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The balance of supply and demand is quite important: when systems have excess capacity, their costs are greater. Losses are higher when systems are operated at partial capacity and maintaining a large system costs more than maintaining a small one. Such systems also have high fixed costs, which makes it increasingly difficult to lower costs when demand decreases. They also tend to be less flexible and reliable. Balancing supply and demand on a daily basis in many systems means reading the weather forecast for the next day and manually setting the burners at the desired production level.

It is not uncommon to hear of gas explosions destroying buildings in Russia and Ukraine. 10. Ministry of Fuel and Energy of Ukraine (2004). 11. Gunnarsdottir et al. (2002). 12. While district heating played the largest role in this decline in emissions, the growth of hydro and nuclear energy nationally offset some local emissions as well. Source: Gochenour (2001). 13. Werner, Spurr and Pout (2002). 1 DISTRICT HEATING: A PRIORITY 44 The challenge for transition economies is to realise the full environmental and efficiency potential of district heating, which will require new policy and management approaches.

In the last ten to fifteen years, countries have dealt differently with these challenges, so today there are significant regional differences. This chapter also looks at how three groups of countries diverge. 3 It is important to note that this grouping of countries is somewhat arbitrary as it is based as much on climatic characteristics as on district heating policy elements. Some countries discussed within one group may have certain features common to other groups. We briefly mention this when there are significant differences.

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