How to unlock the potential of public district heating networks

Pub­lic dis­trict heat­ing sys­tems are col­lec­tive heat­ing infra­struc­tures, owned by local pub­lic author­i­ties. They dis­trib­ute heat from pro­duc­tion units (e.g., cen­tralised boil­ers, geot­her­mal plants, pro­sumers) to con­nect­ed build­ings (e.g., hos­pi­tals, social hous­ings, indi­vid­ual hous­es) through a flu­id – usu­al­ly over­heat­ed water. The sup­ply mix and con­sumer pro­files vary a lot from one coun­try to anoth­er, depend­ing on the avail­able resources and the ener­gy den­si­ty of the area, for exam­ple. If dis­trict heat­ing is still heav­i­ly based on fos­sil fuels in the EU, more and more renew­able and waste heat sources are being inte­grat­ed to the sup­ply mix mak­ing it a great lever for the ener­gy tran­si­tion¹.

Going for a car­bon-neu­tral dis­trict heat­ing sys­tem requires a change in means of heat pro­duc­tion from fos­sil-inten­sive to decar­bonised meth­ods. How­ev­er, decar­bon­i­sa­tion can take many roads. There is no clear solu­tion that opti­mal in every con­text. Find­ing the most envi­ron­men­tal­ly-friend­ly solu­tion often requires using local resources, a vari­ety of heat sources to and coor­di­na­tion of mul­ti­ple local actors (most of which are not pro­fes­sion­als in the heat­ing mar­ket). Secur­ing local resources (like waste heat from local indus­tri­als, or bio­mass resources) is a chal­lenge that must be over­come to engage long-term invest­ments. Sev­er­al Euro­pean projects have tack­led this pre­cise prob­lem, try­ing to pro­pose mech­a­nisms and con­tract claus­es to secure local resources and unlock invest­ment poten­tial². Some pub­lic author­i­ties – for instance in Dunkirk – also play a role in facil­i­tat­ing such part­ner­ships, by pro­vid­ing insur­ances to indus­tri­als (pro­duc­tion out­let, etc.).

Anoth­er uncer­tain­ty comes from the fram­ing of “sus­tain­able” dis­trict heat­ing. It can vary depend­ing on polit­i­cal deci­sions. Some coun­tries like Den­mark have already made a shift from car­bon-inten­sive heat sources to bio­mass boil­ers, pushed by pol­i­cy incen­tives. These new infra­struc­tures have a lifes­pan of sev­er­al decades, but their finan­cial bal­ance is threat­ened. As sus­tain­abil­i­ty of bio­mass is increas­ing­ly con­sid­ered prob­lem­at­ic at a polit­i­cal lev­el, incen­tives and sub­si­dies may be re-assigned to a oth­er tech­nolo­gies. Sim­i­lar­ly, the out­comes of the Euro­pean tax­on­o­my can impact the invest­ments capac­i­ty in some technologies.

All in all, shift­ing to a sus­tain­able dis­trict heat­ing requires long-term invest­ments. But there is a high lev­el of uncer­tain­ty about what would be the best invest­ment for today and tomor­row, and a lack of know-how on secur­ing local resources in long-term projects.These long-term invest­ments and the over­all design of the infra­struc­ture make dis­trict heat­ing sys­tems more of a monop­oly; there are rarely sev­er­al dis­trict heat­ing oper­a­tors in the same area, mean­ing that unlike oth­er ener­gy infra­struc­tures, you can­not change your sub­scrip­tion from one oper­a­tor to anoth­er. This lock-in effect can be seen as a bur­den by the final con­sumer, all the more as they are usu­al­ly not the sub­scribers. In France, dis­trict heat­ing sys­tems con­nect build­ings, not indi­vid­ual hous­ings. The prin­ci­pal inter­locu­tor of the network’s oper­a­tor is thus the build­ing own­er, not the final heat user. This means that the final user has very lit­tle pow­er over heat deliv­ery: the user can­not choose the oper­a­tor (who is appoint­ed by the pub­lic author­i­ty – like the munic­i­pal­i­ty – based on a pub­lic ten­der), in some cas­es he can­not choose whether or not the build­ing is con­nect­ed to the net­work (in par­tic­u­lar for social hous­ing), and if there are no indi­vid­ual meters he does not have the means to opti­mise the heat­ing lev­el of his hous­ing, which is most­ly con­trolled at a build­ing-lev­el. Final­ly, when pay­ing for the heat, the final user often receives a bill from the build­ing-own­er, which will com­prise “heat and oth­er charges”, mak­ing it hard to under­stand heat tar­if­fi­ca­tion and his means of action to low­er his bill.

