Fraunhofer Institute for Manufacturing Technology and Advanced Materials IFAMStudy “Improving third-party access to district heating networks”
As part of the study “Improving third-party access to district heating networks” commissioned by dena, experts from Fraunhofer IFAM have developed a concept that structures the integration of external heat generators, so-called third parties, into large heating networks through regulated processes. This takes into account the requirement of the Renewable Energy Directive (RED III), according to which operators of district heating or cooling networks with a capacity of more than 25 MWth are required to grant third-party providers of energy from renewable sources and waste heat and cooling access to the network or to purchase and feed in the energy (Article 24, Paragraph 4b). Two main use cases are considered:
- Expansion of the existing district heating network: an optimal generation portfolio is sought.
- Replacement of generation plants in an existing heating network: This is done for the purpose of decarbonization or because the useful life has been reached.
New grids to be built, on the other hand, were not explicitly considered.
Three-stage procedure as a solution approach
Third-party access describes a structured procedure that defines the processes from the identification of accessible heat sources to the conclusion of a binding supply contract between the current district heating supplier and any additional providers of climate-friendly heat. The design of the process is subject to a number of requirements:
- Acceleration of decarbonization: effective third-party access for additional climate-friendly heat providers should drive forward the decarbonization of district heating.
- Transparency and incentivization: Transparency should be created regarding available climate-friendly heat sources and incentives for their development should be improved.
- Mobilization of private capital: The financing of investments in climate-friendly heat generation through private capital should be made possible.
- Closeness to implementation: The procedures should fit seamlessly into the existing legal and regulatory framework.
Based on the comparative assessment of various approaches to third-party access from the dena preliminary study “Regulatory models for climate-neutral district heating in Germany” (2023), a three-stage procedure was designed. Each stage addresses a specific problem that arises in the context of third-party access to the district heating network.
Stage 1: Market enquiry
Effective third-party access requires that all possible heat sources are considered by the district heating supplier in a transparent and non-discriminatory manner. This task is addressed in the Fraunhofer IFAM concept by a market survey. The market survey offers third-party suppliers a time window in which they can provide non-binding technical information on potential heat sources so that these can be taken into account in the district heating supplier's further project planning. It concludes with the publication of the results and a memorandum of understanding. In this, the interested third-party providers and the district heating supplier guarantee further project planning and grid connection, provided this is economically reasonable and the heat source is selected in stage 3.
Stage 2: Consolidation
The market survey provides technical information on the potential heat sources required by the district heating supplier to create demand-oriented generation portfolios. However, it is expected that the results of the market survey are often inconsistent from an overall system perspective. For example, the total quantities and heat supply curves offered may not match the forecast heat demand or the lead times for heat supply may not match the development of demand. For this reason, the results are consolidated into one or more technically and economically feasible generation portfolios as part of a round table with district heating suppliers, third-party providers and local authorities. A regulatory authority to be determined calculates a reference price for each generation portfolio developed on the basis of a predefined methodology, which has yet to be developed, and settles potential conflicts between the stakeholders.
Stage 3: Selection of the generation portfolio
This stage is required if more than one generation portfolio was developed in stage 2. In this case, the portfolios are evaluated on the basis of specific, transparent and monetizable criteria. The optimal solution from an overall system perspective (in relation to the costs of generation and the heating network) is selected. Differences in the decarbonization paths are also taken into account via the CO₂ prices. The steering function resulting from these prices can be supplemented by quota regulations if necessary.
Even after the access process has been completed and the heat sources have been selected, uncertainties remain regarding the approval process and the level of costs associated with further implementation. For this reason, the third-party access concept is concluded with a memorandum of understanding that commits the selected heat sources (subject to economic reasonableness) to further project planning and guarantees grid connection after implementation under the previously negotiated conditions. A final supply contract will only follow after the heat generation plant has been implemented and the remaining risks have been eliminated.
Implementation recommended after 2027
The third-party access concept developed fits in with the current regulations of the Heat Planning Act (WPG). It supplements and formalizes the existing processes of municipal heat planning and decarbonization roadmaps. As local authorities and district heating suppliers are currently working on drawing up these plans, Fraunhofer IFAM recommends that the proposed changes are only considered in the next round of revisions.
“Improving third-party access to district heating networks” at a glance
Duration
07.2024-03.2025
Project partners
- Fraunhofer IFAM - Institute for Manufacturing Technology and Applied Materials Research
- EERA Consulting GmbH
Commissioned by
German Energy Agency on behalf of the European Climate Foundation