Thank you.
Thank you very much for the opportunity to participate in this hearing. We are both independent consultants working in the district heating sector. We are normally helping Swedish district heating companies in their operation, and especially in their market presentations.
We are also focusing on exporting Swedish district heating competence, as we understand that Sweden is among the world leaders when it comes to district heating systems.
We have been called in a very short time to participate in this hearing, so unfortunately we have not been able to send any presentation to you or any figures; we'll just have to read it. I'm sorry about that. All the same, we are going to focus on district heating, as I suppose this is the main interest for this hearing.
To begin with, I'd like to say something about the district heating advantages as we find them in Sweden. The district heating system.... There is actually a low prime energy demand due to the high system efficiency. There is a very high efficiency in the system when it's correctly done.
We also have good utilization of domestic renewable energy resources. There is big utilization of industrial waste heat in the Swedish system. The carbon dioxide emissions are very low. We use incineration where heat recovery is gained for the district heating systems. Cogeneration is normally a basic system in district heating systems where we produce electricity. Heat supply is profitable in Swedish cities. The environmental performance is actually outstanding.
There are so many advantages to district heating systems, not only in terms of energy sources and fuel usage but also environmentally. As well, it's always produced in a profitable way.
The district heating history in Sweden covers about 60 years now. All major cities in the country invested in these systems in the 1950s. Initially it was local environmental reasons that started the replacement of individual oil boilers. Although there was continuous expansion in the 1950s and 1960s, mainly in the big cities, a dispersion took place after two oil price peaks in the 1970s. Then even smaller cities invested in district heating systems in order to reduce heating costs and to improve system performance efficiencies.
Most municipalities started their district heating expansion by connecting major buildings such as hospitals, schools, administration buildings, and municipally owned apartment blocks. When network pipes were passing areas of smaller houses, these were also connected to the district heating system, basically due to bulk demand.
The infrastructure within each building made it easy to convert from oil boilers to district heating, where we normally have centralized systems, but the production and distribution system needed heavy investment. For the municipalities, normally the owners, the accepted depreciation period was about 20 to 30 years, but the return on investment was much shorter than that.
In Sweden, the municipalities dominated ownership of district heating systems. Fifty years ago, 35% of the system operations were organized in municipal administrations. Today, though, almost 100% are organized in business-driven companies. They are also making good profits.
Historically there has been a regulatory system advantage for these systems, which we call heating plants. The legal heating plan, which was sort of a map of the city, had different areas planned for district heating, electricity heating, and gas heating. This system was abolished in the mid-90s; district heating companies are now operating in an unregulated market, competing with other heating systems, often heat pumps in Sweden.
Still, the expansion not only proceeded, it even increased. During the 1980s, there was a major increase in district heating systems all around the country. This was a politically driven expansion in order to reduce oil dependence and emissions of especially sulphur dioxide and nitrogen oxide.
The incentives were basically economic in order to stimulate market conversion, but this was also the starting point for fuel conversion within the district heating systems. I'll talk about a few of the systems just to show what happened between 1981 and 2007.
In 1981 we had about 97 petajoules of district heating in the Swedish system. By 2007 it was almost double that, at 175 petajoules. The fossil fuel accounted for 87% in 1981; in 2007, it's 12%. Biomass was none in 1981 and 45% in 2007. Incineration has increased from 5% to 16% in these years. Heat pumps accounted for 0% in 1981, and today, or at least two years ago, it was 9%. Industrial waste heat was 3% in 1981 and 7% in 2007.
So in 2007, renewable energy sources, like biomass incineration, industrial waste heat and so on, accounted for 75% to 80% of the fuel supply in all the Swedish system. Since the eighties, the expansion of district heating indicates that Sweden has achieved the Kyoto agreement more than four times over.
The reduction of CO2 emissions from the district heating system has exceeded 80% in these years. The market share for district heating among multi-family houses to date is 88%; offices and public buildings, 75%; and small houses, 12%.
Customer opinion about district heating is that the environmental aspects are the most important for choosing district heating, but they also say that simplicity and the trust in district heating is one of the biggest reasons for choosing it. It's also said to be modern and price-worthy, although the companies are profitable.
Fifty years ago, 35% of the operation was under municipal administrations, but there has been a conversion. Today, almost every operation is a business-driven company.
This was just a short brief of the development for more than 50 years. I hope to give you more appropriate and helpful answers to your questions.
Thank you very much.