HOT|COOL NO. 1/2022 - "Conversion from gas - it's time now!"

This first 2022 issue of Hot Cool is about "CONVERSION FROM GAS". IT IS TIME NOW! Read about how district heating can help unlock the hydrogen economy in the UK and study the neighborhood energy approach as a scalable alternative for gas heating in the Netherlands. Our chief editor Lars Gullev questions in his column "Green versus Black Heat" whether we are at risk of color blindness. Have a look at our new column "Scientist Corner" where two young scientists share their findings of their fresh study about the district heating development through fair conditions for the consumers. You will find this and much more in this issue of Hot Cool.

NO. 3 / 2021 . 1 2



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By Jacob Byskov Kristensen 4 8

16 20 21








DBDH Stæhr Johansens Vej 38 DK-2000 Frederiksberg Phone +45 8893 9150

Editor-in-Chief: Lars Gullev, VEKS

Total circulation: 5.000 copies in 74 countries 10 times per year

Grafisk layout Kåre Roager,

Coordinating Editor: Linda Bertelsen, DBDH

ISSN 0904 9681


Climate and reduction of CO2 emissions have reached the very top of the agenda in most countries. People have taken on the responsibility, and therefore, the topic has received the highest political interest - and priority. If we are not careful, investments, political focus and peoples understanding will work against our climate goals.

By Lars Gullev, CEO at VEKS

gas” signals a product from nature, natural gas never becomes a green fuel.

In April 2021, the EU member states, and the European Parlia- ment agreed to reduce CO 2 emissions by 55% by 2030 com- pared to 1990 levels. Although it was a long, complicated pro- cess to agree on a common goal - a green EU - it was probably the most straightforward part.

Once the European Commission has classified nuclear pow- er and natural gas as green technologies/fuels, the rationale is that it is necessary to accept imperfect solutions for a tran- sitional period to achieve the goal of climate neutrality in the EU by 2050.

Now it’s getting tricky, and the subsequent discussions have already begun - can green be graded?

Others express that this is a case of greenwashing.

At first glance, one would not think it possible - but on 2 Febru- ary 2022, the EU has created serious, legitimate doubts about what is green and what is black. As part of the EU Action Plan for a Greener and Cleaner Econo- my, in line with the Paris Agreement and the UN’s Global Goals, the EU has phased in a new classification system (taxonomy) to ensure uniform identification of green and environmentally sustainable investments in the European market... The taxonomy classifies an economic activity as environmen- tally sustainable based on several criteria. The problem with the taxonomy is that most people now will feel great uncer- tainty and ambiguity about defining black or green fuels - and green technologies. The European Commission has now recognized both natural gas and nuclear power as greenish - and we have initiated a process in which the colors “green” and “black” are no longer unambiguous. Burning coal emits less CO 2 than burning lignite - but does it make coal a green fuel? Most people will probably think that coal is a “black fuel.” Burning oil emits less CO 2 than burning coal - but does it turn oil into a green fuel? Most people will probably think that oil is a “black fuel.”

But how did we end up here, where the traditional colors “black” and “green” now take on a different meaning?

One could imagine that several countries slowly realize that the transition from a fossil-based society to a green, sustaina- ble society is more complicated in the real world than in the political world.

Therefore, there is likely to be a compromise between the EU’s two heaviest players, France, and Germany.

With the dramatically rising prices of, i.e., natural gas, France has been quick to catch the ball - about 75% of France’s elec- tricity production comes from nuclear power. With the decision in Germany to phase out nuclear power - and thereby increase the dependence on natural gas - the Germans have been dependent on natural gas also “joining the pool.”

It is thus a traditional barter.

With the introduction of taxonomy, one has - overstating it a bit - gone from a science-based standard to a political norm.

A significant challenge will be that if you choose to invest your pension in green investments in the future, you risk that part of the money going to natural gas or nuclear power. Unless, of course, the pension fund states explicitly that the investment only makes for renewable energy sources.

Burning natural gas emits less CO 2 than burning oil - but does it make natural gas a green fuel? Although the word “natural

This taxonomy opens the door for money that would have gone to renewable energy, such as wind turbines and solar cells, to go to natural gas and nuclear power, making it very difficult for Eu- ropean consumers to invest sustainably. GREEN VERSUS BLACK HEAT: ARE WE AT RISK OF COLOR BLINDNESS?

Let’s hope that the European Parliament will end this redefinition of green and black colors.

There has been massive criticism from several countries that the Commission has not listened, as neither nuclear power nor natural gas should be called green in line with renewable energy. The Commission sends an entirely wrong signal to investors, and the taxonomy will promote in- vestment in technologies that are problematic for both the climate and the environment.

