Directions of the Energy Transition in District Heating: Case Study of Poland

Abstract

In light of the ongoing discussion concerning the energy transition of the heating sector, primarily focused on district heating and shaped by heating corporations towards an incremental transformation, an alternative direction for the energy transition of the heating sector towards electroheating—a breakthrough transformation—is presented in this paper, along with a justification of its rationale. Arguments “for” and “against” both transformation paths are provided. Analyses of the costs of transforming district heating systems along both trajectories are conducted. The opportunities of a breakthrough transformation are characterized. An alternative approach to the energy transformation of district heating systems will provoke resistance and opposition from representatives of institutions operating within the current model. Transforming the existing heating model without changing its structure will burden society with high transformation costs through demands for government guarantees to cover these expenses. The analysis presented in this paper shows that these costs can be significantly reduced if the approach to the generation and distribution of district heat is changed.

1. Introduction

The European Commission has adopted the “European Green Deal” [1], with detailed implementation measures outlined in the “Fit for 55” package [2]. These initiatives form part of the European Union’s energy policy, which emphasizes energy security, sustainability, and the integration of energy markets across member states.

Regardless of ongoing political and ideological debates, EU member states are preparing for current and forthcoming changes in legislation.

Buildings account for approximately 40% of the EU’s total energy demand [3], with the majority of this energy required for heating and domestic hot water. In Poland, legacy district heating systems are predominantly based on coal-fired boiler plants, which are currently being modernized, most commonly through the replacement of coal boilers with gas-fired units [4]. However, the question arises whether such an energy transition will be sufficient under the constraints of the Fit for 55 package. If carbon dioxide emission limits are upheld, it may become necessary to move toward the concept of electrical monism [5].

Electrical monism is a theoretical concept in which all energy demands (including heating and transportation) are met exclusively through electricity, while minimizing overall electricity consumption [5].

Under such a scenario, building heating systems would be based on electric energy. This assumption forms the starting point for the analysis presented in this article. The authors do not question whether the implementation of electrical monism is technically or economically feasible, nor do they attempt to estimate whether individual member states are capable of producing or transmitting the required amounts of electric energy.

Instead, the article examines issues related to the cost of transitioning from conventional district heating to electric-based heating systems—referred to as electroheating. This term is used here to describe district heating systems in which electricity serves as the sole source of thermal energy.

The study considers a scenario in which a municipality is required to modernize its district heating network and where, due to regulatory constraints (e.g., environmental legislation), electricity must be used as the heat source. The simplest approach appears to be a direct replacement of coal-fired boilers with electric boilers—a process referred to in the article as incremental transformation. However, is this the optimal solution [4,6,7]?

The authors explore an alternative approach termed breakthrough transformation, in which heat is generated directly at the point of consumption. Although this approach appears rational, most of the current public discourse and media suggest a focus on incremental transformation.

The authors therefore performed calculations, based on available data, to compare the costs associated with both transformation models. These calculations are intended to provide a basis for further discussion regarding the pathways and prospects for district heating transformation in Poland.

The motivation for this study stems from published estimates indicating high costs associated with the heating sector’s transition [8,9]. The research aimed to address the following key questions:

• Does the energy transformation of district heating into electroheating need to be as costly as assessments of the state of district heating in Poland indicate?
• Do heating bills from electric energy need to be “nightmare bills”, as suggested in the media?
• Does the transformation of district heating in Poland need to burden the state budget?

Does the current generation, which is shaping an expensive “incremental” energy transformation of district heating, have the moral right to pass these costs on to future generations, especially when the dynamic technological development of renewable energy sources, storage technologies, and heat sources allows for a cheaper “breakthrough transformation”?

The chosen path of energy transformation will have far-reaching consequences for future generations, both financially and technologically [4,10]. These factors will determine whether the transformation will be either a breakthrough or incremental transformation [5,11,12]. An incremental transformation would amount to nothing more than an expensive cosmetic modification of existing solutions.

Public awareness among both heat producers and consumers regarding the transformation of district heating to electroheating differs depending on the type of heat source—whether in individual households, network-based district heating, or industrial/technological heating systems, which may be networked or off-grid.

In individual households, electroheating is a natural consequence of the rise of electroprosumerism [5,11,12]: a personal photovoltaic micro-power plant, a heat pump, an electric energy storage system, a thermal energy storage unit, and an energy management controller together justify the shift toward electric heating. The goal of the transformation in this sector should be the maximization of self-consumption.

Network-based district heating, on the other hand, constitutes a specific sectoral market of electroprosumerism and is closely tied to the adopted pathway of energy transformation [4,10]. An incremental transformation [5,11,12] is characterized by the preservation of the existing central district heating distribution infrastructure. It focuses solely on replacing current fossil fuel-based heat sources with renewable energy sources, without fundamentally rethinking the underlying system architecture.

A prosumer (from producer + consumer) is an energy user who both consumes and produces energy, typically from renewable sources. Prosumers are usually individual households, businesses, or housing cooperatives that generate electricity—most often via solar panels, wind turbines, or other renewable technologies—and use it for their own needs. Any surplus energy can often be fed back into the grid. An electroprosumer is a more specific type of prosumer who not only produces and consumes electricity but also actively uses electricity for technologies that traditionally rely on other energy sources, especially for heating (e.g., replacing gas or coal with heat pumps, electric boilers, or induction heaters). Electroprosumers thus electrify their energy demand while producing their own electricity, often from renewables [5,12].

A breakthrough transformation [5,11,12] is based on the distribution of energy via the electrical grid and its conversion into heat at the point of use.

What logic of transformation should be adopted under the assumption that, by the year 2050, we will have achieved electric monism and a zero-emissions economy?

