Impact of climate change on the cost optimal mix of decentralized heating in Europe

Residential demands for space heating and hot water account for 31% of the total European energy demand. Space heating is highly dependent on ambient conditions and susceptible to climate change. We adopt a techno-economic standpoint and assess the impact of climate change on decentralized heating demand and the cost-optimal mix of heating technologies. Temperature data with high spatial resolution from nine climate models implementing three Representative Concentration Pathways from IPCC are used to estimate climate induced changes in the European demand side for heating. The demand side is modelled by the proxy of heating-degree days. The supply side is modelled by using a screening curve approach to the economics of heat generation. We find that space heating demand decreases by up to 16% and 24% in low and intermediate concentration pathways. This reduction reaches 42% in the most extreme global warming scenario. When considering historic weather data, we find a heterogeneous mix of technologies are cost-optimal, depending on the heating load factor (number of full-load hours per year). Increasing ambient temperatures toward the end-century improve the economic performance of heat pumps in all concentration pathways. Cost optimal technologies broadly correspond to heat markets and policies in Europe, with some exceptions.