District heating is often the least-cost option for providing heat to high-density urban areas. In Eastern Europe and Central Asia, however, the district heating networks were constructed at a time when little attention was paid to energy efficiency. The particular technology and operating philosophy used are often incompatible with objectives of minimizing losses, measuring consumption, and providing a wide range of service levels geared to what customers are able or willing to pay. The key issues relating to district heating and energy efficiency are:
- The gap between costs and prices continues to be particularly large in the residential heating market.
- Competition from improperly priced other network fuels causes major reductions in the district heating consumer base in several countries, threatening major distortions in investments; poor service by the district heating companies is another contributing factor to loss of customers.
- Central governments are no longer able to cover the cost of uniform service, at the same time that the ability of industrial customers to produce their own heat limits the scope for cross-subsidies.
- Regulation of district heating is increasingly frequently delegated to local governments, but few of them have the necessary regulatory experience.
- Individual metering of heat consumption is the best way to achieve savings on apartment level but is often regarded as too costly.
- Collective metering is the second-best option but often there is no legal basis for collection of bills at the building level.
- Inadequate information is available about energy-saving measures, including state-of-the-art technologies, financial benefits, and experience in applying them.
- Despite considerable potential for profitable investments in energy efficiency significant financial barriers continue to deter investors.
- The number of specialized energy service companies able to offer both expertise and financing is still very limited.
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