The impact of building renovation with heat pumps to competitiveness of district heating: Estonian district heating pricing system needs more flexibility

The European Union (EU) and the whole world are striving towards less polluting and more efficient energy use and production. For that the EU has set targets for 2020, and has envisioned plans for 2030 and even 2050. In 2015, world leaders have agreed to reduce emission of greenhouse gases in the Paris summit. EU sees as one of the measures to fulfil these targets the development of district heating (DH). DH is an economical and environmentally friendly and a very convenient way to supply heat to end consumers. DH is especially popular in Nordic countries where there is high demand for heating due to colder climate, but it has a huge potential also elsewhere in Europe. Estonia is committed to comply with those targets. The actions of market participants in the energy field have been motivated greatly by subsidies and grants. There are different measures targeting on one hand building energy performance and on the other hand energy delivery and production efficiency and implementation of renewables. This paper analyses how those measures work together and shows shortcomings of the policies and measures developed separately for each target. It becomes clear that to develop successful policy it is necessary to look at the whole system, including the pricing principles, not just its parts alone.