A production strategy helps energy companies navigate the transition

Energy companies are making increasingly large investment decisions at a time when the number of options is greater than ever before. Evaluating individual investments in isolation is no longer enough. What’s needed is a comprehensive view of a future competitive energy production system. A production strategy combines technical and economic analysis across different energy production options.

Finland’s district heating sector and industry are going through an exceptionally significant transition. For past decades, the key strategic questions in energy production centered on fuel choices, combined heat and power (CHP) production, and peak load capacity.

The operating environment is now changing much faster. The drivers are not only the green transition and technological development, but also geopolitical factors that affect energy availability, price levels, security of supply, and the long-term competitiveness of different production methods.

Is your district heating production mix ready for change?

Across Finland, companies are planning data centers, hydrogen production facilities, synthetic fuel projects, carbon capture solutions, fossil-free heat production, and other electricity-intensive industries.

From a district heating perspective, these share one common characteristic: they all generate significant amounts of waste heat. At the same time, electrode boilers, heat pumps, thermal storage, and electricity market participation are fundamentally changing the logic of district heating production.

Our view is that evaluating individual investments in isolation is no longer sufficient. A comprehensive production strategy is needed, one that examines multiple future development paths in parallel and calculates the profitability of different investments relative to the alternatives.

Scenario analysis helps prepare for the future

For energy companies, the question is not just about choosing the right technologies or calculating payback periods. It is about identifying which solutions create the most value for owners, customers, and the local community over the long term.

Production strategy work starts by analyzing the current production system: energy flows, cost structure, fuels, power generation, security of supply, and investment needs. From there, alternative future scenarios are developed, such as:

• Utilizing waste heat from data centers
• Waste heat from hydrogen or synthetic fuel production
• Heat flows associated with carbon capture
• Wider use of electrode boilers
• Recovery of industrial process waste heat
• Heat pump solutions
• Thermal storage
• Keeping existing CHP capacity versus extending its operational life
• Using demand response, electricity markets, and reserve markets

Comparing these future scenarios against each other and against the current situation provides valuable insight into which direction the company should develop. It also creates a foundation for prioritizing different waste heat sources and supports potential heat supply contract negotiations.

Waste heat is not always profitable

Without a comprehensive techno-economic production strategy, it is difficult to assess which waste heat sources to prioritize when several competing options are on the table.

Sometimes the volume of available waste heat is so large that different projects rule each other out, because not all of it can necessarily be utilized. A critical finding here is that waste heat does not automatically mean cheap heat.

The temperature of waste heat, the need to boost its temperature for the network, utilization rate, electricity requirements, reliability of supply, and the impact on the company’s own power generation can all significantly change the overall picture. In some cases, waste heat improves an energy company’s profitability. In others, it can reduce it.

The same applies to other solutions. Electrode boilers, heat pumps, and energy storage can look attractive as individual investments, but their true impact only becomes clear when assessed as part of the full production system.

Competitiveness is what matters, not payback time

In strategy work, all options are compared using the same baseline assumptions, covering technical, economic, and security-of-supply perspectives. The analysis typically includes energy balance modeling, investment requirements, production costs, cash flow analysis, and enterprise value impacts over the long term.

From a security-of-supply perspective, recent years have shown that energy production can no longer be treated as a purely technical or economic question. Geopolitical tensions, uncertainties around energy availability, security-of-supply requirements, and a shifting European energy and security policy landscape are increasingly affecting the competitiveness of different energy sources and the risks associated with investment decisions.

In practice, this means a production strategy must also assess long-term dependencies on individual fuels, electricity markets, energy sources, and external parties.

Simulations show where to take production next

Forming a strategy increasingly requires data, simulations, forecasts, and comparisons of alternative development paths. These tools make it possible to assess the system-wide impact of different solutions. When source data and analysis build a shared picture of the operating environment, the production strategy becomes a decision-making tool grounded in real conditions rather than assumptions.

The output is a concrete view of the following:

• Which investments genuinely create value
• On what terms waste heat is worth acquiring
• How dependent production would become on external parties
• How different solutions affect heat prices, profitability, security of supply, enterprise value, and returns to owners
• Which production structure best supports long-term competitiveness

Strategy work makes decision-making easier by bringing options, impacts, and risks into a single comparison framework. When investments are evaluated from the perspective of the full production system, decisions are based on the complete picture of which development path best supports the company’s competitiveness, security of supply, and long-term value creation.

Value comes from how systems work together, not from individual solutions

The next phase of the green transition is no longer just about replacing fossil energy sources. It is about integrating different heat, electricity, and industrial systems in ways that create value for both the energy company and the local community.

Without a strategic approach to these choices, the direction of investment decisions will effectively be set by markets, regulation, energy prices, and the actions of external parties.

The value of a strategy only materializes when its implementation can be monitored and steered in practice. Digital solutions make it possible to bring together operational data, reporting, and analytics into a continuously updated picture of where things stand, allowing progress toward strategic goals to be tracked as part of day-to-day management.