The logic of technological transformation can be better understood through historical paradigms that illustrate how innovation dynamics—especially the interplay between technological potential, incumbent resistance, and market forces—shape system evolution.

Table 1. Historical paradigms of technological transformation.

Pattern	Transformation Description	Key Features	Lessons for Energy Transition
1. Factory and Workstation Drives	Steam engines and belt-driven torque systems gave way to electric motors. Eventually, individual electric drives replaced centralized mechanical distribution [13].	Gradual evolution; legacy resistance; eventual obsolescence of transmission belts.	Decentralization of energy use; technology shifts may initially preserve legacy formats before transforming system-wide logic.
2. Telecommunications	Wired telephony was rapidly overtaken by mobile wireless systems [14].	Rapid transformation; user-driven demand; market outpaces regulation.	Innovation aligned with user behavior can accelerate systemic change. Policy and infrastructure must adapt quickly.
3. Transport and Electromobility	Fossil-fuel lobbies delayed electric vehicle development despite superior electric motor performance [15].	Negative example of innovation resistance; historical and modern suppression of alternatives.	Market interests can hinder beneficial innovation; policy intervention may be needed to overcome entrenched resistance.

presents three paradigms relevant to understanding today’s energy transitions.

Is the current situation in Poland not analogous, particularly regarding the development of prosumer-based energy systems? Lobbying efforts in favor of centralized corporate energy solutions are strikingly visible and, unfortunately, act as a brake on innovation in the renewable energy sector.

Following the logic that governed the transformation of industrial drive systems and telecommunications, one can conclude that if electricity is to become the primary energy carrier, it would, perhaps, be rational to deliver energy in the form of electricity directly to the end user and convert it into heat at the point of use.

To embrace this logic by the market, electricity should become a true market commodity, and the following conditions should be met:

Condition 1: Minimization of electricity distribution costs. It is beneficial when the electricity used in electroheating originates from local renewable energy sources (RES) and electroprosumer systems—in other words, from a decentralized power grid. Transmitting electricity over long distances through the National Power System (KSE), for example, from the north to the south of the country, only to convert it into heat, is expensive. The transmission and infrastructure investment costs associated with such long-distance transport significantly increase the fixed costs of heat derived from electricity. Decentralized RES sources installed by investors in local government units or industrial zones can form local “direct networks” or “green medium/low-voltage electroprosumer networks,” along with electroprosumer settlement platforms. These structures can relieve the burden on national transmission and distribution networks (KSE), thereby reducing the need for costly grid investments—investments for which the traditional energy and district heating sectors currently seek public funding;

Condition 2: Exergetic optimization of buildings [3,11]. Electroheating must be integrated with the minimization of thermal losses in buildings and should be introduced only after all feasible energy efficiency measures have been exhausted. Only then does its implementation make thermodynamic and economic sense. The authors did not consider the thermal modernization of buildings in the calculations because this will be carried out regardless of the adopted path of energy transformation, in accordance with [3]. Regardless of whether the transformation is incremental or breakthrough, it will be difficult without the exergetic optimization of buildings. Electroprosumerism inherently promotes energy-conscious thinking, which translates into optimal energy use management—including in the heating sector. It is also crucial to store heat when RES generation exceeds immediate demand;

Condition 3: Minimization of heat distribution costs (fixed costs). The reduction in heat distribution costs has the greatest impact on the final price of heat. Below is a summary of factors influencing the cost of distribution in the two models discussed:

A.

Incremental Transformation

• Heat loss costs in distribution networks—associated with the transmission of high-parameter heat (high temperature and pressure);
• Heat loss costs in heat exchange stations—due to the lack of regulation, incorrect controller settings, or poor maintenance. Heat distributors are typically not incentivized to optimize heat consumption, but rather to maximize heat sales;
• Costs associated with failures in district heating networks;
• Maintenance costs of the heat distribution network.

B.

Breakthrough Transformation

• No heat distribution losses—heat is generated directly at the point of use from electricity;
• Automatic optimal regulation of space heating and domestic hot water consumption through the control system of the electric heat source;
• Electroheating node is owned by the building owner—creating an incentive for energy conservation;
• No failures in district heating networks—the centralized heat distribution system is eliminated;
• Optimized digital energy management from a centralized dispatch point (e.g., a housing cooperative’s management office or electroheating utility operator);
• Lower maintenance costs for district heating networks or centralized heat exchange stations—the infrastructure is decentralized and simplified.

The logic behind incremental approaches to heating sector transformation must be seriously reconsidered. District heating in Poland is developed on a scale unmatched globally, except within the former Eastern Bloc [4]. The Warsaw district heating system is the third largest in the world, following those in Moscow and St. Petersburg. While system-based heating was technically and economically justified in the past era, it is now a legacy solution that requires a thorough analysis of whether its continued operation—and especially its further development—makes sense in light of the high modernization costs [8,9].

Even though it is a declining solution, this decline will unfold gradually and should follow economically rational principles. The transformation of the energy sector, particularly with respect to heating, should be a breakthrough in nature. It also presents an opportunity for municipal heating companies (PEC) willing to embrace disruptive transformation in the heating sector.

1.1. Breakthrough Transformation

A breakthrough transformation of network-based district heating into electroheating (i.e., electroprosumer-based heating) will lead to the gradual and partial phase-out of the central heating network, as it becomes technically obsolete. In areas where it is technically and economically justified, the district heating infrastructure will be replaced by the electrical grid and decentralized electric heat sources such as heat pumps and induction boilers. As the load on the central heating network decreases, the temperature of the medium in this network can be reduced, which will reduce heat losses. However, this requires a reduction in the energy transmitted through this network, because current networks were designed for high parameters. This would also require replacing equipment on the recipient side.

