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A culture of cooperation

Denmark’s leadership role in the field of sustainability is not by chance – it is the result of an entire nation’s concerted effort to make sure that going green makes economic sense, for all stakeholders involved. What mechanisms are in place to help the country achieve its ambitious objectives and how is Denmark able to operate a District Energy infrastructure that is sustainable and cost-effective for consumers? Hannah Jo Uy has the story…

| | Aug 12, 2018 | 11:33 am
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On June 29, 2018, the Danish government signed an energy agreement to strengthen Denmark’s climate and energy goals and to ensure that 50% of the country’s energy needs by 2030 are met by renewable sources. While ambitious goals are nothing new for a country known for its leadership role in the global dialogue towards sustainability, perhaps the most impressive aspect of the agreement is the unprecedented political support it received from all sitting parties in parliament.

Iver Høj Nielsen

Iver Høj Nielsen, Head of Press, State of Green, speaking on the significance of the agreement, points to the overarching objective to be independent of fossil fuels by 2050. This, he says, has prompted consensus in parliament in relation to big energy agreements, such as the most recent one that has paved the way for an investment of DKK 19 billion (USD 2.96 billion) towards green energy. Key elements of the agreement, Nielsen says, include a commitment to construct three new large offshore wind farms, new funds for onshore wind and solar energy, a targeted effort to realise energy savings and a targeted strengthening of energy and climate research. “After negotiations,” Nielsen says, “all people in parliament agreed.”

Such a consensus embodies the ethos of green that cuts across Danish society. This, Nielsen says, is backed up by studies from opinion institutes revealing climate change and the environment as high on the agenda of the Danish people. “This has surprised even some of the political parties,” he says. “The Danes, as a people, feel conscious about it, and it has influenced politicians. We must have policy that reflects what the people think. It is easier to implement or find consensus of energy policy, because all parties accepted the opinion of the people that climate is important.”

Julia Panzer

Julia Panzer, Head of Group Public Affairs and Sustainability, Group Communication, Danfoss, echoes this, noting that the mindset is indeed reflected in regulation. “Sustainability is not something you think about,” she says, “It’s the new normal.” This, Panzer stresses, is owing to Denmark’s experience following the oil crisis of the 1970s, which brought different stakeholders together in the move to find solutions where profit and comfort can go hand in hand in a sustainable manner.

Niels Radisch

Niels Radisch, HVAC Engineer, Senior Consultant, Ramboll, says the carrot-and-stick methodology is helping in this regard, pointing to the vital role subsidies play in prompting the investment towards sustainable buildings and equipment. Gleaning from experience, Radisch says companies showed interest following incentives from the government to promote greater efficiency in new and existing buildings, be it in the form of insulation, solar energy or better ventilation systems. This, Radisch says, showcases the government’s approach to develop regulation that combines energy efficiency and renewable energy.

Nielsen stresses that “green business is good business”. To provide an example, Nielsen points to offshore wind, which, he says did not exist until 2001. “In the beginning, offshore wind was very expensive,” he says. “There were huge subsidies from the government to build the offshore wind parks, but technologies in the wind sector, and the industry, have made it possible to make cheaper solutions.” Today, Nielsen says, wind parks are being built without the subsidies, and they are competitive with other energy sources. “This is really a breakthrough in renewable energy,” he says. Nielsen adds that while technology is important, it is vital to have political will and the support of the citizens, to really make a change.

Jørgen Abildgaard

Jørgen Abildgaard, Executive Climate Program Director, City of Copenhagen, considers this close cooperation between the private and the public sector as an old tradition. We have done that for 200 years,” he says, “maybe more. It is embedded in the DNA of the people of Denmark, following the wake-up call that was the oil crisis, where people were 98% dependent on oil. When it comes to Copenhagen, the only way we can do these projects is with close cooperation with stakeholders, companies and universities and, to some extent, also citizens. Because a lot of consequences are to citizens.”

Abildgaard stresses that this integrated approach is necessary and that the target is to make energy efficiency, if not cheaper, at the very least, not more expensive.

Panzer stresses that the District Energy system is perhaps one of the biggest successes of Denmark in this regard, which is currently at a penetration of 64% across the country. “The highest country globally,” she says. This, she explains, was made possible by early investments, which laid the foundation for its success. “It is not possible to do everything green,” she says. “Save energy first, make it as efficient as existing technology, then switch what we still use to renewables.”

Abildgaard says that during the 1970s, in Copenhagen, the penetration for District Heating was only 40%. “By national regulation and a number of different activities in Copenhagen it was possible to raise that in the 1980s up to 80%.” Today, he says, there is full-scale District Heating in Copenhagen. “As much as 99% of all heat consumption in the city is coming from District Heating,” he says, “more or less all buildings have District Heating.”