The UK governments’ ambitions for new hydrogen infra- structure n could create new sources of waste heat suffi- cient to supply the entire UK demand for domestic space heating. But this heat does not have to go to waste. If hydro- gen production can be located close to towns and cities, where there is high heat demand, district heating networks could provide significant economic, environmental, and social benefits to everyone - the hydrogen producer, the district heating network, and consumers. This was the con- clusion of a study conducted by Ramboll UK on behalf of the Danish Government’s Energy Governance Partnership at the Danish Embassy in the UK. Here, we explore wheth- er district heating is in tension with the electrification ver- sus hydrogen debate, the opportunities for district heating from waste heat from hydrogen production, and how to actually make this work through policy and planning. Hydrogen has been identified by all UK govern- ments as having an important role in the decarbon- isation of heating. Hydrogen is on everyone’s mind these days – at least in Newstudy shows significant economic, environmental andsocial benefits from co-development of hydrogen and dis- trict heating (DH) in the UK

So, where is district heating on the green/black scale?

The district heating of the future will primarily be based on utilization of surplus heat from data centers, CO 2 capture, from Power-to-X (PtX) fac- tories and waste energy plants, heat from sea- and sewage water heat pumps, from geothermal plants, from electric boilers, and combined heat and power plants based on sustainable biomass. So, district heating will be the greenest you can imagine. All in all, green, sustainable technologies that ei- ther utilize the energy resources in society with- out a well-functioning district heating system would be lost to society - or technologies based on sustainable fuels.

In our district heating world, there is no doubt about what is green and what is black.


By Jacob Byskov Kristensen, Energy Counsellor, Embassy of Denmark, UK

the energy sector. That is also the case in the UK, were the UK government’s Hydrogen Strategy suggests that 250 – 460 TWh of hydrogen could be needed by 2050, making up 20 – 35% of the UK’s final energy demand. A key reason for these high estimates is that the UK, unlike many other countries, con- siders hydrogen as a possible pathway to decarbonisation of the heating sector, including domestic buildings. In the UK, domestic heating is often considered a “hard-to-decarbon- ise” sector alongside heavy transport and industry. Whether heating of households with hydrogen – blended or not – is a good idea, is still a highly contentious policy topic. In any case, current government policy is such that hydrogen looks set to occupy a cornerstone position in the Net Zero pathway for UK industrial and transport decarbonisation. This in turn means it’s likely that huge volumes of hydrogen will be produced on land, and potentially near areas of high heat demand. What seems to be less well-known, is that like other energy conversion processes the production of hydrogen itself gener- ates heat - potentially a lot of it in the case of the UK. By default, this heat is considered a by-product with no immediate use, which will therefore be vented off into the surrounding envi- ronment, leaking substantial cost and potential carbon savings from the hydrogen production process. For some of the most well-known and established green hydrogen production tech- nologies, using electrolysers, as much as 30% of the input ener- gy can end up as waste heat. Even blue hydrogen production

technologies (often significant net consumers of heat) yield significant waste heat through their its auxiliary processes. This is especially the case where blue hydrogen production – e.g., steam methane reformation – is combined with carbon cap- ture technologies. All these observations beg the fundamental question; why not use this (wasted) heat for heating purposes – increasing the efficiency of hydrogen production, creating new revenue for hydrogen producers, and freeing up valuable hydrogen for other hard to decarbonise sectors? Decarbonisation of space heating in the UK - has the electrification vs. hydrogen debate slowed down the development of district heating networks? Decarbonisation of heating systems is, by most, considered to be the biggest immediate policy challenge that the UK faces to achieve its Net Zero targets. In 2019, heating of buildings accounted for 23% of the UK’s total carbon emissions. Same year, the UK Climate Change Commission estimated that less than 5%of the UK’s homes are heated from low-carbon sources – with more than 85% of households heated with natural gas. Awareness of this challenge is nothing new. In 2008, the UK be- came the first major economy to legislate on climate change – legislation that today includes a binding national Net Zero target by 2050. But while these ambitions have helped yield a transition to low carbon energy sources, such as wind, in the

power sector, relatively little progress has so far been made to decarbonise heat.

The South Humber area was eventually selected from a short- list for further economic modelling and assessment. This case was particularly interesting as it included three ambitious new hydrogen production projects; two very substantial (2 x 100MW) green hydrogen projects, and another large (700 MW) blue hydrogen project. In addition, the area has several DH net- works currently under consideration. Significant economic, environmental andsocial benefits The study concluded that it is technically feasible to recover heat from new green and blue hydrogen infrastructure without negatively impacting production. It also concluded that heat recovery would actually provide great potential gains in system efficiency, especially for some green hydrogen technologies (14-32% efficiency improvements for the various electrolysers considered). The temperature of the captured heat also proved to be generally compatible with supplying heat networks, par- ticularly newer schemes operating at lower temperatures. The results of the financial assessment were even more en- couraging. Even without an existing DH network in place (as with the South Humber area), the case still proved financially attractive for the hydrogen producer, the heat network oper- ator, and the heat consumers. The heat network option was compared to the best available low carbon heating counter- factual of individual building air source heat pumps. Table 1 - Key results from financial assessment (*compared to counter­ factual of air source heat pumps)

