Feature
Story

Urban Heating in Transition Economies:

Key problems and remedies

Astghine Pasoyan, Senior Program Manager for CEE & CIS, Alliance to Save Energy

Era of Reform
Under the former economic system
in CEE and the CIS, district heating com-
panies were state-owned and centralized.
Dozens of large district heating companies
operating hundreds of heat sources and
district heating networks existed in dif-
ferent cities. Heating tariffs were set by
the government, with subsidies often
comprising more than half of the tariffs,
already set below cost-recovery level.
Consequently, those companies continually
lacked funds for operations and mainte-
nance, retrofits and quality assurance.
Over time, the pressure for change and
better service quality and reliability created

Figure 1. Share of District Heating in Providing National Heat Demand in Selected CEE and CIS Countries.
Armenia Croatia
Macedonia FYR Slovenia
Serbia Hungary Bulgaria
Romania Czech Republic
Bosnia/Herzegovina Slovakia Moldova
Kazakhstan Belarus
Poland Estonia Lithuania
Ukraine Russia
Latvia
0 10 20 30 40 50 60 70 80 90
3%
8%
8%
14%
16%
16%
20%
31%
32%
37%
40%
49%
50%
50%
52%
52%
58%
67%
70%
70%

Percentage of National Heat Demand Provided by District Heating

District Energy / Third Quarter 2009

In much of Central and Eastern Europe (CEE) and the Commonwealth of Independent States (CIS) that com-
prise Russia and former Soviet republics,
district heating systems play a predomi-
nant role in the urban heating sector. As
the economies in these countries make the
transition from central planning to the
free market, they have inherited old, over-
sized district heating systems, which
serve roughly 250 million people (fig. 1).
While district heating technology is
generally a good fit in these countries,
with their high-density urban populations,
the industry in many places is character-
ized by significant problems. The large
boilers in these central heating plants
should be able to generate economies of
scale. Due to underinvestment in equip-
ment and renovations, however, up to
one-half of their energy is wasted. Coun-
tries in the region spend billions of dollars
annually on emergency repairs to their
district heating systems due to poor
routine operation and maintenance.

Remedies do exist, however, for improving the state of the district heating industry in the region. Some countries have had more success than others in reform, particularly in CEE. Analyzing and learning from their experience can help countries that have made less progress chart their way forward.