still have to take into consideration their
external costs, (emissions, pollution, etc.) This means that RHC technologies are already
competitive and give consumers more sustainable and affordable solutions to their thermal
needs against the growing volatility of fossil fuels. Therefore a real level playing field, which
would show this, is asked for. Concrete policies, for instance in terms of taxation, increased
awareness and adequate Research, Development and Innovation resources allocated to the
priorities identified by the European Technology Platform on Renewable Heating and Cooling
16
All parameters used for the calculation of the range in LCOH for heat supply technologies available on
page 1010 of the IPCC report on Renewable Energy Source and Climate Mitigation, 2011.
17 ftp://ftp.cordis.europa.eu/pub/etp/docs/rhc-sra_en.pdf
42
will make RHC technologies even more competitive. As a result European consumers will
benefit from stable and affordable RHC solutions as opposed to increasingly volatile and costly
alternatives.
4.3 Creating local jobs and fostering European competitiveness
A 2009 study by HSbc18 concluded that the three most promising sectors in terms of social
return, job creation and relevance to the economic recovery are renewable energy, building
efficiency and sustainable vehicles. From a societal perspective, the RHC industry offers a
variety of high-quality jobs in very different technologies, bringing immeasurable benefits,
including in areas such as construction that have been hit hardest by the crisis.
Based on a wide review of studies, mainly taken from the 2013 report “Renewable energy and
jobs” by the International Renewable Energy Agency it is possible to estimate the following
figures in terms of direct and indirect jobs:
Estimate of direct and indirect employment in the RHC sector (thousands jobs)
Sector
Germany
Spain
Other EU
Total EU
Biomass and
biogas
345
107
40
198
(including for
electricity)
Geothermal
(including for
51.3
14
0.3
37
electricity)
Solar Thermal
32
11
1
20
Heat Pumps
(excl. geoth.)
31.6
(source: EHPA,
2014)
Total
459.9
131
41.3
255
Table XX: Estimate of direct and indirect employment in the RHC sector. Source: IRENA,
EHPA19
With a greater development of RHC in the next years, these numbers are expected to grow
substantially. The heating and cooling demand in Europe is mostly decentralized, be it for
residential, commercial or industrial use. Due to the particular characteristics of thermal energy,
the supply needs to be available locally, on-site or nearby. This is already the case today with
conventional technologies. Likewise, RHC solutions need to be decentralised, meaning that
they are installed on-site or nearby. This means that a relevant part of the investment is related
to the lower end of the value chain, in activities such as commercialisation, installation and
maintenance.
Even when the equipment used in RHC solutions is not produced locally, its installation has an
important impact on the local economy, thus redirecting part of the funds used for energy
18
19
HSbc, A Climate for Recovery. 25th February 2009.
IRENA, Renewable energy and jobs, 2013.
43
imports (from other countries or even other regions of the country) towards job creation at local
level. Another important aspect to consider is that, as most of the market is residential, support
mechanisms have an almost immediate impact in terms of private investment, reduction of the
energy consumption and of CO2emissions, besides job creation.
Renewable energy sources are also the only indigenous sources in which the EU has a
competitive advantage. Europe is leader in the manufacturing and design of RHC technologies
and at a global level its main competitive strength is the high quality of its technologies. The
following sections provide an overview for each RHC segment.
Biomass:
The EU, together with the United States and Brazil (mainly for ethanol), is a dominant producer
and employ the largest number of workers in the sector (345 thousands according to IRENA).
As agricultural and forestry operations play a large role in the sector, bioenergy can support
rural economic development as cultivation and harvesting biomass feedstock indeed requires
large numbers of people.
To date, technically reliable, sustainable and economically attractive biomass heat solutions
exist. Biogas and solid biomass can already provide heat at temperatures above 250°C at costs
competitive with fossil fuel alternatives. In the coming years, these solutions will continue to
improve and new solutions should also be available so as to cover the different consumption
types. With biomass supply set to increase significantly by 2020, a sustainable, innovative and
cost-efficient advanced biomass feedstock supply will bring reductions in supply costs and a
decrease in production costs.
The EU is a global leader in biomass technologies and provides a wide range of high quality
biomass combustion installations with high efficiency, controlled and clean combustion and
automated operation and modulation both for domestic and commercial uses. Through a
permanent commitment in innovation and R&D the European biomass industry keeps improving
the quality of the products that are put to the market. As an example, the most performant EU
biomass boilers and stoves can reach 90% energy efficiency today with very low levels of
emissions (NOx, SOx and particulate matters).
