Business Model Changes in District Heating: The Impact of the Technology Shift from the Third to the Fourth Generation

Abstract

This paper addresses the implications on the business model of district heating companies of the technology shift targeting lower temperatures in the distribution network. Lower temperatures are valuable, since heat supply to low-energy buildings with low grid losses is facilitated. In addition, low-temperature heat sources can be integrated into an efficient energy system, improving the environmental performance of the industry. This technology shift opens a window of opportunity to update the business logic in the sector, since the lower temperatures allow a diversification of the value proposed to customers and a closer, long-term customer relationship. The extent to which the business model is impacted by the shift is not known. Thus, six cases of low temperature implementation from five European countries have been identified. Interviews with the project managers of the implementations show that the six cases made limited change to the primary business model when making the technological shift. Consequently, there is an unexplored potential for updating the value proposition and the customer relationship.

A Graph Theory-Based Method for Regional Integrated Energy Network Planning: A Case Study of a China–U.S. Low-Carbon Demonstration City

“…RIES have become one of the important ways for global low-carbon eco-cities to achieve the goal of energy conservation and emission reduction. RIES include regional heating [14,15], regional cooling [16], regional cooling and heating [17,18], regional combined heat and power, regional combined cooling heating and power [19][20][21], and so on. At present, the research on the technology of RIES has been considerable.…”

Contracts, Business Models and Barriers to Investing in Low Temperature District Heating Projects

“…Second, to harvest the local heat source, close customer dialogue is needed. This builds trust and long-term engagement, which can create a competitive advantage for district heating providers over other heat suppliers who depend increasingly on digital interaction with customers [24]. Third, and most importantly, urban waste heat sources are fossil free (although the electricity used to power a heat pump may come from a non-renewable source) and readily available.…”

Energy System Transition in the Making: Case study of Greater Copenhagen District Heating Network

“…However, DH systems have the potential to integrate large amounts of electricity generated by wind power. District heating is considered an important means of decarbonizing the energy system and as having significant potential in terms of ensuring a low-carbon future (Connolly et al 2013;Roberts and Geels 2019;Lygnerud 2019).…”

“…Even though much of the BMI informed literature focuses on developments within the power sector, there are a few studies of how district heating utilities are adapting to changes in their business environment as more and more renewables are introduced into the energy system. Lygnerud (2019) investigates how district heating utilities could remodel their business model for transitioning to a 4GDH. Lygnerud (2019) studies six "frontrunner" utilities, which claim to have implemented 4GDH networks, at least partly.…”