How to unlock the potential of public district heating networks

Pub­lic dis­trict heat­ing sys­tems are col­lect­ive heat­ing infra­struc­tures, owned by loc­al pub­lic author­it­ies. They dis­trib­ute heat from pro­duc­tion units (e.g., cent­ral­ised boil­ers, geo­therm­al plants, prosumers) to con­nec­ted build­ings (e.g., hos­pit­als, social hous­ings, indi­vidu­al houses) through a flu­id – usu­ally over­heated water. The sup­ply mix and con­sumer pro­files vary a lot from one coun­try to anoth­er, depend­ing on the avail­able resources and the energy dens­ity of the area, for example. If dis­trict heat­ing is still heav­ily based on fossil fuels in the EU, more and more renew­able and waste heat sources are being integ­rated to the sup­ply mix mak­ing it a great lever for the energy trans­ition¹.

Going for a car­bon-neut­ral dis­trict heat­ing sys­tem requires a change in means of heat pro­duc­tion from fossil-intens­ive to decar­bon­ised meth­ods. How­ever, decar­bon­isa­tion can take many roads. There is no clear solu­tion that optim­al in every con­text. Find­ing the most envir­on­ment­ally-friendly solu­tion often requires using loc­al resources, a vari­ety of heat sources to and coordin­a­tion of mul­tiple loc­al act­ors (most of which are not pro­fes­sion­als in the heat­ing mar­ket). Secur­ing loc­al resources (like waste heat from loc­al indus­tri­als, or bio­mass resources) is a chal­lenge that must be over­come to engage long-term invest­ments. Sev­er­al European pro­jects have tackled this pre­cise prob­lem, try­ing to pro­pose mech­an­isms and con­tract clauses to secure loc­al resources and unlock invest­ment poten­tial². Some pub­lic author­it­ies – for instance in Dunkirk – also play a role in facil­it­at­ing such part­ner­ships, by provid­ing insur­ances to indus­tri­als (pro­duc­tion out­let, etc.).

Anoth­er uncer­tainty comes from the fram­ing of “sus­tain­able” dis­trict heat­ing. It can vary depend­ing on polit­ic­al decisions. Some coun­tries like Den­mark have already made a shift from car­bon-intens­ive heat sources to bio­mass boil­ers, pushed by policy incent­ives. These new infra­struc­tures have a lifespan of sev­er­al dec­ades, but their fin­an­cial bal­ance is threatened. As sus­tain­ab­il­ity of bio­mass is increas­ingly con­sidered prob­lem­at­ic at a polit­ic­al level, incent­ives and sub­sidies may be re-assigned to a oth­er tech­no­lo­gies. Sim­il­arly, the out­comes of the European tax­onomy can impact the invest­ments capa­city in some technologies.

All in all, shift­ing to a sus­tain­able dis­trict heat­ing requires long-term invest­ments. But there is a high level of uncer­tainty about what would be the best invest­ment for today and tomor­row, and a lack of know-how on secur­ing loc­al resources in long-term projects.These long-term invest­ments and the over­all design of the infra­struc­ture make dis­trict heat­ing sys­tems more of a mono­poly; there are rarely sev­er­al dis­trict heat­ing oper­at­ors in the same area, mean­ing that unlike oth­er energy infra­struc­tures, you can­not change your sub­scrip­tion from one oper­at­or to anoth­er. This lock-in effect can be seen as a bur­den by the final con­sumer, all the more as they are usu­ally not the sub­scribers. In France, dis­trict heat­ing sys­tems con­nect build­ings, not indi­vidu­al hous­ings. The prin­cip­al inter­locutor of the network’s oper­at­or is thus the build­ing own­er, not the final heat user. This means that the final user has very little power over heat deliv­ery: the user can­not choose the oper­at­or (who is appoin­ted by the pub­lic author­ity – like the muni­cip­al­ity – based on a pub­lic tender), in some cases he can­not choose wheth­er or not the build­ing is con­nec­ted to the net­work (in par­tic­u­lar for social hous­ing), and if there are no indi­vidu­al meters he does not have the means to optim­ise the heat­ing level of his hous­ing, which is mostly con­trolled at a build­ing-level. Finally, when pay­ing for the heat, the final user often receives a bill from the build­ing-own­er, which will com­prise “heat and oth­er charges”, mak­ing it hard to under­stand heat tar­if­fic­a­tion and his means of action to lower his bill.