Solar Thermal:
China is by far the world leader in solar hot water, representing 65% of the total installed
capacity in operation, which amounted to 234.6 GWth by the end of 2011.20 Europe, with an
installed capacity of 39.3 GWth represents 16.7% of the total. Even though China is by far the
largest market and the largest manufacturer, the European solar thermal industry is seen in the
world as a technology leader with strong capacity of innovation. From 1995 to 2010, the sector
reached a learning curve of 23%. Several innovations on manufacturing process, i.e., welding,
have helped to reduce manufacturing time and costs, while enlarging the raw materials options
(now both copper and aluminum are widely used in the sector). In terms of capacity, the
European sector has invested in counter cycle, meaning that there is enough capacity to
20
Solar Heat Worldwide: Markets and Contribution to the Energy Supply 2011. Edition 2013
44
address a steep rise on demand for collectors. While its traditional market is the preparation of
domestic hot water for the residential sector, large applications for district heating or industrial
process heat have seen significant growth. For instance, in Denmark the solar thermal capacity
installed for district heating reached 196 MWth, with almost one third installed in 2012 alone.
The European market reached a turnover of 2.4 billion EUR in 2012 (ESTIF 2013) and IRENA
estimates more than 30 thousand workers direct and indirect employed in the sector. Depending
on the markets, approximately half of the turnover is downstream of the value chain, pushing for
the creation of local jobs in planning & design, commercialization, installation and maintenance,
while over 80% of the market is supplied by European manufacturers.
Geothermal:
With 1.2 million units of GSHP installed, Europe is the world leader, in terms of installed
capacity, in the shallow geothermal market. It is also leading in innovation such as in
underground thermal energy storage. Main competitors are for heat pumps manufacturers in
China and the USA.
With more than 200 geothermal district heating systems in operation, Europe in also the global
leader for geoDH where global competition exists mainly for heat exchangers and pipes.
Regarding direct uses, even though this geothermal sector started in Europe, China is now
leading the market due to the large demand there. Last but not least, EGS plants are only in
operation in Europe up to now, whereas research projects are on-going in the U.S. and
Australia.
In the EU, geothermal employment appears to be fairly stable at about 50 thousand direct and
indirect jobs, mostly in heat-related applications (EurObserv’ER, 2012). As geothermal
technologies are site specific (geology is different all over Europe) and capital-intensive, many
geothermal companies have developed customised products (example: drilling rigs
manufacturers). It is expected that the factories and the jobs created will remain local and
cannot be exported, e.g. to China. The sector will move from a geological approach to an
engineering approach where systems can be replicated but can hardly be industrialised. It is
estimated that 85% of the geothermal value chain in Europe is local and it is planned to remain
as such. Because of the nature of the work, we can assume that construction and O&M cannot
be relocated, meaning that they are “European” jobs. Regarding equipment (rigs, turbines), the
number of large manufacturers is not forecast to boom internationally.
Heat Pumps:
European heat pump manufacturers are often technology leaders. Value chains are increasingly
becoming global: On the one hand, development is done for the European and for the world
market, on the other hand sourcing is taking place on the global level.
An increasing market penetration of heat pumps will lead to more employment. Trying to
estimate the total required employment to manufacture, install and maintain the European heat
pump market (only aero- and hydrothermal) reveals that approx. 31.600 people are working fulltime within the heat pump business (Source: EHPA 2014). It is known that the very large
45
majority of these installed heat pumps are also manufactured in Europe. In any case, this is a
moderate estimation, as many employees are not working full-time on heat pump technology.
Hence, the total amount of employees in this segment is certainly larger.
A large part of the employees necessary are already active in the heating sector. As such, an up
skilling of the workforce towards knowledge necessary to plan, install and maintain heat pump
technology is necessary. This requires in particular a better understanding of a buildings energy
demand and the influence of climate differences and user behaviour on the performance of the
whole system. The majority of employers are local to Europe, as development, manufacturing
and installation are located on the continent.
