Results of the quantitative assessment of selected policy ... fileResults of the quantitative...

Results of the quantitative assessment of selected policy

packages for Brasov (D4.1)

Prepared by: Richard Büchele (TU Wien – Energy Economics Group)

Reviewed by: Eftim Popovski (Fraunhofer ISI)

Irina Tatu (ABMEE)

Date: 08/09/2017

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D4.1 - Results of the quantitative assessment of selected policy packages for Brasov The progRESsHEAT project

The progRESsHEAT project aims at assisting policy makers at the local, regional, national and EU-level in developing integrated, effective and efficient policy strategies to achieve a rapid and widespread penetration of renewable and efficient heating and cooling systems. Together with 6 local authorities in 6 target countries across Europe (AT, DE, CZ, DK, PT, RO), heating and cooling strategies will be developed by a detailed analysis of (1) heating and cooling demands and future developments, (2) long-term potentials of renewable energies and waste heat in the regions, (3) barriers & drivers and (4) a model-based assessment of policy intervention in scenarios up to 2050. progRESsHEAT will assist national policy makers to implement the right policies based on a model-based quantitative impact assessment of local, regional and national policies up to 2050.

Policy makers and other stakeholders will be strongly involved in the process, learn from experiences in other regions and gain a deeper understanding of the impact of policy instruments and their specific design. They are involved in the project through policy group meetings, workshops, interviews and webinars targeted to the fields of assistance in policy development, capacity building and dissemination.

Acknowledgement

This project has received funding from the European Union's Horizon 2020 research and innovation programme under grant agreement No. 646573 .

Legal Notice

The sole responsibility for the contents of this publication lies with the authors. It does not necessarily reflect the opinion of the European Union. Neither the INEA nor the European Commission is responsible for any use that may be made of the information contained therein.

All rights reserved; no part of this publication may be translated, reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the written permission of the publisher. Many of the designations used by manufacturers and sellers to distinguish their products are claimed as trademarks. The quotation of those designations in whatever way does not imply the conclusion that the use of those designations is legal without the consent of the owner of the trademark.

Funded by the Horizon 2020 Programme of the European Union

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D4.1 - Results of the quantitative assessment of selected policy packages for Brasov

Years of implementation: March 2015 – October 2017 Client: INEA Web: http://www.progressheat.eu Project consortium:

Energy Economics Group, Institute of Energy Systems and Electrical Drives, Technische Universität Wien

Fraunhofer Institute for System and Innovation Research ISI

Technical University Denmark

Institute for Resource Efficiency and Energy Strategies

Energy Cities

OÖ Energiesparverband

EE Energy Engineers GmbH

Gate 21

City of Litomerice

Instituto de Engenharua Mecanica e Gestao Industrial

Agentia Pentru Management ul Energiei si Protectia Mediului Brasov

http://www.progressheat.eu/

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Contents 1. Introduction and Method ................................................................................................................ 5

1.1 Indicators for policy assessment ............................................................................................. 6

1.2 Main assumptions ................................................................................................................... 6

1.3 Policies assessed for Brasov .................................................................................................... 7

1.3.1 Long term loans for DH infrastructure ............................................................................ 7

1.3.2 Support of connection to DH-network ............................................................................ 8

1.3.3 CO2 price for individual heating technologies ................................................................. 8

1.3.4 Subsidies for RES supply technologies in the DH system ................................................ 8

1.3.5 Zoning with prohibition of individual fossil fuel technologies ........................................ 8

1.3.6 Policy package ................................................................................................................. 8

2. Results of the quantitative assessment of selected policies until 2030 .......................................... 9

2.1 Results of policies on energy demand, district heating share and RES share until 2030 ........ 9

2.2 Results of policies on total and specific CO2 emissions for heat ........................................... 11

2.3 Results of policies on total and average costs for heat ......................................................... 12

2.4 Difference in total system costs for the different policies for implemented scenarios ........ 14

3. Results of the quantitative assessment of selected policies until 2050 ........................................ 16

3.1 Results of policies on energy demand, district heating share and RES share until 2050 ...... 16

3.2 Results of policies on total and specific CO2 emissions for heat ........................................... 18

3.3 Results of policies on total and average costs for heat ......................................................... 19

3.4 Difference in total system costs for the different policies for implemented scenarios ........ 20

4. Conclusions .................................................................................................................................... 22

5. References ..................................................................................................................................... 22

Appendix A: Indicators for policy assessment ....................................................................................... 24

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1. Introduction and Method The objective of this report is to provide a quantitative analysis and assessment of policies for renewable heating and district heating for the case of Brasov for the time horizon until 2030 and 2050. The project progRESsHEAT also provides results of the policy assessment on the national level, which are not part of this report. They are summarised in the reports “Results of the quantitative assessment of selected policy packages at the national level”. Similar reports are also available for the other local cases covered in progRESsHEAT, i.e. Ansfelden, Helsingoer, Herten, Litomerice and Matosinhos1.

