Whereas there are presently over 20 mio. customers taking advantage of district heating within the EU, the amount of consumers is substantially higher in Central and Eastern Europe. Listing up nine countries that will in the shorter or longer run be members of the EU, one will find that an average of almost 40% of the inhabitants are customers of district heating grids, adding 41 mio. users to the total. This figure does not include Russia, where DH penetration is higher still.

A closer co-operation with the countries bordering the enlarged EU, for instance Belarus and Ukraine, will further add to this trend. In Ukraine, with a population of 50 mio. people, DH has reached a 65% market share on the heat market.

The above graph points to the fact that the fuel input for district heating in Central Europe is very differently composed compared to that of EU countries.  The enormous production of DH in the Ukraine based on natural gas dominates the picture. Poland and the Czech Republic base their production on domestic coal. Generally, one observes that CEE countries rely much more on one source of fuel than EU countries.

There is a historical component to the explanation of the fuel distribution in CEE countries. The fuel composition of the Czech Republic and Poland is the result of past policies pursuing a high degree of reliance on domestic fuels. This development is slowly changing towards a more diversified supply, but the coal component remains very important, as it appears.  Belarus has in the past embraced oil (mazout) instead of coal, but self-reliance is also an important part of this country's fuel input for DH.

Estonia provides yet another variant of self-reliance, in that the share of oil shale, a particular Estonian source of fuel, has attained a very high share of the fuel input. However, there is a growing recognition in Estonia that the fuel mix must change in order to promote environmental ends. In future, emphasis will be put on natural gas and renewables. Already, Estonia has a share of 4.5% renewable sources in total supplies. This is a fairly high figure by CEE standards.

Apart from the very high dependence on domestic coal in the total picture, it is remarkable that the use of waste and renewable sources is practically zero in the region. Small contributions can be found, but in general, there seems to be a substantial potential for increasing the use of waste and renewable sources in the supply.

Price conditions in Europe for household consumers of district heat

Pricing of district heat is a component of great importance for increasing penetration of district heating in Europe.

The tables below feature prices of district heat in a number of EU and CEE countries. The prices shown include VAT. They do, however, include various levies, too. The tables can be used to demonstrate the impact of VAT on prices, but it must be kept in mind that the levels of levies can differ quite markedly from one country to another and thereby impact on the overall prices.

The table above illustrates that prices of heat and VAT levels for district heat vary substantially.  The average VAT level is around 20% and the average heat price 49 ECU/MWh. Finland stands out in that its heat price is imposed a 22% VAT, but still maintains a heat price among the absolute lowest in the EU. The heat price in the UK is the lowest of all, featuring also the lowest VAT level.

Heat prices in CEE countries are lower than in the EU. The highest prices in CEE  countries match approximately the lowest prices in countries of the EU. In the CEE region, it is subsidies rather than levies that impacts on the price of district heat to the customer.

The costs of heat to households in this region weighs 25-50% heavier than in EU countries, except in the Baltic countries and Ukraine, where this share is still higher. The reasons are several. The period of economic restructuring in the CEE region has been difficult for the district heating sector. Many industrial clients have disappeared as have waste heat contributions to the DH utilities from industries. This leaves the utilities with overdimensioned systems and little possibility to recover the costs. In some countries, it is the high dependence on imports that has part of blame. In some cases, political preference for other sources of heating has created cross-subsidy schemes to the detriment of district heating and cogeneration.

The conclusion may be that in these rather difficult times for Central and Eastern European district heating systems, the legislatory and regulatory authorities sometimes miss the target. Trying to solve short-term problems they end up compromising the optimum long-term solution, namely to support renovation and upgrading of existing systems. It is essential in CEE countries that the image of district heating and cogeneration is improved.