The European Industry has heavily invested in research and development as well as in
education activities of the work force. Recent legislation such as Ecodesign for heaters and the
F-gas regulation require more intense efforts: systems can and will be optimised, heating
systems will have to be integrated into the larger energy landscape, in particular integrating
renewable electricity via improved controls and new refrigerants have to be developed. It
requires in particular new lab capacity for the development of low GWP refrigerants,
components and systems.
The European industry and the EU research arena are prepared for future market growth: it has
invested in laboratory and manufacturing capacity over the past three years and is ready to
continue to do so. This engagement should encourage further public funding.
District Heating and Cooling:
District heating has been well established in Europe for decades, and a large manufacturing
sector - comprised of a diverse mix of local SMEs and global industrial players – has grown up
around it. Europe remains the clear world leader within the global district heating and cooling
sectors, both as regards overall network design, performance and management, and with
respect to technical components within systems and at the level of the interface with buildings.
European know-how and products are exported to facilitate the development of DHC networks
around the world, particularly in China and Russia.
Continued investment in R&D, both by operators within the sector and via the public sector, will
help ensure that this leadership position is maintained. It is expected that district cooling will
cover an important share of the cooling demand in the incoming decade in Europe, but not only,
with huge potential for penetration in new developed countries, like Brazil, India, etc.
4.4 Reducing pollution and carbon emissions
European citizens will more and more live in urban centres. Increasing the share of RHC in the
EU fuel mix will be an important alternative to help improving the urban environment conditions.
Indeed, a reduction in emissions of pollutants such as nitrogen oxides, sulphur dioxide, heavy
metals, etc. from reduced fossil fuel consumption has significant positive impacts on human
46
health and lowers costs for air pollution control with benefits being disproportionately larger in
lower income Member States expressed as a % of GPD.21
In addition, it will also result in efficiency gain and significantly lower greenhouse gas emissions,
including carbon dioxide and methane.22 For instance, calculations of the European Heat Pump
Association (EHPA) show that heat pumps alone can already save up to 65% of CO 2 emissions,
compared to a standard gas-condensing boiler.
With regard to the carbon abatement potential in the next years, it is not possible to say exactly
how much RHC will contribute to reducing emissions. This is because the level of fuel
substitution between coal (mainly cogeneration), natural gas, and heating oil is unknown yet.
However, the extent of the effect of greater RHC deployment can be estimated by multiplying
the additional amount of RHC by the EU average fossil fuel comparator for heat, set by the EC
2010 Report on biomass sustainability in 87 gr CO2eq./MJ heat (assuming renewable
technologies are carbon neural in their generation/ combustion phase).
Based on EUROSTAT data and own calculations, it is estimated that in 2012 the additional
RHC compared to 2005 levels contributed to reduce the annual carbon emissions by 101.2
MtCO2. eq. Considering the additional RHC provided for in the NREAPs between 2011 and
2020, it can be expected that in 2020 RHC will contribute to reduce the annual carbon
emissions by some 200 MtCO2 eq. compared to 2005 levels.
This contribution is already significant. However, if the RHC generation in 2020 were in line with
the RHC Common Vision (148 Mtoe), the potential annual carbon emission savings compared
to 2005 levels would be much greater: about 343 MtCO2 eq. in total or 143 MtCO2 eq. more
compared to the NREAPs scenario. The results of this investigation are illustrated in Figure XX
below.
*EUROSTAT, **NREAPs, *** RHC Common Vision
21
European Commission, (2014b), p.126-127.
Methane (CH4) is a potent greenhouse gas, per unit more than carbon dioxide. Methane emissions in
the atmosphere are on the rise, according to the IPPC, including from leakage from natural gas systems.
22
47
Though impossible to calculate with currently available information, it would be worth assessing
the abatement costs as well as the monetised health benefits from fuel substitution in the
heating and cooling sector (industry, residential and non-residential) compared to other sectors
such as electricity or other options like deep renovation of buildings.
In conclusion, as pointed out in the European Commission’s Energy Roadmap 2050, RHC is
undoubtedly vital to decarbonisation23. This is why EU and national research and other policies
should not only focus on electricity or demand reduction, for instance within buildings. A key
policy objective should be to identify and encourage an optimal balance between decreasing
demand and rendering the supply more sustainable and efficient with RHC technologies.
