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Contents 2 Foreword 4 Acknowledgement 5 Reader’s Guide and How to Use This Report 7 Supplementary Data 9 Conclusions 10 Abbreviations 14 Chapter 1 District Heating and Potential Heat Sources in 15 the Baltic States Key findings 15 District heating today 16 Heat pumps today 27 Characteristics of existing district heating areas 34 High-temperature heat sources 37 Low-temperature heat sources 43 Excess heat potential of heat sources used by large-scale heat 52 pumps Low-temperature heat source potential based on GIS 60 proximity analysis Example of three district heating areas with access to heat 62 sources Chapter 2 Modelling the Future of Power and Heat 66 Supply in the Baltic States with Heat Pumps Key findings 66 Previous modelling results relevant for HPs in future energy 67 scenarios in the Baltics Current practice of heat pump representation in energy 75 planning Our modelling approaches 79 2 Energy system development 89 Scenario analysis of the future of district heating in the Baltics 92 Summary of results for each Baltic state 97 Sensitivity analysis 108 Chapter 3 Drivers Behind Widespread Adoption of Heat 111 Pumps and Cooling Technologies Key findings 111 Power-to-heat technologies and their drivers 112 Danish experiences on large-scale heat pumps for district 132 heating Large-scale heat pumps for district cooling 143 A potential Baltic path for large-scale heat pumps 149 Chapter 4 Socio-Economic Impact of Power-to-Heat 151 Solutions on the Heating Sector Key findings 151 Impact on individual consumers when switching to 152 power-2-heat technologies Development of the heating market considering the 169 implementation of large-scale heat pumps Potential for electrification of the industrial sector 174 Annex 1 District heating demand and temperatures 183 Annex 2 Modelling methodology 187 Annex 3 Baltic energy systems in the Nordic and Baltic 189 energy markets Annex 4 Assumptions for calculating the cost of 192 individual HPs List of References 194 About this publication 207 3 Foreword For a long time, Nordic Energy Research and the Baltic countries have worked closely to develop a thriving exchange of knowledge that adds value to the Nordic-Baltic region. We share many of the same energy challenges on our path toward achieving carbon-neutrality in our respective countries. Therefore, it is in our common interest to cooperate and create opportunities together. An important area of common ground is district heating and cooling. District heating and cooling networks are widespread in most Nordic and Baltic countries. The coupling of the common Nordic-Baltic electricity market to local district heating via power-to-heat, offers large comparative advantages with respect to flexibility of source, potential synergies, and economic considerations. It also facilitates the deployment of renewable energy, decarbonization of the electricity and heat sectors, as well as ensures a cost-effective energy supply. This report illustrates the considerable potential and benefits of using heat pumps and electric boilers, which are promising options for curbing climate-warming emissions and developing the heating- and cooling markets in the Baltic countries. I hope that this report sheds light on the possibilities associated with heat pumps and highlights their significance for the green transition in the Nordic-Baltic region. With growing interest, research must advance to reach our ambitious climate and energy goals by 2030. During the last couple of years, Baltic researchers have been involved in several other projects that Nordic Energy Research has initiated and funded, among which are the comprehensive reports Baltic Energy Technology Scenarios (2018) and Transport Statistical Data and Projections in The Baltic States (2020). After these successful collaborations, we are once again pleased to publish a report carried out with Baltic management. Klaus Skytte CEO, Nordic Energy Research 4 Acknowledgements The report on heat pump potential in the Baltic states is a collaborative project between Tallinn University of Technology (TalTech), School of Engineering, Department of Energy Technology and Nordic Energy Research (NER) – an intergovernmental organisation under the Nordic Council of Ministers. Kevin Johnsen and Nicki Carnbrand Håkansson at Nordic Energy Research were the coordinators of the project. Anna Volkova at Tallinn University of Technology was the analytical project manager and had overall responsibility for the design and implementation of the study. Team at Nordic Energy Research Kevin Johnsen Senior Adviser [email protected] Nicki Carnbrand Håkansson Adviser [email protected] Team at Tallinn University of Technology The following researchers at Tallinn University of Technology