Fur­ther amp­li­fy­ing this issue, mul­tiple act­ors are involved in dis­trict heat­ing sys­tems, mak­ing it dif­fi­cult to nav­ig­ate shared respons­ib­il­it­ies and cre­at­ing some opa­city in com­mu­nic­a­tion. For instance, in the case of a default in the heat deliv­ery for an apart­ment in a social hous­ing, the issue can come from the glob­al dis­trict heat­ing sys­tem. The respons­ib­il­ity is thus shared between the pub­lic author­ity and the net­work oper­at­or, depend­ing on the type of con­tract gov­ern­ing the net­work oper­a­tions. The prob­lem may also come from the main­ten­ance of the build­ing heat­ing sys­tem. In this case, respons­ib­il­ity is shared between the build­ing own­er and the com­pany in charge of the main­ten­ance of this sec­ond­ary net­work. Heat deliv­ery issues can also be cause by a lack of insu­la­tion, the lat­ter being the respons­ib­il­ity of the build­ing own­er. Com­mu­nic­a­tion between all these act­ors is not always fully optim­ized. For example, the 2021 report from the Gen­er­al Account­ing Office high­lights the lack of trans­par­ency on dis­trict heat­ing gov­ernance – espe­cially in cases of Pub­lic Ser­vice Del­eg­a­tion in the form of con­ces­sions – lead­ing the pub­lic author­ity own­ing the net­work to have lim­ited con­trol over their own pub­lic ser­vice ³.

Co-cre­ation is a col­lab­or­at­ive pro­cess between loc­al stake­hold­ers to find innov­at­ive solu­tions to pub­lic stakes⁴. It allows integ­ra­tion of a vari­ety of stake­hold­ers in the design and oper­a­tion of the net­work, who would oth­er­wise be stuck in pre-defined roles with no part in the gov­ernance of the net­work (cus­tom­ers, cit­izens asso­ci­ations, etc.).

Due to its inher­ent col­lab­or­at­ive and open approach, co-cre­ation is aligned to a glob­al dynam­ic of muni­cip­al­it­ies and pub­lic author­it­ies reclaim­ing con­trol over their pub­lic ser­vices for which oper­a­tion has long been del­eg­ated to private oper­at­ors. Dis­trict heat­ing sys­tems are now part of the stra­tegic plan­ning of pub­lic author­it­ies, who come with new demands towards these oper­at­ors – like car­bon-neut­ral­ity, com­mu­nic­a­tion with cit­izens, etc. – and wish to be involved more closely in the gov­ernance of the network.

By being integ­rated to the whole life­cycle of the infra­struc­ture – or at least to its con­tract for oper­a­tion – co-cre­ation can foster its devel­op­ment by answer­ing to the above-men­tioned chal­lenges (Table 1).

Co-cre­ation requires a sus­tained endeav­our dur­ing the whole infra­struc­ture lifespan. As any rela­tion­al pro­cess, resources must be engaged in the long-term to ensure the suc­cess of the pro­cess. Here are four prin­ciples that can facil­it­ate the integ­ra­tion of co-cre­ation into a dis­trict heat­ing project.

Enga­ging with the stake­hold­ers: One pre­requis­ite to engage in a co-cre­ation pro­cess is to take time under­stand­ing the ter­rit­ory. Co-cre­ation emerges from com­mon needs and stakes. There­fore, get­ting a strong sense of the main loc­al stakes, and the exist­ing dynam­ic in tack­ling them is neces­sary to craft a rel­ev­ant co-cre­ation pro­cess. This first step can also be a way to get to know the loc­al act­ors if you are not famil­i­ar with the eco­sys­tem. One inter­est­ing aspect when get­ting this first sense of the ter­rit­ory, is to look at the exist­ing meth­ods used for e.g., loc­al demo­cracy, com­mu­nic­a­tion, and par­ti­cip­a­tion. The more the co-cre­ation pro­cess relies on the exist­ing, the easi­er it would be to get people to com­mit to go a little bit fur­ther in their approach.