Decarbonising our energy sector should not be regarded as a burden, but rather as an
opportunity for Europe’s sustainable growth and industrial renaissance alike. Policy-makers
should look at the overall benefits to society as clear pledges on RHC and energy efficiency will
substantially alleviate EU’s energy dependency, while improving our balance of trade, creating a
significant amount of new local jobs and ensure stable and affordable energy prices to our
consumers and industries.
23
European Commission, Energy Roadmap 2050, COM (2011) 885, 2011, p.11.
48
5. Promoting private investments in Renewable Heating and Cooling
5.1.1 Introduction
In order to pursue the EU objective of decarbonising the heating and cooling sector, there is a
clear need for more resources. The Strategic Research and Innovation Agenda (SRIA) 24
estimates that over the period 2014 - 2020, on average 576 mln Euro should be allocated
annually to RHC research and innovation activities. The resources are expected to be
committed respectively by the private sector (60%), European Commission (20%) and Member
States (20%). For private sector, this means 347 mln Euro each year. Attracting private
investors is essential to decarbonise the heating and cooling sector and public intervention is
equally vital for accelerating and mobilising private financing.
How to leverage private investments in RHC technologies in Europe? And how to encourage
private investors to dedicate more attention to the European RHC sector at large in order to
make it grow, reduce the cost of technologies and enhance system performances? This
chapter aims at providing a framework to address RHC investments aspects by highlighting its
benefits and analyzing the constraints and the barriers that often prevent private actors from
allocating more funds in the RHC industry.
Further to that, the chapter offers suggestions to improve the investment-grade scenario for
RHC industry aimed at policy-makers, RHC market actors and any person or institution
involved in the design and implementation of policies to promote RHC. Special focus is given to
financial schemes supporting RHC innovative technologies.
It is important to underline that the heterogeneity of the technologies and market conditions
involved is so broad and the related value chain so complex that it is very challenging to
provide a framework valid for all EU Member States and for all technologies. The aim of the
present chapter is rather to offer general guidelines that would still need more specific analysis
in a given context.
5.1.2 Benefits of Renewable Heating and Cooling for investors
The low yields in the traditional investments, such as corporate bonds issued by large
companies, government bonds and mortgage bonds have become the major problem of
institutional investors such as insurance companies, pension funds, etc. They can no longer
achieve the expected returns of the investors from the risk-return profile that they have created
in the past. Also, government bonds are not always the safe heaven known from the past.
These altered conditions are the base for consideration of alternative and forward- thinking
investment results. Renewable Heating and Cooling entail substantial asset values. Investors
24
Strategic Research and Innovation Agenda for Renewable Heating and Cooling. European Technology
Platform on Renewable Heating & Cooling (RHC-Platform), 2013. Available at http://www.rhcplatform.org/publications/
49
can benefit from technically well controlled planning and implementation, (and?) even long-term
returns and fixed long term prices (for production and depreciation). Compared to other
conventional heat sources, RHC plants possess lower need for maintenance, lower risks when
in operation and low variability of the costs of the plant. Many RHC technologies are already
quite mature and, with the exception of biomass heating, they are not exposed to any fuel price
risks, e.g. for purchasing oil or gas. These characteristics may be attractive for pension funds,
which are increasingly looking for “real” asset classes which can deliver steady, preferably
inflation-adjusted, return.
Additionally investors may get concerned about the gas supply or the gas price and the
subsequent energy dependency of some EU countries to ensure residential and non-residential
heating. In this context, RHC offer a more reassuring scenario where security of supply is
guaranteed thanks to stabile and endogenous heat sources and dependency on unstable
external suppliers is considerably reduced.
Investing in RHC is directly beneficial for the economic growth & healthy environment. The high
demand and political pressure for increased efficiency and CO2 reductions and the increasing
attention of the investors’ community to socially responsible indicators, environmental, social
and corporate governance principles, transparency and disclosure rules make them even more
interesting.
Renewable energy technologies for the production of heating and cooling are today viable
solution in the market, in particular for the most traditional applications for heat demand, such
as domestic hot water preparation and space heating for the residential sector. Though, these
technologies will play a vital role in the coming years, in the transformation of our energy
system, providing decentralized, clean, secure and effective solutions. For instance, they are
central to the implementation of the Energy Performance of Buildings Directive, as they
constitute an essential element of the Nearly Zero-Energy Building. As described in this
Roadmap, research & innovation will play an important role in bringing these technologies
further ahead towards the future requirements of the market of new/deeply renovated buildings,
from a technological perspective. Research & innovation is required also to have renewable
heating and cooling technologies positioned as main market solutions for replacement and
retrofitting of existing systems.
