HOT|COOL NO. 2/2023 "AI & Digitalization"

This research confronts the myth of active energy consumers. It suggests a new and col- laborative path for district heating (DH) companies that want to remain relevant and competitive toward and beyond 2050. A study has been made to understand the future business conditions of DH and what these imply for the efficiency of current business models. THE DISTRICT HEATING BUSINESS MODEL IN 2050- POSSIBLE PATHWAYS

By Kristina Lygnerud, Senior Energy Expert at the Swedish Environment Research Institute, Adjunct Professor in Energy Sciences at Lund University Chair of the European Knowledge Hub on District Heating and Cooling DHC+ and Hanne Kortegaard Støchkel, Ph.D., Researcher, and Business Development Manager, DBDH

1.1 To remain competitive in 2050, challenges need to be proactively managed District Heating (DH) can play an important role in the Euro- pean energy transition. This was pointed out as early as 2016 in the European Commission’s strategy for heating and cool- ing [1]. To remain competitive, DH companies must account for changes across the value chain- from heat supply (shift- ing from fossils to renewables and waste heat) to significant changes reflecting societal objectives 2040, 2050 even 2080. The many challenges ahead will likely necessitate a change in how many sectors, including DH, will have to revisit how busi- ness is conducted. For a long time, hope was set on the active energy consumers – highly motivated and willing to act and overlook their own needs – to come and save the day. But human nature does not change much; instead, progress can be found when ac- cepting and incorporating this in how DH companies develop their business to match new circumstances. This development is not a technical challenge; it requires opening up and reach- ing out to customers and society to co-create future solutions actively. 1.2 To study the future is difficult – a combination of methods was applied In the project “The DH business model 2050“, a group of mixed stakeholders has attempted to understand possible future customer values and business models for DH.

To understand the future, different methods to collect data were combined. First, information about EU level and national, long-term objectives in the countries represented in the pro- ject group (Denmark, Sweden, Germany, and France), DH’s cur- rent and future role in these countries, and current and future competition to DH was collected (literature review). Based on the findings, an interview guide was prepared to identify the current DH customer value and possible upgrades of it. Three groups of respondents were targeted: DH companies, waste heat owners (sometimes also a prosumer), and customers. Five interviews were targeted per group and country. Based on the literature review and interviews, future conditions under which DH companies will need to operate were identified (we call them boundary conditions). With the boundary conditions as the point of departure, the project team engaged in identifying the value of the future DH customer offer. A tool to work on business model development called the value proposition canvas was applied (derived from the business model Canvas [2].) To use it is a process where the project team meets on several occasions to discuss different aspects of customer value. Based on the joint discussions, two alternative customer value propositions for DH were identified. These were used to identify two possible business models of DH in 2050.

A study of the future is incomplete, and it is impossible to know if it will arrive at conclusions that will be realized in

The group consists of representatives from two cities (Al- bertslund in Denmark and Nice in France), one DH com- pany (in Braunschweig, Germany), one industry associa- tion (Danish Board of District Heating), and two research organizations (University of Applied Sciences in Stuttgart

and the Swedish Environmental Research Institute). IEA-DHC funded the research as an Annex XIII project, and the entire project report is publically available [ ii/annex-xiii-project-06].

24 HOTCOOL no.2 2023

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