The local policy assessment is based on the quantitative model results and methodology documented in the report “Assessment of local feasible renewable energy-based heating/cooling utilisation for Brasov” (Büchele et. al, 2016) and accompanied by the policy assistance carried out in several workshops and policy group meetings.

The methodological overview is depicted in Figure 1. It comprises the identification of a reference scenario for each local case. Desirable alternative scenarios were discussed with the stakeholders and implemented in the modelling framework described in “Documentation of the modelling framework in the project progRESsHEAT” (Petrovic, 2016). Within the modelling framework the need for support to reach the desired alternative scenario was calculated.

This report includes the documentation of the different policies assessed for the local case of Brasov and the identified need for support.

1 All reports are available at: http://www.progressheat.eu/Reports-publications-69.html

http://www.progressheat.eu/Reports-publications-69.html

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Figure 1 Methodical overview on policy impact assessment

1.1 Indicators for policy assessment Several indicators are needed for the assessment of the different policies and scenarios. The following indicators are described in detail in Appendix A:

1) Total useful energy demand for heat 2) Share of district heating 3) Total and specific CO2 emissions for heat 4) Total and average costs of heat supply and heat savings 5) Share of renewables 6) Difference in total system costs for the different policies compared to no policy scenario

1.2 Main assumptions The policies assessed in this report are built on the technical scenarios, developed and described in the Report “Assessment of local feasible renewable energy-based heating/cooling utilisation for Brasov” (Büchele et. al, 2016). For each scenario the least cost combination of heat savings and heat supply with individual or district heating is calculated for different building classes.

Two different technical scenarios for the district heating system were modelled:

• The technical reference scenario where the current situation will persist within the considered time horizon and the heat will be purchased from an external company producing heat in natural gas fired high-efficient cogeneration engines at a certain price and

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D4.1 - Results of the quantitative assessment of selected policy packages for Brasov investments will be made to replace 50% of the old parts of the network (not renewed within the last 10 years).

• The technical alternative scenario where the public service installs own production units (A biomass boiler, solar thermal panels plus heat storage and a heat pump) in the different parts of the district heating system and additional needed heat can be purchased from the external company. Also in this scenario 50% of the not yet renewed network will be renewed within the considered time horizon

In a first step for each of these two technical scenarios all policies are implemented and compared one at a time, to be able to clearly customerunderstand their impact.

Then in a second step it is assumed that a new public service takes over the operation and investments into the district heating network. This new public service represents the implementation of the long term loan policy and all remaining policies are implemented again one at a time, on top of this situation.

And as a last step the impact of a policy package including the most promising policies from the previous steps is assessed.

1.3 Policies assessed for Brasov In this section the different policy instruments are explained. In a first step they will be assessed one at a time and in a second step effects of combined policies will be assessed and incorporated into a policy package.

We distinguish three different types of policy instruments: Regulatory measures, Support schemes and accompanying information campaigns.

In this report we do not assess any policy implementation costs (such as administration and monitoring), but the effect of implementing each specific scenario and policy on the total (and average) cost of heat supply and heat savings, as well as on the difference between the total costs, when a specific policy is present and when it is not.

The effect of information campaigns cannot be assessed with the developed modelling framework, but they are seen as a necessary instrument accompanying each regulatory or support measure. Barriers and drivers at local level for renewable heating and cooling are discussed in (Chassein et. al, 2017a) and best practices and success factors in (Chassein et.al, 2017b)

1.3.1 Long term loans for DH infrastructure

This policy instrument ensures low interest rates and long depreciation times for investments made into district heating infrastructure. It can be implemented either by giving long term loans from a public fund to a private operating company or by guaranteeing an ownership structure that allows calculation under these conditions: This could be a public service or a consumer owned cooperative.

In the case of Brasov this policy is about to be implemented by a local public service whose intent is to identify funds, such as structural funds or funds for governmental programs, needed to support the district heating sector, but also to make provisions in the public budget to reduce the losses in

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D4.1 - Results of the quantitative assessment of selected policy packages for Brasov the system. This public service will use generated profit continuously for new investments into the district heating system and only incorporate these investments and running costs to calculate the price of heat for the citizens.

For the calculation of the effects of this policy the interest rate is set to 1,5% and the depreciation time is 40 years for network infrastructure investments.

1.3.2 Support of connection to DH-network

This policy instrument supports the connection of buildings to the district heating network for the occupants/owners of all types of buildings by covering the connection costs. The costs per dwelling in apartment blocks are in the range of 700 € to 1 200 € depending on the size of the building.

These costs have to be paid either by a (municipal/regional/national) subsidy or by the utility or a public service.

