Digitalisation is the key to the transformation of district heating

Paweł Uznański

The heating sector in Poland is an essential industry for fulfilling basic social needs, but it is underestimated. In discussions on energy security or environmental impact, it is often treated as a background for the power industry. However, it is worth recognising that the heat market in Poland has enormous potential and is divided into three distinct segments:

  • the district heating, which includes nearly 400 licensed companies (above 5 MW in a heat source) and an unlicensed part, with total heat production of approximately 400,000,000 GJ/year
  • heat production for own needs or in a neighbourhood manner (small heat sources for one or several buildings and agriculture) with a total heat production of approx. 500,000,000 GJ/year
  • industrial heat production for own use – approximately 200,000,000 GJ/year

Therefore, we are talking about 1.1 billion GJ of heat produced annually in Poland for residential, production, commercial and agricultural purposes. Of course, this figure also includes heat losses in the transmission process and the internal needs of heat sources.

Suppose we assume, with a high degree of approximation, that the unavoidable losses and internal needs of heat sources are at the level of 15-20%. In that case, we are dealing with a heat stream of about 900 million GJ per year, which is the basis for optimisation and savings.

Of course, depending on whether we are talking about an organised part of the heat market (district heating, primarily licensed and industrial) or individual heat production for personal use, the possibilities, scale, time and instruments for achieving savings will be different. We will not always want to use advanced IT systems. However, such support seems necessary for district heating, industry, and, more broadly, cities.

The segment of district heating, which is an organised part of the heat production and supply market, is much more diversified than the electricity or gas segments. This is due to the specific nature of the heat sector – the ownership structure of enterprises, their size, the profile of heat consumers, the fuel mix used to produce heat and the competitive pressure on the local market are all different. Often, a heat producer is not simultaneously a heat distributor. Above all, the heating industry is inextricably linked to the heat source and distribution system location, so it is inherently local. And this is the most significant difference from the other two sectors of the energy market.

But is this a disadvantage or an advantage? And how to wisely use the “local” aspect of district heating in the energy transformation of Polish cities? And finally – how can the support of appropriate IT systems help in this transformation?

Why does the industry need to change

To answer these questions, we need to understand where the heat market is today and what kind of changes we are facing – natural and forced. We have already been in the transformation process for several years and, in connection with the Russian aggression against Ukraine, probably on the eve of drastic changes in the heat production and supply market.

This accelerating change results from the need to free ourselves from fossil fuels coming from Russia, the consistently implemented climate policy of the European Union, the development of RES technologies and changes in consumer habits.

Before the outbreak of war, a turning point began for district heating in Poland, which was associated with ambitious EU programmes – Green Deal and later Fit For 55.

Compared to any period in the industry’s past, one could mention the late 1990s, when the regulations imposing new heat supply settlement obligations and heat tariff approvals came into force. We dealt with a kind of revolution, which led to a sharp reduction in the ordered capacity and consumers’ heat demand. This was a significant step towards the profound restructuring of heating companies and modernising sources and networks.

However, heat suppliers were the active and dominant party at that time, imposing solutions and shaping these changes. Now it is often the other way around – the consumers are often ahead of their heat suppliers. Their awareness and needs regarding the use of heat are changing quite rapidly. They have new technical and financial possibilities, which allow them to invest in their RES sources and force changes in heating companies. Saving and ecology are “in”.

Technological progress is incredibly dynamic. Only ten years ago, “solar panel” was associated mainly with hot water heating systems. Heat pumps were an extravagance in Poland.

Today we are already producing electricity from PV installations on a massive scale, more efficiently and cheaply, and heat pumps are widespread. The following technologies are waiting in line, so to speak – perovskite panels, hydrogen technologies, micro-wind installations. A significant proportion of heat consumers will slowly become independent of electricity and heat supplies from the system.

In addition to new power generation techniques, the development of short-term and seasonal heat and electricity storage technologies is inevitable. At ConectPoint, we are currently participating in a Research and Development Project with support from NCBiR (National Centre for Research and Development), focusing on heat and cold storage.

At the same time, the demand for heat will be reduced through intensified investments in the thermo-modernisation of existing buildings and the development of passive construction. This is a necessary and most desirable direction because we should start saving heat first of all.

For many existing consumers, particularly those in the small building, commercial and retail segments, but also public buildings, district heating may soon become a supplementary, peak source.

It is, therefore, necessary to quickly change the often relatively narrow perception of their role in the heat market by heating companies. Local heat suppliers must get out of the comfort zone, which for many years has been provided by the certainty of heat supply and a steady process of connecting new customers. These consumers will not diminish in terms of numbers, but they will start to consume significantly less heat. The volume will be decreasing despite significant investments in network development.

District heating companies as leaders of positive change

It is essential to participate in this change actively. District heating companies can use their potential and position in the local heat market to take on the role of creators of district heating policy, or energy policy more broadly, in a given city.

Of course, fate has not been in favour of district heating companies in recent years – the challenges posed by the necessary modernisation of heat sources and the situation in the fuel and CO2 emission allowance market have made the profitability and condition of the industry weak. But this does not mean that one can stand still; quite the contrary. Anyone who does not take advantage of the opportunity now and does not offer new services to their customers will lose market position.

It is also necessary to widen the circle of customers to include those who are not, and will not be, consumers of district heat by doing other business with and for them. Already, many companies offer heat consumers in the city, housing cooperatives, industrial or public clients, services in heat consumption optimisation or heat generation from RES. Often this is in the ESCO formula, using the income from the acquired “white certificates” to cover the investment costs.