Anders Dyrelund

Anders Dyrelund, Senior Market Manager, Ramboll, seconds this, adding that the connection rate is also 99% in the large municipality of Frederiksberg and close to 99% in the District Heating zones in the nineteen suburbs part of the integrated District Heating system in Greater Copenhagen.

 The ingredients for a successful system

Speaking on mechanisms that encouraged the uptake of District Heating and paved the way for its continued success, Abildgaard points to regulation prompting new buildings to have District Heating “if they cannot prove from a socio-economic point of view that they have a better solution”.

Dyrelund says there are two dimensions to the cost-benefit analysis. First, the consumer cooperative or the municipal-owned District Heating company looks if the project is profitable for the local community compared to the base line. “Second, the “Heat Supply Act of 1979”, established to rid dependence on oil, regulates the supply of heat and hot tap water,” he says. “Denmark was divided into three heat supply zones: District Heating networks, Natural Gas networks and other sources.” Thus, he says, competition between District Heating and Natural Gas networks came in.

To control competition, Dyrelund says, a heat-planning system was established from the bottom-up and top-down, which took into account input from the Minister, the municipality – as a planning authority – and potential investors, all of which needed to approve and ensure that it was “the best solution for the people of Denmark”.

In the municipality-owned companies, the city council, he says, nominates people to the board, to represent the interests of the municipality and the consumers, to make sure it is cost effective and is run efficiently. “The municipality could use the power in the “Heat Supply Act” to force buildings to connect to the District Heating network, and would not do it unless it was cost-effective in the long-term,” he stresses. “When the city council decides to connect consumers, they take into account the most cost-effective [solution] to ensure it will not be more expensive than the oil alternative.”

In addition to strong national regulation related to the heating sector, Abildgaard says, District Cooling is gaining popularity. “We have two District Cooling stations [in Copenhagen] with two or three more in the way in the coming five years,” he says. Its growing popularity, Abildgaard says, is because it was developed in such a way that it makes economic sense for stakeholders. “We secure the infrastructure cost,” he says. “We do not develop a new plant, if we don’t know there is a market for it. We need to have at least 60% consumers in the area, and we have to know the business case in place can deliver lower cost.” This approach, he says, is vital to protect the interests of the consumer. “Otherwise,” he says, “it will be a waste. If there are only 45% of consumers [for the area] it will be a higher price than expected. Low prices are important for consumers,” he says, adding that the cost of individual (cooling or heating systems) in Copenhagen, “is at least 20-25% higher”.

Dyrelund further elaborates on factors driving growth of District Cooling in Denmark. First, he points to new building regulations that require good indoor climate, prompting new office buildings, shopping centres and other institutions to have active cooling. The second reason, Dyrelund stresses, is fluctuating electricity prices. “We have more wind in our system,” he says. “Sometimes electricity is cheap, sometimes it’s expensive [due to having no wind for some time]. Wind is going to be our dominating energy source, not even biomass.” Thus, he says, for the District Heating sector, it will be profitable to invest in electric boilers, larger heat storages and large heat pumps to supplement the CHP plants and benefit from the fluctuating electricity prices. Therefore, large heat pumps, which can generate both useful heating and cooling, will be most profitable and justify investments in

District Cooling networks to buildings that have a cooling demand. Dyrelund says that District Cooling, including chilled water storage can also level fluctuating electricity prices and reduce the “cooling peak”. The main reason that District Cooling can be more cost effective than individual chillers, he says, is that it is an integrated network, and the chilled water storage tanks reduce the need for expensive cooling capacity. “You save in investment, and the cooling is more efficient,” he adds.

Essentially, Dyrelund says, the success of the country’s District Energy system is owing to its democratic nature. “The consumers own the natural monopoly network, and even large production plants, directly, as a co-operative, or indirectly, through municipal ownership,” he says. “This ownership is efficient as the companies can use the market forces with the aim to reduce costs of supply. The private sector – consultants, contractors, suppliers of equipment, as well as the financial sector – compete to provide the best services.”

Dyrelund says this kind of public-private sector cooperation is also easy to administrate, through transparent tenders, and to regulate. “Seen from the national price regulators’ perspective,” he says, “[the mechanism] is self-regulating, as the aim is to use profit for reducing the heat price and not for [the profit of] any financial investor or contractor. If you have a private investor, who is allowed to own a natural monopoly and can include cost, then experience shows that it’s inefficient for the consumers and the society. The private sector will abuse a monopoly position. But when the monopoly is owned by those supplied by the natural monopoly, in a democratic way, i.e. consumer cooperative, politicians and city council, and [they are asked] on behalf of cities, to do what’s best for the city, then it’s a symbol of efficiency.” It’s a symbol with which the country, and its people, have increasingly become associated.

Editor’s Note: Currency conversions in the article are as per July 31, 2018.

 

Hannah Jo Uy is Assistant Editor at Climate Control Middle East magazine. She may be contacted at hannah@cpi-industry.com


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