1.3.3 CO2 price for individual heating technologies

This policy reflects the implementation of a tax on CO2 Emissions caused by burning fossil fuels in individual heating technologies. Two different price levels are investigated:

• The same CO2 price per ton as it is foreseen for the CO2-certificates market (31,5 EUR/t in 2030 and 87 EUR/t in 2050)

• And the CO2 price level that is needed to reach an impact without other policies (level is calculated within the least cost tool and depends on other variables)

1.3.4 Subsidies for RES supply technologies in the DH system

This policy reflects the investment subsidies of up to 45% of the eligible costs that can be obtained for investments into renewable heating technologies in a district heating systems. The maximum value for a project cannot exceed 15.000.000 euro

1.3.5 Zoning with prohibition of individual fossil fuel technologies

This policy reflects the obligation of having a GIS based analysis on the distribution of the heating demand in the municipality resulting in the prohibition of individual gas boilers within the designated district heating area.

1.3.6 Policy package

The policy package includes the founding of a public service following a long term investment horizon without additional profit and therefore assuring the long term loans described in section 1.3.1. Additionally subsidies for RES DH technologies as described in 1.3.4 are available and a CO2 Tax of 35€/tCO2 is in place which is slightly above the expected CO2 certificates price for 2030.

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2. Results of the quantitative assessment of selected policies until 2030

This section analyses the effects of the different policies and for the combined policies described in Section 1.3 on the indicators from Section 1.1 for both the reference and the alternative scenario mentioned in Section 1.2 and further described below:

The two different technical scenarios for the district heating system are:

• Reference Scen 2030: The technical reference scenario where the current situation will persist and the heat will be purchased from an external company producing heat in natural gas fired high-efficient cogeneration engines at a price of 48,8 EUR/MWh2 and a CO2 emission factor of 95 kg/MWh3. Additionally investments will be made to rehabilitate 50% of the not yet renewed network.

• Alternative Scen 2030: The technical alternative scenario where the district heating company installs own production units (A biomass boiler, solar thermal panels plus heat storage and a heat pump) in the different parts of the district heating system and additional needed heat can be purchased from the external company at the conditions stated above. Also in this scenario 50% of the not yet renewed network will be renewed within the considered time horizon.

For both of these scenarios then the effect of policies in combination with the new public service is assessed:

• Public Ref 2030: In this scenario the new public service follows the reference scenario. • Public Alt 2030: In this scenario the new public service follows the alternative scenario.

And as a last policy scenario an advanced policy package is assessed:

• Policy Package: The policy package includes the establishment of a public service for the district heating network which allows investments with long time horizons and without generating additional profit, investment subsidies of 45% for renewable supply technologies in district heating and a CO tax on individual fossil fuels of 35 €/tCO2

2.1 Results of policies on energy demand, district heating share and RES share until 2030

Figure 2 shows the results of the least cost combination for the different policy scenarios compared against the current situation of 2014. Compared to the current situation it can be seen that a reduction of the total heat demand of 17,5 to 18% can be achieved in all scenarios. This demand reduction comes mostly from the achievable heat savings until 2030 and not from the assessed policies because the assessed policies do not directly target the heat demand.

2 This price results from the current (2014) price of 35,5 EUR/MWh and an assumed increase of 2% p.a. until 2030 3 The CO2 emission factor is calculated according to the IEA method using a thermal efficiency of 37% and a total efficiency (thermal plus electric) of 78% as it is given for the installed high efficient natural gas engines.

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D4.1 - Results of the quantitative assessment of selected policy packages for Brasov Without any policy, the share of district heating would decrease to 1,5% in both the reference and the alternative scenario assuming that all consumers apply the cost optimal combination of heat savings and heating supply technology for their building. According to this calculation most detached single family houses would switch to air source heat pumps after renovation resulting in almost 16% of the demand supplied by this technology. Applying the least cost combination for 2030, other single family houses and row houses would switch to individual biomass boiler as the cheapest option after renovation and biomass would supply more than 9% of the heating demand. This would increase the RES share from 0.2% in the current situation up to more than 22%. However, restrictions not reflected in the modelling framework like comfort, the availability of biomass and the already existing connection to the natural gas network probably would inhibit the expansion of biomass up to this share resulting in even more natural gas boiler.

Figure 2 Comparison of total heat demand [GWh] in the different scenarios for different policies

Comparing the different policies one at a time for the Reference and for the Alternative Scenario 2030 it can be seen that most of the assessed policies alone do not affect the results regarding the heat supply structure. Only a high CO2 tax on fossil fuels of 130 €/t would increase the cost for natural gas to an extent so that individual heat pumps get cost effective in more buildings and that district heating would get competitive in the alternative scenario for most of the bigger buildings

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D4.1 - Results of the quantitative assessment of selected policy packages for Brasov within the district heating area where no additional network has to be built. As another policy, the regulatory measure of forbidding natural gas boilers in designated district heating areas would also enforce most of the buildings within this area to switch to district heating leading to a district heating share of around 18%.