Upon disconnecting a building’s heat exchange station from the central district heating network, the heat supply is taken over by on-site heat pumps and induction boilers, supported by local (distributed) heat storage systems, as shown on Figure 1, where red crosses symbolize disconnected part of network.

Local heat pumps and induction boilers can be powered by a combination of building-integrated photovoltaic systems, and, optionally, wind power systems, electricity storage units, bioelectric power stations, hydrogen or gas-fueled cogeneration units (with temporary use of oil-fired systems if necessary), and hydrogen electrolyzers. These resources can be managed by a centralized energy management system. In practice, energy sources will depend on local conditions. Generally, it is optimal when energy sources are local, which reduces the costs of transmission and expansion of the energy grid

An enterprise operating under this model, referred to as Electro-PEC, can function as an energy island (self-sufficient microgrid) or be connected to the local KSE (National Power System) distributor, depending on its level of energy self-sufficiency. The management center consists of a computer system and an IT specialist performing monitoring, service coordination, and billing functions. An example of the organizational structure of Electro-PEC is presented on Figure 2.

The task of Electro-PEC can be taken over by a housing cooperative, enabling it to become energy-independent. The feasibility of this transformation depends on the cooperative’s investment capacity in energy transformation, particularly in heating and renewable energy systems (RES). The technical possibilities are already available, with heat pumps and induction boilers (Figure 3) offering the potential for optimal heat management.

1.2. Breakthrough Transformation—Induction Heating Boiler in a Multi-Family Building

The induction boiler is an alternative heat source in the transformation of district heating towards electroheating. The induction boiler is proposed as an alternative heat source in the transformation of conventional district heating systems to electroheating, serving as an alternative to heat pumps. In the context of multi-family housing, induction boilers with capacities exceeding 100 kW, installed in thermal substations, may be applicable. These boilers feature continuous control of heating power and their integrated control systems enable optimal operation of the substation. The operational characteristics and advantages of induction boilers, particularly in comparison to resistive electric boilers, are described in the literature [16,17].

Induction boilers are particularly relevant in cases where the use of heat pumps is technically or economically unjustified. Such circumstances include:

• Large-area buildings not connected to a district heating system, such as schools, public offices, hotels, commercial facilities, places of worship, or buildings occupied by SMEs. Here, the induction boiler may function either as the primary or supplementary heat source;
• Large-area buildings in city centers, often renovated or historic, where the repair of district heating network failures is economically unfeasible;
• Small- to medium-scale thermal energy storage systems (e.g., facility-based, cooperative-based, or energy community-owned), supplied by RES, for storing surplus renewable energy in the form of heat;
• Large-scale heat storage systems, charged with heat generated by heat pumps, where the induction boiler is used to increase the temperature of stored heat;
• Waste heat recovery systems, such as from wastewater, where induction boilers can be used to boost the temperature of heat recovered by heat pumps;
• Dynamic air-based heating systems for industrial halls, where rapid and responsive heating is required;
• Emergency electroheating systems, acting as backup heat sources in cases of the failure of primary systems;
• Temperature stabilization in industrial processes, such as in the production of food items, bituminous materials, resins, protective films, etc.

The cost of electric heating using induction boilers is approximately twice as high as heating with heat pumps. Therefore, the price of electricity is a critical factor. Of particular importance is the local generation of renewable electricity through distributed energy systems and prosumer-based production, which are not burdened by distribution costs. Prosumer electricity should be transmitted via local “green networks” within economic zones or municipal areas (LGU). An additional factor in optimizing the cost of heat is the presence of a local thermal energy storage system.

2. Methodology

To estimate the costs of transitioning from conventional district heating to electric-based heating systems (electroheating), two analyses were conducted, as presented on flowchart on Figure 4.

2.1. Analysis of Investment Costs and Return on Investment for Individual Multi-Family Buildings

This analysis focused on estimating investment costs, subsequent operational costs, and the return on investment (ROI) for an individual multi-family residential building. The estimation was based on data available to the authors from a case study described in a publication [18]. As some of the building data were based on design assumptions, the authors conducted additional analysis using empirical heat demand data from a similar building. These data were obtained directly from the property owner [16] and assumed a higher heating demand.

For the analyzed building, data were collected on the residential floor area, heat demand, pre-retrofit heating costs, and the investment cost associated with replacing the heat source.

Since heat pumps were implemented in these buildings, a coefficient of performance (COP) was assumed. This issue is non-trivial, as the literature provides a broad range of COP values [19,20,21,22,23], and manufacturer-reported values often serve marketing purposes. In Poland, outdoor temperatures during the heating season frequently hover around 0 °C, which is unfavorable for heat pump performance. High humidity leads to evaporator icing and necessitates periodic defrosting, thereby reducing efficiency and lowering the COP.

For the analysis, two COP values were assumed:

• COP = 3, based on standard values for air-source heat pumps;
• COP = 2, which accounts for reduced performance under high humidity and low ambient temperatures.

At the time of investment decision-making, the actual COP of a given heat pump is unknown. Therefore, when calculating system capacity and ROI, it is safer to consider a wider range of COP values.

Based on the building’s heat demand and the assumed COP values, the corresponding electricity demand was calculated. Subsequently, a unit electricity price of EUR 0.35/kWh (1.5 PLN/kWh) was assumed, based on current market prices, and the annual cost of heating was determined. Comparing the annual heating cost before and after modernization allowed for a calculation of the annual savings. The investment payback period was then estimated by dividing the investment cost by the annual savings.

The analysis was based on simplified assumptions. Inflation, financing costs, potential changes in electricity prices, and the self-generation of electricity by prosumers were not considered. Given the numerous uncertain and politically influenced factors, the purpose of the analysis was to obtain a rough estimate of the ROI and to determine the order of magnitude of the involved values.

