Supplier obligation can be a cost effective model for more renewable energies in the heat sector

About a year ago the EU Commission put its highly regarded proposal for a heating and cooling strategy forward in order to support the use of renewable energies comprehensively. The Fraunhofer Institute for Systems and Innovation Research ISI coordinated a consortium which supports the EU Commission with scientific studies in further developing the heating and cooling strategy.

About 50%, the largest share of energy consumption in the European Union, is accounted for by the provision of heat and cold; even the share for mobility is with 35 per cent significantly lower. At the same time the use of renewable energies is only slowly increasing in most member states; particularly heat production is still dominated by the use of fossil fuels, such as natural gas, oil and coal.

In the first part of the project “Mapping EU heat supply“ the consortium coordinated by Fraunhofer ISI consisting of Fraunhofer ISE, TEP Energy, TU Vienna, Observer and IREES compiled a comprehensive energy balance for the heat and cold sector in all EU countries. This sound data was the basis for the EU Commission’s blueprint of the heating and cooling strategy. The second part of the study, which has now been published, contains scenarios on the development of energy supply for heating and cooling in the EU until the year 2030. A particular emphasis lies on possible funding instruments to increase the share of renewable energies.

Energy suppliers should provide more renewable energies

The study also investigates the impacts which may occur when gas and oil suppliers are obliged to bring a certain amount of renewable energies for the provision of heat on to the market each year. Energy suppliers would be free to decide for themselves which technologies fulfill their quota or which incentive they create for the end customer. One example is to directly fund heat pumps, biomass boilers and solar thermal collectors in buildings or for process heat supply in industrial enterprises. Another possibility would be to buy certificates from energy service providers who specialize in implementing respective projects.

Jan Steinbach, one of the coordinators of the project at Fraunhofer ISI, points out, “The basic concept of the supplier obligation is to make the expansion of renewable energies as cost-effective as possible and to treat all available technologies equally. Our model calculation shows that the quota can only be fulfilled when different technologies are being used as the economic viability very much depends on the respective installation situation.“

In order to model the impact of the supplier obligation, different scenarios were calculated, in which this obligation substitutes the current national funding instruments. Tobias Fleiter, who coordinated the project together with Jan Steinbach, sums up, “a supplier obligation as a key policy tool to fund renewable energies in the heat sector potentially reaches the European targets for renewable energies at low costs. A share of 30 per cent renewable energies in the EU in 2030 is realistic, it does, however, require additional measures. The supplier obligation could close this gap. If it were implemented optimally an additional charge of just 0.1 cent per kilowatt hour of sold oil and natural gas would be necessary.“

Abolishing subsidies for fossil fuel-powered boilers

So that new instruments to fund renewable energies can work efficiently, existing subsidies of fossil heating technology have to be abolished. One example is the subsidies of fossil fuel-powered boilers in Germany. Abolishing these subsidies can have significant impacts on the expansion of renewable energies in the heat sector until 2030 as the so-called lock-in-effects are prevented by supposedly short-term savings: Due to the long lifetime, gas boilers installed today will supposedly still be running in 2040.

The study “Mapping and analyses of the current and future heating/cooling fuel deployment“ is the most comprehensive set of figures up to now on the status quo of the energy demand for heat and cold production in the EU and its development until 2030. Fraunhofer ISI builds on this basis with current projects in the EU research program Horizon 2020 and continues to research possible paths to an EU-wide heat transition. The most important projects in this context include Heat Roadmap Europe, progRESsHEAT and HotMaps. More information on the project “Mapping EU heat supply“ as well as the study as a download can be found at the project's website.

The Fraunhofer Institute for Systems and Innovation Research ISI analyzes the origins and impacts of innovations. We research the short- and long-term developments of innovation processes and the impacts of new technologies and services on society. On this basis, we are able to provide our clients from industry, politics and science with recommendations for action and perspectives for key decisions. Our expertise is founded on our scientific competence as well as an interdisciplinary and systemic research approach.

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