In the Public Alternative scenario where long term loans by a public service are available to finance investments in district heating systems, better results regarding the supply structure can be reached with not too strong additional policies like an additional CO2 Tax of 31.5 EUR/t or investment subsidies for RES technologies in district heating. Alternatively banning natural gas from the district heating area allows reaching similar RES shares of almost 29%.

Figure 2 also shows the shares of district heating for the different policies in the different scenarios. These results are important as they show under which policy scenario district heating is economical feasible, compared to individual technologies. It can be seen that without any policy, district heating is not economically feasible in this case and therefore the share of heat delivered by district heating would reduce to 1,5% limited by the heating systems change rate until 2030. Only the very strict single policies of prohibition of individual natural gas boiler in district heating areas or a very high CO2 tax makes district heating competitive against individual natural gas boilers. But when the new public service follows the alternative scenario, district heating gets competitive also together with subsidies or a low CO2 tax for more than 18% of the heat demand. In this case even more production capacities would be needed in the district heating system.

Comparing the DH share and the resulting RES share for the reference and the alternative scenarios, it can be stated that increasing the share of district heating only makes sense from a climate policy point of view when the district heating system is transformed into a renewable direction. When district heating is forced in by zoning and the prohibition of gas but the district heating system stays with the fossil reference supply system there is no positive climate mitigation impact

2.2 Results of policies on total and specific CO2 emissions for heat Figure 3 shows the total CO2 emissions for heat for the different policies in the different scenarios. Compared to the current situation, the CO2 emissions will decrease remarkably by 39% to 44%. In the no policy scenarios and the scenarios where district heating will be drastically reduced, the emissions reduction comes to one part from the implemented heat savings and to another part from the switch from individual natural gas boilers to heat pumps and individual biomass boilers in single family homes.

The figure also shows that scenarios where district heat increases its share, lead to lower CO2 emissions than the scenarios where district heating is reduced. The emissions reduction is limited because the renewable capacities in the district heating system are limited and therefore with higher district heating demand more heat is purchased from the fossil based system. Having not enough renewable production capacities while expanding the district heating system can lead to the paradox situation that the renewable share increases but there is only little emission reduction because additional demand is supplied by fossil peak load boiler with a higher specific emission factor. Therefore expanding the district heating system only makes sense together with a remarkable share of renewable heating technologies within the district heating system.

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Figure 3 CO2 emissions [kt] for the different policies in the different scenarios for 2030

Figure 4 shows the specific CO2-emissions for heat [kgCO2/MWh] in the different scenarios for different policies

Figure 4 Specific CO2 emissions [kg/MWh] for the different policies in the different scenarios for 2030

2.3 Results of policies on total and average costs for heat Figure 5 shows the results of the different policies on total costs for heat for the policy scenarios and Figure 6 the results on average costs for heat. The increase of the total costs in all scenarios compared to the current situation comes from the increase of costs for all energy carriers until 2030.

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D4.1 - Results of the quantitative assessment of selected policy packages for Brasov The natural gas price will increase by 103%, the biomass pricy by 28,5% and only electricity is assumed to stay almost constant until 2030.

Compared to the no policy scenario the different policies only have a moderate impact on the total and average cost for heat or can even result in lower costs. The policy package would lower the total and also the levelized cost for heat by 1% compared to no policy and simultaneously generating a renewable share of more than 30% (which is 8 percent points higher than the no policy scenario) and a CO2 emission reduction of 6% compared to the no policy scenario).

Figure 5 Total cost for heat [MEUR] for the different policies in the different scenarios for 2030

Figure 6 Average cost for heat [EUR/MWh] for the different policies in the different scenarios for 2030

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2.4 Difference in total system costs for the different policies for implemented scenarios

Figure 7 shows the difference in total system costs for the different policies in the different scenarios compared to no policy. It is the calculated as the difference of all costs for the respective policy scenario compared to the no policy scenario. These differences in costs have to be interpreted individually for each policy because the policies do affect different cost parameters leading to differences in the total system costs.

The costs for the Reference and the Alternative Scenario in the first two rows are costs for the single policies and the costs for the Public Reference and Public Alternative Scenario in the next two rows are costs resulting by combining the strategy of the public service (long term investment horizon) with the respective policy and may even include other effects.

• When applying the long term loan policy the total system costs in the reference scenario are 0,87 Mio EUR lower and in the alternative scenario 1,09 Mio EUR lower than without any policy in the respective Scenario. This reduced total costs come from a lower price for district heating resulting from calculating the investments into the infrastructure with lower interest rate and a longer life time. This is a direct benefit for customer of the district heating network and does not affect the costs of heat for individual heating technologies. This reduction in total system costs strongly depends on the number of district heating customers. The higher the number of customers the higher is the profit from this policy.