2.2. Analysis of Incremental vs. Breakthrough Transformation of Polish District Heating

The analysis compared the costs of two district heating transformation pathways in Poland: incremental and breakthrough.

2.2.1. Incremental Transformation Cost Estimation

For the incremental approach, published data were used:

• A 2020 report by the Polish District Heating Chamber of Commerce estimated the cost of transformation between 2020–2030 at EUR 12–24 billion;
• According to a source in the literature [8], the total investment requirement is EUR 92 billion by 2030, and EUR 235 billion by 2050;
• Another source [9] estimated the cost of transforming the centralized heating sector at EUR 70–100 billion by 2050.

Based on data from Poland’s Central Statistical Office (GUS), 52.2% of the residential floor area in multi-family buildings was heated by district heating. Given a total of 438.8 million square meters of residential floor area in multi-family buildings, centralized district heating currently serves 229.05 million m².

Using published estimates of incremental transformation costs and the serviced area, the cost per square meter of residential floor area was calculated.

An alternative estimate was derived from a case study of the “heating plant of the future” in Lidzbark Warmiński (northeastern Poland) [24], where the total investment amounted to EUR 12 million. The plant is expected to serve 3000 residents of the Astronautów housing estate. Assuming four residents per 50 m² apartment (12.5 m² per person), the plant is expected to heat approximately 37,500 m².

2.2.2. Breakthrough Transformation Cost Estimation

For the breakthrough approach, the cost was estimated based on the implementation of an inductive boiler system with a thermal storage unit. This estimate was based on a prototype system developed by the authors. Market analysis indicates that the cost of implementing heat pumps of an equivalent capacity would be comparable. The investment cost was converted to a per-square-meter basis and the total cost of the transformation for the entire 229.05 million m² of residential area currently serviced by district heating was estimated.

Finally, the estimated costs of the incremental and breakthrough transformation approaches were compared.

3. Results

3.1. Analysis of Heat Pump Application in a Multi-Family Building—Implemented Solutions

The analysis concerns a case study of a multi-family building that was disconnected from the district heating system and where heat pumps were implemented for heating [18]. This is an example of a breakthrough transformation in district heating. Based on this example, the authors address key issues related to electroheating. The considered building is located in Urszulin, Lubusz Voivodeship, in the western part of Poland [18] and has the following properties (

Table 2. Analysed building properties.

General Building Data
Residential Area	Residential Area	1600	m2
Floors	Number of Floors	5
Units	Number of Apartments	32
Average Unit Area	Average Area per Apartment	50	m2
Occupants	Number of Occupants	80	People
Heating Demand and Performance
Calculated Heat Demand	Heat Demand at −20 °C	60	kW
Verified Heat Demand	Verified Demand at −15 °C	40	kW
Domestic Hot Water (DHW)
Average Consumption	Daily Hot Water Consumption	2000	L/day
Peak Consumption	Peak Hourly Consumption	800	L/h
Buffer Tank	Buffer Tank Capacity	700	L
Hot Water Tanks	Number and Size of Hot Water Tanks	3 × 500 L	1500 L total
Heating System
Radiators	Existing Radiators	Not replaced
Installed Equipment	Number of Heat Pumps	6	units
Heat Pump Capacity	Capacity per Heat Pump	13	kW
Total Installed Capacity	Total Heating Capacity	78	kW
Commissioning	Date of Commissioning	June 2024
Heat Pump Model	Assumed Typical Parameters	Not specified
Energy and Cost
Previous Heating Cost	Annual Heating Cost	EUR 52,706
Heating Cost per Area	Annual Heating Cost per m2	EUR 35.29	/m2/year
Annual Electricity Demand	Total System Consumption	43,971	kWh/year
Per Heat Pump Electricity	Per Unit Consumption	7600	kWh/year per heat pump

):

Assuming a COP (Coefficient of Performance) of 3, the heat production would amount to approximately 132,000 kWh/year. However, if we assume a COP of 2, the heat production would be approximately 88,000 kWh/year.

Given that at −15 °C, the measured heat demand required is 40 kW, it follows that for an average annual temperature of +0.5 °C, the demand for heat would be around 26 kW (on average, annually). Therefore, the annual heat demand would be 26 kW × 8760 h = 227,760 kWh. This difference suggests bold assumptions (132,000 or 88,000 kWh/year). Therefore, additional cost analysis was performed with assumed higher energy demand.

Costs: In the analyzed building, the annual electricity consumption costs, assuming the energy demand for the heat pumps and a price of EUR 0.35/kWh, would be EUR 15.50/year. Adding the service cost of EUR 1412 /year, the total annual heating cost would be EUR 16,941/year. Previously, the annual heating cost was EUR 52,706/year. The investment cost amounted to EUR 72.94; after deducting the subsidy of EUR 42.35, the cost for residents was EUR 30,588. With annual savings of EUR 35,765, the return on investment (ROI) would occur in less than one year, and without the subsidy, in about two years. This is a very short period and a noteworthy return, which requires a verification of the assumptions and a comparison with results from other implemented solutions for heat savings.

The second calculation is based on a residential building with similar characteristics (1740 m² and 45 apartments) [16], after thermal renovation, where heat pumps were installed for hot water production. The annual heating demand was 136,542 kWh, which is comparable to that assumed in [18], where total heat and hot water consumption with COP = 3 (132,000 kWh). The annual hot water demand amounted in [16] to 251,570 kWh. Thus, the total consumption was 388,112 kWh [16]. This is more than the authors’ supplementary calculations (227,760 kWh) for the analyzed building [18] with respect to average heat consumption for an average annual temperature. However, since the heating power demand was empirically verified at low temperatures (−15 °C), for this heat demand and an optimistically assumed COP of 3, the electricity demand would amount to EUR 28,207/year. With a COP of 2 (a more realistic value), it would be EUR 41,605 /year. These calculations were made for an electricity price of EUR 0.35+ VAT. Considering additional annual service costs for the heat pumps, the return on investment without subsidies would be achieved in approximately 3 years (optimistic version, COP = 3) or 6.6 years (realistic version, COP = 2). These are very favorable investment return rates, especially for an investment in heating transformation that does not require the involvement of the state budget.

