Overview of National DHC Market

Overview of National DHC Market

Country

Romania

Summary of national DH market

Romania is one of the important markets for District Heating in the European Union (9th place in total heat delivered). In Romania 91 % of the heat from District Heating grids is delivered to residential customers, 7 % is delivered to public buildings and customers from the area of business, trade and services and 2% to the industrial sector. The heat delivered in 2008 account for approximately 60.000 TJ

The total length al DH network is 7611 Km, number of employees’ approx. 76.000, and estimated number of residents using DH service: 4.368.000 persons.

During the period 1997 to 2002 more than 500.000 flats were disconnected from the DH networks. As the price for natural gas was, at that time, artificially set at a low level, the disconnections occurred preponderantly in DH systems that used coal and heavy fuel oil. After the year 2002, with the gradual increase of gas price, the disconnections did not correlate with the fuel type any more.

The fuels used by DH: natural gas – 48%, coal and coal products – 41%, oil and petroleum products – 10%, renewables close to 1%.

Approximately 84 % of District Heating is generated in. Natural gas and coal are the main types of fuel being used in Combined Heat and Power with biomass gaining in importance.

Combined Heat and Power units supplying DH accounts for approx. 10% of the Romanian electricity production.

Natural gas and coal are the main types of fuel being used in Combined Heat and Power with biomass gaining in importance. (Coal and coal products – 53%, Natural gas – 38%, Oil/Petroleum products – 9%).

Traditionally, district heating in Romania was part of the urban planning starting 1960. As the industrial capacities and blocks of apartments were build all-around the country, numerous power plants were build to supply power and heat to major industrial plants (electricity and steam) and for urban residents in the close-by cities. Starting 1990, Romanian industry was disaggregating, the demand for steam being lower and lower. As a result, some of the power plants ceased production, in some area was not economical anymore to use the same source of heat for DH. Anyway even in the case of still productive power plants the oversized capacity, age of technology, increased price of fuel, lack of emission treatment and control and a poor cash flow resulted in late return from heat sales are elements that are endangering the future of these energy producers.

The low level of income for the Romanian population (only Bucharest is close to the European average level of income, the rest of the country is only at about 50% of it) is a big handicap for DH. Due to the economical situation occurred starting 2009, the state budget is not anymore able to help the DH systems. A large number of DH companies are not able to pay back the loans and to finance the minimal investment requested for a fair maintenance of the systems. Situations may vary depending on the fuel used (natural gas being more expensive than coal), the configuration of the heat supply and distribution (companies that are including only DH, DH + Power plants), the use of cogeneration (or not), the level of income of the customers, the grade of modernization (insulated pipes, metering, variable speed pumps, monitoring, modern heat exchangers, etc).

With a very price-sensitive market and District Heating being in direct competition with other forms of heating systems and predominantly gas and oil boilers, a competitive price is a precondition for the further development of District Heating in Romania. The European Union Emission Trading Scheme is therefore considered a barrier towards the further development of District Heating in Romania from the third Trading Period onwards. The European Union Emission Trading Scheme favors installations below 20 MW by not including them in the system. In Romania these installations consist mainly of individual gas and oil boilers. These same systems are also the biggest competitors of District Heating in Romania. Since Romania, unlike other Member States, has no tax on CO2, the market balance is heavily distorted to the disadvantage of DH.

Renewable energy sources play an increasingly more important role in District Heating, especially in small sized grids. Especially wood chips are used in DH, mostly in areas where wood is exploited extensively.

Prices and Costs of District Heating

Apart from unquestioned ecological benefits of District Heating, analysis of the full costs of District Heating in comparison to other energy sources show that District Heating is a well-priced alternative for customers. Despite this, the regulated heat tariffs and the inertia that characterize the income movement (delay in customer’s payments, in subsidy and aid from local or central government) is deteriorating the finance balance of DH companies that are able to perform well.

The cyclic characteristics of the heat supply activity and the use of a one-part tariff for heat is also influencing in a non-beneficial way the DH economical performance. Taxes paid are not coordinated with the characteristics of the heat supply and the tariffs system cannot absorb high fluctuations of the primary energy prices. More than that, the regulation of the electrical energy market is not favorable to the producers that are using cogeneration in supplying DH systems.

Image of District Heating in Romania

District Heating in general has a neutral or even negative image, as an obsolete and communist era heating system. In the last years the rate of disconnection was considerably lower than the 1997-2002 period, but the challenge now is having entire systems in bankruptcy situation.

One major reason for the negative image is the lack of possibilities to meter and control individually the heat supplied from DH network to each flat. During the last 20 years, metering was introduced for cold water, hot water and natural gas. For these new arrangements, small changes were done in the configuration of the network (mostly inside buildings) and the installed meters are not very expensive. Most of the apartments in Romania now have metering for water and gas. And almost 90% of the Romanians own the apartments they are living in. The possibility to make radical changes in the same apartment building and in the same period in time is depending on the owners opinion regarding the subject and on their financial situation. For the heating systems is not that simple and extensive works have to be done in order to change the customers installations from the vertical system to a horizontal one. Each flat has pipes that are crossing the rooms from above to bellow, one pair for each room. To be able to meter the heat, each apartment should have all the radiators connected to one in and one out pipe, where the meter is installed. Apart from this, the heat meters are much more expensive than the ones for water or gas, this resulting in a long period needed to recover the investment.

Other reasons for bad image: old networks-frequent failures, oversized-huge fixed costs.

Perspective for District Heating in Romania

Noteworthy development of District Heating is not expected soon because of the economic situation of the consumers, legislative framework that is not promoting enough the DH, emission measures that have to taken, tariffs that are not encouraging investors to invest in DH, inefficiency of old systems, lack of interest from the local councils that owns DH, gas undifferentiated price for big and small consumers.

Regarding legislation, we have to mention the Government Decision 381/2008 which improved and extended the program “District Heating 2006-2015/ Heat and Comfort” and which facilitated the modernization of some boilers and steam turbines belonging to power plants which supplies heat to DH. In the same program, funds are allocated for rehabilitation of buildings, including thermal insulation and modernization of heat installations. Lower consumption of heat per square meter will help in lowering the heat bill per apartment.