• The implementation of a low CO2 Tax for fossil fuels for households has almost no effect on the total system costs unless it is not high enough to convince people to switch to other energy carrier. When the tax is high enough it is able to lower the total system costs for heat because higher heat saving would be achieved and because if enough customers change to district heating the specific cost of heat for district heating gets lower. The tax at the same level as the CO2 certificates market would generate around 5,9 Mio EUR for the end consumers in the Reference and the Alternative Scenario. These CO2-costs do not affect the price for district heating but only for fossil driven individual heating technologies which means individual natural gas boiler in the case of Brasov. The received tax is seen as transfer payments and therefore is subtracted from the total system costs. The money could be used to support renewables.

• The subsidy for connection to the DH system does not generate any additional consumer and therefore would not cost anything in the Reference and Alternative Scenario

• The single policy of subsidising renewable heat supply technologies to achieve the alternative technological scenario (therefore only applicable in the Alternative Scenarios where there will be renewable technologies) would cost almost 2,6 Mio EUR and would increase the total system costs as a single policy by almost this amount if only a low number of customers stays with district heating and can profit from this policy. In the Public Alternative Scenario where a lot of district heating customers can be generated the subsidy together with the benefit from the public service would lower total system costs by 0,75 Mio EUR

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D4.1 - Results of the quantitative assessment of selected policy packages for Brasov • The prohibition of individual gas boiler within the DH area would generate additional costs

of 2,6 Mio EUR in the Reference Scenario coming from customers that would have to switch from the cheapest option – the natural gas boiler – to more expensive options like district heating and heat pump. In the Alternative Scenario the prohibition of natural gas within the district heating area would lower the total system costs by 1 Mio EUR because the generated number of customer makes district heat specifically cheaper.

• The policy package in sum would lead to a decrease in total system costs by more than 1 Mio EUR generating a reasonable share of renewables.

Figure 7 Difference in total system costs for heat compared to no policy Scenario for the different policies in the different scenarios for 2030

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3. Results of the quantitative assessment of selected policies until 2050

This section analyses the effects of the single and combined policies described in Section 1.3 on the indicators from Section 1.1 for the reference and the alternative scenario mentioned in 1.2 and further described below. The scenarios for 2050 differ from the scenarios for 2030 in assuming that the total building stock can be renovated and therefore no limitation in renovation activities is given. Furthermore energy and CO2 prices are as they are expected to be in 2050.

The two different technical scenarios for the district heating system are the same as for 2030:

• Reference Scen 2030: The technical reference scenario where the current situation will persist and the heat will be purchased from an external company producing heat in natural gas fired high-efficient cogeneration engines at a price of 72 EUR/MWh4 and a CO2 emission factor of 95 kg/MWh5. Additionally investments will be made to rehabilitate 50% of the not yet renewed network.

• Alternative Scen 2030: The technical alternative scenario where the district heating company installs own production units (A biomass boiler, solar thermal panels plus heat storage and a heat pump) in the different parts of the district heating system and additional needed heat can be purchased from the external company at the conditions stated above. Also in this scenario 50% of the not yet renewed network will be renewed within the considered time horizon.

For the alternative scenario additionally the effect of policies in combination with a new public service is assessed, which allows investments with long time horizons and without generating additional profit:

• Public Alt 2050: In this scenario the new public service follows the Alternative scenario

And as a last policy scenario an advanced policy package is assessed:

• Policy Package: The policy package includes the establishment of a public service for the district heating network which allows investments with long time horizons and without generating additional profit, investment subsidies of 45% for renewable supply technologies in district heating and a CO tax on individual fossil fuels of 170 €/tCO2

3.1 Results of policies on energy demand, district heating share and RES share until 2050

Figure 8 shows the results of the least cost combination for the different policy scenarios compared against the current situation of 2014. Compared to the current situation it can be seen that a very high reduction of the total heat demand of around 72% can be achieved in all scenarios. This demand

4 This price results from the current (2014) price of 35,5 EUR/MWh and an assumed increase of 2% p.a. until 2050 5 The CO2 emission factor is calculated according to the IEA method using a thermal efficiency of 37% and a total efficiency (thermal plus electric) of 78% as it is given for the installed high efficient natural gas engines.

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D4.1 - Results of the quantitative assessment of selected policy packages for Brasov reduction comes from the achievable heat savings until 2050, when not limited by a renovation rate. This shows that heat savings are the cheapest option to implement in the Brasov building stock. Although heat savings are the cheapest option due to bad thermal condition of the current building stock, in reality there may be certain barriers to realise all the achievable heat savings especially when the potential is unknown to the building owner or when the building owner is not the building user and therefore does not benefit from lower energy demand.

Due to this heat demand reduction district heating is not competitive without connecting additional customers and would be phased out in the reference scenario. Without any policy, the cheapest combination with heat savings is given by 65% of the remaining heat demand supplied by individual natural gas boiler, 13% by individual biomass boiler and 22% by heat pumps resulting in a renewable share for heating of more than 31%.