Table 3. Analysis of heat pump application in a multi-family building.

		Calculations for Design Assumptions	Calculations for Corrected Energy Demand
			COP = 3	COP = 2
Residential area	m2	1600
Heat demand	kWh/year	132,000	227,760
Electricity demand	kWh/year	43,971	75,920	113,880
Heating cost EUR 0.35/kWh + EUR 1412/year service	EUR/year	16,931	28,207	41,605
Previous annual heating cost	EUR/year	52,706
Heating Cost Difference	EUR/year	35,775	24,499	11,101
Investment cost	EUR	72,941
Return On Investment (ROI)	Years	~2	~3	~6.6

summarize presented calculations.

Conclusions from the analysis and general practical conclusions regarding electroheating with heat pumps:

• Dual benefit for investors: The residents of the analyzed multi-family building, investing their own financial resources, achieved a dual benefit: the first is material—reduced heating costs after the amortization period; the second is environmental—contributing to air-quality protection. Such actions should be incentivized through partially forgivable investment loans (e.g., energy loans similar to technology loans). The transformation of district heating into electroheating must be rational; the choice of an electric heat source, such as a heat pump, must consider its operational specifics. In the case of air-to-water heat pumps, the COP coefficient must account for the temperature difference between the lower source (heat extraction) and the required heating fluid temperature under real operating conditions, rather than relying solely on laboratory-based performance characteristics. Local weather conditions during the heating season, which significantly affect the COP (fog, humidity), should also be considered. In high humidity conditions (November, December) and temperatures of around 0–5 °C, frost on the evaporator and defrosting requirements can significantly lower the COP. This important dependency is often not acknowledged or concealed from investors. In practice, it is safe to assume an average annual COP of 2 [19,20,21,22,23];
• Electroheating must be integrated with energy efficiency measures: Electroheating must be linked to minimizing heat losses in the building and should only be implemented when there are no further reserves for reducing energy losses, i.e., alongside thermal renovation. Only then does it make sense. Energy prosumerism inherently promotes energy-saving thinking; thus, optimal management of energy use, including heating, is required. Maximum COP values are achieved when there is a minimal temperature difference between the lower heat source (external source) and the upper source (required heating temperature). The lower-source temperature is weather-dependent (evaporator outside the building); however, the upper-source temperature can be controlled. Limiting the upper temperature to 35–40 °C and using underfloor heating or larger radiator surfaces ensures optimal performance. This investment pays off through the savings on electricity consumption;
• Heat storage: It is important to store the heat produced by the heat pump or electric boiler when energy from renewable sources (RES) is at the cheapest price. Distributed heat storage, near the heating nodes of the building, is the cheapest and simplest form of energy storage from a technical implementation perspective. The cost analysis shows how significant the electricity price is in determining the cost of heat. For electroheating, it is beneficial when electricity comes from local renewable sources, i.e., prosumer sources, making distributed electricity generation crucial. It is usually not optimal to transmit energy through the transmission network to convert it into heat. Transmission costs significantly increase the fixed costs of heating. Distributed RES sources owned by investors in local government units (LGUs) or industrial zones are better solution. Investors, who often do not receive permission to connect photovoltaic or wind farms to the electricity grid, as well as bio-power plants, can create local “direct networks” or green prosumer electricity networks (MV/LV), along with prosumer billing platforms, relieving the national electricity grid (KSE). Importantly, local RES investments do not burden the state budget.

3.2. Analysis of Published Costs of Transforming District Heating

After the completion of the incremental transformation, the cost of heat will primarily depend on:

• the price of electricity, which will be influenced by the amortization costs of large-scale renewable energy sources (RES), particularly the amortization of nuclear power plants and investments in the transmission and distribution infrastructure for electric power;
• the amortization costs of investments in centralized district heating networks, associated with the energy transition.

Prosumer-based district heating systems powered by local renewable energy sources (RES) free the heat price from the aforementioned burdens—there is no or limited need for transmission of electricity through the national grid (KSE), and no investment in the systemic heating network.

Let us analyze the amortization costs of investments in centralized district heating infrastructure under incremental transformation.

In the 2020 report on district heating by the Polish District Heating Chamber of Commerce (in Polish: Izba Gospodarcza Ciepłownictwo Polskie), the cost of the transformation in the decade to 2030 is estimated at EUR 12 to 24 billion. This includes the modernization of 6500 km of the network (approximately 36%), in which:

• EUR 10 to 17 billion relates to heat generation;
• EUR 3 to 7 billion relates to heat distribution.

According to one study in the literature [8], the total investment in the transformation is estimated at:

• EUR 92 billion by 2030;
• EUR 235 billion by 2050.

This implies an annual expenditure of EUR 9,5 billion over 25 years. The percentage of the centralized network to be modernized by 2030 for EUR 92 billion is not explicitly stated; however, a comparison of the figures suggests 39% coverage.

From another source [9], the estimated cost of transforming the centralized heating sector is EUR 70–100 billion by 2050. The discrepancy between the estimates is significant: EUR 118–235 billion. The conclusion of the author [9] is as follows:

“It will be necessary to spread these costs over time in order to minimize their impact on tariffs and heat prices for end users.”

