Making district heating fit for the energy transition 

District heating stands to become a key component of the transition to a smart and integrated energy system and a decarbonised economy by 2050. However, whether district heating companies will be able to modernize their infrastructure and invest in sustainable energy sources depends on the rules of tariff setting and the way they are applied. This was the inspiration behind this week’s webinar, which focussed on the tariff setting methodologies in the Contracting Parties and lessons learned from using different heat price regulation models.

To provide a starting point for exchanging best practices, the Secretariat launched a discussion paper outlining the different tariff setting methodologies in all Contracting Parties and selected EU Member States. Concluding with a set of recommendations, the paper calls for district heating tariffs to be clearly defined and understandable and cover all justified and reasonable costs to enable the efficient use and development of district heating systems and investments directed towards the clean energy transition. The process of adjusting tariffs to reflect the cost of fuel should be timely, easy and fast. Given the foreseeable introduction of carbon pricing in the Energy Community, it was also recommended for district heating companies to introduce internal carbon pricing at the same level as in the EU for reporting purposes, without waiting for binding obligations to kick in.

The Discussion Paper was developed with the support of the Energy Community Regulatory Board and builds on the report on distribution tariff methodologies for electricity and gas in the Energy Community adopted by the Board in 2019 and Policy Guidelines on distribution network tariffs adopted by the Energy Community Secretariat in April 2018.