Impact of fossil-free decentralized heating on northern European renewable energy deployment and the power system

Complying with ambitious EU climate targets, decarbonization pathways for space heat and hot water, in addition to the centralized energy generation sector, are analyzed using the open energy modeling framework, Balmorel. Hybrid systems and simplified consumer preferences are incorporated in the investment choices for decentralized heat.

Five scenarios are analyzed: three with varying heat demand developments by 2050, one acknowledging the presence of carbon-neutral gas, and one covering only power and centralized heat sectors for comparison. All scenarios must comply with the EU emission targets in both the Emission Trading System (ETS) and non-ETS sectors by 2030, followed by a linear reduction towards zero fossil CO2 emissions by 2050.

The optimization model reveals that the most cost-effective solution is electrification, which requires substantial investment in wind energy infrastructure. In the case of constant decentralized heat demand, the electricity demand will increase by one-third from the current level, consequently quintupling the installed wind capacity.

Heat demand seasonality causes challenges leading to extreme high and low seasonal prices, and substantial curtailment in summer. Impacts on the power system have been underestimated because decarbonizing decentralized heat has not been considered. The results also imply a more important role for system integration.