Figure 8 Comparison of total building related heat demand [GWh] in the different scenarios for different policies until 2050

Comparing the different policies for the Reference and the Alternative Scenario 2050 it can be seen that most of the assessed policies alone do only slightly affect the results regarding the heat supply structure. As a single policy only the regulatory measure of forbidding natural gas boilers in designated district heating areas would be able to hold district heating, leading to a DH share of 21%.

In the public alternative scenario with high CO2 tax, a tax of 210 EUR/tCO2 is needed to increase the price level for natural gas to a level that other technologies can compete. Alternatively natural gas boilers can be forbidden in designated district heating areas.

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D4.1 - Results of the quantitative assessment of selected policy packages for Brasov In the advanced policy package without heat planning and resulting designated district heating areas, still a CO2 tax of 170 EUR/tCO2 is needed to further reduce the share of individual natural gas boiler.

3.2 Results of policies on total and specific CO2 emissions for heat Figure 9 shows the total and Figure 10 the specific CO2-emissions for heat for the different policies in the different scenarios. Compared to the current situation the CO2 emissions will decrease remarkably by 82% to 85% for the different scenarios.

In the no policy scenarios and the scenarios where district heating will be phased out, the emissions reduction comes to a big extent from the implemented heat savings and partly from the switch from natural gas boilers to heat pumps and individual biomass boilers in single family homes.

In the policy scenarios where district heating has a notable share, the CO2 emissions can be further decreased by up to 13% compared to the no policy scenarios. This is especially the case in the alternative scenarios where renewables will be integrated into the district heating system.

Figure 9 CO2 emissions [kt] for the different policies in the different scenarios for 2050

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Figure 10 Specific CO2 emissions [kg/WMh] for the different policies in the different scenarios for 2050

3.3 Results of policies on total and average costs for heat Figure 11 shows the results of the different policies on total costs for heat and Figure 12 the results on average costs for heat for each scenario for the policy scenarios. The general decrease of the total costs for heat in the no policy scenario compared to the current situation comes from the high share of heat savings that are implemented. Heat savings are cheaper than heat supply and therefore contribute to lower total system costs. In Figure 12 it can be seen that the specific cost of heat will increase drastically, first because all energy carriers are supposed to get more expensive and second because investments will be shared amongst much less produced energy for each technology.

Figure 11 Total system cost for heat [MEUR] for the different policies in the different scenarios for 2050

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Figure 12 Average cost for heat [EUR/MWh] for the different policies in the different scenarios for 2050

3.4 Difference in total system costs for the different policies for implemented scenarios

Figure 13 shows the difference in total system costs for the different policies and the different scenarios compared to no policy. These differences in costs have to be interpreted individually for each policy: The costs for the Reference and the Alternative Scenario in the first two rows are costs for the single policies and the costs for the Public Alternative Scenario are costs resulting by combining the strategy of the public service (long term investment horizon) with the respective policy and may even include other effects:

• The long term loan policy, the DH connection subsidy and the RES DH subsidy alone do not affect the total system costs because these policies alone are not able to generate district heating customers but district heating would be faced out until 2050 in these cases.

• The implementation of a CO2 Tax on fossil fuels for households at the level of the expected CO2 certificates price as a single policy would also not be able to let consumer switch their heat supply system but would lead to higher savings and therefore higher costs for higher renovation levels. A CO2 tax level of 210 EUR/t would generate enough district heating consumers to lower the district heating price below the natural gas price (without tax) leading to an overall benefit of 0,58 Mio EUR.

• The prohibition of individual gas boiler within the DH area would generate additional costs of 4,8 Mio EUR in the Reference Scenario coming from customers that would have to switch from the cheapest option – the natural gas boiler – to more expensive options like district heating and heat pump. In the Alternative Scenario the prohibition of natural gas within the district heating area would increase the total system costs by only 0,5 Mio EUR and in the

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D4.1 - Results of the quantitative assessment of selected policy packages for Brasov Public Alternative even lower the total costs by 0,6 Mio EUR because the generated number of customer makes district heat cheaper and competitive against natural gas boiler.

• The policy package would increase the total system costs by 1,84 Mio EUR including 2,6 Mio EUR for subsidising the renewable district heating system but generating enough customer for district heating to lower the district heating price below the natural gas price.

Figure 13 Difference in total system costs for heat to no policy Scenario for the different policies in the different scenarios for 2050

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4. Conclusions Although the proposed approach is not capable to fully reflect the real behaviour of all actors and certain barriers like comfort or consumer preferences couldn’t be integrated in the modelling framework, the impact of different policies on decisions based on a least-cost-approach could be assessed. This assessment showed that single policies in most cases are not enough to tackle all problems district heating faces in Brasov. Rather it is necessary to combine different policies to ensure a modernization of the systems and to bring back confidence and the required consumers. On the one hand it is crucial to trigger new investments into the outdated network infrastructure and into renewable supply technologies and on the other hand it is essential for the feasibility of the district heating network to share the infrastructure costs amongst as many customers as possible. The former can be reached by guaranteeing a long term investment planning horizon and low rates of return by implementing a public service operating without profit and following a long term planning horizon. The latter can be either reached by making district heating economically more attractive compared to fossil technologies with connection subsidies or taxes on fossil fuels, or by a stronger planning approach in terms of strategic local and regional heat planning defining zones where certain supply technologies are preferred.