carried out the report and the analysis: Anna Volkova Senior Researcher, PhD Head of Research Group Smart District Heating Systems and Integrated Assessment Analysis of GHG Emissions Department of Energy Technology [email protected] Henrik Pieper Postdoctoral Researcher, PhD Department of Energy Technology [email protected] Hardi Koduvere Junior Researcher Department of Electrical Power Engineering and Mechatronics Kertu Lepiksaar Junior Researcher Department of Energy Technology 5 Andres Siirde Director of Department, Professor Department of Energy Technology The report was proofread by Bella Joffe-Eisler. Steering group The work was guided by the Joint Baltic-Nordic Energy Research Programme Board, composed of: • One representative appointed by the Ministry of Economic Affairs and Communications, Estonia, • One representative appointed by the Ministry of Economics, Latvia, • One representative appointed by the Ministry of Energy, Lithuania, • Two representatives appointed by NER. The individuals and organizations that contributed to this study are not responsible for any opinions or judgements contained in this study. Contact Comments and questions are welcome and should be addressed to: Kevin Johnsen, Nordic Energy Research, e-mail: [email protected] Anna Volkova, Tallinn University of Technology, e-mail: [email protected] For enquiries regarding the presentation of results or distribution of the report, please contact Nordic Energy Research. Additional materials, press coverage, presentations etc. can be found at www.nordicenergy.org. 6 Reader’s Guide and How to Use This Report The report is split into four main chapters covering modelling results, assumptions and approaches. A description of the key findings can be found at the beginning of each chapter. Below is a brief explanation of what to expect in each chapter and how this information can be used. Chapter 1: District Heating and Potential Heat Sources in the Baltic States This chapter provides an overview of the current stage of development of district heating and heat pumps in each Baltic country. District heating areas and high- and low-temperature heat sources were identified, analysed and described in detail for each Baltic state. GIS software was used to perform spatial analyses. The theoretical and practical possibilities of large-scale heat pumps using heat sources to supply district heating were calculated. Examples of using a GIS map for further analysis by, for example, urban developers, public authorities and/or utility companies, are provided at the end of the chapter. Chapter 2: Modelling the Future of Power and Heat Supply in the Baltic States with Heat Pumps This chapter provides an overview of modelling results from previous projects related to the Baltic region. A brief description of the current approaches to modelling heat pump performance and investments is given, while the modelling approach for this project is detailed. The results of modelling the energy system of the Baltic region are described in detail. Based on the socio-economic analysis, various possible scenarios for the future development of the Baltic energy system until 2050 were explored. The focus of the results is on the implementation of large-scale heat pumps and heat sources used for this. The results can be used to give an idea of how many heat pumps can be installed in the future, as well as which heat sources will be most relevant to use and in which district heating areas. Chapter 3: Drivers Behind Widespread Adoption of Heat Pumps and Cooling Technologies This chapter describes the auxiliary instruments and conditions that are beneficial for the implementation of large-scale heat pumps. Power-to-heat technologies and their advantages are described in the chapter. The relevance of the power sector and the importance of the district heating sector are also highlighted. For each Baltic state, the existing power sector is described in detail, including the generation mix, the share of renewable energy sources, national energy and climate plans, and current support mechanisms. In addition, the successful integration of large-scale heat pumps in Denmark was analysed and described. Potential applications of large- scale heat pumps for district cooling are also described. Based on the current conditions in each Baltic state and the auxiliary instruments identified in Denmark, a potential way of creating an environment conducive to the implementation of large- scale heat pumps in the Baltic states was outlined. 7 Chapter 4: Socio-Economic Impact of Power-to-Heat Solutions on the Heating Sector This chapter provides an overview of how individual heat pumps compete with conventional natural gas, oil and biomass-fired boilers in terms of cost
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