According to a number of political agreements, the latter concluded on 2 September 2021, it has been decided to introduce new and improved framework terms for the exploitation of surplus heat, for instance from data centres or climate systems.
A bill was therefore submitted for consultation on 9 September 2021 containing, among others, proposals to change:
- The price adjustment of collective heat supply plants’ purchase of surplus heat
- The charge which companies are to pay when selling surplus heat.
The objective is that the companies’ surplus heat must be exploited when this is to the benefit of the climate, the consumers and the companies. The purpose is to give the companies a financial incentive to exploit surplus heat and at the same time ensure that the consumers receive the cheapest heat.
Present price adjustment: surplus heat may be sold at a profit up to the substitution price
Today, suppliers of industrial surplus heat and surplus heat exploited by way of electrically powered heat pumps may include a profit in the price up to the substitution price. The substitution price is the price of the heat supply utility's specific alternative to purchase of surplus heat, for instance the price of own production or purchase from another supplier. On the contrary, surplus heat from other processes than industrial processes or surplus heat which has the right temperature to be exploited without a heart pump may not be sold at a profit but must be supplied at the cost-determined price.
New price adjustment: price may be agreed freely based on a ve price cap
It is proposed that the surplus heat supplier and the heat supply utility are free to agree on the price of surplus heat in the future as long as the price is fixed under a price cap. It is the total price of the exploitation of surplus, i.e. including any investments made by the heat supply utility, which must be kept under the price cap. The price cap agreed at the time of the conclusion of the agreement may be maintained during the entire term of the agreement.
The Utility Regulator will fix the national price cap based on the average costs for the cheapest alternative heat production plants based on renewable energy (a so-called VE price cap). Until the framework of the Utility Regulator’s price cap is in place, the Energy Agency may fix the price cap.
It must be possible to have an individual price cap approved if it can be documented that the price cap is not a relevant reference in the district heating area in question.
A transition scheme is expected to be established covering existing surplus heat supplies.
The principle concerning substitution price is maintained. Surplus heat suppliers may no longer include a profit under the present rules which are expected to be abolished completely in relation to surplus heat suppliers after the expiry of the transition scheme.
Small surplus heat suppliers are exempted from the price adjustment
Finally, the bill proposes that small surplus heat suppliers (with a capacity of up to 0.25 MW) are exempted from the price adjustment. It is assumed that the price cap of surplus heat is not to apply to purchase of surplus heat from small suppliers. However, the price of surplus heat from small suppliers may not exceed the substitution price.
Reporting to the utility regulator
Surplus heat suppliers are not to report prices to the Utility Regulator. This also applies to the large suppliers. The Utility Regulator may take action against the heat supply utility purchasing surplus heat. The Utility Regulator may not order a surplus heat supplier to change the price if it is contrary to the rules. On the other hand, the heat supply utility purchasing surplus heat may then have to reduce the price when redistributing to the consumers. It is therefore important that the heat supply utilities purchasing surplus heat ensure in the agreement with the supplier that the agreed price does not exceed the price under the Heat Supply Act.
To sum up, the new price adjustment involves the following:
- Small surplus heat suppliers are exempted from the price adjustment and may de facto supply surplus at a price up to the substitution price.
- All surplus heat suppliers may supply at a profit, however, at the lowest price of either a VE price cap fixed by the Utility Regulator or the substitution price.
- Supply of surplus heat exploited by way of an electrically powered heat pump may still include a profit based on the current rules, i.e. up to the substitution price.
Current rates of surplus heat charges
The present surplus heat charge is generally DKK 50 per GJ (2015 level), but there are many exemptions. Firstly, 33 % of the remuneration may paid instead. Under current practice, this means that no surplus heat charge is to be paid if the surplus heat supplier gives away the heat to the heat supply utility which only compensates the supplier for any investments in surplus heat plants. Secondly, the rate of internal use of surplus heat is DKK 0 in the summer half and DKK 10 per GJ in the winter half.
In 2020, an amendment to the act was made resulting in a general rate of DKK 25 per GJ (2018 level) for internal and external surplus heat and the possibility of a reduced rate of DKK 10 per GJ for external surplus heat when concluding an agreement with the Energy Agency. The amendment to the act in 2020 has not yet come into force and is proposed to be replaced by the new rules in the bill which has just been submitted for consultation.
New uniform charge rate with the possibility of exemption under an energy optimisation scheme
The bill proposes the introduction of a uniform surplus heat charge of DKK 24.50 per GJ (2015 level) for both external and internal surplus heat.
If the surplus heat suppliers join an energy optimisation scheme, they may be exempted from paying surplus heat charges in the future. The energy optimisation scheme will contain a number of technical and administrative requirements to ensure an effective exploitation of energy for the companies’ processes. More detailed rules will be laid down in relation to the wording of the energy efficiency scheme. The scheme may for instance lay down rules on energy reviews and efficiency measures. Compliance with the rules will be supervised by the Minister for Climate, Energy and Supply who may carry out inspection visits.
In addition, the bill proposes that payment of surplus heat charges may be moved from the surplus heat suppliers to the heat supply utilities. That will require that the surplus heat is given away to the heat supply utilities. However, the heat supply utilities are permitted to compensate the surplus heat suppliers for any investments in surplus heat plants without this being considered payment of surplus heat.
To sum up, the surplus heat supplier must pay a surplus heat charge of DKK 24,50 per GJ (2015 level) in the future, unless:
- The surplus heat supplier joins the energy efficiency scheme, or
- The surplus heat supplier supplies the surplus heat free of charge to the heat supply utility which pays the surplus heat charge.
The consultation deadline expires on 6 October 2021.
Would you like to know more?
For more information on the bill: Forslag til lov om ændring af lov om varmeforsyning mm (article in Danish)
For more information on the agreement behind the bill: Opfølgende aftale ifm. Klimaftale for energi og industri mv. (article in Danish)