District heating: an effective
yet underexploited resource
for the energy transition
Thematic public report
Summary
September 2021
2
Summary
Introduction
This report, the result of a joint survey between the Court of Accounts and nine Regional and
Territorial Chambers of Accounts, seeks to analyse the way in which the State and the competent
local authorities respond to the problems of implementing the national objective of developing
district heating networks in the context of energy saving policies.
1-
Insufficient development of network heat produced from renewables
Through the law of 17 August 2015 on the energy transition for green growth, France has set itself
the objective of multiplying by five the quantity of renewable and recovered heat and cold delivered
by the heating and cooling networks between 2012 and 2030, which would correspond to
renewable heat production representing 3.4 million tonnes of oil equivalent in 2030.
Diagram 1: organisation of a heating network:
Source : Cerema
When the conditions are met, in particular the presence of a sufficiently dense stock of residential
or tertiary buildings, district heating networks
1
can present real advantages, in particular allowing
the development of renewable heat installations, the production costs of which are moreover more
stable than the heat produced from fossil fuels.
1
A district heating network is a collective heating installation combining one or more pieces of heat production equipment,
a distribution network and several users who buy heat from the network operator.
3
Diagram 2: comparative interest in 2019 of heating networks supplied by renewable and
recovered energies in terms of carbon content:
Source : MTE, projet de PPE
This heating method is used in various ways in Europe, for reasons linked in particular to history,
to energy development choices or to climatic conditions. Nevertheless, the choices shared within
the European Union in favour of renewable energies now make heating networks an energy
transition tool in many Member States. In France, their penetration rate is below the European
average but, measured by the rate of incorporation of renewable energies, their environmental
efficiency is satisfactory. The existing support systems in France are structured in a manner
comparable to those in the main Western European countries.
Graph 1: share of district heating networks in the supply of the residential sector and rate
of supply of renewable energies:
Source : International Energy agency, "District heating's share of residential energy demand and share of renewable energy
in district heating, 2017", IEA.
4
These mechanisms deliver results: between 2012 and 2019, the consumption of renewable heat
by the networks increased from 0.68 to 1.21 Mtoe
2
, growing 10% per annum. Their greenhouse
gas emissions fell from 173 g/kWh to 107 g/kWh and the number of carbon neutral networks
increased from 19 in 2013 to 154 in 2019, out of a total of around 800 networks.
Diagram 3: challenges of final heat consumption in France in 2019:
Source : MTE/SDES/CGDD, ADEME
–
Agence de la transition écologique, SCNU, retraitement Cour
While the potential of these networks is estimated at 5.8 Mtoe, 10% of the national heat
requirement, these developments remain insufficient however. The current development trajectory
is limited to 83,000 Toe per annum. At this rate, the renewable heat delivered in 2030 would only
be 2.26 Mtoe, significantly less than the target set by law. To increase the pace of development
and achieve this objective, it would be necessary both to increase the share of renewable energies
supplying existing networks and to develop new networks. For this, the State needs to support local
authorities, who are responsible for the creation and operation of a public heating or cooling
network.
Table 1: theoretical and observed trajectories of the development of renewable heat
delivered by district heating networks:
Expected annual development in thousands of toe
2018-2023
2023-2030
accelerated scenario
200
157
middle scenario
160
186
gradual development scenario
120
214
trend 2012-2018
83
projects expected by ADEME
–
Ecological Transition Agency, annual
average 2018-2020
73
Source : LTECV, SNCU, retraitement Cour
2
Mtoe: million tonnes of oil equivalent. The tonne of oil equivalent (toe) is a unit of measurement of energy corresponding
to the calorific value of a thousand tonnes of oil. 1
TWh ≈ 86,000
Toe.
5
2-
A public service of which the planning and management of performance by local
authorities must be improved
Diagram 4: distribution of roles between heating network players:
Source : Cour des comptes
The municipalities and in some cases their public cooperation agencies are responsible for the
creation and operation of a public heating or cooling network. This activity constitutes an industrial
and commercial public service. In this way, these communities are the main players in the
development and use of network heat.