Fur­ther ampli­fy­ing this issue, mul­ti­ple actors are involved in dis­trict heat­ing sys­tems, mak­ing it dif­fi­cult to nav­i­gate shared respon­si­bil­i­ties and cre­at­ing some opac­i­ty in com­mu­ni­ca­tion. For instance, in the case of a default in the heat deliv­ery for an apart­ment in a social hous­ing, the issue can come from the glob­al dis­trict heat­ing sys­tem. The respon­si­bil­i­ty is thus shared between the pub­lic author­i­ty and the net­work oper­a­tor, depend­ing on the type of con­tract gov­ern­ing the net­work oper­a­tions. The prob­lem may also come from the main­te­nance of the build­ing heat­ing sys­tem. In this case, respon­si­bil­i­ty is shared between the build­ing own­er and the com­pa­ny in charge of the main­te­nance of this sec­ondary net­work. Heat deliv­ery issues can also be cause by a lack of insu­la­tion, the lat­ter being the respon­si­bil­i­ty of the build­ing own­er. Com­mu­ni­ca­tion between all these actors is not always ful­ly opti­mized. For exam­ple, the 2021 report from the Gen­er­al Account­ing Office high­lights the lack of trans­paren­cy on dis­trict heat­ing gov­er­nance – espe­cial­ly in cas­es of Pub­lic Ser­vice Del­e­ga­tion in the form of con­ces­sions – lead­ing the pub­lic author­i­ty own­ing the net­work to have lim­it­ed con­trol over their own pub­lic ser­vice ³.

Co-cre­ation is a col­lab­o­ra­tive process between local stake­hold­ers to find inno­v­a­tive solu­tions to pub­lic stakes⁴. It allows inte­gra­tion of a vari­ety of stake­hold­ers in the design and oper­a­tion of the net­work, who would oth­er­wise be stuck in pre-defined roles with no part in the gov­er­nance of the net­work (cus­tomers, cit­i­zens asso­ci­a­tions, etc.).

Due to its inher­ent col­lab­o­ra­tive and open approach, co-cre­ation is aligned to a glob­al dynam­ic of munic­i­pal­i­ties and pub­lic author­i­ties reclaim­ing con­trol over their pub­lic ser­vices for which oper­a­tion has long been del­e­gat­ed to pri­vate oper­a­tors. Dis­trict heat­ing sys­tems are now part of the strate­gic plan­ning of pub­lic author­i­ties, who come with new demands towards these oper­a­tors – like car­bon-neu­tral­i­ty, com­mu­ni­ca­tion with cit­i­zens, etc. – and wish to be involved more close­ly in the gov­er­nance of the network.

By being inte­grat­ed to the whole life­cy­cle of the infra­struc­ture – or at least to its con­tract for oper­a­tion – co-cre­ation can fos­ter its devel­op­ment by answer­ing to the above-men­tioned chal­lenges (Table 1).

Co-cre­ation requires a sus­tained endeav­our dur­ing the whole infra­struc­ture lifes­pan. As any rela­tion­al process, resources must be engaged in the long-term to ensure the suc­cess of the process. Here are four prin­ci­ples that can facil­i­tate the inte­gra­tion of co-cre­ation into a dis­trict heat­ing project.

