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District heating customers and companies could benefit from better services

District heat providers should pay more attention to their customers and their wishes. Both would stand to benefit from the development of services, according to Petri Penttinen, who recently completed his doctorate in real estate economics.
Vantaan Energian kaukolämpölaitos
Vantaa Energia district heating facility. Photograph: Jani Ahosola.

There is a lot of room for improvement in the collaboration between district heat companies and their property owner customers. According to Petri Penttinen, who completed his doctorate in real estate economics at Aalto University, improved collaboration could bring Finland closer to its carbon neutrality goals and save money at the same time. Penttinen works as development manager for electric utility Vantaan Energia.

’Energy companies rarely see their customers as partners. Seeing as the heating business exists entirely for the customer, this makes no sense’, Penttinen says.

Customers have come to believe that energy companies cannot be negotiated or dealt with. Thus, property owners make even decades-long commitments to heating systems that often have not been negotiated about in detail.

TkT Petri Penttinen
Petri Penttinen, DSc

’Energy and real estate are very conservative sectors of business, with little collaboration between stakeholders. The commonly held view is that energy, once produced, simply disappears somewhere. The customer pays their bill, and there is no active collaboration’, Penttinen says.

Due to this lack of communication, it is left up to the customer to seek solutions for saving energy or cutting costs. This is exactly the reason why solar panels, among others, are being installed.

Penttinen encourages customers to take a negotiating attitude toward energy companies. The companies, for their part, should develop their service models and learn to identify customer needs.

Solutions for emissions reduction or energy and cost efficiency could be offered hand in hand with sales, especially in the heating business. This would benefit both the energy company and the property owner.

Developing collaboration in district heating

In its district heating strategy for 2030, Finnish Energy calls out for developing service offerings in the sector. In practice, Finnish Energy is encouraging companies to develop new service models and alternative pricing schemes for their customers. On a concrete level, this development is being done through personnel training, events organised together with customers, and development collaboration.

According to Janne Kerttula, Director of Energy Networks at Finnish Energy, district heat companies are already listening to customers’ wishes, which have a direct influence on investments. When making decisions, companies are particularly sensitive to customers’ demands with regard to emissions.

However, one–third of district heating in Finland is still produced with fossil fuels. According to Kerttula, the coal and peat play a significant part in heat production. No new investments are going into fossil fuels.

’Their use should be reduced’, says Kerttula.

Finland has set its carbon neutrality goal to the year 2035, which means new ways of producing district heating are being sought in a hurry. EU climate legislation has set the final deadline at 2050, by which point every member state should reach carbon neutrality.

When it comes to reducing emissions in energy production and district heating, many hopes rest on capturing waste heat generated in hydrogen production. As of yet, however, there is no hydrogen production in Finland, and the transformation in question will take years.

’We have quite a few potential sources of waste heat. Energy use is growing in data centres and industrial processes. Demand is also expected to grow for cooling, which generates heat that could be used for district heating.

In the summer, Kerttula says, the demand for district heating is roughly one-tenth of winter demand. Heat can be stored during the summer, as well, with captured heat stored in energy storages built into bedrock, for example. Stored heat can then be transferred to the heating network in wintertime when the system is otherwise under strain.

According to Penttinen, district heating companies should also focus on capturing heat from smaller customers, such as shops. The capacity offered by one larger customer could be secured from a number of smaller customers.

Saving money with heat pumps

Penttinen mentions heat pumps as an excellent solution for cutting both emissions and costs. A geothermal heat pump, for example, can be combined with a district heating connection as a ‘hybrid solution’.

’This would allow the system to automatically choose the cheapest source of heat, whether geothermal or district heating. Hybrid solutions could offer property owners synergistic benefits with waste heat sales, bringing more cashflow and easing the production burden of the district heating system’, Penttinen says.

Finnish Energy’s Kerttula also notes that the widespread adoption of geothermal pumps as part of district heating networks is already being planned.

With hybrid solutions, companies could more efficiently offer their customers demand flexibility in heating prices, where heating would be cheaper when less of it is used. The underlying logic is the same as in selling spot electricity.

’District heating companies are looking at different ways of developing this’, Kerttula says.

Companies’ costs are caused mostly by heat production, so more energy could be stored during periods of lower consumption, providing companies with savings that could also be reflected in customers’ pocketbooks.

Distributed heat pumps could produce heat energy to the district heating network when it is not needed by the property itself. This could also lower the return temperature of district heat, which would benefit production facilities by improving the efficiency of the steam turbines used in the system.

Penttinen notes that energy companies ought to offer their customers more energy services instead of only focusing on selling energy. The companies are slow to change, however, even though Finnish Energy’s actions represent a small step in the right direction.

’Time is starting to run out. We are at a point now where business models need to change quickly’, Penttinen says.

Petri Penttinen defended his doctoral dissertation at Aalto University in September 2023. The topic of his  dissertation is the green transition and the requirements it places on developing collaboration in the district heating business. Read the dissertation here.

Text and photos: Jani Ahosola

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