The experience among Danish DH companies is that chang- ing the up-front payment has an effect, and more people will sign-up. It was mainly a psychological effect but likely also a matter of liquidity for the individual households. Not everyone can raise money for a significant up-front investment. Both DH offers would be equally good for the customer if you look at the overall economic value seen over many years. Still, people are more likely to connect if the up-front payment is lower. Making an offer that benefits the business case Two essential parameters in a DH business case are the con- nection rate and connecting customers in one go to keep costs low. Making use of the psychological effects helps to achieve both. Typically, the process will run like this: A time-limited offer: “Connect now and get a large discount on your connection fee.” If enough people sign-up for the project to be economically viable, DH will be developed in the area. When the dates for digging are set, a new offer is made: “We come to your area to dig during this period. If you sign up be- fore we start digging, you can still connect with a (smaller) dis- count”. The second offer also has a sizable effect; the extra customers connecting adds little additional costs and much value. This will boost both the economy and the robustness of the DH projects. Same tool – different use During the energy crisis, the focus in the DH companies shift- ed. People were now eager to join, but the concern is whether their interest to connect is robust or a short-term effect that evaporates when energy prices stabilize. This has brought about a change in the use of discounts on the up-front pay- ment. It is rare to see up-front payments that would secure the
entire investment in Denmark, but discounts are smaller, and some projects have increased the up-front payment.
Before the energy crisis, discounted up-front payments were typically between 0 and 3000 Euros. Now, a broader spectrum is seen depending on the situation. Some DH companies have the philosophy that everyone should be able to have a green heat transition and that connection fees should not stand in the way if the business case is robust. Others have started in- creasing up-front payments as a tool to reduce financial risks and make sure that people are earnest about connecting. Also, the limit for what people consider a bargain has shifted up- wards – allowing the DH companies to secure more funding up-front without significantly affecting the number of custom- ers connecting. How big is the effect? Danish DH experts are not in doubt – the effect of discounts is real - but giving a formula is not so easy. It is affected by en- ergy policy, current events such as the energy crisis, and local parameters for the area. What is considered a large amount depends on your income, the value of the building, and the size of your current heating bill. When asked how significant the effect is, the answers from Danish DH experts come from a gut feeling based on knowing their area and listening to the potential customers. To illustrate the impact and importance of having a realistic un- derstanding of this, figure 1 shows two different situations. The red line represents a situation where the up-front payment is a significant barrier to potential customers, and only 50% would connect if the connection fee is 3.400 €. The dotted line repre- sents an area where the up-front payment is less of a barrier. Perhaps because it is a wealthier area or their current heat sup- ply is more expensive. The figure also illustrates just how valu- able it is to put some effort into connecting more customers.
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