Sus­tain­ing co-cre­ation through gov­ernance: To integ­rate co-cre­ation as well as pos­sible (not only in reac­tion to crisis) there is a need for a long-term engage­ment strategy. Usu­ally, stake­hold­ers real­ise that co-cre­ation can be inter­est­ing only when they are faced with a crisis. How­ever, crisis is not the best time to engage in a co-cre­ation pro­cess, as people are polar­ised around a spe­cif­ic issue. Integ­rat­ing co-cre­ation from the very design of pro­jects, when every­one is com­mit­ted to work togeth­er in solv­ing a com­mon issue, is usu­ally much easi­er. How­ever, to keep this dynam­ic ongo­ing and effi­cient when there are crises, this co-cre­ation pro­cess could be embed­ded with­in gov­ernance arrange­ments. These arrange­ments frame the roles of stake­hold­ers, their peri­met­er of influ­ence and the decision-mak­ing pro­cess. They can be embod­ied through a vari­ety of engage­ments formats, designed for dif­fer­ent moments of the pro­ject life­cycle, stakes and their cor­res­pond­ing stakeholders.

Secur­ing the needed resources: Both intern­ally (to the par­ti­cip­at­ing organ­isa­tions) and extern­ally to cre­ate some com­mit­ment to these resources and cul­tur­al shift. Co-cre­at­ing requires some spe­cif­ic resources and com­pet­en­cies, that are dif­fer­ent from the tech­nic­al or com­mer­cial ones at the heart of the pro­ject teams on dis­trict heat­ing.  Enga­ging on long term co-cre­ation pro­cesses means to secure some resources intern­ally to the par­ti­cip­at­ing organ­iz­a­tion – e.g., people par­ti­cip­at­ing in the co-cre­ation pro­cess, but also the sup­port teams to make the decided actions real – and extern­ally by secur­ing the com­mit­ment of the tar­geted stake­hold­ers, that may be out­side of the usu­al dis­trict heat­ing stake­hold­ers. For instance, when design­ing co-cre­ation work­shops with cit­izens to design the recon­fig­ur­a­tion of a street where dis­trict heat­ing will extend, it is import­ant to under­stand how to incentiv­ize the cit­izens to come and to keep their engage­ment on the long run. Finally, co-cre­ation entails a major cul­tur­al shift, decent­ral­iz­ing the decision-mak­ing and mak­ing the pub­lic infra­struc­ture more demo­crat­ic. The import­ance of this cul­tur­al shift, and the need to accom­pany this shift, should not be min­im­ized if ones want to design a sturdy co-cre­ation process.

Mon­it­or­ing the impact: A last prin­ciple when it comes to co-cre­ation, is to design from the start a mon­it­or­ing sys­tem of both the pro­cess itself (who is integ­rated, what actions have been taken, etc.) and of the eco­sys­tem (should the peri­met­er of the co-cre­ation pro­cess vary? Should new stake­hold­ers be integ­rated to the co-cre­ation pro­cess?). People enga­ging in co-cre­ation should be account­able for their actions and always strive towards improve­ment. Co-cre­ation is not an end per se, but a mean for decision-mak­ing. These decisions should lead to con­crete actions that help solve actu­al loc­al issues. Also, co-cre­ation is nev­er fully achieved, but always under con­struc­tion. The pro­cess should always be re-adap­ted, facing the new stakes, new demands, new stake­hold­er groups, etc. As the col­lab­or­at­ive cul­ture spreads, new forms of col­lab­or­a­tion may emerge and cause a com­plete re-design of the co-cre­ation process.