Part of the explanation for this is that there has so far been little strategic consensus on the most appropriate transition pathway for the sector. There is, for example, still active and heated debate around the relative merits of electrification vs. hydrogen as the best solution to decarbonise heat. In the UK Government’s Heat and Buildings Strategy from 2021, a strate- gic decision on the “role of hydrogen” in heating was effectively postponed until 2026. For better or worse, this uncertainty is making it difficult for stakeholders and investors to make long- term decisions for their business and industry. The impact of continued strategic uncertainty around decar- bonisation of heat is perhaps illustrated by the DH sector. The technology has been around for more than a Century and is widely recognised as a low-regret policy option to decarbonise heating in densely populated areas. A central reason for it be- ing “low-regret” is that not only is it well-established technology, providing the lowest cost Net Zero option to many households, but it also yields opportunities to exploit synergies with both electrification and the hydrogen pathways for space heating. Unfortunately, this fact seems to have been drowned out amidst the noise of the discussion on electrification vs. hydro- gen. This could at least in part explain why DH in the UK today still serves less than 3% of households - compared to for exam- ple over 65% in Denmark. So although great policy strides in the UK are being made, it remains to be seen if the DH sector will end up with the favourable, stable and long-term frame- work conditions that it has been craving for so many years. The study to investigate possible synergies between hydrogen and district heating in the UK context In an attempt to highlight the “low-regret” nature of DH, the Danish Energy Governance Partnership at the Danish Embas- sy in the UK, together with Ramboll UK, decided to launch a study in early 2021. The study was set to investigate possible synergies between evolution of “the hydrogen pathway” and the DH sector and draw inspiration from some promising case studies in Denmark and the Netherlands. To capture the particular circumstances of the UK, the study fo- cused its inquiry on case studies and stakeholder engagement with several geographical “clusters” in the UK where hydrogen production and DH are understood to be rapidly evolving in tandem*. Across each cluster, existing, planned, and potential hydrogen production and DH networks were identified and mapped, and a technical assessment was undertaken to short- list opportunities to capture and utilise hydrogen waste heat.

Hydrogen producer

14% IRR, positive NPV

District neat network operator

>4% IRR, positive NPV

Heat consumers

20% reduction in heating cost*

Based on these results, the study firmly concluded that signif- icant economic, environmental, and social benefits are asso- ciated with heat recovery from hydrogen production, and its auxiliary processes. How to reap the benefits? To seize the opportunities that this analysis points to, hydrogen production and centres of high heat demand need to be in proximity to one another. As heat demand is already fixed, the key will thus be to influence the location of new hydrogen pro- duction facilities. This is not a novel undertaking. Most stake- holders across the world are currently contemplating how to best achieve the same end, trying to ensure that this emerging technology, and the ensuing investments, falls in their geogra- phy – be that region, nation, or local authority.

* Cases included: Aberdeen City; Leeds City; the Humber Region (split into Beverley, Hull and South Humber)

Waste Heat



In Denmark, one of the contributing factors for recent success in attracting hydrogen investments** has been the creation of opportunities to sell waste heat into the country’s well-estab- lished heat networks. Major new hydrogen projects develop- ing in Esbjerg, Fredericia and Copenhagen are today all inte- grated parts of local heat planning - planned to deliver large quantities of waste heat into DH networks. This synergy yields additional revenue and branding for the hydrogen producer, low-cost green heat for the DH network as well as potentially important gains in efficiency and integration of the energy sys- tem as a whole. These synergies and cross-sector benefits are of particular in- terest to national governments. In the UK, national governments are working to introduce a new tool that could provide similar opportunities for its local authorities and other stakeholders. Local heat network ‘zoning’, as it is called, is a planning tool meant to allow local authorities to identify and designate areas where DH is recognised as the lowest cost, lowest carbon solution for decarbonising heat. The tool is still under development and its methodology and regu- latory reach is therefore still somewhat uncertain. That said, it is standard that any heat planning process includes assessment of existing waste heat sources. As suggested by this study, it might add great value if future heat policy and zoning meth- odologies also looks at assessment or designation of suitable hydrogen production sites. If consideration of waste heat from hydrogen sources can be integrated into the future UK heat policy and zoning frame- work, it could attract renewed interest from hydrogen produc- ers, most of whom at present are unlikely to concern them- selves with opportunities for heat recovery. And through their local knowledge and position, local authorities could be the ideal stakeholder to promote this sector integration and en- sure that great synergies are realised between two key energy infrastructures of the future.



Fuel Cell Heat only Boiler Hydrogen CHP Injection to the Gas Grid (out of current scope)

For further information please contact: Jacob Byskov Kristensen,

** The Danish projects are not only producers of hydrogen, but also other e-fuels or power-to-x products


Kick the habit: In the past 50 years, the Netherlands has allowed itself tobecome addicted to its own supply of natural gas. It will need to kick this habit and find alternatives to heat homes in the future.

