"We Need to Take a Good Hard Look at Ways to Improve Efficiency"

Expert Interview – May 21, 2021

Interview with Tobias Dworschak, Director of vedec, about the role of the heat sector in the energy transition

Heating and cooling accounts for a good 50% of energy consumption in Germany. What’s more, almost 85% of this energy is still generated using fossil fuels such as gas, coal and oil. With this in mind, we asked Tobias Dworschak, Director of vedec (German association for energy services, efficiency and contracting), what can be done to accelerate Germany’s heat transition and what role contractors can play in this.

Mr. Dworschak, could you start by giving us a brief introduction to what contracting is exactly?

Contracting is basically a typical outsourcing service. Rather than sorting out the energy supply to my buildings, real estate or production sites myself, I simply outsource it to someone who knows what they’re doing and can make money from the energy efficiency savings.

In the past, the contracting model focused solely on heat supply, but now it is used for a wide range of services, including heat, electricity, electric vehicles, battery charge management and energy management. Contracting comes in a host of different forms. The most common model by far are energy supply contracts, where the energy supplier operates the generation plants, absorbs any efficiency risks and sells usable energy to customers in the form of heat, electricity, compressed air, light, cooling, etc. Energy performance contracts are a little different. Here, the energy supplier guarantees the energy savings in advance and is then responsible for operating the energy generation plants and meeting the agreed targets. That’s what makes contracting such an exciting development and vital tool for a successful energy and heat transition.

When it comes to electricity generation and transport, everyone’s talking about renewables, renewables, renewables. But developments in the heat sector seem to have stalled. Has the sector been forced to play second fiddle in the renewable energy race? The BDI (Federation of German Industries) is finally calling for the heat sector to aim at 100% renewables as well. But how realistic is that? And how can this goal be achieved?

All excellent questions! I don’t think the heat sector’s been “forced to play second fiddle” exactly; but we perhaps haven’t seen the same level of commitment from day one. It’s certainly true that we’re much further ahead in the electricity sector than the heat sector. As I see it, there are two separate issues:

Firstly, renewables are not the complete solution for the heat sector. We also need to take a good hard look at ways to improve efficiency. A few years ago, the German government was really pushing its big Efficiency First message, but I’ve not seen much focus on this in recent discussions around energy policy. Efficiency improvements are, however, vital if we’re going to succeed. It’s unlikely that we’ll be able to generate enough energy from renewable sources to meet current consumption levels, especially if the economy and population continue to grow and we want to maintain today's living standards. That means we need to dramatically reduce our energy consumption.

That said, if the remaining demand is to be met from renewables, there still needs to be a significant push towards expanding their share right now. The contracting model is not biased towards any one technology. Contractors can install what their customers want, be it fossil fuel boilers, high-efficiency combined heat and power units, photovoltaic systems, heat pumps or wood chip boilers. The energy supplier doesn’t mind what solution is used; their only concern is how cost-effective it is and whether they can offer it to their customer at a competitive price. For me, price is one of the key issues at the moment. We still need address the cost gap between fossil fuels and renewables, but the new CO2 price introduced in Germany at the start of 2021 marks a positive step in the right direction.

In a recent episode of The smarter E podcast, the mayor of Tübingen suggested that the threat posed by climate change is now so great that we can’t afford to wait for all private homeowners to put photovoltaic systems on their roofs and install heat pumps. According to him, it would be much quicker to get rid of heating systems entirely and connect all homes to a carbon-neutral district heating network. Has the concept of a citizen-led energy transition run its course, and is it time for more proactive large-scale solutions? What do you think?

Above all, I think we need a mix of solutions. There’s ultimately no one-size-fits-all option – no single solution that works for all use cases. I live in a rural area in a place with around 5,000 residents. The solutions needed for my community are very different to those required in central Berlin, Cologne or Hamburg where there is already a district heating network that could be switched over to renewables – or perhaps already has been.

I worry that we focus too much on finding a single solution, which ultimately doesn’t exist because every situation is different. That said, it’s important that the discussion doesn’t become too fragmented. We need to make change happen – and for that we need a sensible roadmap and consistent framework, so that today’s investors know what technologies they should be investing in. If a new must-have technology appears every six months, that only breeds uncertainty.

Waste heat is another important factor in improving energy efficiency, especially at large-scale industrial sites. Are there contracting options that enable companies to integrate their waste heat into heating networks?

Yes, some energy suppliers are running projects where waste heat from industrial or other processes is fed directly into local district heating networks supplying heat for homes. In other projects, modern heat storage systems eliminate the need for a direct connection. In other words, the waste heat can be generated in one place, stored and then fed into a separate network nearby. These solutions exist today and are a great option for contractors because they create an interface between the generators and consumers of heat.

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