Engag­ing with the stake­hold­ers: One pre­req­ui­site to engage in a co-cre­ation process is to take time under­stand­ing the ter­ri­to­ry. Co-cre­ation emerges from com­mon needs and stakes. There­fore, get­ting a strong sense of the main local stakes, and the exist­ing dynam­ic in tack­ling them is nec­es­sary to craft a rel­e­vant co-cre­ation process. This first step can also be a way to get to know the local actors if you are not famil­iar with the ecosys­tem. One inter­est­ing aspect when get­ting this first sense of the ter­ri­to­ry, is to look at the exist­ing meth­ods used for e.g., local democ­ra­cy, com­mu­ni­ca­tion, and par­tic­i­pa­tion. The more the co-cre­ation process relies on the exist­ing, the eas­i­er it would be to get peo­ple to com­mit to go a lit­tle bit fur­ther in their approach.

Sus­tain­ing co-cre­ation through gov­er­nance: To inte­grate co-cre­ation as well as pos­si­ble (not only in reac­tion to cri­sis) there is a need for a long-term engage­ment strat­e­gy. Usu­al­ly, stake­hold­ers realise that co-cre­ation can be inter­est­ing only when they are faced with a cri­sis. How­ev­er, cri­sis is not the best time to engage in a co-cre­ation process, as peo­ple are polarised around a spe­cif­ic issue. Inte­grat­ing co-cre­ation from the very design of projects, when every­one is com­mit­ted to work togeth­er in solv­ing a com­mon issue, is usu­al­ly much eas­i­er. How­ev­er, to keep this dynam­ic ongo­ing and effi­cient when there are crises, this co-cre­ation process could be embed­ded with­in gov­er­nance arrange­ments. These arrange­ments frame the roles of stake­hold­ers, their perime­ter of influ­ence and the deci­sion-mak­ing process. They can be embod­ied through a vari­ety of engage­ments for­mats, designed for dif­fer­ent moments of the project life­cy­cle, stakes and their cor­re­spond­ing stakeholders.

Secur­ing the need­ed resources: Both inter­nal­ly (to the par­tic­i­pat­ing organ­i­sa­tions) and exter­nal­ly to cre­ate some com­mit­ment to these resources and cul­tur­al shift. Co-cre­at­ing requires some spe­cif­ic resources and com­pe­ten­cies, that are dif­fer­ent from the tech­ni­cal or com­mer­cial ones at the heart of the project teams on dis­trict heat­ing.  Engag­ing on long term co-cre­ation process­es means to secure some resources inter­nal­ly to the par­tic­i­pat­ing orga­ni­za­tion – e.g., peo­ple par­tic­i­pat­ing in the co-cre­ation process, but also the sup­port teams to make the decid­ed actions real – and exter­nal­ly by secur­ing the com­mit­ment of the tar­get­ed stake­hold­ers, that may be out­side of the usu­al dis­trict heat­ing stake­hold­ers. For instance, when design­ing co-cre­ation work­shops with cit­i­zens to design the recon­fig­u­ra­tion of a street where dis­trict heat­ing will extend, it is impor­tant to under­stand how to incen­tivize the cit­i­zens to come and to keep their engage­ment on the long run. Final­ly, co-cre­ation entails a major cul­tur­al shift, decen­tral­iz­ing the deci­sion-mak­ing and mak­ing the pub­lic infra­struc­ture more demo­c­ra­t­ic. The impor­tance of this cul­tur­al shift, and the need to accom­pa­ny this shift, should not be min­i­mized if ones want to design a stur­dy co-cre­ation process.

Mon­i­tor­ing the impact: A last prin­ci­ple when it comes to co-cre­ation, is to design from the start a mon­i­tor­ing sys­tem of both the process itself (who is inte­grat­ed, what actions have been tak­en, etc.) and of the ecosys­tem (should the perime­ter of the co-cre­ation process vary? Should new stake­hold­ers be inte­grat­ed to the co-cre­ation process?). Peo­ple engag­ing in co-cre­ation should be account­able for their actions and always strive towards improve­ment. Co-cre­ation is not an end per se, but a mean for deci­sion-mak­ing. These deci­sions should lead to con­crete actions that help solve actu­al local issues. Also, co-cre­ation is nev­er ful­ly achieved, but always under con­struc­tion. The process should always be re-adapt­ed, fac­ing the new stakes, new demands, new stake­hold­er groups, etc. As the col­lab­o­ra­tive cul­ture spreads, new forms of col­lab­o­ra­tion may emerge and cause a com­plete re-design of the co-cre­ation process.