11. jul 2019

The Danish District Heating Model

The Danish district heating model is unique in its extensive range. District heating is part of Danish welfare history and it contributes to values beyond the economically measurable. 

The history of Danish district heating
The Danish district heating sector provides 64 pct. of all Danish households with district heating. This makes Denmark one of the countries in Europe with the most developed district heating supply networks. 

District heating is not a new technology; it can be traced all the way back to the Roman empire. In Denmark, the first district heating facility was established in 1903 in Frederiksberg. However, the extensive nature of Danish district heating started in the wake of several energy crises in the 1970s, where oil prices doubled. Here, Denmark had to rethink their energy dependency. Additionally, there were problems with the deposition of refuse collection as well as the extensive amount of carbon dioxide emissions due to dependency on fossil fuels.

To combat these various problems Denmark reorganised their use of energy to more domestic sources. Consequently, the district heating grid was developed. By using district heating technologies Denmark was able to reduce dependency on fossil fuels and solve problems with waste management, urban planning and pollution. This lead to the adoption of Denmark’s first Heat Supply Act in 1979 (revised extensively in 1990, 2000 and 2005).

The Heat Supple Act has been leading to an increase in the usage of district heating, which is now the dominant source of heat in Danish households. Furthermore, the act contains regulations regarding the implementation and content of heat planning in the country, which is managed at the municipal level. It introduced extensive public heating planning that secured a collective heating supply and a socially-appropriate exploitation of energy.

However, the development of the collective heating supply required massive investments for production and distribution. As a result, obligatory connection was introduced for new and existing residential projects in district heating areas, to ensure a sufficient customer base and the socio-economic benefits that the collective heating supply was able to provide. This obligation scheme came to an end in 2019.

The value of district heating
District heating production is decentralised, as production is generally reliant on being in the vicinity. This means that there is/are often only a single or just a few heating suppliers to the local district heating network. As a result, the Danish district heating industry is regarded as a natural monopoly and is regulated by a principle of non-profit.

The principle of non-profit dictates which costs can be covered in the heating price. Likewise, the price of district heating must not exceed the cost of heat production. This ensures that customers are protected against possible abuse as a result of the industry’s natural monopoly state.

In addition to municipally-owned companies, a large proportion of Danish district heating companies are operated as cooperatives. This means that the cooperative is owned by its own customers and works to promote their common interests. Alongside the non-profit principle, this creates an efficient heat supply at the lowest possible price for the end-user.

The extensive reach of the district heating grid bears witness to the extensive welfare system present in Denmark. District heating is a collective solution to the provision of heating and the benefit of this scheme is that the more households attached to the grid, the cheaper the heating costs will be. By being both collective and efficient, district heating is creating values beyond the short-term, economic ones and this contributes to the importance of district heating in the Danish energy framework.