Table 2: network management method in terms
of number of networks and heat delivered
Management method
In number of networks*
In quantity of heat
delivered*
Concession
37%
75%
Delegated service
5%
5%
Property management (internalised and outsourced)
27%
4%
of which management with public operating contracts
(outsourced)
17%
2%
Other public networks
#
13%
5%
Source: SNCU, données 2018
6
The territorial development planning of these networks, which is their responsibility, is
unsatisfactory at all territorial levels. The SRCAEs
3
did little to incorporate the issue. The
development of SRADDETs and PCAETs is behind schedule. The full assessment of the way in
which they take into account the issue of heating networks is therefore not yet possible. The master
plans for the heating networks that the municipalities and intermunicipal authorities with a heating
and cooling network in service as of 1 January 2009 were to achieve were not at the expected
level. The law of 8 November 2019, known as the energy and climate law, made this an obligation
for all communities with a network and provided for the regular review of these plans. It is, however,
too early to measure the effects.
With a view to improving planning, the master plans for district heating networks should adopt a
multi-energy approach, in particular to identify the interactions between electricity, gas and heating
networks for the purpose of optimising operation and costs. Investment aid from the heat fund
should be dependent on this approach.
Due to the size of the investments necessary to create a heating network, the majority of public
heating networks (80%) are operated in the form of a public service delegation. In addition to the
interest of the delegating local authorities to put the operation of the networks back out to tender
when the conditions are met, i.e. in principle at the end of the current delegations, the extension of
which must be decided with the greatest caution, the control of the operator throughout the duration
of the delegation contract should be strengthened.
The investigation revealed several examples where the controls of the delegating authorities were
lacking, often due to a shortage of suitable human or technical resources. For this reason and to
better incorporate heating and cooling networks into the planning of urban spaces, the
responsibility for creation, development, maintenance and management of urban heating and
cooling networks should be transferred to all public intermunicipal cooperation agencies for
municipalities with more than 20,000 inhabitants.
3-
A need for better information on the economics of district heating
The energy code provides for the collection of economic and statistical data on the activity of
heating and cooling networks. Economic data is collected by an association representing the
network operators (the French District Heating and Cooling Association
–
SNCU) on behalf of the
Data and Statistical Studies Department (SDES) of the Ministry for the Ecological Transition.
Constraints linked to preservation of the industrial and commercial secrets of the network operators
make certain economic data difficult to access or uncertain, particularly as regards the selling price
of heat. The dissemination of this data, which is useful for the State and the delegating local
authorities, should be improved, both for the conduct of national energy policy and for better
informed management of the networks.
Better information for consumers would also encourage the development of heating and cooling
networks. To this end, it would be desirable for delegating authorities to publish an annual report
on the prices and on the quality and price of the public district heating service, like the obligation
they already have for other local public services.
3
SRCAE: Regional Climate-Air-Energy Plan. SRADDET: Regional plan for spatial planning, sustainable development
and equality. PCAET: Territorial Climate-Air-Energy Plan.
7
Diagram 5: distribution of the heating network bill: JPG format provided
Source : Cerema, Fiche découverte, Prix de la chaleur et facturation
4-
Support measures for the development of district heating that can be streamlined and
strengthened
The State supervises, guides and supports the development of district heating networks through
actions implemented primarily by the Ministry for the Energy Transition (Directorate General for
Energy and Climate), the Environment and Energy Management Agency (ADEME) and the Centre
for Studies and Expertise on Risks, the Environment, Mobility and Planning (CEREMA). The
resources devoted by these institutions to heating networks are modest. They do not exceed 20
full-
time staff at an estimated cost of €1.5
M p
er year, to which is added €1.3
M for research or
partner support, for a total of €2.8
M. ADEME finances it 90%.
The State has also implemented many and varied support mechanisms. The main one is the heat
fund managed by ADEME, which aims to help finance investments in heat production projects that
use renewable and recovered energies, as well as the heating and cooling networks related to
these facilities. This fund has the advantage of at least partially compensating for the main handicap
of heating and cooling networks: the high cost of the initial investments. It provided these networks
with funding to the tune of
€110M in 2019.