These solutions need to compete in the market with low cost (and often still subsidized) fossil
fuels, often offering lower upfront investment costs but higher lifecycle costs. Indeed, for
consumers and investors, the competitiveness of RHC solutions should become more obvious
when the analysis is based on life cycle costs. In this respect the concept of cost optimality
introduced by the EPBD is very relevant for renewable heating and cooling technologies.
The specificities of this sector require tailored solutions. In order to promote a higher level of
investment in these technologies, it is important to translate its potential and specificities into a
formula that can be understood by investors in general.
50
5.1.3 Investments and market barriers
Given the increasing interest from inventors for this type of investments, it is legitimate to
wonder what barriers are hindering the scaling up of private financing in RHC.
Regulatory instability. As the RHC are highly dependent on a stable and predictable policy
framework, part of the problem relies in a lack of clarity and consistency in commitments from
policy-makers. These uncertainty increases the risk and consequently the cost of these
investments, whose returns must be commercially competitive with existing investments in
more polluting technologies.25
Lack of Investor capability and shortage of data. Given the relative immaturity of green capital
markets compared to traditional energy markets, investors may lack adequate expertise or
even confidence in the RHC sector. Capital investment into RHC cannot be valued by a pure
investment specialist, the liquidity (marketability) of the investment is very limited and therefore
the evaluation according to the standard investment of insurance companies and pension funds
is still difficult. Most institutional investors do not invest in sectors that do not provide years of
track record on performance data. The consequence for these aspects is that higher risks are
included in project evaluations requiring a higher return on investment to compensate for the
risk.
Market fragmentation and scale problems. It can be challenging to find the company that deal
holistically with the issue of implementation and also build up the network to of (several)
manufacturers, planners and handicraft to realize the investment. Mobilising funds can be hard
due to the small size of a particular installation (e.g. solar thermal collectors or modern biomass
heating systems at household level). Transaction costs and assessment and monitoring of
energy savings are complex and thus proportionally more expensive than in bigger projects.
High upfront costs. Renewable energy technologies such as solar thermal and geothermal
energy have low running costs but require a high upfront investment, compared to conventional
technologies. The decision of whether to go for a new RHC investment is closely linked to the
cost of available capital and this is particular challenging for private home-owners and small
business owners. Most subsidy programs are dedicated towards SMEs and municipalities.
Outside these groups major investors need additional investment sources and subsidies as well
to overcome the high upfront costs.
Diverging investment criteria and split incentives A classic example is the ”landlord‐tenant
problem”, where the landlord provides the tenant with a heating system but the tenant is
responsible for paying the energy bills; similarly incentives diverge between the real estate
developer and the buyer/owner.
Not inclusion of externality costs. Tariffs from traditional energy sources often do not include
externality costs, e.g. carbon emissions, pollution, gas infrastructure, etc..
25
For examples, see discussion on social tariffs and carbon price in chapter 4.
51
As example, Deloitte’s 2012 report addressing the attractiveness of investment in biomass
projects identified 5 obstacles. 26 These were regulation – the need for long term confidence in
the stability of the incentive regime, fuel availability – long term contractual arrangements
between bioenergy plants and suppliers do not allow market liquidity, sustainability credentials
– the need for biomass to be sustainably sourced with an overall lower carbon footprint than
fossil fuels, supply chain – investment in biomass handling, logistics, port and rail facilities will
be critical, financing – biomass projects must offer attractive ROI to potential investors.
5.2 Analysis on promoting private investments in RHC
The second part of the chapter gives some indications on which actions could be carried by
policy-makers, public financial institutions, RHC stakeholders and investors’ community to
remove or weaken some of the barriers presented and accelerate the scaling up of private
investments in RHC. This part is organized according to two main sections. While the first
section addresses proposed changes at policy level, the second tackles financial aspects more
directly via investment schemes. As it will be seen through the text, challenges and therefore
resolutions on large scale such as utilities and district heating and cooling and the challenges
for smaller and residential scale are much different. Special focus is given to financial schemes
supporting RHC innovative technologies.
5.2.1 Analysis related to the policy framework
Support a stable investment environment. The best way to mobilise private finance is to create
a long-term stable investment and regulatory environment in order to boost investor confidence.
