A year of big challenges for the heating industry EU regulations, emission standards and support for combined heat and power will be key for the sector

The heating industry is facing challenges connected with an avalanche of new regulations: from the Winter Package to RES Directives, to the implementation of the capacity market and a new system of support for combined heat and power. According to industry representatives, this system should be independent but compatible with the capacity market. This would allow the heating industry to become a partner for the electric power industry.

“The district heating industry is facing numerous challenges in the fields of generation, infrastructure and networks, and also with regard to heating substations and cooperation with our recipients paying for the supply of heat,”  Jacek Szymczak, President of the Management Board of Izba Gospodarcza Ciepłownictwo Polskie (Chamber of Commerce of the Polish Heating Industry, the IGCP) told the Newseria Biznes agency.

Poland offers a lot of potential for the development of the heating industry – over 100 medium-sized cities are still lacking their own combined heat-and-power plants and in many agglomerations the heating network is in need of a complete refurbishment. At the same time, the industry must prepare for even more challenges connected with the new EU and state regulations. The most important of these is the Winter Package – an over-1000-page-long collection of recommendations on the EU’s energy and climate policy in 2020-2030.

“The Winter Package is a document containing about 30 various legal acts. We are especially interested in the new Directives on Renewable Energy Sources, Energy Efficiency and the Energy Performance of Buildings. These documents will lay down the rules for connecting new renewable sources to our heating systems and can create challenges for the ongoing activities or lead to higher prices for district heating. These are key issues for our business,” Jacek Szymczak stressed.

The work on the Winter Package is currently entering the stage of negotiations between the European Commission, the European Parliament and the Member States, which have developed their positions during the December Summit of Energy Ministers.

The industry will also be affected by the EU's BAT reference documents (BREF), which will have to be met by 2021 and include strict emission criteria for nitrogen and sulphur compounds, and dust for large combustion plants with a rated thermal input greater than 50 MW. Similarly strict requirements will apply to small and medium combustion plants with the input of 1 to 50 MW – this is required by the Directive on emissions from medium combustion plants (MCP Directive).

“The process of amending the Directive on the trade in emission allowances has also ended. The heating industry has made the most of the situation – in 2020–2030 we will have a free allocation of 30 percent. It will not be decreased using the linear reduction factor, but 70 percent will need to be obtained – due to this the price for allowances will have a significant impact on the profitability of our business ,“​ Jacek Szymczak said.

According to the President of the IGCP, also the domestic model of regulations concerning the heating industry requires a thorough reconstruction. It should be more flexible and allow enterprises to achieve a decent return on equity, so that they can obtain the funds for the investments necessary to meet the emission requirements.

In Jacek Szymczak’s view, “The current regulations do not provide for this and over the next few months more extensive changes will have to be introduced in Poland.”

The heating industry will also be affected by the introduction of a capacity market in Poland and the new support system for CHP, which, in view of its representatives, should be independent from, but also compatible with, the capacity market.

“This would unlock the development potential of combined heat and power, which the heating industry estimates at several thousand megawatts of power. As a sector, we are also a partner for the electrical energy industry and it would be a shame if we did not take advantage of that, especially with one of the greatest potentials that we have in Poland,” Jacek Szymczak emphasised.

CHP is a technological process involving the combined generation of power and useful heat in a single plant. It is one of the most effective methods of primary energy conversion, allowing more than 10-percent savings. It is also more environment-friendly, contributing to lower carbon dioxide emissions, which is why supporting combined heat and power is used as an instrument of energy policy for both Poland and the EU. State support for CHP drives investments in the heating industry, and in its current form the system is going to apply until the end of 2018.

The President of the IGCP also notes that under current EU regulations, so-called inefficient heating systems are barred from obtaining support from state funds, which makes investing in networks unprofitable as business ventures.

“I would like to stress that this name is misleading, as it does not mean that our systems are inefficient in energy terms. As defined in the EU regulations, an efficient system is one in which at least 50 percent of heat comes from renewable energy sources or waste heat, or 75% from combined heat and power generation. We need to ensure that CHP can develop and provide reasonable access to renewable energy sources to achieve the status of an efficient heating system and leverage funds for modernisation and network development. Without those external funds, investments in networks pay back only after several dozen years, so it’s not something anyone would do to further their business goals other than to secure supplies,”​ Jacek Szymczak added.

Conscious cooperation with our recipients and clients who are convinced that district heating prices are too high and that there should be cheaper alternatives is also very important for the condition of the industry. The IGCP has operated the industry “District Heating Promotion Programme” for ten years now. It is aimed at making the end users aware of the component costs of district heating and emphasising the fact that the development of the heating industry reduces low-stack emission, which is good for the environment.