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

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-

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