HOT|COOL NO.3/2021 - "Don't waste it!"

Differences in district heating tariffs between European countries District heating (DH) tariffs vary between heat networks, between cities, and between the EU-Member States. This article compares average tariffs in four Member States: the Netherlands, Denmark, Germany, and Sweden.

By Pieter Verstraten, Junior Scientist Innovator at TNO and Annelles Huygen, Professor at the University of Utrecht and Principal consultant at TNO

cost-based tariffs, and in Germany, there is no regulation at the national level, except the general competition rules.

International comparisons are useful for various reasons. First, comparisons empower consumers, who often spend a sub- stantial part of their income on energy. Second, comparisons of tariffs may provide preliminary insights into differences in the costs of energy supply, the efficiency of the energy com- panies, the effect of local or national policies, and the effect of innovations. But…comparing is hard Comparing tariffs for DH is more complicated than for other commodities, such as gas and electricity. Gas and electricity have international markets, and it is easy to separate unit costs from infrastructure costs. On the other hand, heat markets are local, and separating unit costs of energy from the infrastruc- ture costs is difficult. Although heat companies split their tariffs in a variable part and a fixed part, different companies calculate these using dif- ferent methods. As a result, fixed tariffs do not necessarily re- flect infrastructure only, and variable tariffs do not necessarily correspond with unit heat costs. The variable part is the tariff per unit of heat (e.g., per MWh or GJ). In many networks, variable tariffs are constant throughout the year. Still, in other networks, they depend on the season, outside temperature, or peak or off-peak timing of the energy consumption. Fixed tariffs are also determined in different ways: the same for every residential consumer, dependent on the surface of their houses, the maximum capacity of their connection, or the ef- ficiency of the user’s installations (the so-called ‘bonus-malus scheme,’ delta T or spread). Methods to set tariffs vary between companies and between the Member States. The Netherlands, for example, has maxi- mum tariffs based on the tariffs for natural gas, Denmark has

How to compare the tariffs? Member States and/or branch organizations regularly publish the average yearly heating bill, albeit with many differences in reporting. The Netherlands reports the average demand of a DH customer (7 MWh) and the tariffs (fixed and variable separately), which are more or less the same throughout the country. DH companies generally use the same methodology of heat pricing as the regulator ACM sets them. Therefore, it was possible to calculate the average annual heating bill. Ger- many and Sweden report the average yearly bill for the average annual demand by residence type. As most DH customers live in apartments, we chose this category (heating demand of 9 MWh for Germany and 13 MWh for Sweden). Denmark reports the average bill for the standardized demand of 18 MWh.

For our first analysis, we compared the average yearly bill for the demand reported by the country. Figure 1 shows that

Figure 1: Annual heating bill for a reported heat demand in various countries. Demand is the yearly average demand or, for Denmark, the standard heat demand

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