• Question 1: Will such high investment expenditures in centralized district heating ensure a heat price that is socially acceptable?
• Question 2: What does EUR 118 or 235 billion mean in relation to the residential floor area?

According to data from Poland’s Central Statistical Office (GUS) on energy consumption in 2021:

• In 2021, 52.2% (compared to 40.4% in 2018) of the residential floor area in multi-family buildings was heated by district heating;
• 78.2% of district heating consumers used network-supplied hot water;
• The total residential floor area in multi-family buildings in Poland amounted to 438.8 million square meters.

Thus, centralized district heating currently supplies 229.05 million m² of the residential floor area (438.8 million m² × 0.522 = 229.0536 million m²).

Assuming that, based on the previously mentioned data, a total investment of EUR 235 billion is needed to fully modernize the district heating network by 2050, this translates to EUR 1027 per square meter. If the cost were EUR 118 billion, the figure would be halved.

This means that a 50 m² apartment would carry a cost burden of EUR 51,362 for the modernization of the district heating network.

An alternative calculation is based on a case study from the construction of the “heating plant of the future” in Lidzbark Warmiński (north-east part of Poland) [24], where the investment amounted to EUR 12 million. It is reported that this source of heat will primarily serve 3 000 residents of the Astronaut housing estate. Assuming four persons per 50 m² apartment, which amounts to 12.5 m² per person, the plant is expected to heat approximately 37 500 m².

This results in a cost of EUR 307 per square meter.

With these projected costs—of both the estimates [8,9] and the realized case (Lidzbark Warmiński)—a key question arises:

Will the heat price remain “socially acceptable”?

Another major issue is the source of financing. As noted in one study [9]:

“…Given the enormous costs, the state will have to play a crucial role as a guarantor of long-term investment financing. Funding may come from emissions trading revenues, EU funds, or financing from banks and other institutions.”

“The state” means the citizens. With the national budget deficit growing, this implies higher taxes and greater debt for future generations.

What, then, is the alternative? What is the rationale behind the logic of a breakthrough transformation in centralized district heating?

The investment cost for an induction boiler, including a thermal storage unit and installation work in the heating substation, is estimated at EUR 38–47/m² (at current market prices), for systems with 100 kW capacity serving 2500 m², depending on the size of the on-site thermal storage unit. This estimate is based on a prototype implementation [17].

The total cost of full electrification of the heating sector—transforming it into electroprosumer-based heating—would be as follows:

• 438.8 million m² × EUR 38/m² = EUR 17 billion;
• or EUR 21 billion, if the cost is EUR 47/m².

The above figures assumed that electrification is based solely on induction boilers for the entire residential floor area in multi-family buildings.

For the 229.5 million m² currently covered by centralized district heating (52.2% of total), the cost would be as follows:

• EUR 9 billion at EUR 38/m²;
• or EUR 11 billion at EUR 47/m².

This is a staggering difference, when compared to the EUR 118 or 235 billion investment estimates cited in the literature [8,9].

Spread over 25 years, the annual investment cost would be only EUR 0.43 billion, not EUR 9.5 billion (or EUR 4.7 billion depending on the estimate). Translated into investment per PEC company (with approx. 400 companies in Poland), this equals just EUR 1 million per year per company.

Table 4. Analysis of costs for transforming district heating.

		Estimates from [8]	Estimates from [9]	Theoretical Implementation of Induction Boilers (Cost Similar to Heat Pumps)
Estimated cost	EUR	235 × 109	118 × 109	11 × 109
Estimated cost per year	EUR/year	9.5 × 109	4.7 × 109	0.43 × 109
Estimated cost per m2	EUR/ m2	1027	51,362	47
Cost per 1 m2 per year (assumed 25 years until 2050)	EUR/ m2/year	41	21	2

summarize presented calculations.

For comparison, the electrification of a heating system in a residential block with 32 apartments in Urszulin cost EUR 72,941. Thus, with a EUR 1 million budget, it is possible to modernize 13 residential buildings. Even without government subsidies, the investment achieves payback within five years. Therefore, by 2050, it would be feasible to electrify 65 residential buildings (within the area served by a single district heating company, PEC) by taking out only a EUR 1 million loan over 5 years—i.e., EUR 200,000 annually. This level of financing does not place a significant burden on the PEC. Moreover, an “ecological loan”, partially forgiven due to the social and environmental benefits, could further facilitate the breakthrough transformation.

The calculated cost of a breakthrough transformation does not include the cost of electric RES (renewable energy sources); however, the incremental transformation estimates also do not include such costs.

The operating costs of the district heating system under the TEE (Transformation of Energy to Electroprosumerism) concept [5,11,12] are not included in this analysis, but are likely to represent only a fraction of a percent of the total transformation cost. Energy consumption of the induction boiler is recorded remotely and can be transmitted to a centralized management and billing system. Likewise, the operation of each heat exchange station can be remotely monitored from a control center.

The price of electricity must reflect market rates, comparable to EU prices—this is a critical condition for the societal acceptance of electroheating in general. Specifically, “energy at 50 EUR/MWh” [25], i.e., 0.215 PLN/kWh. A low electricity price, and thus low heat price, can be ensured by local investments in RES and local “green grids” that enable peer-to-peer energy trading and balancing (e.g., internal electricity distribution systems, WSDEs).

Demonopolization of the energy market is a core feature of electroprosumerism and a driver of rapid innovation.

An Electro-PEC (electroprosumer district heating company) can operate within the existing energy law. It can invest in its own RES assets, purchase additional green electricity, and sell heat to consumers.

4. Discussion

4.1. Industrial Electroheating

According to the Theory of Energy Transformation to Electroprosumerism (TEE) [5,11,12], the optimization of industrial heating systems should be implemented within the framework of crisis shields. An industrial electroprosumer crisis shield—a physically defined area in which an electroprosumer manages the full balance of their energy needs —serves as an effective model for minimizing energy costs, particularly when renewable energy generation is aligned with energy demand, thereby maximizing self-consumption.

