A technical analysis of FTT: Heat

This report introduces a new bottom-up model for simulating Future Technology Transformations in the European residential heating sector, FTT:Heat. Based on scenario inputs for the future demand for heating as an energy service, the model simulates the uptake and replacement of heating technologies by households in all 28 EU Member States up to 2050. It features an explicit representation of households’ technology choices, based on market competition, climatic conditions, policies, and induced technological change.

FTT:Heat is here applied for simulating a set of policies and scenarios. A baseline scenario is defined, which assumes the continuation of current policies and technology diffusion trends. Based on the identified trajectories, it is estimated that residential heating within the EU would become less carbon-intensive in the future: CO2 emissions by residential heating are projected to decrease by around -22% until 2030 (relative to 2014), while household demand for heating would remain stable. A closer look at individual Member States, however, unveils large differences: while some countries are estimated to continue an ongoing transition towards renewable heating, others would hardly see any change in their heating systems under existing policies.

In addition to this baseline projection, several scenarios aiming at an increased share of renewable heating are simulated. For this purpose, different policies are successively added on top of each other, until an increase by at least ten percentage points is realized between 2018 and 2030. Eight Member States are projected to reach this objective without any additional policies, thanks to an ongoing diffusion of renewables technologies. For thirteen Member States, the model simulations suggest that the renewable heating objective could be fulfilled by introducing a combination of (additional) market-based policies from 2018 until 2030: a new carbon tax on the residential use of coal, gas and oil (starting at 50 € per ton of CO2), which would need to be combined with capital subsidies on the upfront cost of renewable technologies in eight Member States (-30% on the installation costs, phased out after 2030). For the remaining group of seven Member States, even the combination of both price instruments is projected to be insufficient for reaching the renewable objective by 2030. In these countries, the current shares of (decentralized) renewable heating are so low that it would require additional ‘kick start’ policies (e.g., procurement policies targeted at publicly owned building) to enable a sufficiently fast growth of the incentivized technologies.1 The results indicate that the envisioned increase in renewable heating share needs relatively more effort in countries with low starting values.

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