The “policy package scenario” for 2030 allows reaching the highest share of renewables for heating without very high CO2 taxes and without strong regulative measure of forbidding natural gas within the district heating area. Therefore combining different policies lead to good results without overstressing one single measure and will be needed in the short to middle term.

Furthermore it has to be stated that increasing the share of district heating only makes sense from a climate policy point of view when the district heating system is transformed into a renewable direction. When district heating is forced in by zoning and the prohibition of gas, but the district heating system stays with the fossil reference supply system there is no positive climate mitigation impact especially if more peak load capacities (mostly fossil heat only boiler) are used. Therefore the discussed and assessed technological alternative scenario may be a starting point until 2030 but definitely is not enough for the long term horizon up to 2050.

5. References Büchele et. al, 2016; Büchele, Richard; Ben Amer-Allam, Sara; Aydemir, Ali; Bellstädt, Daniel;

Popovski, Eftim; Fleiter, Tobias: Assessment of local potential for renewable energy-based heating & cooling. Factsheets for Ansfelden, Brasov, Helsingor, Herten, Litomerice and Matosinhos. Report of the progRESsHEAT project. With Contributions from: Marcus Hummel, Camelia Rata, Marie Münster and Jaroslav Klusák. Online available: http://www.progressheat.eu/Reports-publications-69.html.

Chassein et. al, 2017a; Chassein, Edith; Roser, Annette; John, Franziska; Kranzl, Lukas; Fleiter, Tobias; Schilken, Peter (2017): Using Renewable Energy for Heating and Cooling: Barriers and Drivers at Local Level. An analysis based on a literature review and empirical results from local case studies. With Contributions from: Michael Rex, Christiane Egger, Megan Lauringer, Anja Gahleitner, Jaroslav Klusák, Hugo Santos, Thomas Wiene, Martin Dam Wied, Camelia Rata and Leea



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D4.1 - Results of the quantitative assessment of selected policy packages for Brasov Catincescu. Client: European Commission (Horizon2020). Online available: http://www.progressheat.eu/Reports-publications-69.html.

Chassein et. al, 2017b; Chassein, Edith; Hummel, Marcus; Kranzl, Lukas; Maurer, Christiane, Cappelletti, Floriane; Münster, Marie; Ben Amer-Allam, Sara (2017): Boosting renewable energy in heating and cooling. Fact sheet for six case studies. progRESsHEAT fact sheet of best practices and success factors and recommendations on actions and policies based on empirical results. With Contributions from: Michael Rex, Christiane Egger, Megan Lauringer, Anja Gahleitner, Jaroslav Klusák, Hugo Santos, Thomas Wiene, Martin Dam Wied, Camelia Rata and Leea Catincescu. Client: European Commission (Horizon2020). Online available: http://www.progressheat.eu/Reports-publications-69.html.

Petrović, Stefan (2016): Documentation of the modelling framework in the project progRESsHEAT. With Contributions from: Richard Büchele and Marcus Hummel. Client: European Commission (Horizon2020). Online available: http://www.progressheat.eu/Reports-publications-69.htm




http://www.progressheat.eu/Reports-publications-69.htm

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Appendix A: Indicators for policy assessment Indicators are needed for the assessment of the different policies and scenarios. Table 1 explains the indicators used:

𝑖𝑖 Index for building class 𝑗𝑗 Index for supply technology 𝑑𝑑𝑇𝑇_𝑢𝑢𝑢𝑢𝑢𝑢 Total useful energy demand for space heating and domestic hot water 𝐴𝐴𝑖𝑖 Floor area (per building class) 𝐻𝐻𝐻𝐻𝐵𝐵𝑖𝑖 Specific heating demand (per building class) 𝐶𝐶𝑂𝑂2 Total amount of CO2 𝑓𝑓𝑗𝑗𝐶𝐶𝐶𝐶2 Specific CO2-emission factor (per energy carrier) 𝑓𝑓𝑇𝑇_𝐶𝐶𝐶𝐶2 Average CO2-emission factor for heat 𝜂𝜂𝑗𝑗 Efficiency (per supply technology) 𝑑𝑑𝑗𝑗 Useful energy demand (supplied per technology) 𝐶𝐶𝑇𝑇 Total system costs of heat supply and heat savings Δ𝐶𝐶𝑇𝑇 Difference in total system costs between different policies 𝐶𝐶𝐴𝐴 Average cost of heat (after implementation of heat savings) 𝐿𝐿𝐶𝐶𝑂𝑂𝐻𝐻𝑖𝑖𝑗𝑗 Levelized cost of heat per building class and supply technology 𝐿𝐿𝐶𝐶𝑂𝑂𝐻𝐻𝑆𝑆𝑖𝑖𝑗𝑗 Levelized cost of heat savings per building class and supply technology Δ𝑑𝑑 Difference in useful energy demand for SH&DHW before and after renovation 𝑓𝑓𝑇𝑇_𝑅𝑅𝑅𝑅𝑅𝑅 Total share of useful energy demand supplied by renewable technologies 𝑓𝑓𝑇𝑇_𝐷𝐷𝐷𝐷 Total share of useful energy demand supplied by DH 𝑓𝑓𝑗𝑗𝑅𝑅𝑅𝑅𝑅𝑅 Renewable factor (per supply technology)

