Applied taxonomy - the case of District Heating
The EU taxonomy is a framework to guide investors toward green investments. Not all assessment parameters are known to date, and the real impact of the ones derived to date has yet to be discovered. This project aims to understand the consequences of EU Taxonomy concerning investment strategy, technical choices and policy in the district energy sector.
The energy sector is key to combating climate change, and in Europe, the heating and cooling segment reflects a large part of the sector (half of final energy use). In terms of monetary value, the market was estimated at USD 138 billion by 2020. The district heating sector has great potential to supply Europe with green heat and could meet half of Europe's heat demand by 2050. In order to avoid investments in district heating projects being hampered by uncertainties in the EU taxonomy, this project aims to understand the consequences of it with regard to investment strategy, technical choices and policy in the district energy sector. By applying the taxonomy to the district heating case study, knowledge is generated for effective decision-making among investors in green energy, the public sector, district heating companies and regulators.
Case study in Gothenburg
Results will be generated through techno-economic energy system optimisation modelling. A tool, an existing model, is updated by identifying relevant taxonomy criteria and integrating them into the model. In addition, life cycle data (LCA) of the manufacture of technologies are included. Experience from the district heating sector will be added to model results and effective, taxonomy-adjusted, investment strategies will be identified that are required to achieve the 2030 targets. The case study includes the city of Gothenburg and its energy company. The City of Gothenburg is a pioneer in green bonds and has a great interest in understanding how district heating can contribute to the transformation of the energy system, how the local energy company's investments as well as how the city's borrowing strategy will be affected by the taxonomy.
The project core team is composed of the Swedish Environment Research Institute, Stuttgart University of Applied Sciences and Eurac Research. The work is conducted with the Sustainable Finance Lab Sweden at KTH and supported by a reference group reflecting an array of stakeholders (investors, district energy national and European associations, as well as organisations working on thermal energy AI, investment and district cooling). The project is validating results with a reference group on a monthly basis.