The ‘neighborhood energy approach’ aims to address three major issues: Upgrade local environmental thermal energy Connect existing housing at a reasonable cost

By Roelof Potters – Innovation Manager Alliander, Arnhem, The Netherlands Hans Korsman – Principal Consultant, Qirion (an Alliander subsidiary), Duiven, The Netherlands

Offer freedom of choice of primary energy supplier

Current situation The Groningen Gas Field was discovered in 1959 in the north of the Netherlands. It has since been a dominant factor in Dutch energy policy. In less than a decade, an extensive network was built to make natural gas available almost everywhere, at af- fordable prices, facilitating a swift transition from coal and oil. Now, the field is becoming depleted, diminishing pressures is causing local earthquakes, and the supply of natural gas is switched to mostly foreign sources. Around 2000, the Dutch electricity and natural gas markets were liberalized, introducing competition between energy sup- pliers, and giving consumers freedom of choice. However, this freedom of choice was not extended to district heating (DH). A transition towards renewable sources The Netherlands has been lagging somewhat in adopting re- newable energy sources. Offshore wind may stage a comeback since 57,000 km2 of the European Continental Shelf in the

North Sea is Dutch. The development of large wind farms at sea is ongoing. It is expected to significantly increase the share of renewables in the coming years. Extensive infrastructure will have to be built to connect produc­ tion to consumers all over the country. While homes can be heated with electricity, current electrical networks lack capac- ity. Measured in power for heating, natural gas networks, and connections capacity is at least ten times larger. The transition

are not enough heat sources to replace natural gas, and the renewable content is debatable. Burning biomass (wood) was heavily subsidized initially but now faces increasing opposition and decreasing subsidies. Clearly, alternative renewable ther- mal sources need to be developed. Current market model for district heating There is another reason why new development in DH is prov- ing particularly difficult: DH is operated as a local monopoly by

from natural gas to electricity cannot be met without signif- icant restructuring and massive expansion of the grids on all voltage levels. The use of heat pumps will considerably reduce the ‘power gap’ between electrical and natural gas infrastruc- ture, but likely not enough. Even without capacity for electrical heating, network operators experience an unprecedented rise in requests for additional capacity and are struggling to meet demand. DH is considered a viable alternative in densely populated ar- eas. Even during the Groningen natural gas epoch, it has seen some success in large-scale urban expansion, that is, for new- ly built housing. Connecting existing housing is much more complex and costly. However, it also has much more potential in volume. The DH networks use traditional, fairly high temperature, large- scale thermal energy sources such as waste incineration and (natural gas-fired) combined cycle cogeneration plants. There

commercial enterprises, in stark contrast with the liberalized markets for electricity and natural gas. There, consumers have learned to use competition and the free choice of a supplier as a weapon against otherwise assured commercial exploitation. It is a common opinion amongst DH customers that they are paying too much. Recent price hikes due to much higher pric- es for natural gas (which serves as price reference) have made things worse and refueled the debate on heating prices. With the current market model, local councils are hesitant to force a monopoly on unwilling citizens. At the same time, it is not attractive for commercial enterprises to make large upfront investments in infrastructure with low and uncertain returns. Circumstances being what they are, the development of DH as an alternative for natural gas is not go- ing well. Until today, DH has rarely been used to help existing natural gas-connected private homes transition to renewable heating sources.

Community approach In some neighborhoods, a community approach was taken. Local inhabitants joined together and established a cooper- ative DH venture, often with help from the municipality. This process typically takes a lot of effort and results in one small neighborhood switching from natural gas to DH with their own source, often heat pumps. Whereas the cooperative itself is a member’s democracy, com- munity cooperation leaves the freedom of choice of the heat source, the service providers, and the energy supply compa- nies to the neighborhood, thus approaching the individual freedom of choice. We designed a step-by-step process that standardizes the whole process of preparation, communication, finding enough participants, building, and exploiting the DH system. In two pi- lot projects in Nijmegen and Arnhem, we are improving and testing this approach. In the meantime, we are working together in a coalition with EnergieSamen, the Dutch union of energy cooperatives, Kli- maatverbond Nederland, a union of public organizations that aims for climate solutions and sustainability, and Rabobank, one of the large Dutch banks which is a cooperative itself. The coalition works on institutionalizing the community approach and seeks support from the national government. The designed process, the lessons learned from the pilot pro- jects, and the coalition’s work led to the desired standardiza- tion. It makes the cooperative solution scalable and bankable, thus making it efficient to establish. This leads to the opportunity for over a thousand neighbor- hoods in the Netherlands (varying from 200 to about 1,000 houses) to make the transition from natural gas to a sustaina- ble heating source.

