A much favoured piece of regulation for promotion of renewable energy is tax exemption for biomass. This is taking place in all countries, but Estonia, by different policy means. Such exemptions can have dubious effects on CHP and P2H, since it reduces the comparative advantage of these technologies towards HO boilers. The barriers here are both regulatory and technological, as small scale CHP using solid biomass is currently not an economically attractive alternative to other types of heat production. Traditionally, there has been plenty of biomass in all countries, which in many cases have provided an economically attractive fuel for DH production. Subsidies and additional support for biomass-based boilers are generally not applied. The exceptions are Finland, where wood-based heat plants are supported, and Norway where biomassbased boilers are supported as part of general DH-plant subsidy. Furthermore, support can in some cases be provided in Latvia and Lithuania, as part of EU projects. Price regulation is generally impacting flexibility in all countries. Price caps are present in Norway and the Baltic countries, but prices are generally monitored by regulators. Flat tariff structures are present in all countries. Profit caps are not directly impacting operational flexibility, but can reduce incentive for commercial operators of DH to make long term investments in flexible production units, due to potentially higher capital costs and payback times of flexible units, compared to e.g. HO boilers. Since the profit cap is only present in Denmark and Lithuania, which both have a significant share of public ownership in DH, the barrier might not be significant here. Table 14: Additional framework conditions for DH in the Nordic and Baltic countries. Framework conditions for general resources DK ES FI LA LI NO SE 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 Mitigation of Barriers – Framework Conditions for General Resources The framework condition Absence of operational practice of generation following demand is considered the most important, since it is the direct opposite of flexible operation. As described in the previous section, heat storage is a prerequisite for utilising the full flexibility of CHP and P2H. Secondly, CHP and P2H should be market-exposed, to allow them to operate flexibly, and should be a first, and often not significantly expensive, investment when moving towards flexible production. For the Baltic countries, security of supply is a concern and an argument for establishing the conditions for CHP that results in generation following demand. It is likely, that increased market 45
WP2 DH report
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