Lessons from Denmark's thriving district heating sector

District heating accounts for 10 per cent of the heat supply in the European Union, yet the concept is still strange to many across the region. Instead of distributing gas to individual household boilers, district heating or heat networks take the heat from a centralised location and transport it through insulated pipes to homes and businesses. In Denmark, a global forerunner in this technology, most people are familiar with it, and the municipality of Nyborg is a good example: 65 per cent of its 32,000 inhabitants have access to the district heating system run by the local utility company, Nyborg Forsyning & Service.  

“About 95 per cent of the heat we use comes from surplus heat,” said Jimmy Jørgensen, heating manager at Nyborg Forsyning & Service. “We have 8,850 customers and most of them are households, but we also distribute heat for industrial purposes, mainly for food production.”

Nyborg receives excess heat from local industries that include a chemical plant and a wastewater treatment facility. It is the site of one of the pilots where the EU-funded R-ACES project will test waste heat management tools it has developed to create ecoregions . These are industrial areas where businesses collaborate, exchanging excess energy flows to reduce emissions. Nyborg’s high rate of renewable energy sourcing and the large-scale participation of locals in the district heating system make it a good example of how to bring heat networks closer to residents and local businesses.

Jørgensen is in charge of daily operations, including speaking with those using their service. He explains that there are two kinds of customers, each with different needs and concerns when considering whether to join the network. “While households are looking at how different their energy bills will be when compared to other sources of heating, those running a business are looking to see a return on a short-term horizon. They’re seeing it from the investment side, and expect a payback period of one to three years.” 

Becoming part of a district heating system usually implies an initial investment that can make people wary of taking such a big step. It is also a project that can be quite invasive, with new pipes needing to be installed to reach the network. Despite this, the Nyborg municipality has seen demand increase by 7% since 2021 as the current energy crisis makes gas and electricity prices soar.

“It´s nothing close to business as usual, it’s been very busy,” said Jørgensen, who adds that the most common doubt people have before connecting their house to the district heating system is the reliability of surplus heat. “They ask if they can be sure that there will continue to be excess heat. They’re afraid that prices may rise in the future, for instance, if one of the companies that supply heat closes. So of course we must have some kind of emergency system, and we have the boilers ready in case one of the companies can’t deliver heat.”

NEW CHALLENGES

The Danish district heating industry has one of the highest market shares in the world, reaching nearly two-thirds of private households. Ownership models are one of the factors that have helped convince people to make the jump to district heating: most of these networks are managed either by a cooperative or a municipality like the one in Nyborg, which runs it as a non-profit business. These municipally-owned utilities provide around 60 per cent of the heat supplied by district heating in the country.

However, inflation and rising energy prices are putting firms like Nyborg Forsyning & Service in difficult positions. While more residents want to connect their homes to the district heating network, the cost of installation continues to increase for the company. “We’ve been trying to keep the price of joining the network low, so you can say that the debt has stayed within the company,” said Jørgensen. He explains that pipes have become more expensive in the last year, and so has the use of machinery for the works. “When we’ve made offers, people have joined at a price cheaper than the real one. That must stop at some point, we cannot continue taking new customers at a low price. This last year has shown us that we must raise our initial pricing. New customers need to pay more to join the company so that we don’t put the load on existing clients.”

While price increases might bring challenges in the future, persuading new industries to sell their excess heat to district heating systems has become easier. Charlotte Lundsberg Baumgartner is a project manager at Energy Cluster Denmark, the national organisation that incentivises innovation in energy technologies.

“Until 2020, legal barriers were mainly the reason why not so many industries focused on utilisation of excess heat,” she said. “They had to pay too many taxes”.

However, new Danish legislation that came into force in 2021 removed some of the existing taxes and burdensome reporting requirements on excess heating, which made its reutilisation more interesting for Danish companies. “We need to remember that these industries’ main work is to produce something else, not surplus heat,” said Baumgartner. “That’s just an add-on. So it’s very important to make the process as easy as possible because producing surplus heat it’s not their main focus.”

This is where the R-ACES comes in with tools that will cut down bureaucracy. “You need to consider that industries need to know what data they have. They might know they have some surplus heat, but they might not know how much. That’s where you can use R-ACES’s self-assessment tool. R-ACES has also developed a legal tool so that you can make the contract between industries and the district heating company,” explained Baumgartner.    

Most district heating firms assume the cost of the infrastructure needed to reach industries that will join the network to sell their waste heat, according to Jørgensen: “If you have excess heating and we don’t buy it, then you have to cool your excess heat and that demands electricity and maintenance costs for the cooling system. So selling excess heating makes it cheaper to run your business.”

Fintan Burke is a writer and editor at the European Science Communication Institute