Consumer protection
FREE CONNECTION + PRICE REGULATION
OBLIGATION TO CONNECT + PRICE REGULATION
Investor protection
FREE CONNECTION + NO PRICE REGULATION
OBLIGATION TO CONNECT + NO PRICE REGULATION
Figure 1. An illustration on how different solutions for meeting investor and consumer interest. A combination of consumer obligation to connect to the grid and a strong price regulation provides the best conditions for implementing DH systems.
The next question is then where this infrastructure should be built. Although DH systems are local, national procedures for identifying viable DH areas are beneficial. EU member states may also look to the European framework for a comprehen- sive assessment of heating and cooling under the Energy Ef- ficiency Directive. This may serve as a welcoming opportunity to establish an ambitious national screening of DH potentials. Based on socioeconomic screening, designated areas for DH systems can be established through zoning policies. For the political legitimacy and energy economic rationale, the zon- ing policies must be rooted in an aim of the common good and socioeconomic screening. Once the “where question” is answered, an enabling regu latory framework must address the “how question”. The an- swers to this question are many related to building policies and general energy sector policies. Likewise, the single heat- ing project will be embedded in local, national, and Euro- pean levels of legislation and planning. However, the rest of this article will focus on some selected elements of the how question. The central factors include the price and ownership regulation since the monopolistic nature of energy grids is of- ten a showstopper for DH projects. Consumers’ trust is vital for DH development, and price and ownership regulations are critical. The regulatory challenge If we approach the question in a simplified but systematic way, the regulatory challenge can be seen from two perspec- tives. From a company perspective , the regulation of DH systems must address that 1) High upfront capital costs ne- cessitate a long-term investment perspective, and 2) the risk
associated with that including 3) access to capital. From a societal perspective , the regulation of DH systems must be able to deliver 1) consumer acceptance and protection and, not less important, 2) the ability to support long term stra- tegic energy planning. The second point might appear a bit diffuse, but it is vital that the DH company - as responsible for an important societal infrastructure in urban areas - is willing and able to collaborate with local authorities in the long-term planning for sustainable cities. Four basic forms of regulative measures For finding a regulatory balance that solve the regulatory chal- lenges, it has been helpful to open a toolbox of regulatory measures more diverse than a simple “market or state” dichot- omy. The theoretical approach to regulation could instead be based on four basic dimensions of regulation through which citizens are empowered, namely 1) ownership power, 2) buy- ing power, 3) state regulative power and 4) communicative power which relates to openness of information. While buying power of consumers and the state regulative power are often in focus in mainstream economic textbooks, the ownership power and communicative power dimensions have been key features of the well-functioning Danish regulation. The state regulative power is fundamental by for example setting the overall aim of DH in the Heat Supply Act. But the state regulative power has also been used to enable owner- ship power and communicative power. This have empowered consumers and local communities to gain sufficient control of the monopoly companies to trust it.
The synergies of Danish district heating policies In the Danish heat planning, strong regulative measures that
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