**8.1. Lower demand**

Now, heat demand is decreasing due to higher outdoor temperatures caused by the en‐ hanced greenhouse effect, as well as policies that promote low-energy houses, which makes district heating a less suitable form of heat supply. All new buildings in the European Union are supposed to be *nearly-zero-energy* buildings in 2020 [19]. Low-energy houses often have thick wall and attic insulation, windows transmitting little heat, ventilation with heat recov‐ ery and solar heating. These more advanced installations cause higher investment costs but the lower energy use reduces operation costs.

Lower heat demand should reduce the use of natural resources, such as fossil fuels, and ena‐ ble biomass to be used for other purposes than space heating, such as production of automo‐ tive fuel. But the heat demand reductions are a challenge for district heating and therefore also for the possibilities to utilise energy sources that need district heating to be used, such as industrial surplus heat. Therefore it is important to analyse the interplay between energy supply and energy conservation and between district-heating companies and buildings.

Energy-efficiency measures, such as improved wall insulation and better windows, primari‐ ly reduce heat demand in winter and, hence, decrease seasonal demand variations. This may be favourable from a heat-production viewpoint because high-load plants are needed less but base-load plants (Sect 1.1) may be used more, which would reduce operation costs and environmental impact. But base-load plants would also be affected, which could decrease ef‐ ficient electricity generation in combined heat and power plants.

Åberg and Henning [20] studied the impact of a potential heat-demand reduction due to ex‐ tensive energy-efficiency measures in existing buildings on district-heating and electricity production by using the energy system optimisation model MODEST (Sect. 2). In the Swedish city under study, the heat-demand reductions would primarily decrease heat-only produc‐ tion, whereas CHP production would be less reduced. The *electricity-to-heat output ratio* for the system would even increase, that is, generated electricity per unit of delivered district heating would increase. Local carbon-dioxide emissions would be lowered by the energy-efficiency measures because less fossil fuel would be used. Global carbon-dioxide emissions would also be reduced though less efficient coal-fired condensing power plants would need to replace the electricity that can no longer be produced in the CHP plants due to reduced heat sink in the buildings. However, only the existing electricity and district-heating production plants are considered in this study [20], whereas a process of gradual heat-demand reduction in present houses would run in parallel with a restructuring of the heat supply system probably includ‐ ing a transition to even larger use of renewable fuels. In such a future system, energy-efficien‐ cy measures might not reduce carbon-dioxide emissions.

In a similar study of another city [21], the combined effect of energy-efficiency improve‐ ments in existing multi-family buildings and the connection of new low-energy multi-family houses to the district-heating grid was studied with MODEST. These changes would not af‐ fect global carbon-dioxide emissions if there is interplay with coal-fired condensing power plants. But heat production plants and fuels used have crucial importance for the environ‐ mental impact of district heating. In this case, the heat demand changes would, for example, decrease the use of a CHP plant fuelled with carbon-rich peat, which cause similar carbondioxide emissions as coal. The larger impact on CHP production compared to the previously mentioned study is also shown by an electricity-to-heat output ratio for the system that de‐ clines with heat demand [21].
