Profitability of sparse district heating

The expansion of district heating into areas of low heat densities (heat sparse areas) constitutes a challenge due to the higher distribution costs. The profitability of sparse district heating has been analysed from actual investments in 74 areas with 3227 one-family houses connected to district heating between 2000 and 2004 in Goteborg, Sweden. The profitability was estimated from a probable price model, a typical marginal heat generation cost, and the investments from the actual connections made. The analysis identified factors as the linear heat density and heat sold per house explaining the main variations in profitability. The profitability analysis was concluded with a competition analysis. The main conclusion is that sparse district heating is possible when reaching low investment costs for the local distribution network and low marginal costs for the heat generation. In Sweden, the general competitiveness of sparse district heating is facilitated by the high consumption taxes for fuel oil, natural gas, and electricity. Hence, it should be more difficult to introduce sparse district heating in other countries with low energy taxes.