This is indeed one of the scope of the Common Roadmap and the previous publications of the
RHC-Platform: giving long-term objectives paves the way to mobilising private (and public)
investment. A framework of economic support policies should be permanent and internationally
harmonized. Long-term support strategy, consisting of a financial incentive scheme and
suitable flanking measures (especially awareness raising, training of professionals) has shown
to have the highest impact on market growth.
The ultimate goal for institutional investors is to have success with such an investment product
by ensuring that their customers (private investors) have long-term financial security and also
contribute to an environment worth living for their children. There are already examples of joint
investments of Energy Provider and pension funds in the Netherlands, based on these
considerations.
For example RHC District Heating and Cooling Investments have been more and more
common practice for pension funds and other large scale investors over the last couple of
years. Now interest starts to materialize in investments in energy infrastructure and DHC grids
in particular. ELES, the 3rd largest District Heating Network in The Netherlands from RWE AG /
26
Deloitte, Knock on Wood, Is Biomass the Answer to 2020 (2012).
http://www.deloitte.com/view/en_GB/uk/industries/eiu/89c42e2e281ca310VgnVCM3000003456f70aRCRD.htm
52
Essent has been taken over by Dutch pension fund service provider PGGM and Dalkia in
December 2013.27
Improving risk perception and addressing lack of knowledge. As previously discussed, risks in
RHC are in many cases perceived higher than what they are in reality. Performance data over
investments are becoming available thanks to pioneer investors and are contributing to narrow
the gap between reality and risk misperception) There is a need to address lack of knowledge
by improving data flows and understanding of sustainable energy investments by e.g. banks,
financial institutions or investors. Some examples of recommended actions are for example
establishing networks between finance, RHC industry and technology providers and fostering
training for banking and insurance company agents related to RHC technologies to support the
development of appropriate financing products. For example, Sustainability, Energy Efficiency
and Carbon emissions should be fully integrated into the investment processes of investors and
consultants. It would be also beneficial to develop a pipeline of flagship projects and model
innovative financing solutions to gain investors’ confidence and enable standardization and
aggregation.
Standardization aspects Markets would gain from more harmonization and cross compliance
and from strengthening energy performance certificates, energy codes and legislative
enforcement. However, if the indicators that are implemented are too complex, the danger is
that the certification process becomes too demanding, costly and difficult to manage making it
unattractive for users. For example the market penetration of efficient hybrid systems could be
supported by improving energy performance labels, which should be required for all new
heating and cooling systems in the EU by 2020. The information provided should not only
include the relative efficiency, but also the annual running cost, greenhouse gas emissions and
the expected system lifetime.28
In the case of biomass, uncertainty for investors has been created by discussions on different
sustainability requirements as companies realize that they may in future need to comply with
requirements and criteria that are unknown today. The recent move of the European
Commission to harmonize sustainability criteria at EU level sends a strong signal to ensure the
regulatory certainty needed by the bioenergy industry. A harmonized proposal would facilitate
trade and investment, and for this reason a widely accepted framework on the sustainable
production of biomass for energy, material use and other purposes needs to be established.
27
The portfolio of assets (ELES - Essent Local Energy Solutions) comprises 64 heating networks all over
the country, spanning 1,950 kilometers, along with a number of RWE Generation Nederland's mediumsize units and services. The networks serve more than 62,800 households and 1,240 business
customers. ELES posted 2012 revenue of €135 million. The business will be owned by PGGM (80%), the
country's second-biggest pension fund service provider (EUR 153,5 billion in assets under management),
and Dalkia (20%).
28
Strategic Research and Innovation Agenda for Renewable Heating and Cooling. European Technology
Platform on Renewable Heating & Cooling (RHC-Platform), 2013. Available at http://www.rhcplatform.org/publications/
53
Development of frameworks for the standardization and benchmarking is important also on the
financing side: standardization of measurement and verification for project evaluations will
reduce risk perception, increase reliability and certainty. Measurement and verification
approaches in the different European countries should be assessed in order to harmonise
calculation methodologies.