Renewable energy sources (RES) should be dimensioned to cover not only electricity demand but also the thermal energy requirements (process and space heating) of the enterprise. On-site RES installations, combined with electricity and thermal energy storage systems, enable energy supply at minimal cost, unburdened by grid transmission and distribution charges.

From the perspective of thermal supply and within the framework of the electricity monism paradigm, the establishment of industrial electroprosumer crisis shields is a strategic approach. A prototypical solution developed for research, training, and dissemination purposes is the “OK-P Energo-Complex” shield, as described in references [17].

An example is the 100 kW induction boiler, illustrated in Figure 3, installed in the heat substation of a company’s boiler plant and currently undergoing performance testing. The system is powered by renewable energy sources and integrated with waste heat recovery from a generator set. Air conditioners, operating as heat pumps during the heating season, are also incorporated into the company’s energy management system.

Experimental results confirm the full suitability of the induction boiler for both industrial and municipal applications. Although the electricity cost associated with induction heating is estimated to be at least twice as high as that of heat pump operation, the induction boiler is proposed for applications where heat pumps are not technically or economically viable.

4.2. Advantages of Electroheating and Tasks for Innovators of the Breakthrough Transformation of Heating

Summary of the previously described advantages:

• Elimination of operational disruptions caused by failures in district heating networks;
• Crisis resilience in energy supply, enabled by on-site renewable energy sources (RES);
• Minimal failure rate of the induction boiler as a thermal energy source;
• High responsiveness and flexibility of the heating system for the facility;
• Thermal energy storage, with charging during periods of peak RES production and local, small-scale thermal storage units;
• Lowest investment cost for the energy transition toward electrothermal systems;
• Energy transformation independent of state budget financing.

In light of the aforementioned advantages, innovators of the breakthrough energy transformation can engage in the following tasks:

• In small- and medium-sized enterprises (SMEs), building crisis-resilient industrial control shields with renewable energy sources (RES). Optimizing energy costs produced by RES for production and heating purposes. Striving for self-consumption of generated energy;
• In high-temperature technological processes that are thermally stabilized with thermal oil, replacing gas or oil boilers with electric boilers, e.g., induction boilers;
• Building public energy awareness;
• Constructing bio-power plants as backup energy sources and for the production of green hydrogen.

Socially, it is unacceptable to present a hype-driven optimism in the promotion of heating system transformations, such as that which accompanied the promotion of heat pumps, without raising awareness of the technical limitations of the product, the thermal requirements of the building, and without protecting against potential manipulations by installation companies. It is also unacceptable to promise so-called thermal security at the expense of excessively costly investments and the indebting of society.

4.3. Opportunities for Breakthrough Energy Transformation to Electroheating

Opportunities for Electroprosumer Heating in the District Heating System—Slim to None—Why?

The breakthrough transformation is not of interest to heat producers and distributors, i.e., heating corporations and district heating companies (PEC). They want to sell as much heat as possible and maintain the existing heat supply system. The more deregulated the heating network at the consumer’s end, the higher the sales. The flat-rate fee for heating per square meter is the most advantageous form of billing for PECs. Propaganda is often used to promote the concept of energy security. Decentralized heating systems and electroprosumerism are seen as a threat.

For well-managed, innovative housing cooperatives and PECs, electroprosumerism offers a chance for development through investments in new heating technologies, renewable energy sources (RES), including bio-power plants, energy storage, and a new heat distribution system. The opportunity lies in the transformation of a PEC into an Electro-PEC.

Even if housing cooperatives are interested in the breakthrough transformation, they are often incapacitated by PECs. Not every management board is willing to risk disconnecting from the district heating network and invest in their own solutions. With a guaranteed supply of heat from PECs, there is no risk.

Suggestions:

• The launching by, for example, the NCBR (The National Centre for Research and Development), of a pilot program called “Electro-PEC of the Future,” similar to the “Future Heat Plant” program, which would include RES sources and the electrification of buildings, where electricity is converted into heat using heat pumps and induction boilers, depending on the results of a technical–economic analysis. The goal would be maximizing self-consumption of energy from RES, including from biogas plants and cogeneration, as well as energy storage;
• Creation of a Research and Development Center for Electroprosumers, with a structure of research facilities as shown in Figure 2, as an NCBR program, aimed at the practical implementation of electroprosumer heating and training in the implementation of the Electro-PEC and Housing Cooperative of the Future structures in district heating systems.

Examples of Implemented Solutions:

• Housing Cooperative “Sienkiewicza Estate” in Wieliczka: The cooperative decided to abandon its own coal boiler and district heating network and instead use distributed heat sources. Each building has its own gas boiler. The cost of heating decreased significantly, by about 25%. In the future, after 2050, gas boilers may be replaced in the heating network by heat pumps or induction boilers. This is an example of the first stage on the trajectory of energy transformation to electroprosumerism (TEE)—a breakthrough transformation;
• In Rybnik, as a result of the shutdown of the heat and power plant in Chwałowice, two gas-fired heating plants were built, supplying the existing district heating network. The cost of heating almost doubled, and this is not the final price. Issues with heat distribution (transmission losses, failures) persisted. This is an example of the first stage of incremental transformation.

Opportunities for Electroprosumer Heating in Industry

Significant opportunities exist for the optimization of energy within the industrial sector. A particularly promising area where electroprosumerism and electroprosumer heating can be implemented is within special economic zones (SEZs). Within these zones, industrial control shields (OK-P1) can be established by specific companies through individual investments in photovoltaic power plants, wind farms, energy storage systems, bioelectric plants, and backup generators.

