ERÚ publishes report on district heating systems, with over 45% of generation still coming from coal

The Energy Regulatory Office (ERÚ) published a report on the operation of district heating systems in 2023. It comes as no surprise that heat production declined year on year. The reasons were the higher temperatures and commodity prices prevailing last year. Year-on-year heat generation fell by 6.7%. Approximately 45% of total final heat consumption is accounted for by households, highlighting the importance of energy savings in this sector. The issue will become increasingly prominent in the coming years as the introduction of EU ETS II approaches.

Last year, 140 923 TJ of heat was generated in the Czech Republic. Of this, 31% was consumed within the company or facility itself. Heat supplies, meaning the volume of thermal energy delivered to district heating systems (DHS), fell by 7.6% year on year to 75 803 TJ.

More than 45% of gross generation was produced from coal, with lignite accounting for 38.5% and hard coal for 7.7%. Coal is followed among the most widely used input fuels by natural gas (19%) and biomass (16%). Nevertheless, despite the above figures, the district heating market is gradually moving away from coal: generation from lignite has fallen by 23% compared with 2017, while hard coal generation has declined by 45%. By contrast, generation from the aforementioned biomass has risen by 24%.

The statistics for heat generation from natural gas are also of interest. They show a low share of useful heat—38%. Useful heat refers to heat produced in the process of combined heat and power generation (CHP). According to ERÚ, this is due to there being more natural-gas boiler plants than cogeneration units. There is significant potential here: natural-gas cogeneration units are highly controllable sources, making them well suited to complement variable renewable electricity generation.

Introduction of the EU ETS II system

The issue and pressure to move away from coal combustion in the district heating sector will gain momentum in the coming years. A second emissions trading system, known as EU ETS II, is due to be introduced from 2027. The heating and transport sectors will fall under this system. Until now, emissions allowances have only been paid by sources with a thermal input above 20 MWt. More on EU ETS II here.

However, from 2027 smaller sources are also set to be included in the emissions trading system, which will affect smaller district heating systems. It is important to note that households will not surrender emissions allowances; fuel suppliers will. Nevertheless, the effect will be the same: prices will increase compared with a situation without the new system. The assumption is that fuel or energy suppliers will pass on at least part of the new costs to end consumers.

The price increase will depend both on the price of emissions allowances in EU ETS II and on the fuel mix. Coal is the most emissions-intensive fuel, and it is used to generate most of the heat in the Czech Republic. Households are the largest end consumers, accounting for 45% of total consumption, while industry accounts for 26%.