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The future of the heating sector. What can we expect?

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Jon Arteta Ibinarriaga's picture
Consultant Freelance

  Jon is an Industrial Engineer contributing to the development of the Energy sector. Through a solid technical base, polyvalent approaches and a multidisciplinary character, Jon has developed...

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  • Oct 18, 2021
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Despite the Covid-19 pandemic, the need to decarbonise the different areas of our economy, so the impact on the environment is minimised, has not waned.

Amongst the different proposals and recommendations made lately on this subject, the one mentioned by the Spanish heating sector (i.e. Sedigas, Conaif, Fegeca, CNI, Amascal) is worth being highlighted. This is, the need to renew today´s appliance stock, as well as further pursuing the use of renewable gases (e.g. green hydrogen, blue hydrogen, biomethane, biogas), in the hopes of accelerating decarbonisation efforts.

A measure that may seem quite controversial, considering that decarbonisation proposals, at least at a European level, essentially go through electrification.

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That said, this proposition invites us to reflect on the most convenient routes of action on the sector’s pathway towards reducing its environmental footprint.

Currently, households account for around 25% of the total energy expenditure in the EU, a figure in which heating represents 80% of the overall consumption. In the case of Spain, this can be translated as 2 tons of CO2eq out of the 7 tons emitted annually by the average citizen.

Considering that the overall energy consumption is mainly based on fossil fuels (i.e. 47.1%, without accounting fossil fuels used for power generation), the need for a change seems imperative. However, should we bet on new “renewable” gas equipment, or is there a better option within the sustainable spectrum?

It is definitely a difficult choice, since the business environment of each individual country, the infrastructure, market trends, or energy security, all play a part in the decision making process. Regardless, there are two routes of action that seem pretty clear:

  1. The mixture of “renewable” gases, such as green hydrogen or biomass, in the current gas supply system. It could be an effective way to decarbonise the sector in the short term. Countries such as Germany or the Netherlands are an example of this type of action, having achieved integration levels between 5% and 15%.
  2. Renewing current distribution systems and equipment. Either by focusing on electrification, or by adapting the current structure to the use of renewable gases.

This last point is probably, at least in my opinion, the most thought-provoking of the two, as it invites us to reflect on the following question; How to drive change in the sector, while considering the interests of stakeholders?

As I see it, the answer lies in circular economy principles, and more specifically, in the servitisation of products. Why? Well, customers openly displayed their demands from the beginning: heat is required. Therefore, it was never about acquiring new products, but about satisfying a need. In other words, providing a service.

Furthermore, in this particular field, the need for servitisation seemed more than obvious, not only due to the changing demands experienced by the market, but also due to the flexibility that this option offered. All while opening a pathway towards accelerating the decarbonisation process in the sector, developing new sustainable business models, or even renewing the existing ones.

However, how does this concept translate into benefits for suppliers or consumers?

The high costs of acquiring new products is eliminated for the consumer, falling on to the supplier company, which, in turn, is responsible for the installation, maintenance and replacement of the equipment during its life cycle. In exchange, the company charges a monthly fee for its services. This allows users not to be responsible for the liability associated to the product, while minimising the associated operating times and avoiding the risk of a possible high-expense that may compromise the users’ finances.

As for the company, it obtains the capacity to easily adapt to possible changes in the market, a constant flow of capital, and an absolute and centralised control of its equipment, all while contributing to the reduction of its associated environmental impact.

It is also worth mentioning the obvious link between digitisation and this differential factor, given its close relationship with ICT, IoT, or Big Data. An additional point of interest for both companies and consumers.

Definitely a model worth studying in the future, given its ability to accelerate the decarbonisation process, while offering the chance of avoiding major disruptions in the market.

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Matt Chester's picture
Matt Chester on Oct 18, 2021

The high costs of acquiring new products is eliminated for the consumer, falling on to the supplier company, which, in turn, is responsible for the installation, maintenance and replacement of the equipment during its life cycle. In exchange, the company charges a monthly fee for its services. This allows users not to be responsible for the liability associated to the product, while minimising the associated operating times and avoiding the risk of a possible high-expense that may compromise the users’ finances.

Are the supplier companies ready to mobilize on this at scale, or would they find themselves strapped for the capital, equipment, and labor to get this done quickly? 

Jon Arteta Ibinarriaga's picture
Jon Arteta Ibinarriaga on Oct 18, 2021

Well, it would certainly need to be a progressive change, and an adaptation period would be required. However, customer service teams, as well as independent contractos, already fulfil this function. The main barrier may come from the restructuring needs of this proposal.

Nevertheless, problems related to; obsolescence, the need to retain a varied and outdated stock, storage cost, or expertise needs, would be concepts destined to disappear.

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