23 5.1. Country Profile: Denmark 5.1.1. Main Drivers and Barriers The future of the large capacity of CHP with heat storages, which has been able to provide flexibility in the power system, is uncertain due to low electricity prices, out-phasing of support payments and tax exemptions for biomass. At the same time, high taxes and tariffs on electricity use reduce incentives for investment in P2H technologies. For CHP plants the electricity production is exempted from taxes, while the CHP heat is subject to taxes. Table 5: Framework conditions for flexibility in the DH‐electricity interface in Denmark DENMARK Framework conditions for CHP Absence of mandatory procurement of electricity Absence of feed‐in tariffs Absence of feed‐in premiums Presence of market pricing for electricity Presence of power capacity payments Presence of other subsidy to CHP Presence of tax exemptions for fuel to electricity production Presence of energy, CO2 or other tax reductions Presence of grid connection discounts Absence of tariffs levied on CHP for feeding into grid Framework conditions for P2H Absence of PSO on electricity (when used for heat generation) Absence of Grid tariffs on electricity (when used for heat generation) Absence of other levies or taxes on electricity (when used for heat generation) Presence of reduced electricity tax on electric boilers Presence of reduced electricity tax on heat pumps Absence of regulatory priority to heat from waste, RES, biomass or geothermal Presence of subsidy for heat pumps Presence of subsidy for electric boilers Framework conditions for general resources Absence of heat price regulation ‐ price caps Absence of heat price regulation ‐ flat tariff structures Absence of heat price regulation – profit caps in commercially owned DH Absence of operational practice of generation following demand Absence of tax exemption for RES fuels Absence of subsidies for HO boilers 5.1.2. Flexibility Options in the Danish DH System CHP has since long been encouraged in Denmark by legal means. In Denmark DH covers around half of the total heat consumption of industries and households (Energistyrelsen 2015). In 2014 approximately two thirds of DH were produced by CHP units mainly based on waste incineration, coal, wood pellets, and natural gas. Electric boilers and heat pumps were the source of 0.4% of the DH. By introducing time varying electricity tariffs (and later market pricing), heat storage tanks have been installed in connection to many CHP plants. The heat storages contribute to flexibility by making the CHP plants able to postpone the delivery of heat, which allows for optimization of electricity generation according to demand. 5.1.3. Framework Conditions for CHP in Denmark Current Aspects Co-generation of heat and power in Denmark is divided into central and decentral plants. Decentral CHPs are usually locally owned back-pressure plants, while central CHPs are large extraction
WP2 DH report
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