Technical approach The community approach needs to be supported with standardized solutions that are technically robust and economically viable. We devised our approach based on earlier experience with traditional DH and some experi- ence using heat pumps. We want our solution to be: 1. Modular We aim to exploit readily available local sources of environ- mental thermal energy by upgrading temperature to usa- ble levels with heat pumps, to avoid large upfront invest- ments in long-distance transmission pipelines. However, the availability and cost of local sources may vary consid- erably. In some places, ground or surface water is easily accessible; in other areas, you need to drill hundreds of meters to gain access. In general, we want the best quali- ty thermal source available at the lowest cost. Modularity must give us the flexibility to adapt while allowing us to employ most of our solutions unchanged. We decided to start with perhaps not the best, but indeed the most ubiquitous heat source available: outside air. 2. Scalable It is a lot easier to get small projects going, whereas shar- ing common costs and scaling advantages work in favor of bigger projects once you have them. We want to be able to serve small projects as well as larger ones, and we want to be able to connect nearby small projects to cre- ate bigger ones. Modularity must serve this exact purpose. The intent is to reuse a component that has become too small due to local growth in some projects that are just starting elsewhere. 3. Sufficiently low temperature yet practical Heat pumps work most efficiently at low-temperature lift, that is, the little temperature difference between source

6. Affordable We need to be cost-competitive compared to alterna- tive solutions. Therefore, we prefer the use of standard (mass-produced) components. To reduce installation costs, field modules are preassembled by design and transported to the site.

and delivery. Very large heating surfaces such as under- floor heating are preferable, which can be done with a reasonable cost in newly built houses. Not so in existing housing, where the cost of underfloor heating would of- ten be prohibitive. We aim to use existing radiators and employ control technology to operate at the most effi- cient temperatures for cost reasons continually. Furthermore, too low-temperature difference distribution systems are impractical and costly, and we need to sup- ply domestic hot water, which requires somewhat higher temperatures of around 60°C. The lowest return tempera- ture possible optimizes transportation. As it happens, this fits well with an array of heat pumps once you connect those in series. We run the array as close to 60°C as weath- er permits, while every degree of lowered return tempera- ture improves array efficiency. In our first implementation, the array consists of 10 heat pumps supplemented with natural gas-fired boilers with 1.5x heat pump capacity, in series with the heat pump array. This allows us to reduce the heat pump supply temperature further once boilers are needed. 4. Modern Control of DH equipment in homes is usually done with passive regulators, which cannot connect to apps on mo- bile phones. We need active (electronic) components to optimize function anyway, which opens a pathway to modern user interfacing. 5. Connected Heat meters are required to be connected by law, neces- sitating some channel of communication. This channel allows for firmware upgrades, which we made a require- ment for control equipment.

Conclusion DH is an essential tool in transitioning from natural gas to sustainable heat sources in existing houses. This transition can only be made with a cooperation-based, community approach and a modular technical system approach.

7. Upgradable

Having toomuch ambition for the time available, we were forced to run design teams concurrently on assumed op- erating conditions, having to settle for less than perfect in the process. We chose to promote this drawback to the guiding principle: the first edition will work, the next one will be better. Wherever possible, we design for up- gradable solutions, which are the easiest in software. With production fully operational and about half of the houses connected, we see ample room for improvement.

For further information please contact: Roelof Potters,

DISTRICT HEATING DEVELOPMENT THROUGHFAIRCONDITIONS FOR THE CONSUMERS Heat demand densities and consumer connection rates determine DH systems’ economic viability and sustainability. Hence, encouragingheat consumers to connect —and remainconnected— to the local DHsystemis essential forDH implementationand continuation. However, discussions and the ensuing confusion on the most suitable institutional conditions for encouraging consumers to adopt DH are still ongoing in several EU countries. The study we present here intends to contribute to the ongoing policy discussions.

By Leire Gorroño-Albizu, Mondragon Unibertsitatea (ES), and Jaqueline de Godoy, Aalborg University (DK)

It’s (almost) all about consumer connection rates. District heating can provide environmental and economic ad- vantages in targeted areas compared with other low-carbon heating solutions such as individual heat pumps. Therefore, together with energy efficiency measures, DH systems could play an essential role in decarbonizing the heating sector and the whole energy system in the EU. Yet, the potential for DH deployment is largely untapped in many EU countries, such as Germany, Poland, and Spain, for example. Protecting consumers to promote DH DH companies’ malpractices (see box 1) may counteract DH’s comfort and economic advantages to consumers. It may dis- trust DH systems and encourage consumers to adopt alterna-

tive heating solutions. Thus, the design and implementation of fair institutional conditions, based on an appropriate balance between consumer power mechanisms (see box 2), could be essential for DH deployment and continuation in EU countries. We understand that conditions for consumers are fair when DH companies comply with their duty of heat supply and cus- tomer relations at satisfactory quality levels while charging a reasonable heat price. We investigated why the different institutional frameworks managed or failed to promote fair conditions for DH consum- ers in the context of Denmark and Sweden. Below we present the primary outcomes and lessons from our study on the topic. ing may be in the hands of just a few people. Furthermore, unlike in electricity and gas systems, there is little space for competition between producers and retailers. Therefore, DH production, distribution, and retail are often integrated under the same company. This structure has several impli- cations, including that dissatisfied DH consumers cannot choose another DH supplier, with their only option be- ing to invest in another heat supply system. Therefore, the consumer lock-in effect is more robust with DH than with other heat supply technologies. Individual heat pumps or natural gas boilers depend on natural monopolies but (have been regulated to) offer consumers the possibility of changing their retailer. The particularities of DH demand the institutional conditions that safeguard consumers’ in- terests and rights for the DH systems to be trustworthy.


