Introducing digital solutions to the district heating or energy sector holds great potential. It should, for example, increase operational efficiency, facilitate new, sustainable sources of heat and improve the efficiency of energy consumption. However, before contemplating top-end digital solutions, it is important to get the basics right throughout the system. One way to look at the sector is to divide it into the supply side, which includes heat production and transmission, and the demand side, comprising commercial, institutional and residential end users.^[i]

Getting the basics right on the demand side means having the right framework in place to encourage or mandate consumption-based metering and billing. Ideally, this should be at apartment level, but building-level metering and billing in tandem with individual heat substations are often a good place to start. There should also be a framework requiring minimum technical standards for metering, ideally covering the remote reading and monitoring capabilities of metering devices.^[ii]

On the supply side, the basics should include a standardised approach to the monitoring and analysis of key operating parameters, from individual heat substations at building level to key points on the network and heat generation facilities. These should all be visible in a modern, centralised control system (or supervisory control and data acquisition (SCADA) system).

With the basic measuring and monitoring infrastructure in place, there are a number of digital and smart platforms that can perform data analysis, recommend more efficient operating patterns, foresee potential faults, generally improve reliability and reduce the energy consumption of these systems. On the demand side, for end users, there are various forms of metering and management solutions available, enabling the remote and automated management of heating or cooling supply.

The following illustrates common technologies adopted in the development of smart district energy in more detail, including (i) the introduction/use of sensors and metering in distribution systems; (ii) the introduction of a SCADA system; (iii) data analysis and forms of automated operation/optimisation; (iv) smart meters and management systems for end-users; and (v) green district energy technologies.

• Sensors and meters

Intelligent district energy systems are based on sensors, meters and smart grid-integrated communications. Various devices measure the status of equipment at key points on the network and at each substation, then send diagnostic signals for further processing and analysis by the SCADA system and control centre.^[iii] Devices installed at the substation may include heat meters on primary supply lines, sensors to gauge outdoor temperature, communications equipment and temperature sensors on the supply and return pipelines. Heat cost allocators are considered a sufficient technical solution in older buildings, where retrofitting an individual apartment meter would require costly piping renovations. Leak detection, combined with a geographic information system (GIS) that provides positional data on the pipe networks and other infrastructure, helps identify the exact location of an incident, ensuring the safety of the system and reducing energy waste.

• SCADA^{[iv], [v], [vi]}

Municipalities could integrate SCADA systems to manage the aforementioned large-scale sensors, devices and smart meters located in the distribution network, as well as the data generated. This system-integrated hardware and software, with data acquisition, monitoring, processing and control management functions, presented in a human machine interface, is used to monitor and supervise the actual status of flow, pressure, and forward and return temperatures at the network end points.

These measurements can also be used to estimate the status of all positions in the network. Continuous comparison helps to identify any potential defects, outliers or dangerous situations in the distribution network, enabling immediate response to alarm signals.

SCADA is usually adopted to control and manage equipment and machinery located at multiple sites through a complicated process. It is seen as a means of reducing operating costs, meeting consumer needs and fulfilling regulatory requirements.^[vii] It is also a necessary step in moving from a production-led model of heat supply to a demand-led model in which heat is produced and distributed based on actual demand.

• Data analysis and forms of automated operation/optimisation

In addition to actual status management, predicting and organising heat loads according weather conditions and historical data is also an important step in intelligent district heating systems. Using historical data on climate and the parameters of heating supply in different periods, the heat load can be pre-regulated for different weather conditions, improving consumer comfort.

Hydraulic modelling, a form of real-time and operational monitoring, is a useful tool for distributing heating water based on demand. Unlike other forms of intelligent district heating systems, hydraulic models require a number of specialised software packages. The optimisation of thermal operations is done using big data analysis and artificial intelligence (AI). Various data are required to find the best balance of supply temperatures and flow in order to predict future demand and pre-adjust operational parameters, including:^[viii]

• Historical and real-time demand data for various times of day and weather conditions
• Economic data, such as the price of fuel and electricity
• Network environment data, including transmission times and network losses.
• Smart meters and management systems for end users^[ix]

The deployment of smart metering at dwelling level requires heating consumption data not only for billing, but also user behavioural data that can be analysed to forecast district heating consumption, optimise network operation and improve performance. The installation of smart meters allows end users to control their heating remotely, turning it on and off and adjusting the temperature through a mobile app. It also optimises heat settings automatically and adjusts boiler output based on internal and external temperatures.^[x]

Doing away with the need to invest in additional capacity means that smart meters improve the efficiency of existing distribution networks. In addition, the collected data can be used to provide end users with information on their consumption and payments, as well as to suggest certain energy-efficiency initiatives (for example, on flow, return temperature and cooling) to lower consumption-based billing.^[xi]

The preconditions for consumption-based billing and smart metering at dwelling level should be put in place throughout the system. These should not be limited to the procurement and deployment of heat meters and thermostatic radiator valves, but also involve careful planning for financing and implementation (such as subsidy and distribution programmes for end users through heating utilities), accompanied by extensive public outreach campaigns.^[xii]

• Green district energy technologies

Heating and cooling production can involve multiple heat sources, including various forms of renewable energy and excess heat from industrial or urban sources. It can actively incorporate thermal energy storage and, optimally, be integrated into the electricity grid. Improvements to networks are also needed to reduce operating temperatures, integrate greater quantities or facilitate the use of renewables or excess heat supplies. However, this approach makes district energy operations more complex, increasing the need for real-time information and advanced forms of automation.

A green improvement on the demand side may focus on the introduction of consumption-based billing by installing smart metering in residential buildings. Introducing cost-reflective prices for heating and putting consumption-based billing into practice is fundamental to realising the financial viability of energy-efficiency investments. Improving the building envelope, by insulating walls and repairing doors and windows, for example, also plays a vital role in greater energy efficiency.

The operation and management of district heating services has traditionally been the domain of the public sector. Recurring challenges, such as inadequate maintenance, insufficient funds for infrastructural development and poor planning and project selection are some of the key reasons municipalities are now considering alternative models involving the private sector.

The lack of a predictable and stable regulatory framework that allows for a suitable return on investment is the biggest obstacle to greater private-sector participation in the economies where the EBRD invests. Municipalities can take various actions to attract private capital to the district heating sector and ensure the conditions for its successful development through partnership with the private sector. One way to do this efficiently is to develop a pipeline of pilot projects in municipal services (including district heating) and seek international assistance to develop the transactional structure of pilot projects.^[xvi]

Private-sector participation in the district heating sector can take the form of public-private partnerships (PPPs), management contracts, lease contracts or concessions. There are also models designed to tackle specific challenges in the district heating supply chain, such as heat entrepreneurship and energy service companies (ESCOs), which are being widely implemented.^[xvii]

Involving the private sector typically results in better district heating services, as it can provide a long-term investment perspective while enabling access to additional sources of funding. It also fosters innovation and brings valuable private-sector experience.