The heat transition in the built environment is one of the most significant challenges within the broader energy transition. The Actualisatie Startanalyse 2025 (PBL) provides an important foundation for the Netherlands by identifying, for each neighbourhood, the heating solution with the lowest national costs. However, there are still many open questions about the factors that can shift these national costs.
Commissioned by Netbeheer Nederland and EBN, Common Futures examined how various system and project factors can affect both the total national costs and the cost-optimal mix of heating solutions for homes in the Netherlands. These are factors for which limited data is currently available, but which can significantly influence decisions by governments, grid operators and policy-makers.
Key insights from the study
National costs and the heating mix are sensitive to multiple factors
The Startanalyse estimates that the national costs of the heat transition in the built environment consist of more than €200 billion in investments and around €14 billion in annual variable energy costs. Our deeper analysis demonstrates that several factors can strongly influence the national costs and the choice between electric heat pumps, hybrid heat pumps, and district heating networks.
The report focuses on factors such as:
- insulation quality of homes
- price and availability of green gas
- costs of dispatchable electricity generation capacity
- investment costs and lifetime of district heating networks
- electricity prices and peak demand patterns in the energy system
These factors not only determine the costs of individual technologies but also shift the national cost optimum between solutions.
Factors can significantly change the cost-optimal mix, but this ‘re-optimisation’ has only limited impact on total national costs
Changes in factors such as electricity prices, green-gas prices, or district heating costs can cause many neighbourhoods to switch to another lowest-cost heating option. As a result, the mix between electric heat pumps, hybrid heat pumps, and district heating can shift considerably.
At the same time, the sensitivity analyses show that total national costs change only marginally after re-optimisation. For example, doubling the electricity price increases national costs by around 28% if the original heating mix is maintained; after re-optimisation, this is still around 27%. The mix responds strongly, while the direct cost impact of the underlying factors remains dominant.
The direct impact of several factors on national costs is substantial
Factors such as insulation levels, the project management costs of district heating networks, gas network costs, or higher electricity prices have direct—and sometimes significant—implications for the national costs of the heat transition. It is important to assess how these costs can be minimised.
Our recommendations
The sensitivity analyses show that for many neighbourhoods the national costs of different heating options are relatively close to each other. We therefore recommend prioritising neighbourhoods where one option is clearly more favourable and where the outcome is robust. At the same time, it is essential to strengthen the enabling conditions for each major heating pathway:
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Electric heat pumps: Address peak loads in the electricity system, investigate the need for dispatchable capacity, and consider discontinuing subsidies for heat pumps with electric resistance elements.
- District heating networks: Encourage standardisation and cost reduction, and consider withholding subsidies for individual heat pumps in areas where district heating is the robust solution.
- Hybrid heat pumps: Make clear decisions on the long-term role of green-gas imports, and develop appropriate policy if this pathway is desired.