8
Table 3: possible changes in tax expenditure by 2030
Average rate of renewable heat
Total volume delivered (Mtoe)
Estimated ta
x expenditure (€M)
60%
5.7
211
70%
4.9
181
80%
4.3
158
90%
3.8
141
100%
3.4
127
Source : Cour des comptes
Heating and cooling networks supplied more than 50% by renewable energies allow their users to
benefit from a reduced rate of VAT (5.5%) on the part of their bill linked to the supply of energy.
This tax expenditure is estimated at €67M per year. There is
a risk of incompatibility with European
regulations since, on the bills of consumers of non-eligible networks, the VAT rate is differentiated
between the subscription part (5.5%) and the part linked to the supply of energy (20%). As the
Court has already noted in previous investigations
4
, however, this measure constitutes an effective
incentive for the development of renewable energies.
There are various other forms of financial incentive to support heating and cooling networks in
smaller amounts. These incentives are often not evaluated or not particularly effective. In addition,
expenditure for connection to heating networks was eligible for the energy transition tax credit, from
which they benefited little however. It is also eligible for the energy transition bonus
(MaPrimeRenov), which replaced it in 2020.
Aid for the development of heating and cooling networks could take forms other than recourse to
public funding.
In order to promote connection decisions in the areas served, it could be envisaged to modify,
under certain conditions, the current rules for sharing the amortisation of the costs for connecting
to a heating network between lessors and tenants, in return for the energy savings obtained through
this investment.
In planning operations, the decision could also be made to extend (in the French Town Planning
Code) the possibility of making planning permission conditional on the completion and financing by
the developer of the works necessary for the viability of the heating and cooling networks, in the
same way as other networks, particularly natural gas.
More generally, the development of heating networks, which is the subject of this investigation,
cannot in the future be dissociated, within the framework of the energy transition and the objective
of carbon neutrality, neither from an improvement in the overall energy performance of the sectors
served in terms of thermal insulation, nor from a possible increase in cold demand. Network
development policies must take into account these changes in consumer demand.
4
Communications addressed to the Senate Finance Committee on the basis of Article 58-2 of the by-law relating to
finance acts (LOLF), on
the evaluation of tax expenditure relating to sustainable development
(September 2016) and on
the support objectives for renewable and recovered energies
(April 2018).
9
Summary of recommendations
Guideline 1: increase the energy and environmental performance of district heating networks
1.
Make aid from the heat fund for creation of new heating networks dependent on the
performance of a multi-energy diagnosis (DGEC, DGCL and ADEME
–
Ecological Transition
Agency, 2025);
7.
Identify the heating networks concerned by the community emission trading system and draw
up an action plan for these networks in favour of a supply that emits fewer greenhouse gases
(DGEC, immediate);
Guideline 2: take better account of the users of this public service
2.
Make the creation of a users’
committee compulsory for each local network (DGCL, 2021);
3.
Include in the CGCT (French local government code of practice) the obligation for the owners
of heating and cooling networks to draw up an annual report on the price and quality of the
public service with a view to presenting it to the deliber
ative assembly and to the users’
committee (DGCL, 2021);
4.
Through legislation for social and private landlords and tenants, review the rules relating to the
sharing of the amortisation of the costs for connecting to a heating network (DGEC, DHUP,
DGCL 2021);
Guideline 3: make the organisation and management of the heating networks more efficient
5.
Automatically allocate the exercise of responsibility for the creation, development, maintenance
and management of urban heating and cooling networks to public intermunicipal cooperation
agencies for municipalities with more than 20,000 inhabitants (DGCL, 2021);
6. Include in the annual administrative investigation on heating networks the economic data
currently requested in the annual statistical survey and improve dissemination thereof (CGDD
and DGEC, immediate);
8.
Supplement the French Town Planning Code to apply to district heating networks the provisions
relating to the development of gas and electricity distribution networks in planning operations
(DGEC, DHUP, immediate).