Webinar: Business models of district energy

Given that district energy networks are costly and require high levels of investments, having a clear and reliable business model is key for securing political and financial interest and attaining a return on investment.

From setting strategic objectives and coordinating stakeholders, to defining the correct value proposition that will attract customers and guarantee a revenue stream, district energy operators and owners need to have a clear vision for their business. In other words, a rational of how the network creates, delivers and captures value for the customers, by combating energy poverty with affordable heating and cooling; for the company, with a stable revenue flow; and for the environment, by improving energy efficiency.

During this online meeting the peculiarities of business models in district energy were discussed. Also, the differences between private vs. publically owned companies and public-private partnerships are explored. The full presentation is divided into three presentations with a concluding Q/A discussion.

1. Reliable business models for international funding

Iñigo Prior, Corporate Finance Expert, European Energy Efficiency Fund
Power point presentation by Iñigo Prior / Short cut to the video recording

The European Energy Efficiency Fund (eeef) is presented. It is a public-private partnership that aims to counteract climate change through market-based financing in the EU. Investments are made in energy efficiency, renewable energy, and clean urban transport. An overview is provided regarding objectives, sponsors, structure of investments and funding, eligibility criteria, typical projects, and support in the investment setup process. Also, typical DHC project risks and mitigants are listed, and an example of a business model is described: a biomass combined heat and power plant.

2. Urban economic development through district energy

Sergio Saiz Bombin, Energy Efficiency and Industrial Sustainability Director, Tecnalia, representing the PITAGORAS project
Power point presentation by Sergio Saiz Bombin / Short cut to the video recording

The EU project PITAGORAS is described. In the project, a pilot plant was added to a DH network in an Italian city. The pilot plant uses waste heat from a local steel mill. Key success factors include Public-Private Partnership (PPP), support from the municipality, and an integrated approach, including long-term heat planning and the use of local resources. These factors allow competitive prices and a profitable business.

The main barrier identified was potentially unacceptable investment payback times; however, this was overcome by incentives, funding by the EC. The solution is highly replicable, especially in other cities that are important centers of high energy intensitive industry. It is emphasized that the key is the role of the public authorities. They should consider energy infrastructure in the same way as they do with other infrastructures, i.e. not as a short-term profitable investment.

Questions from the audience:

– What is meant by an integrated approach to heat planning?
– What is the economic benefit for the industry providing heat to the heating system?
– Following the conclusions, energy infrastructure is out of the market, so why do we talk about competitive prices?
– Do the changes in concession procurement change the approach in establishing a district heating network?
– What would be the best business model for the public sector for district heating?

3. Local market places for electricity, district heating & district cooling

Claes Sommansson, Director of Open Arena Energy, Johanneberg Science Park
Power point presentation by Claes Sommansson  / Short cut to the video recording

This talk describes the EU project Fossil free energy districts (FED), with nine partners. The project creates a local market for electricity, district heating and district cooling. The aim is to support the energy transition in EU. The presentation introduces some basic principles from the project: The roles of the producer, consumer, storage operator, retailer and flexibility supplier (a new role), and how they are connected to each other.

Question from the audience:

– How will the integration and changed roles impact the system of district heating and cooling business models?

4. Interactive discussion

Short cut to the video recording

– Are there situations when district heating could be sustainable without incentives?
– Does the European Energy Efficiency Fund finance projects outside of EU?
– How many years is long-term, in the context long-term heat supply costs?