Energy conservation conflicts in district heating systems

In Sweden, district heating of buildings is in common use. The paper deals with the district heating tariff. Many economists argue that the tariff should be based on short-range marginal costs, but in practice this never occurs. Traditionally instead, the prices are set so that they are lower than the alternatives. A case study is presented dealing with a residential building in Navestad, Norrkoping. For this building, the life-cycle cost with extra wall insulation and the introduction of a heat pump has been calculated. A comparison of two perspectives, the present tariff and a tariff-based short-range marginal cost, is done. It is shown that there is a conflict between the two perspectives. For the tariff based on short-range marginal cost, neither extra insulation nor an introduction of a heat pump is profitable. However, with the present tariff, a bivalent system with a heat pump and district heating is profitable.