Decarbonising District Heating and Cooling- Latest policy insights on decarbonising the district heating and cooling (DHC) sector



Energy efficiency in industry and SMEs
Heating and cooling


Euroheat and Power organized a joint policy roundtable with 5 EU-funded Research & Innovation projects – Bio-FlexGen, HYPERGRYD, REWARDHeat, SENERGY NETS and W.E. District. The session presented key points from their position paper – Key Texts of the European Commission’s Fit for 55 Package, presented byRobert Fedrizzi (EURAC).

What are the current policies driving the heating and cooling sector?

The roundtable centred on the key legislation of the EU Green Deal and the Fit-for-55 package, describing the implications for the heating and cooling sector.  

  • Energy Efficiency Directive (EED)
  • Renewable Energy Directive (RED)
  • Energy Performance of Buildings Directive (EPBD)
  • EU Emissions Trading System Directive (ETSD)

Energy Efficiency Directive (EED)

Key points for the heating and cooling sector

For the heating and cooling sector, the introduction of the Energy Efficiency First Principle implies energy efficiency is taken into account and prioritized before new generation. The Directive also gives a clear definition of efficient district heating with a timeline for adoption. Waste heat is now treated as being on the same level as renewable heat – huge potential for waste heat in district heating. Local heating and cooling plans are now mandatory for municipalities with over 45,000 residents.

Suggestions for national implementation:

  • The Directive does not take into consideration the energy efficiency that can be obtained from the transformation and distribution in district heating. e.g., reducing supply temperature or insulating pipelines, not considered by the EED as a relevant energy saving. Reducing supply temperature is the first step (for the district heating and cooling sector) to adopting low temperature renewable and waste heat sources in citizen homes.
  • Different definitions of efficient DH (District Heating), which could generate misunderstandings among Member States. There needs to be guidance before national transposition.
  • The transition to energy efficient district heating is not mandatory which may lead to several utilities not willing to move forward in this direction due to investment costs.
  • Need for guidance for Member States to remove the legal barriers in adopting waste heat in district heating and standardize contracts and business models to integrate waste heat in district heating.
  • Technical and financial support needed for municipalities in adopting local and heating plans.

Renewable Energy Directive (RED)

Key points for the heating and cooling sector

The Directive sets out binding targets for RES integration in the energy system. Large potential for sector coupling via digitalisation and implementing heat pumps.

Suggestions for national implementation:

  • Higher ambition is needed to reach the binding RES penetration targets in the heating and cooling sector.
  • Cooperation frameworks are needed to reduce the risks of waste heat and renewable integration in district heating and cooling.
  • Financing mechanisms need to be in place to accommodate energy price fluctuations.
  • Incentivize large thermal energy storage capacity installation.
  • Cooperation frameworks between DHC operators and DSOs.

Energy Performance of Buildings Directive (EPBD)

Key points for the heating and cooling sector

RES integration in newly built and retrofitted buildings. Fostering renovation of buildings is key to reduce DH networks supply temperatures. Potential to connect district heating networks to buildings.

Suggestions for national implementation:

  • A district approach to building stock renovation is needed to maximise DH network adoption and plan optimal utilization of waste heat.

EU Emissions Trading System Directive (ETSD)

Key points for the heating and cooling sector

  • Created a level playing field across heating and cooling sector: ETS1 has proven an effective tool to redistribute C02 emissions costs. ETS2 for individual systems is a relevant tool to accelerate the transition.

Suggestions for national implementation:

  • Potential issue with price cap (45\ton of C02 emitted lower than C02 price under ETS1) – may lead to unfair competition with large district heating networks.
  • Easy implementation to avoid unnecessary contractual burdens.
  • Use the revenues generated to cover investments and reduce taxes on renewable energy.


  • Energy Efficiency First can also be fostered through lowering supply temperature.
  • Waste heat is now being treated at the same level as renewable energy.
  • Great potential for sector coupling, district heating can add value to overall energy system.
  • A district- level approach is needed for municipal heating and cooling plans.
  • Financing – a level playing field across heating and cooling sectors and de-risking mechanisms to foster investments in DHC.

The after event material is also available here.

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