Why do heat suppliers themselves very rarely do this? Fear of losing revenue due to demand reduction is a bad advisor. Heat consumers will sooner or later reduce their heat consumption. So it’s better to participate in this process, be a moderator, and partially offset the loss of revenue from the sale of heat with income from, for example, an optimisation service. In addition, you can obtain efficiency certificates and use such activities to strengthen your position, marketing and social activities.

It seems evident that district heating can and should be an integrator of local, municipal actions aimed at satisfying the energy needs of cities’ residents. With the active participation of district heating companies, energy management plans should be drawn up and constantly updated in municipalities or cities. Low-carbon plans, heat maps, urban planning – all these activities should be coherent, and the district heating company can play an active role in all of them. Cooperation between the municipality and the district heating company is often natural, as a large part of this sector is owned or co-owned by the municipality. This should result in mutual trust and a willingness to deepen cooperation in the local energy market.

The power of cooperation between municipalities and district heating companies

In times of crisis in the fuel market and the urgent need to move away from energy sources from Russia, it is important to use available resources and means of production as efficiently as possible. But it is also essential to change the habits of city residents and create energy and environmental awareness.

To build an efficient energy system for an entire city, it is necessary to obtain and analyse vast amounts of information and use it appropriately. Nowadays, we can easily gather massive amounts of data on residents’ daily behaviour and needs and urban infrastructure. The support of IT systems is necessary for effective mass data acquisition for analysis, and then to define directions for optimisation and finally to supervise complex processes.

Digitalisation is essential. Utilities can be a trusted partner that can securely use this data to make life more convenient for city residents, public entities and businesses. And importantly, more environmentally friendly.

To achieve maximum impact, our massively collected data needs to be put to good use. The combination of graphical geographic information, SCADA systems, and analytical and billing systems is usually the main focus of the IT in district heating companies. We can use cartographic, urban and planning information held by municipalities. We can extend the analysis with a multitude of information possessed by other infrastructure companies and city residents.

Is it possible to combine all this into one efficient and secure data system? Is it possible to use all this data to conduct multidirectional analyses and prepare optimisation plans for, for example, the local heat market?

Of course, it is possible, but cities still have a long way to go to achieve this. It seems, however, that there is no turning back. The idea of the SmartCity has been known for many years. An essential element of such a modern city is undoubtedly economic energy management.

District heating needs to take a broader view of the urban energy market. A change of mentality is necessary to recognise that there are consumers as well as producers of heat and electricity inside and next to the current heat distribution system in the city. The development of RES, the recognition of waste heat streams from production processes, and the storage of heat or electricity in micro-installations – these are trends that are gaining momentum. The heating industry and the cities themselves cannot underestimate them. They must take advantage of them.

The heating companies, acting in their interest and, as it were, on behalf of the cities, should obtain and analyse data on the energy needs of the inhabitants and the energy generation facilities for all the facilities in the city.

The heat from renewable energy sources

A district heating network can successfully support the operation of its source with such external heat streams. It can also be a “battery” for the surplus electricity produced by PV installations, especially since the low-voltage power grid is inefficient in many places and cuts off PV installations during sunshine peaks. This represents a measurable loss and a reduction in the planned energy flow, which could be used at other times of the day or year.

One can imagine a system of mutual benefits between the prosumer PV and the district heating company. Photovoltaic installations in combination with efficient heat pumps are becoming more common, and then the local district heating network can receive surplus electricity as heat.

In my opinion, it is possible to adopt a trading arrangement on similar principles as for electricity i.e., e.g. 70/30, smart metering systems that would account for the purchase and sale of heat at a single point of connection and the subsequent collection of “surplus” heat in winter. Regulatory changes would be needed, including the construction of heat tariffs, but this is the future.

Of course, this requires a revolution in district heating systems towards standard 4.0, i.e. low-temperature systems, if only island systems for a start. An indispensable aspect of this transformation will be to have a flexible heat source capable of adapting to cooperation with dispersed, prosumer sources.

The efficiency of systems drives digitisation

It will be challenging to move forward without advanced IT tools and systems. Digitalisation offers an opportunity to optimise and streamline heat production and distribution processes as much as possible. This is important when the reality around us is changing very dynamically.

The vision of significant savings can inspire a company’s implementation or development of digitalisation. But it’s not just about buying software. It has to be a tailored, optimal product. Such a product and implementation can maximise these expected ‘savings’.

In ConnectPoint, we are convinced that the advantages of AI and IT systems must be combined with the experience and “feel” of the company’s technical staff. This is the best recipe for implementation success, for matching the software to the needs of the company and the people working in it.

At the same time, having a solid technological foundation, experience from other implementations and basing on good cooperation with the customer, we can successfully implement advanced technologies such as Predictive Maintenance, Digital Twin or reliable production forecasting. This can lead to a level of operation and performance that meets the ambitions of the business and, at the same time, the expectations of customers. Now and in the future.

ConnectPoint’s mission is to provide organisations with a single ‘source of truth’ about their infrastructure. We prepare a trusted platform with the operational data businesses need to succeed in digitisation. This includes real-time monitoring and automation of reports prevalent in the organisation, such as shift reports or production and sales analyses. The aim is to make processes transparent, eliminate the duplication of work, and provide tools and analyses to optimise operations further and create future objectives.

We already offer software that supports the optimisation of production, distribution and heat consumption in buildings. Our system is flexible and allows supervision and analysis of various heat, energy and media streams, as well as related technological and business processes. We provide tools for mass handling, i.e. for enormous amounts of data. We can provide software for heat consumption optimisation in one or several buildings and for the entire source-distribution-consumption system.

These are the foundations for building a more extensive system that meets the challenges described above. It is an essential contribution to the transformation of district heating companies to the 4.0 standard and ultimately to building a coherent and modern Local Energy Market in each city. A system in which the local district heating supplier will play an important role.

At ConnectPoint, we can help you to achieve this.