5.2.2 Analysis related to the investment framework - Overview of financial instruments
and business models
There is a large variety of financial instruments and business models that can be used to
support RHC deployment. The combination of these instruments varies largely from country to
country and from technology to technology. However, besides the type of financial incentive
scheme, it is always vital to focus on the quality of its design and implementation, the correct
setting and fine-tuning of the scheme to adapt them to the specific situation. Key quality
aspects of a financial instrument are its continuity (no “stop and go”), the coherence of the
parameters, clear target, quality criteria, monitoring and evaluation system, the simplicity of the
application and payment procedures and flanking measures.
Most used and current financial support instruments available in some European States for
RHC technologies comes in the form of investment grants and tax exemptions while financial
incentives such as soft loans are less available. 29 Generally these types of incentives are
funded out of government budgets:
Grants. A grant is a direct support to investment provided by a public authority and can be
offered either to the developers or to the manufacturers, thus reducing their investment costs.
This is a very common type of support and it has been, provided in a number of European
countries by local, regional and national governments. As the budget is limited, the number of
acceptable applications must be limited, either on a first-come-first served.
Besides these above mentioned grants, which focuses on the investment angle, grants can
actually also provide cash payments based on the energy generation basis. These types of
subsidies are rather based on the total installation performance. These scheme incentives
more performing plants and ensures that renewable heat is actually generated.30
Fiscal incentives. Differently from a grant, a fiscal benefit such as a tax reduction has the
benefit of not being tied to a limited budget there can be no limit on the number of accepted
applications. On the other hand, a reduction in tax leads to a benefit only one or two years later
29
See Ecofys, Fraunhofer ISI, TU Vienna EEG, Ernst &Young, Financing Renewable Energy in the
European Energy Market (2011).
http://ec.europa.eu/energy/renewables/studies/doc/renewables/2011_financing_renewable.pdf
30 Renewables for heating and cooling IEA-RETD (2007).
https://www.iea.org/publications/freepublications/publication/Renewable_Heating_Cooling_Final_WEB.pd
f
54
and therefore does not solve the problem of advancing high upfront. Tax credits are mostly
suited to close-to-the-market innovations.
However, as public funding is limited, it is critical nowadays to make greater use of financial
instruments that leverage private sector investment. New instruments should not only look at
governments, utilities and banks which are experiencing constraints in capital investments but
should enable lower cost of-capital financing particularly from institutional investors (such as
pension funds and sovereign wealth funds) in order to create a scale effect. Grant resources
are scarce while financing needs have grown, a situation which is being exacerbated ensuing
from the fall-out of the financial and economic crisis. These circumstances call for finding more
efficient ways of using available resources and for reaching higher "leverage effect" where
public resources attract and multiple private lending. There are interesting financial instruments
both a at equity and debt level that can incentives this leveraging:31
Credit enhancement measures. Credit enhancement is the improvement of the credit profile of
a structured financial transaction, with the effect of lowering the risk and the cost of an
investment. For example, first-loss facilities and guarantees which can be provided by financial
institutions to reduce the risks for banks by covering part of the risk of payment default by
lenders. This mechanism operates as a tool of by splitting the debt of the project company into
slices; a senior and a subordinated tranche. By providing the subordinated tranche (in the form
of a loan or a guarantee), the financial institutional reduces the risk and consequently enhances
the credit quality of the senior tranche, easing its issuance in the capital market. These
mechanisms are very much used but often they are not tailored to the RHC market.
Financial assistance in the form of low-interest loans, long-term loans, and/or loan guarantees
are also efficient in lowering the cost of capital. Loans are well suited to finance lower cost,
potentially profitable innovation carried out by large companies.
Bonds. At debt level, green bonds may be an interesting instrument to attract institutional
investors. Ordinary bonds already represent the dominant asset class of pension funds from
OECD countries, accounting for 50% of total assets on average. For example, the World Bank
has issued over $3.3 billion in AAA-rated green bonds through 51 transactions and 17
currencies since 2008. Other examples include the EIB, which has issued €1.15 billion in
climate awareness bonds. These figures represent a drop in the ocean for the bond market.
However there is a margin for scaling up green bonds issuances. As these mechanisms are
relatively liquid and generally carry a low risk, they may match the long-term return
requirements of pension funds and other institutional investors. As investors need scale and
clarity, the green bonds market should look at forms of aggregation for small-size RHC projects
(for example via project bundling and pooled project financing) to solve scale problems, agree
on clear standards that can be certified by third party organizations and improve dialogue with
rating agencies. Policy-makers could encourage Development of securitization models and
rating models to enable access to secondary markets.
