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However, it can be hard for the city to encourage a private owner to extend the DH&C grid to cover the zoning, which is optimal seen from the perspectives of the city and to shift to meet the energy policy objectives of low carbon energy. Moreover the profit (and risk) of the DH&C business will be given to the owners and not to the consumers. Maybe that is one of the reasons why many cities in e.g. Germany and in Sweden regret that they once have sold their grid to a private investor and now want to buy it back. What is most efficient for the city? It is our experience that the consumer and municipal ownership forms can offer the highest score on all three efficiency factors (technical, institutional and financial), provided that the city council offers the least cost planning and local stakeholder analysis full attention, that the city is creditworthy and is willing to take some risk. An ESCO may also be efficient, provided, however, that the city and the ESCO can agree on a transparent partnership agreement which share risk and benefit in a reasonable and open way. For new urban developments it is e.g. an opportunity for the city or the urban development company to include the investments in the network infrastructure in the basic infrastructure cost to be paid by all land-owners and thereafter lease or transfer the network to the ESCO company. Looking around the world it seems that there is a huge potential for more DH&C, not least due to the new energy policies, who are going to implement the COP21 agreement. As regards ownership we find that: • DH is fully developed in almost all countries in which the cities has taken the responsibility • The largest potential for DH is in communities with no tradition for municipal or consumer ownership. Therefore, the challenge will be to form such organisational structures in cities or to find better ways to share benefit and risk between the cities and investors.
companies, undertake large investment projects with a small staff by engaging consultants and advisers in the first phase. Thereby they control the budget of the natural monopoly and find the most competitive suppliers, contractors, service companies and financial institutions. ESCO companies In case the city council or the consumers do not want to take the risk of forming a company or in case they are not able to guarantee for loans, the alternative solution is to allow a private investor to establish and operate the DH&C system within a certain contract period, a so-called BOOT concept (Build, Own, Operate and Transfer). In this way, the ESCO company and the city can share the risk and benefit of the DH&C business, and the city will be able to transfer it to a municipal or a consumer-owned company after the end of the contract period. The long-term energy price from an ESCO will be larger than the price from a consumer- owned or a municipally owned company, as the ESCO takes a certain risk. The larger risk - the larger price. As DH&C is a natural monopoly, the activities of a private entity will normally be subject to strong regulation from the national energy regulator in order to protect the consumers, and the rather complicated contract between the city and the ESCO company has to take into account the regulatory framework. ESCOs seem to have an important role to play in countries, in which consumers and cities are not able to establish DH&C companies.
Ramboll Att.: Anders Dyrelund ad@ramboll.dk www.ramboll/energy.com For further information please contact:
Copenhagen Markets: The pipes are located under the roof in the huge market building to each tenant.
Private ownership Finally, in some countries there is no regulation of the sector, and private companies can own and operate the DH&C infrastructure and sell DH&C on commercial conditions. This form of ownership can, in principle, develop almost the same DH&C system as the consumer co-operative or the municipally owned utility.
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