Residential heat from a consumer’s perspective Empirical examples from various European countries (in- cluding Denmark, Germany, Romania, Sweden, the UK) show that DH companies can misuse their monopoly po- sition and the consumer lock-in effect. Misuse can lead to disproportionate heat prices, price discrimination to attract new customers, complex bills, and tariff structures that dis- courage DH demand reductions. It can also result in a lack of security of supply, few hours of availability, lack of flexi- bility at a household level resulting in too low/high indoor temperatures, poor customer service, etc. Such malpractic- es may put residential DH consumers vulnerable and hinder DH adoption.

DH systems are natural monopolies of local nature, and thus, the control over the decision-making of district heat-


Understanding consumer power on the monopolistic DH companies The analytical framework for ‘consumer power in natural monopolies’ distinguishes four dimensions of consumer power (or categories of institutional conditions) concern- ing natural monopolies: ‘state regulative power,’ ‘ownership power,’ ‘buying power,’ and ‘communicative power.’ The combination may result in various configurations and levels of consumer power.

The hypothesis (supported by this study’s results) is that there are links between the configurations and levels of consumer power and DH companies’ behavior regarding respecting consumers’ interests.

Why compare Denmark and Sweden? Denmark and Sweden have succeeded in reaching and main- taining high shares of residential buildings supplied by DH: Denmark (64 %) and Sweden (51 %). Despite similarities, the countries have implemented somewhat different regulations and governance models regarding DH systems’ price and qual- ity control during the last few decades. When comparing DH in Nordic countries, Sweden has the largest share of commercial ownership and the softest public regulation for DH, with no price regulation and a free consumers’ choice of heat supply technology. In contrast, Denmark has the largest share of con- sumer ownership and the strictest public regulation for DH, with a non-profit (or cost-based) price regulation and, until recently, the possibility to oblige consumers to connect and remain connected to the local DH system. Furthermore, some examples of DH companies misusing their monopoly position have been seen in Denmark and Sweden. Lessons fromDenmark and Sweden Below, we outline our study’s insights; in box 3, we introduce policy recommendations. 1. Free choice of heat supply technology alone does not put sufficient pressure on DH companies to set reasonable DH prices. It must be supplemented with regulation, high transparency, communicative power, and possibly high or very high ownership power (e.g., as in local consumer coop- eratives or local municipal companies). 1.1. To ensure a free choice of heat supply technology, individ- ual heating solutions must be available at a competitive price with DH. However, DH can be cheaper than individ- ual heating from a socio-economic perspective, especially in areas densely populated or with excess heat. Therefore, creating effective market competition can result in addi-

tional costs for society due to the economic incentives that would be necessary and the reduction in the connected heat demand density. 2. Strong price regulation (such as the cost-based regulation in Denmark) does not ensure reasonable heat prices unless high or very high ownership power is in place (e.g., through local consumer cooperatives or local municipal compa- nies). It should also be coupled with high levels of transpar- ency and communicative ability. Additionally, it could also be essential to address information asymmetry, agency problems, and lack of expertise. 3. Ownership of DH companies influences DH prices and transparency. Under the same regulation, consumer coop- eratives and municipal companies result in lower DH prices and higher transparency than commercial or state-owned companies. In Sweden, companies with cost-based pric- ing are more open about their costs than those with mar- ket-based pricing. 4. With the right combination of policies and regulations, lo- cal consumer cooperatives and municipal companies can develop and run DH systems and contribute significantly to DH implementation. In Denmark, 94% of the DH demand is supplied by local consumer cooperatives and municipal companies; in Sweden, about 63% is provided through lo- cal municipal companies. Cultural aspects may influence the choice of ownership. 5. Regulatory Authorities might not identify all law in- fringements or questionable practices by the DH compa- nies. Transparency, access to information, and media cov- erage are essential to monitor and control DH companies. However, for this to work, Regulatory Authorities and poli-

cymakers must address the issues, protecting consumers’ interests and rights.

7. Short-term cost reduction approaches may lead to, e.g., poor system maintenance and higher future costs.

6. Management of DH companies requires knowledge and expertise to avoid poor managerial decisions. Standard guidelines on investment decision-making, merging small companies, and customized expert support could support good management in DH companies.

Promoting local and inclusive ownership models (such as local consumer cooperatives or local municipal companies) could be of utmost importance to guarantee that residential DH con- sumers’ rights and interests are safeguarded.


Policy insights to support DH systems development – DH regulation is necessary to protect residential DH con- sumers, whereas opting for less or more strict regulation may depend on national or regional preferences. – It is crucial that DH regulation promotes high levels of transparency regarding DH decision-making through regular publication of DH prices by the regulatory au- thorities, access to financial and technical reports, etc.

– Promoting local and inclusive ownership models (such as local consumer cooperatives or local municipal com- panies) could be of utmost importance to guarantee that residential DH consumers’ rights and interests are safeguarded.

This article is based on the research outcomes presented in the scientific paper ‘Getting fair institutional conditions for district heating consumers: Insights from Denmark and Sweden’, published under the Creative Commons Attribution 4.0 International License (CC BY 4.0). The above article contains some extracts (sometimes with minor modifications) from the original scientific article.