Table 1 Indicators used for policy assessment

Indicator Unit Description

Total useful energy demand for heat (SH&DHW) GWh

𝑑𝑑𝑇𝑇_𝑢𝑢𝑢𝑢𝑢𝑢 = �𝐴𝐴𝑖𝑖 ∗ 𝐻𝐻𝐻𝐻𝐵𝐵𝑖𝑖𝑖𝑖

Total useful energy demand for space heating and domestic hot water within the municipality

Total CO2 emissions for heat tCO2

𝐶𝐶𝑂𝑂2 = �𝑓𝑓𝑗𝑗𝐶𝐶𝐶𝐶2

𝜂𝜂𝑗𝑗∗ 𝑑𝑑𝑗𝑗

𝑗𝑗

Total CO2 emissions for heat supply with district heat and with individual technologies within the municipality

For HP and electric heating the CO2 intensities of the Romanian power sector according to EU reference scenario are used (2015=0,6 / 2030=0,27 / 2050 = 0,09) For district heating the specific CO2 emission is calculated for each scenario depending on the produced heat. CO2 emissions from CHP are allocated according to IEA Method [Fuel for heat = eff_th/eff_total]

Average specific CO2 tCO2/ Average specific CO2 emissions for all heating

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emissions for heat MWh

𝑓𝑓𝑇𝑇_𝐶𝐶𝐶𝐶2 =𝐶𝐶𝑂𝑂2𝑑𝑑𝑇𝑇_𝑢𝑢𝑢𝑢𝑢𝑢

technologies after implementation of respective savings

Total costs of heat supply and heat savings EUR

Total private economic system costs of heat supply and implemented renovation options minus transfer payments . 𝐶𝐶𝑇𝑇 = ∑ (𝐿𝐿𝐶𝐶𝑂𝑂𝐻𝐻𝑖𝑖𝑗𝑗 ∗ 𝑑𝑑𝑖𝑖𝑗𝑗𝑖𝑖 𝑗𝑗 + 𝐿𝐿𝐶𝐶𝑂𝑂𝐻𝐻𝑆𝑆𝑖𝑖𝑗𝑗 ∗ Δ𝑑𝑑𝑖𝑖𝑗𝑗) ± transfer payments

Calculated by the levelized costs of heat per technology (including annualized investments, operation costs and taxes) multiplied with the heat supplied by the respective technology plus implemented savings multiplied by the costs of the respective saving.

Average levelized cost of heat EUR/MWh

𝐶𝐶𝐴𝐴 =𝐶𝐶𝑇𝑇

𝑑𝑑𝑇𝑇_𝑢𝑢𝑢𝑢𝑢𝑢

Average cost of heat for all supply options and implementation of renovation options. Calculated by dividing the total costs of heat supply and heat savings by the total heat demand after implementing the heat savings.

Difference in total costs of heat supply and heat savings EUR

Δ𝐶𝐶𝑇𝑇 = C𝑇𝑇policy_x − C𝑇𝑇

no_policy

Costs for each policy and scenario compared to no policy.

The difference in costs to implement the respective policy has to be interpreted individually for

• Long term loans • Support of connection to DH • CO2 price for households • Prohibition of individual gas boiler in DH area • Policy package

Share of RES %

𝑓𝑓𝑇𝑇_𝑅𝑅𝑅𝑅𝑅𝑅 = �𝑓𝑓𝑗𝑗𝑅𝑅𝑅𝑅𝑅𝑅 ∗ 𝑑𝑑𝑗𝑗𝑗𝑗

Share of renewable energy in total useful heat demand:

• For renewable share of electricity the share of net power generation from RES from the PRIMES 2015 reference scenario for Romania is used: (2015=39.6% / 2030=45.5% / 2050=49,8%)

• For renewable share of heat pumps the ambient heat plus the renewable share of power is used

• The renewable share of district heating is individually calculated for each scenario District heating based on fossil fuelled CHP is not considered to be renewable

Share of DH % 𝑓𝑓𝑇𝑇_𝐷𝐷𝐷𝐷 =

𝑑𝑑𝐷𝐷𝐷𝐷𝑑𝑑𝑇𝑇_𝑢𝑢𝑢𝑢𝑢𝑢

Share of heat demand supplied by district heating of total heat demand

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