Southeast Europe has long treated electricity and heat as separate energy systems, even as their economics increasingly converge. Power markets can see very low prices during periods of strong solar generation before shifting to expensive evening ramps. At the same time, cities and industrial facilities continue to rely on gas, coal, biomass and oil to produce hot water and steam.
Power-to-heat links the two systems by using heating demand as a flexible electricity resource. Electric boilers and large heat pumps can raise electricity consumption when power prices are low, while thermal storage enables heat to be delivered hours later. In this setup, the controllable electricity load is intended for heat delivery rather than electricity consumption itself.
The storage choice depends on the end use. If the target is hot water, storing electricity in a battery and converting it later into heat may provide limited economic value when a hot-water tank can perform time-shifting at lower cost. Thermal storage is less versatile than electrochemical batteries, but that flexibility is not always required.
District heating systems using electric boilers, heat pumps and thermal tanks
District-heating systems across Serbia, Romania, Bulgaria, Croatia, Hungary and Bosnia already aggregate thousands of customers around central heat-production facilities. Many of these systems remain dependent on gas and other conventional fuels. That structure creates an opportunity to introduce electricity as an additional energy source.
An electric boiler can add flexibility without requiring an immediate replacement of existing fuel-based equipment. A heat operator could use electricity when wholesale power prices fall below the marginal cost of gas and switch back to conventional boilers when electricity becomes more expensive. Adding a large insulated thermal storage tank can extend the operating window by decoupling heat production from customer demand timing.
Heat pumps can further improve efficiency by delivering multiple units of heat per unit of electricity consumed. This performance can be supported when low-temperature sources are available, including wastewater, rivers, industrial waste heat or data-centre cooling systems. Their operating profile is less binary than that of an electric boiler but can remain economically attractive across a wider range of electricity prices.
Electric boilers, heat pumps and thermal storage together can enable district-heating operators to manage multiple energy commodities. This approach aligns heating assets with electricity-market conditions rather than treating them only as part of the heat sector.
Electrifying industrial steam and moderate-temperature heat
Industrial facilities provide another route for power-to-heat flexibility. Food processing, paper, chemicals and textiles require steam and moderate-temperature heat that can increasingly be electrified.
A hybrid boiler system can switch between gas, electricity and stored heat based on market prices and production requirements. This structure provides industrial consumers with a physical hedge against energy-price volatility instead of relying only on financial hedging mechanisms.
Flexible industrial demand can also support renewable generators by increasing electricity use during periods of low prices. A factory near a solar-rich grid node could raise consumption when prices are weak, absorbing power that might otherwise be curtailed or sold at low market values.
The same shift can support long-term energy contracts structured around flexible demand rather than traditional baseload consumption. In that model, the value for an industrial customer depends not only on how much electricity is used but also on how effectively consumption timing can change.
Network tariffs, connection capacity and regulated heat pricing constraints
Network tariffs are among the main barriers to electric boiler deployment. Even if an electric boiler operates mainly during periods of low wholesale prices, capacity charges, taxes and other network costs can make electricity use uneconomic when tariffs are designed for continuous users.
Connection capacity is another constraint for electrification projects. Replacing a 20 MW gas boiler with electrical equipment could require a substantial substation upgrade, potentially adding years to project development timelines.
Regulated heat tariffs can further limit municipal heating companies’ ability to capture market value or recover investments in new flexible equipment. Policy frameworks therefore need to recognise the system value of controllable electricity demand rather than applying identical cost structures to all loads.
Dynamic connection agreements, time-varying network tariffs and access to balancing markets could improve project economics. The objective is not to subsidise electricity consumption but to reward demand when the power system has an economic or operational need for additional load.
Impacts on solar price patterns, gas use and winter demand
A large-scale power-to-heat sector could affect more than heating operations alone. Additional flexible demand could reduce the depth of midday solar price declines while gas consumption becomes more responsive to relative economics between electricity and fuel.
District-heating operators could begin managing electricity and gas price spreads as part of their operations. Thermal storage would also compete with batteries for selected flexibility services within power markets.
Winter electricity demand would rise as heating becomes more electrified. However, a significant share of that additional demand would become controllable rather than fixed.
The strategic role of power-to-heat extends beyond decarbonisation by enabling heat to function as a balancing resource measured in hundreds of megawatts across Southeast European power systems. For years, the region has sought new sources of flexible electricity capacity; part of that potential already exists in boiler houses, thermal storage tanks, district-heating networks and industrial steam systems.
These assets have traditionally been treated as elements of the heat sector only. The emerging power-to-heat model indicates they should also be considered part of the electricity system as well.