Jaqueline de Godoy

Leire Gorroño Albizu

What makes this subject exciting to you? In my Ph.D. research, I dive into the society-technolo- gies-energy matters to understand the consequences and the role of energy experts in designing energy sys- tems for the communities they serve. The socio-technical nature of district heating systems needs the continuous alignment of large-scale technical changes with social elements. It implies that those systems must be under- stood by the interplay between their social and technical characteristics. Therefore, I was motivated to work on this project to understand what cultural aspects can favor or impede the development of such socio-technical sys- tems. What will your findings do for DH? Our study can motivate district heating experts to imple- ment (or keep implementing) institutional practices that prioritize the citizens’ needs (such as heating at a rea- sonable price). Fair conditions are an ally to enhance the development of district heating projects. - It is crucial that DH regulation promotes high levels of transparency regarding DH decision-making through regular publication of DH prices by the regulatory au- thorities, access to financial and technical reports, etc.

What makes this subject exciting to you? When I moved to Denmark to study the Master Pro- gramme in Sustainable Energy Planning and Manage- ment at Aalborg University in 2012, there were two things (completely new to me) I got fascinated about: (1) local and inclusive citizen ownership of energy projects and infrastructure and (2) district heating. There were (and still are) so many potential benefits to gain from im- plementing these solutions! That is why I have dedicated most of my career to learning more about these two top- ics and disseminating the acquired knowledge - mainly in Europe and abroad. This article is a beautiful piece of that larger work. What will your findings do for DH? The intention is to move the discussion from “what works and what doesn’t” to “why it works, or it doesn’t” – in each context. The analytical framework applied in this study al- lows us to better understand the reasons behind the (in) effectiveness of local institutional conditions to encour- age residential heat consumers to adopt district heating. The framework also facilitates cross-country comparisons and knowledge transfer. Isn’t that great?! And to show it, we bring a (tasty) appetizer: lessons from Denmark and Sweden. Enjoy!

For further information please contact: Jaqueline de Godoy,

For further information please contact: Leire Gorroño-Albizu,

HELLO, HOWCANWE SUPPORT YOUR CITY? DBDH is the Go-To-Platform for district energy. We cooperate with all DH stake holders and support cities in their quest for a sustainable city transformation.

Use our strengths to help your city. We are the link to:  Achieving climate goals through fossil-free district energy  Strategic energy planning  Knowledge on district heating and cooling  A wide network of experts  Visiting green solutions in Denmark

We do not know everything about district heating, but we know who does :) Contact one of our teammembers. Our advice is free of charge.

Lars Hummelmose Contact for China and other Asian countries, North America, and the Middle East

Pia Zimmermann Contact for Eastern Europe, the Baltic States and CIS countries

Morten Jordt Duedahl Contact for Western Europe

Hanne Kortegaard Støchkel Sector integration and new heat sources


HEAT 4.0 takes the district heating sector into the next digital level Useful results for further digital developments

In the later years, dynamic changes in society and the demand for energy-efficient solutions pushes the energy sector towards digitalization. The HEAT 4.0 provides access to new digital inventions on a cooperative basis and has taken a huge leap to secure data exchange in a common system-independent infrastructure.

1. The first andmost straightforwardmethod lets the individual IT models/software share their data insights, called peer-to- peer (p2p). For example, consumers (buildings) share their heating demand forecast with the network component (dis- tribution). The network software can include this information to improve the correctness of its own model. It can hereafter share its predicted operation (flow and temperature) with the production component that optimizes the heat produc- tion accordingly. In a more advanced solution, the involved software tools give feedback information to each other. For example, the pro- duction component could ask to shift demand in time to avoid bottlenecks in production or critical load in the net- work. The network and building optimization tools would analyze whether this is possible and return updated predic- tions. Other scenarios could be envisaged. 2. A system-independent data-sharing platform is established for communication between tools and the DH infrastruc- ture. This common platform enables any digital system to share data (inclusive prediction and setpoints for controlling district heating). In future versions, the platform will also be able to host common algorithms and software components. Data management is the central starting point DH companies are used to handling all their data within their individual IT infrastructure and SCADA systems. Communica- tion with the surroundings was not applied. Aiming at a much more complex control of the next generation DH demand change in minds, data must be communicated in secure manners to enable a more efficient operation of the entire dis- trict system and other services. The HEAT 4.0 solution has succeeded in developing a ‘common data platform’ which will guarantee the quality of data by, e.g., validating data, entering missing data, and resampling data

By Alfred Heller, Managing Director, DTU Compute, Technical University of Denmark and Eva Lange Rasmussen, Communication expert, NIRAS, Denmark

