HOT|COOL NO.2/2021 - "Economics, Finance & Money"

Following the referendum result, the senate bought back the power and gas grid and negotiated the option to also buy back the remaining shares of the DH business for a predefined price. A final decision had to be made in 2018 – five years later. In 2018 the senate decided to exercise the option and buy back the remaining shares in September 2019. Since then, the Hamburg DH business has changed. Plans to replace the first of two coal-fired CHP plants are underway, allowing for 55% climate-neutral heat in the replacement solution. It offers a competitive and profitable alternative to maximizing profit. It shows the new priorities set by the new owner - while still expecting the Wärme Hamburg to be a profitable and efficient company. The mayor promised that potential price increases will always be within the price adjustments of conventional heating solutions. When it comes to investments of the DH company, especially before the final decision to exercise the option, Vattenfall was understandably reluctant to take investment decisions, and only a few investments happened in DH of the northern German city. A reason was that investments in an international company mainly go to those projects with the highest rate of return. As a result, investments often went to offshore wind parks, and Hamburg DH returned empty-handed. The lack of investment is now a thing of the past. The new city-owned company will invest more than one billion Euros into the DH business until 2025. It will then replace the remaining coal-fired power plant of Tiefstack until 2030. How the replacement of the second coal-fired CHP is handled is another sign of change. Since 2020 the Wärme Hamburg has engaged a stakeholder dialogue with NGOs, tenant associations, scientists, and branch associations on the best solution for the power plant replacement. The ambition is to achieve an even higher share of carbon-neutral heat than the 55% bar set for the first coal-fired CHP. With a CO2 reduction of 600,000 t p.a. until 2030 (in comparison to 2020), Wärme Hamburg will contribute the highest single share to the city’s climate goals. That is part of the new owner's directive and how the city of Hamburg uses the lever and its further influence. As always, nothing is black or white. Leaving Vattenfall with a carve-out created several dis-synergies for Wärme Hamburg. The price tag for the carve-out itself came with a two-digit million Euro value. Some disadvantages, however, were compensated by creating new synergies through cooperation with other city- owned companies. But dis-synergies, formerly resulting from economies of scale, and profiting from custom- made company-wide IT developments, could not be compensated. The focus now shifts more and more to software solutions already available on the market. Froma city perspective, re-municipalization has been a success. For example, the company Wärme Hamburg has started to implement the “Wärmewende” and actively contributes to CO2 reductions in the metropolitan area, even if they come with a price tag. Furthermore, the decisions on what to happen are now taken in Hamburg and no longer in foreign company headquarters, giving a better understanding of what the people of Hamburg want and prefer. Last but not least, the engagement in the local discussions has changed – for the better.

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