Transforming Ukraine’s District Heating: Technology to the Rescue

Ukraine’s District Heating systems have been a critical part of the country’s support for its citizens for decades; however, the current state of its systems is inefficient and outdated fossil-fueled equipment that has contributed to an economic drag on the country’s energy sector for many years. These systems require significant costs to maintain and operate and raise costs for customers, while also contributing to urban air pollution. The arrival of new sustainable energy technologies, along with the rehabilitation requirement magnified by the Russian invasion, have created the opportune moment to completely transform this portion of Ukraine’s energy environment.

The Challenge

The collectivist approach to governance from decades of Soviet influence led to today’s uneconomic and inefficient District Heating sector in Ukraine. This sector, vital to the well-being of nearly all urban residents of the country, is still dominated by massive and outdated fossil-fuel-fired steam or hot water boilers. Heat is delivered through poorly maintained distribution systems to individual users who are sometimes not even metered, and have no means of controlling their use. Consequently, District Heating is the single greatest source of inefficiency in Ukraine’s energy system, and only a few of the 256 district heating companies throughout the country are able to recover their operating costs.

The Russian invasion has exacerbated this situation. Rocket and drone attacks have targeted District Heating (DH) generation plants, distribution systems, and user sites like apartment buildings. The fuel delivery systems – coal, fuel oil, and natural gas – have been similarly targeted. It is estimated that as much as 30% of Ukraine’s heating capacity has been damaged since February 2022.

In the face of these devastating challenges, now is the time to transform the District Heating sector to the benefit of the entire country and its emerging diverse energy sector. This ‘Build Back Better’ effort will have to include, as a minimum:

• Solutions and programs that are tailored to municipalities’ individual situations and engage and strengthen the local workforce while still being replicable around the country.
• Employing technologies that increase DH and building efficiency while drastically reducing the use of fossil fuels and their emissions.
• Right-sizing DH systems – while ensuring systems are expandable in the future – to account for customers’ behavior (e.g., disconnecting from these systems due to dissatisfaction with services, resulting in oversized boilers operating at low part-load efficiencies).
• Adopting digital technologies to support DH systems’ assets and distribution networks in providing maintenance, expansion, constructability, and metering and billing.
• Improving market-based tariff collections from users to be cost-reflective of operations
• Creating the legal, regulatory, and policy conditions to attract private sector investment

As part of Ukraine’s DH transformation, there are two critical elements that must be implemented: 1) More efficient and effective technologies such as heat pumps, and 2) Empowering consumers through increased energy education and incentive structures.

Heat Pumps are Ready for Prime Time

Heat pumps extract latent heat from the ground, air, water reservoirs, or waste heat; concentrate the heat with compressors to make it usable; and then deliver it as heated air to buildings and dwellings. Since heat pumps do not create heat, but merely concentrate and transport it, they can operate at efficiencies of over 400% (i.e., 1 kWh of input can provide 4 kWh of usable heat output). This is compared to modern, efficient coal or natural gas boilers that are designed for a maximum efficiency of around 95%, with legacy boilers regularly achieving efficiencies in the 70-80% range or lower.

Transitioning Ukraine’s hydronic DH systems to using heat pumps would also greatly reduce DH boilers’ emissions, a major contributor to urban air pollution. These emissions can be eliminated when the heat pumps are powered by pollution-free electricity, like wind, solar, nuclear, biofuels, or hydro.

The benefits of advanced heat pumps have been demonstrated in numerous city District Heating systems throughout Europe. Prominent examples are Berlin, Stuttgart, and Mannheim, Germany; Gothenburg, Sweden; Esbjerg, Denmark; and Cornwall, UK.

Implementing a DH heat pump system requires tailoring the system to the circumstances of each city – demand peaks, available sources of heat and waste heat, DH utility plants size and location, and distribution system layout. All these factors impact how DH heat pump systems are designed. Hybrid DH plants with new efficient boilers fueled by natural gas or alternative zero- or low-emission fuels can be designed with boilers being used as “peakers” for the system. This will increase overall reliability, resiliency, and energy security.

This flexibility demonstrates another outstanding characteristic of heat pumps: they retain their economics and efficiencies whether distributed or co-located. This is particularly important in conflict situations like Ukraine today, where decentralization of heat production greatly increases energy security.

Given these significant efficiency improvements and the high cost of conventional fuels today, competitively priced heat pump installations can be quite economic, with investible rates of return. There is great interest among international finance institutions and development finance institutions in this sort of asset-based, renewable energy financing.

Empowering Heat Consumers

The value of building-level efficiency improvements can rival the value of improvements in heat production from new technology. However, to effectively reduce the demand for District Heating, appropriate regulations and tariff schedules are needed to incentivize consumers to move toward the more efficient use of energy. Billing on the true cost of delivering heat to customers creates incentives for better energy efficiency. This should lead to the elimination of all but hardship subsidies. As regulations and tariffs are updated, however, heat consumers need to be better educated on how they consume and what the real costs are. Special billing programs like pre-pay may assist here, too.

Energy efficiency education and implementation programs that identify and incentivize cost-effective improvement projects for consumers will also be very valuable. These can range from simple weather stripping to smart HVAC controls. When properly prepared and justified, these projects may be financeable by local commercial banks, perhaps guaranteed by international finance institutions.

The people of Ukraine have faced immense challenges since February 2022, and their critical infrastructure has not been spared. However, by aligning market forces, humanitarian aid, and appropriate regulations and tariffs an opportunity exists to transform from Soviet-style DH systems to modern, efficient, sustainable, equitable, and resilient heat pump-first solutions.