There is ample roof space above production halls and large maneuvering and parking areas that can be utilized for the installation of photovoltaic power plants. OK-P2 control shields could be created by companies located within the zone, enabling mutual balancing and settlements through internal energy distribution systems (WSDE). An example of this could be settlements between entities located in shopping malls.

Energy generated from renewable sources (RES) during weekends, holidays, and non-production hours could be stored, converted into heat, or used for hydrogen production, instead of being fed back into the National Power Grid (KSE). Such an electroprosumer network would significantly reduce the load on the KSE network, lowering required modernization costs. More importantly, it would reduce fixed energy costs by eliminating distribution costs.

This solution also enables companies to obtain a “green certificate” for “green heating”, which can be realized through the use of the company’s own RES.

Suggestion:

• Extension of the Law on Energy Cooperatives: The possibility of establishing energy cooperatives should be expanded to include urban municipalities where economic zones are located. The current law is unconstitutional. Why are rural and urban–rural municipalities allowed to establish such cooperatives, while urban municipalities are excluded from this opportunity?

5. Conclusions

• The breakthrough transformation of district heating, involving the distribution of electricity through the electrical grid and its conversion into heat at the point of use, is the only logical and economically justified path toward an ecological, emission-free economy that should be adopted, assuming that electrical monism is achieved by 2050. The economic justification is presented in the article. The costs of this breakthrough transformation to electroheating are 26 times lower than the costs of incremental transformation presented in [8] and 13 times lower than the costs of incremental transformation defined in [9]. These costs can be financed without involving the state budget;
• Electricity in Electroheating: Electricity in electroheating should come from local renewable energy sources (RES), electroconsumer sources, as well as industrial and consumer energy storage, including energy storage in the distribution system and storage at wind farms and on-site (distributed) heat storage. Distributed power generation has its justifications. It is expensive to transmit energy over long distances through the KSE transmission network, e.g., from the north to the south, only to convert it into heat. The transmission costs and investment in the transmission network significantly increase the fixed costs of heat generated from electricity. Local investments in RES should not burden the state budget. These should come from the business policies of energy producers. Heat sources generated from electricity can be distributed sources and this heat should come from local renewable energy sources. Locally generated heat will ensure thermal crisis resilience;
• Heat Price after Transformation: The price of heat after the transformation of district heating into electroheating will depend on the price of electricity, which must be a market commodity at the price levels occurring in the European Union, ensuring the minimization of heat costs, specifically, “energy at 50 euros/MWh” [25]. Electroprosumerism in heating is the only solution to minimize the price of heat. “Energy from RES is and will be cheaper, and there is no turning back,” quote from [25];
• Rational Transformation: The transformation of district heating into electroheating must be rational and the selection of an electric heat source, such as a heat pump, must take into account its operating specifications. The heat pump is a desirable heat source in electrical monism, emission-free and economically justified, as demonstrated in the article and supported by publications [19,20,21,22,23]. Negative experiences of investors in unsuitable buildings do not indicate the ineffectiveness of heat pumps. The induction boiler is an electric heat source taking over the role of the primary heat source in a high-parameter system, which was previously delivered to the building’s heat exchange station through the district heating network. It should be applied in cases where the installation of heat pumps is technically and economically unjustified, as was discussed in this article. It is an alternative heat source providing optimal regulation of the heat exchange station and is purposeful in the breakthrough transformation of district heating to electroheating;
• Opportunities for District Heating Companies (PECs) and Housing Cooperatives: For well-managed, innovative district heating companies (PECs) and housing cooperatives, electroprosumerism is an opportunity for growth through investments in new heating technologies and RES, including bio-power plants and energy storage. The opportunity lies in transforming local PECs into Electro-PECs. Energy storage in heat is the cheap and technically simple method of stabilizing heat and utilizing excess electricity produced by weather-dependent RES sources;
• The breakthrough transformation of district heating systems is achievable, without involving the state budget, at the local level through local district heating companies;
• Involvement of Government: Engaging the government to solve local heating problems, burdening central authorities with local issues, and demanding billions in support from corporations and district heating companies for inefficient incremental transformation, the financing of which will burden future generations, is a sign of the irresponsibility and incapacity of local authorities. In the case of PEC management and heating corporations, it reflects their inability to move beyond existing habits. The breakthrough transformation requires a mental shift in management;
• Promises of “Heat Security”: heating corporations promise “thermal security” at the cost of overpriced investments and indebting society.

Although this paper focuses on Poland, the core concept—the breakthrough transformation of district heating through decentralized electroheating—is broadly relevant across Europe, especially in Eastern EU countries. Countries with legacy district heating infrastructure face similar challenges: the need to decarbonize heating, rising modernization costs, and increasing pressure to integrate renewable energy sources (RES) at scale. The Polish case exemplifies the tension between incremental and systemic change.

For example, Germany has committed to climate neutrality by 2045 and faces substantial challenges in modernizing district heating systems while phasing out natural gas and coal. Although it has a less centralized heating structure than Poland, Germany is also grappling with how to decentralize heating via heat pumps, local RES, and thermal storage, especially in dense urban areas and older housing stock [26,27].

Similarly, Denmark faces limitations in flexibility and rapid decarbonization due to the scale and rigidity of its existing centralized networks. Recent Danish energy plans have acknowledged the need to integrate decentralized heat pumps and smart grid systems, particularly in small towns and rural areas [28].

Generally, thermal storage at the building or neighborhood level is an increasingly discussed solution in EU decarbonization roadmaps [29].

Countries with a high share of RES and grid congestion, such as Spain and parts of Italy, may particularly benefit from decentralized heat models that avoid stressing national power grids and maximize local self-consumption.