Transforming heat: Towards more sustainable residential buildings

Shaped by different geographical, economic and institutional contexts, heat provision systems have developed in a variety of ways and at a different pace across countries. In the Netherlands and the United Kingdom, an extensive natural gas infrastructure was developed in the 20th century; whereas in France, an abundance of affordable nuclear power led to the dominance of (traditional) electric resistance heaters in the built environment. Moving beyond Europe’s Western parts, countries such as Poland and the Baltic states strongly rely on collective district heating systems where heat provision is considered a public good.

Alexander Oei

Alexander Oei works as a consultant within the Natural Resources Practice at Ecorys. Throughout his studies and professional career, Alexander specialised in the Energy and Industry domain where he had a particular focus on how climate change and resource scarcity are transforming energy policy, infrastructures and markets. Within Alexander’s methodologies toolbox, modelling and simulation studies are among his key expertise. Ecorys is a research and consultancy company with almost ninety years of history and around 500 consultants located in more than ten countries. We offer policy advice, technical assistance and research in the domain of real estate financing, energy efficiency and sustainability, among other areas. https://www.ecorys.nl/english/

Regardless of the historical developments, we now witness a trend towards the use of more sustainable forms of heating across most European countries. This trend is mainly driven by the need to respond to climate change, a decreasing availability of domestic (fossil) energy resources and the risks of energy import dependency. In this article, we discuss our understanding of the challenges behind the heat transition in built environments and show how decision-making in this domain can be supported through the use of quantitative scenario analysis by presenting a case study from the Netherlands.

Understanding the heat transition in built environments

There is a large variety of technologies that can satisfy the heat demand of the built environment. Roughly, technologies can be grouped in three categories: (1) heat savings options (e.g. insulation and double or triple glass), (2) individual heating options (e.g. boilers or heat pumps) and (3) collective heating options (e.g. district heating). Given the wide range of available technologies, the question arises:

Which heating option is techno-economically the most optimal, taking into consideration both country- and sector-specific institutional contexts?

From a techno-economic perspective, answering the above question is primarily a local and regional optimisation problem. Based on local conditions, collective heating options may be attractive because of the close geographical proximity between heat demand and a heat source. In other areas, individual means of heating are the only economically viable option – where collective heat sources are not available for instance. Heat savings measures are, in some cases, a prerequisite for low-temperature heating options, for example; in other cases, they are a trade-off between the costs of heat delivery and the investment costs needed to attain heat savings.
Investments in heat provision require high capital investments in infrastructure and installations. In line with their structure and high initial costs, these infrastructures have long technological and economic lifetimes. Choosing right is therefore very important since duplicating infrastructures next to each other is, in many cases, inefficient. There is, therefore, a path dependence in choices.
Finally, given the path dependence of choices and long technological and economic lifetimes, it is important to take long-term trends into account when choosing which heat provision option to invest in. Trends such as technological innovations and the rise of energy prices are key in determining how attractive the different heating options are. For example, if natural gas is expected to become more expensive on the long-term, natural gas fuelled options will become less appealing.
From an institutional perspective, choosing right means taking into account the public goals of energy and therefore heat provision; that means heat is available for all at all times and is affordable and sustainable.

Case study: From natural gas to sustainable heating (Client: Milieudefensie)

Early 2018, Ecorys was commissioned by Milieudefensie to investigate which policy measurescould facilitate the transition from natural gas to sustainable heating practices in the Dutch built environment. Milieudefensie was interested in the energy, costs and CO2 performance of the Dutch built environment in a challenging policy scenario where the government pushes the provision of heat towards sustainability. An important prerequisite is that the transition should also be affordable for all.
The research scope was the low-temperature heat demand of the Dutch built environment, with a focus on the housing sector. Three scenarios were calculated:

  • A reference scenario – to show the effects of the current and proposed policy;

  • The low-hanging fruit scenario – to find the neighbourhoods in which with 'light support' it is already possible to switch to sustainable heat;

  • The target scenario – to find the policy measures needed to transition 80% of the Dutch houses from gas to sustainable heat.

Based on the calculations, we learned that even without additional support (the reference scenario) it is technically and economically feasible for a large part of the built environment to transition from natural gas to more sustainable heating practices. Currently, 6% of Dutch houses are free of natural gas, whereas in 2030 under the reference scenario this share can increase to 22%, bringing about a reduction in carbon emissions of 56% compared to current levels. Moreover, in the low-hanging fruit scenario, the share of houses free of natural gas would increase to 26% with only ‘light support’. Milieudefensie’s target is, however, only attainable with a strong policy intervention from the government. For 80% of the houses to be free of natural gas, much higher taxes on natural gas are needed. This, in turn, would almost double the price for small consumers. In addition, subsidies for more sustainable options are also part of the policy mix. As a result, carbon emissions can be decreased by 84% compared to current levels.
Figure 1: Geographical distribution of the technologies used in the target scenario. Collective heating options primarily found close to urbanised areas.
Figure 2: Local distribution of the technologies used in the target scenario. Woerden, a Dutch municipality in a rural area, almost fully converts to electric heat pumps, except for the historical city centre, which continues to rely on natural gas.
Figures 1 and 2 illustrate the technologies used in the target scenario on a national and local level. The model results confirm heuristics we see in practice: collective heating options are found to be most economically attractive in urban areas whereas individual heating options, such as the electric heat pump, are primarily found in rural areas. In urban areas, often there is a combination of a high density of the heat demand and proximity to heat sources (e.g. industry, geothermal and power plants). Collective heating options were also found to be more affordable than individual heating options. As a result, the heat transition causes unequal geographical impacts on household income and wealth throughout the Netherlands, and it is likely that similar patterns could be observed in other European countries.
To transform buildings, high capital investments in energy networks and heat production assets are required. Therefore, looking forward in the heat transition is crucial to preventing inefficient investments and fully utilising the potential that a more sustainable building portfolio may offer both people and the environment. Modelling and simulation provides a tool that enables decision-makers to look forward and make an informed choice.
Special context for real-estate portfolios.
In the Netherlands, house rental prices are regulated by law, limiting the ability to recover investments in buildings. In a long-term perspective, however, these investments would reduce monthly energy expenses (thanks to energy savings) and increase the building value. These considerations should encourage real-estate portfolio managers to move towards a more sustainable building portfolio.
When transforming heat in residential buildings, real-estate portfolio managers cannot, however, take investment decisions unilaterally. Consent by all or part of the tenants and coordination with other stakeholders may be required. In the case of district heating, for instance, it is also necessary to coordinate and cooperate with heating companies, possible partners and relevant branches of the (local) government. This may form a practical barrier in the transformation towards sustainability.