T he overall objective within the project HEAT 4.0 is to integrate intelligent IT solutions in a new digital framework to reach a holistic district heating (DH) approach, previously presented in Hot Cool. The HEAT 4.0 addresses the digital needs of the whole sector, from the production site over distribution to the end-users, and creates synergy between design, operation, maintenance, and delivery of DH. Such solutions we call Cross System Services (CSS) and are based on co-operation between components suppliers, scientists at universities, DH companies, consultants, and es- sential for this article, a common platform provider. Data-based optimization and common sharing plat- form for concrete services The work of this project is mainly based on combining already existing IT tools from the DH sector. The purpose is to build a new bridge between today’s different software operating sys- tems to connect systems, exchange and use data securely and more intelligently to obtain innovative and holistic solutions. The methods developed in HEAT 4.0 have typically been based on digital models derived from DH systems in operation to- day. Therefore, the used methods are relatively simple but still reproduce reality as well as possible and create a satisfactory concept for further evolution. The solution can be divided into two steps of methods:

Figure 1: The ICT infrastructure of HEAT 4.0 (very simplified drawing). In the center, you have the consortium-common infrastructure part (cloud). The partner companies’ digital tools and services can be provided through the ‘common cloud,’ enabling the DH operators to choose any combination of services.

to the necessary sampling rates. It also enables DH operators to choose and replace digital services and connect them with plug-and-play technologies through standard data interfaces. The project partner Center Denmark, a non-profit organiza- tion, is in charge of developing this new, commercial cloud platform within the HEAT 4.0 project, enabling business-based value chains. The versions of CSS p2p mentioned above are im- plemented on this platform for the involved three DH compa- nies. Standardized data exchanging interfaces are tested and ready. Generalized versions are under development, enabling other software firms to involve. The objective is a secure, effi- cient, and adaptable platform that will save integration hours for the DH companies, making data much more intelligent and giving freedom of choice to the operators. At the same time, the platform supports the operators to meet the privacy regulations, known as GDPR. Demand for an agile system architecture Within the HEAT 4.0 project, three DH plants are involved in testing the innovations’ ideas, but no DH system in Denmark looks the same. Two of the three DH companies, Bronderslev DH Ltd. and Hillerod Forsyning, have their own and various production sites. In contrast, the energy company TREFOR

Varme buys heat from a heat distributor. Since 2014, Bronder- slev Forsyning had already e-meters installed whereas Hillerod Forsyning has not. It means that the components involved are all different at the three sites. From a HEAT 4.0 perspective, this variation is a technological advantage as it ensures robustness for the project results and solutions developed. The DH companies are using first-generation tools that are working independently. The IT tools usually are directly com- municating with the SCADA systems - a cumbersome task that often leads to high costs and high time expenditure. In the HEAT 4.0 project, the data integration solutions were devel- oped and standardized, inspired by Industry 4.0, general ICT- and security guidelines. This relatively simple adoption enables the companies to integrate easily and operationally with any IT service provided from outside.

DH from TREFOR Varme, 60,000 DH customers, is environmentally friendly and economically advantageous. TREFOR Varme uses surplus heat from the local Shell Refinery, waste incineration, and wood chips as green energy sources.

Case studies - lessons learned – and valuable results TREFOR Varme was the first DH company within the project to raise the demand for a ‘common infrastructure component.’ Thanks to their steadfastness and their enormous organization- al effort to ‘digitize’ their internal system, the HEAT 4.0 partners can refer to precious insights and experiences from this case study. TREFOR Varme introduced a cross-utility ICT strategy that highlights security and robustness. Based on these strict regulations, the current HEAT 4.0 Cross System Optimization (CSO - an optimization service demonstrating the concept of CSS) solution is set in place because it empowers the compa- ny to control external services similar to internal hardware and control systems. This was impossible a few years ago, where all controls had to be placed physically within the company property. The head of the DH department, Helge S. Hansen, put it this way. Our motivation for joining the HEATman project was partly to contribute experiences and knowledge about the digitization of the heating sector and not least to do so in a cyber-secure way. Next, to try to pull the industry in the direction of an integration function, as our own vision was to integrate up to a single “common integrator” [technology]. The new IT solution was integrated by ‘HEAT 4.0 Ready’ software suppliers and the benefits of this co-operation we are to achieve these days. Helge S. Hansen, CEO, Trefor District Heating, Kolding, Denmark

From own experiences, TREFOR Varme concludes that it is a good idea for DH plants, in general, to let other competent specialists handle IT integration in a time where systems and threats from cybercrime have become significantly more com- plex. In a few bullets, they sum up the specific results they have achieved through their project involvement so far: As the cyber-secure connection, high data security is to be predetermined by one integrator, which continuously opti- mizes and improves the concept. In other words, secure data exchange, which can be used for the entire district heating sector. There are economic and timewise savings, fewer problems with incorrect data through standardized technical integra- tion and “one integrator contact.”

The secured data exchange between several software sys- tems enables especially smaller DH companies to digitize.

Another DH plant involved in the project, Bronderslev Forsyn- ing, has announced their satisfaction being a test partner of the project and put it in this way: At Bronderslev DH Ltd., we have for some years suc- cessfully been working with data from Smart Meters to create added value for the company and the cus- tomers. The HEAT 4.0 project has given us new unique possibilities to step up in digitization and explore the

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