See also The Energy Efficiency Financial Institutions Group (“EEFIG”), Energy Efficiency – the first fuel
for the EU Economy, How to drive new finance for energy efficiency investments (2014).
31
55
Equity Investments in Renewable Energy and Efficiency Funds. At equity level, Policy makers
could support dedicated funds suitable for RHC technologies and provide access to project
development services for innovative financing solutions. These instruments have a high
leverage effect and limited need for public funding.
Funds of funds. Again at equity level, a significant proportion of investment in RHC innovation
could be achieved via fund of fund structures. This model implies a top-level fund –partially
sustained by public sources - investing in renewable energy funds, which in turn invest in
projects and early-stage companies developing energy innovative technologies. The
intermediate funds should receive financing also from other private investors. The public equity
provided should make up only a small share of all financing for each intermediate fund but
enough to reassure private investors that they are not ‘alone in the game’.
Further to these financial schemes, several business models needs consideration:
Energy Service Companies (ESCOs) models. An energy service company (ESCO) provides a
broad range of energy solutions including designs and implementation of energy savings
projects, retrofitting, energy conservation, power generation and energy supply. ESCO models
are particularly interesting for existing and new, large commercial, residential and public
buildings. 32Within the ESCO sector, it is possible to distinguish between two fundamentally
different business models:
1)
Energy Supply Contracting (ESC): In this model An Energy Service Company (ESCO)
measures for renovating RHC are financed by the ESCO which is paid from the services of
energy supply in the contractual period. The focus of the ESC service model is on the efficiency
of the energy supply while providing security of supply.
2)
Energy Performance Contracting (EPC): An ESCO guarantees energy cost savings in
comparison to a energy cost baseline. Whereas ESC is based on a business model that
guarantees energy supply, EPC is a business model for energy savings. For its services and
the savings guarantee the ESCO receives a performance based remuneration.
District Heating and Cooling (DHC) as financial instrument Monetary advantages for district
heating and cooling compared to decentralised RES (economy of scale, logistics etc.) as DHC
generation could be located in areas apart from the customer’s premises. DHC doesn’t need
secondary assets like some RES (solar+gas; air-source heat pump+electrical heater, etc.).
District Heating and Cooling (DHC) has proven its benefits in terms of sustainability and
primary energy efficiency. This technology has an important role in the transition phase towards
RES as DHC is open for heating and cooling generation from diverse energy sources. That is
32
ECN, IEA-RETD, Business models for renewable energy in the built environment (2012).
56
the reason why DHC is an existing business model to serve the request for up scaling RHC
investments into a size interesting for institutional investors.
With the advent of low-energy houses, each customer will consume less heat and some
consumers will produce their own heat. All these aspects will lead to a new way of operating
the networks, allowing less investment in the production side and a smoother delivery flow, for
the benefit of the energy system and its customers. The DHC industry needs to adopt new
business models to remain profitable even if less heat is sold. These new models should
incentivize energy savings, delivering capacity and flexibility vs. delivering energy and more in
general support the integration of strategic thinking and sustainability objectives in decision
making processes. 33
There are a number of solutions that can particularly interesting to small residential and
commercial buildings:
Property Assessed Clean Energy (PACE). PACE financing allows property owners to borrow
money from a local government to pay for renewables and efficiency measures. The amount
borrowed is typically repaid via a special assessment on property taxes over a period of 15 to
20 years through an increase in their property tax bills.
Business models for rental market In order to overcome landlord‐tenant problem”, where the
landlord provides the tenant with a heating system but the tenant is responsible for paying the
energy bills, a change in legislation could allow building owners to pass on the cost of the
investment to the tenant through a rent increase. The cost reduction in the energy bill should be
at least the same as the rent increase for the tenants. This model has the advantage to work
well for existing buildings where as building codes tend to be limited to new buildings and
substantial renovations.34
On-Bill Repayment. The On-Bill Repayment business model foresees that the utility provides
capital to a home owner for RHC installations by having them repaid in the energy or tax bill.
Track record of customer payments with utilities and tax authorities have low default rates
compared to other consumer finance.
33 33
Strategic Research and Innovation Agenda for Renewable Heating and Cooling. European
Technology Platform on Renewable Heating & Cooling (RHC-Platform), 2013. Available at http://www.rhcplatform.org/publications/
34 idem
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