Tromsø is an unlikely place to find a modern, affluent city. Located some 350 kilometres inside the Arctic Circle in northern Norway, after the sun sets on the 21st of November it doesn’t rise until the 21st of January. A combination of its remoteness and the country’s desire to be exemplars in decarbonisation and environmental protection has led to the solution of heating all new buildings through district heat, generated from municipal waste rather than fossil fuels.

NAB customer Whitehelm Capital, an Australian infrastructure investor, invested in Tromsø’s municipal supplier of heat in 2018 and is a very active investor in the Norwegian heating market.

“We want to be part of the decarbonisation solution of the heating and cooling sector, and of energy transition more broadly,” said Anne Grandin, Investment Director at Whitehelm Capital.

“Norwegian district heating is particularly attractive for Whitehelm given the strong market fundamentals and the number of mid-market opportunities with a significant value creation potential… Our ambition is to continue investing in this market where we can generate attractive and sustainable returns for our investors,” she said.

The European Union’s “Green Deal” aims to transform its economy to a sustainable, carbon neutral state by 2050¹. At its core are ambitions around clean energy and the circular economy, both of which require the adoption of radical measures to abate carbon emissions.

For some sectors, progress is well underway, most visibly in the growing role of wind and solar generation in producing our electricity and the continuing rise in adoption of electric vehicles. Other sectors face much more knotty problems; emerging interest in hydrogen and fuel cells may address the needs of transport that cannot be readily electrified, but space heating remains reliant on gas.

A parallel approach to decarbonisation

As Chris Stark, Chief Executive of the independent Committee on Climate Change, has argued, the previous approach to carbon mitigation, of “moving from power, to transport, to heat, to industry and agriculture,” needs to be replaced with a parallel approach of addressing
each sector at once².

Helpfully, decarbonising heat has been substantially achieved in some places. In Sweden, for instance, the role of fossil fuels in the heating mix has been driven below 5%³. Government incentives have underpinned recovering energy from waste (where it cannot be recycled), a strong bioenergy sector using forestry products that would otherwise have gone to waste, and a socially responsible manufacturing sector that channels surplus heat back into a distribution grid to warm the housing stock. Other carbon-light economies,
such as Finland and France, are close followers.

Both the Netherlands and the UK are now promoting alternatives to heating with gas, attempting to address the twin problems of eliminating carbon emissions and ensuring security of energy supply.

For Ed Clarke, Co-Founder and Managing Partner at Infracapital, a UK-based fund and long-standing NAB customer which was an early investor into the Dutch heating sector, the role of clean heating is clear. “The market for sustainable clean heating solutions is expected to grow meaningfully, driven by energy efficiency measures and depleting natural gas reserves. Recent impressive growth is expected to continue as these solutions play an increasingly key role in assisting the Dutch heating market to become more sustainable,” Clarke said.

More sustainable solutions

The same logic applicable to heating can be extended to cooling. District cooling is not new – New York has had communal chillers since the 1890s and modern European cooling infrastructure can be traced to the system around Les Halles in Paris established in 1980.

Like heating, cooling is energy intensive; but unlike heating, many cities have established themselves around the natural source of cooling provided by rivers and lakes. An important part of the City of Paris’s ambition to reduce greenhouse gas emissions to zero by 2050 is to expand the network that began around Les Halles, and to build a new chilling plant using water from the Seine.

Work is also underway on ways to manage storage. In a project that combines utility with quite remarkable symbolism, Värmevärden, a district heating utility and NAB customer, recommissioned disused oil storage rooms in Hudiksvall, Sweden, as Sweden’s largest hot water storage facility. This is not a one-off – storage in old mines, in geological structures and in old salt caverns is also being considered around Europe.

Making the transition from an economy reliant on fossil fuels to one that abates carbon dioxide emissions is hard, and decarbonising heat is harder than electricity generation or transport. But as bushfires in Australia and the falling levels of sea ice in the Arctic have demonstrated, deciding to decarbonise heating and cooling is imperative to ensuring we have a sustainable economy while protecting the environment.

1. https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_en
2. https://www.theccc.org.uk/2019/03/19/chris-starktowards-net-zero/
3. https://www.sei.org/publications/swedish-heatenergy-system-new-tensionsand-lock-ins-after-a-successfultransition/

This article was first published in our Corporate & Institutional magazine ‘Beyond 2020: Creating opportunities”.  Read more articles from the magazine, below.

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