HOT|COOL NO. 3/2017 - "North America"


TARIFFS FOR PRODUCTION In case the DH company buys heat from a privately owned production plant, it is even more important that the tariff is divided in true-cost tariff components reflecting long-term fixed costs, variable costs depending on time and temperature, taxes etc. as well as profit for the private owner. Tariffs for heat from large CHP plants may include more than 8 tariff components. CONCLUSION Tariffs for DH can be complicated, and there is no single best tariff structure, and there are many ideas. However, if the DH company considers the tariffs and the modern heat meter as an instrument for communication, there is a better chance for a successful development of the heat supply, even

Figure 2. Daily dynamic tariff reflecting daily marginal cost

as efficient as if all energy infrastructure and buildings had been owned by one single owner. What is most important is to encourage the consumers to use the heat efficiently, to invest in solutions, which are cost-effective, and to avoid suboptimal and inefficient investments.

Other DH companies have paid back the debt and can supply more consumers from the existing but limited capacity. For them it might be a good idea to form the fixed tariff as a long-term variable tariff, e.g. based on the average consumption in the last 3 years in Euro/MWh. The Danish DH company Vestforbrænding, who also owns a waste incinerator, is in such a “fixed tariff”, which in reality is 100 % variable after 3 years. This tariff encourages the existing consumers to save heat, which can then be used to supply more consumers through the same network. TARIFF VARIATIONS INDICATES EFFICIENT HEAT SUPPLY More than 99 % of all Danish DH companies are owned by the consumers or themunicipalities acting on behalf of the consumers. Thus the objectives of the companies are to generate as much profit as possible by minimizing the long-term costs as well as the interest paid on loans and to give this profit to the consumers in terms of lower tariffs. One might say that the tariff should balance revenues and costs every year and not leave any profit for investors. Accordingly, DH tariffs in Denmark differs a lot as the local conditions differs in all local communities. The main factors are heat density, historical development, available cheap heat sources and competitive heat sources. In figure 3 we see the newest statistics, covering all DH companies, for the cost of heating a standard one-family house. Please note that this is not always a mirror of the average tariff, as some companies do not supply small houses and due to discount to large consumers.

For further information please contact:

Ramboll Att.: Anders Dyrelund

Phone: +45 5161 8766

Figure 3. Total costs of supplying a standard building in Denmark

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