As described in the introductory sections. "Development of Danish District Heating" and "Lessons Learned" It is characteristic for the development of district heating (DH) in Denmark that the major cities have integrated their many smaller district heating systems into large. Integrated networks supplied from combined heat and power (CHP) plants.
In continuation of this development. decentralised combined heat and power plants have also been established In smaller urban communities.
As illustrated in the introductory sections. the preconditions for introducing DH in Danish communities have varied, and been based to some extent on historical factors. The most important of these
are:
Stable and competitive heat prices.
Local employment.
Independence of imported fuels. Efficiency in fuel utilisation, and
Environmental considerations. 
The basis for establishing a DH system in other countries will most likely differ from that in Denmark. but it will be possible to utilise Danish experience to establish systems which will fulfil the requirements of the heat consumer, district heating company, and society in general.
A narrow, economyoriented approach can be acceptable to illustrate the relevant issues. but to some extent it is possible also to put a price on factors such as environmental benefits and employment. Both for society and the heat consumer the economic conditions are relative to the conditions inherent in other possibilities.
For society, one must evaluate the total benefits gained when comparing DH with alternative heat supply options, including considerations of surplus heat and fuels which are technically difficult to burn, employment. urban and industrial development, and environmental protection.
For the consumer, the economic considerations are the heating costs of DH compared with that of the cheapest possible alternative taking into consideration costs of the necessary consumer installations.
In the societal case, a longterm evaluation is, naturally enough, most relevant because investments in energy are part and parcel of the urban infrastructure. Conversely, the consumer will be inclined to take a shortterm view based on yeartoyear economic considerations.
The DH company will, with due regard for its economy, make a more cashoriented evaluation, as the issue here is to balance revenue with costs under prevailing economic conditions.
District heating is a capitalintensive technology, and one in which a better exploitation of energy from cheap fuels including surplus heat and minimal environmental impacts justify the large Investments. This also means that interest and depreciation incurred on Investments made in plant stock are main factors In assessing current costs in newer DH systems.
The best way of assuring a viable income base via the sale of heat is therefore a question of regulating certain of the factors involved so that three main requirements are
fulfilled:
The terms for loans must be reasonable.
Rapid extension of and connection to the DH systems, and
Appropriate steering of the development of the collective supply systems to avoid competition among several energy supplies available in close proximity to each other and to a user
In Denmark. these have been achieved through a combination of measures in which the basic preconditions have always been adjustment to current market conditions and high taxation.
The national Heat Planning Scheme has ensured that both DH and natural gas will have a sufficient share of the market. The imposition of taxes on coal, oil, and electricity the latest is a CO2 tax help to improve market conditions for the collective supply systems. The DH companies can choose to give grants and rebates to consumers to encourage them to connect as soon as possible. Ultimately, the municipalities can make a connection compulsory in new developments and allow a maximum of nine years for establishing a connection in existing areas.
With the right use of the available options in measures that are applied, society will gain clear economic and environmental benefits. while consumers and the supplying company will also receive a share of these benefits.
The Heat Supply Act is the formal administrative background for heat supply systems. Under this act, local authorities are responsible for planning and executing projects at the local level, and assuring that these have both societal and environmental advantages, and finally that the projects are in accordance with national energy policy.
For DH this means that:
-nearly all new buildings in the designated areas are designed specifically for receiving DH services.
-DH systems are utilised or are to be further developed in all higherdensity building localities, and
-CHP and renewable energy supplies constitute an increasing part of DH production.
There are more than 300 DH companies in Denmark. Most of the smaller ones are consumerowned cooperatives. The majority of DH companies in the major towns are owned by the local authorities. Supply companies owned by the authorities normally provide a number of public supply services (electricity. water, DH, and gas).
In some of the largest urban areas, management of heat production (load dispatch) and heat transmission is under the responsibility of jointauthority companies owned by the authorities in question.
The Heat Supply Act lays down the basic parameters for heat pricing, stipulating that heat supplies must be priced according to actual costs, based on total economic selfsufficiency. In calculating its heating prices, a company must adhere to two major
points:
It can include all the necessary costs of heat supply. In reality, this means that the company cannot go bankrupt unless the ownerauthority decides to phase out the DH supply altogether.
It can include only a reasonable level of interest on capital invested. This means, for example, that a local authority which owns a DH company must not transfer profits from the company to other uses in the authority (e.g.. to reduce taxation). The total profits shall, in other words, be used to benefit the consumers via a corresponding reduction in heating prices.
Thus, all DH companies act as nonprofit cooperatives in aiming to minimise costs to the consumer by reducing heating prices, thereby eliminating taxable profits.
Boards of directors for the privatelyowned DH companies are democratically elected by the consumers at the annual general assembly. In the localauthority companies, the political representatives on the board are elected indirectly (via election to the council) by the local citizens who, by and large, are the heat consumers themselves.
The Heat Supply Act also lays down the framework for administering the very general rules for price
setting:
In accordance with the Act, a Gas and Heat Price Committee has been appointed with representatives from the Ministry of Energy, local authorities, consumer groups, DH, electricity and gas companies, as well as legal and economic experts.
All terms for prices and supply which, as a general rule, are made public, are regarded as valid after submission to the Gas and Heat Price Committee.
Consumers and companies can complain to the committee about unacceptable tariffs and contracts. Normally, the committee avoids appraising the fairness of a particular tariff or agreement until a complaint has actually been lodged. Issues which cannot be resolved on a clearly legal basis or through negotiations are resolved by a vote among the committee members.
The committee's decisions are made public and like legal rulings become guidelines for future terms of agreements and tariffs.
CHP stations are normally owned by the power companies, though for small. decentral stations the owner is often a DH company.
For supplying heat from a major CHP plant owned by the power company, the DH company pays the extra costs associated with the heat production under a comparison with the price of power production alone (the marginal price). In the contracts the DH companies are foreseen to share the economic benefit derived from the combined production with the power companies after a period of 1215 years.
For CHP stations owned by the DH company, the heat price is determined as the total cost incurred by the station including fuel minus the income derived from the sale of power. It should be pointed out here that the power companies have agreed to buy the total power production at a price which corresponds to 85% of a large consumer's purchasing price. The value of the power depends on the time of day or night and corresponds with the marginal cost in the power system. This provides an incentive for connecting CHP stations to heat accumulators (810 hours peakload operation) for more optimised production of heat and power, thus benefitting the owner company, consumer, and society.
As heat accumulators are simplest to construct and cheapest to operate at temperatures under 1000C, and because of the income from power sold, the DH companies have an incentive to reduce their operating temperatures.
The real goal in setting the DH tariff is to divide all costs fairly among consumers. At the same time, tariffs should be set to encourage consumers to use their DH wisely. e.g., the DH water should be cooled to the lowest possible temperature.
The calculation of tariffs results from a weighing of technical, economic, and political factors plus common sense, combined with a normally accepted concept of fairness.
A consequence of the requirement that prices must cover costs prices vary from one DH company to another is that because the price charged to the consumer depends on factors such as the price of heat production, the age of the DH network (whether it is a new company with a large debt burden or an old company without debts), and operating and maintenance costs.
Normally, a DH company sets the same tariffs in the whole supply area (irrespective of distance from the heating station).
A typical DH tariff comprises two items:
a) A fixed, annual rate calculated per connected square metre of heated space, covering basic costs. This rate is normally scaled so that large consumers pay proportionally less per square metre than smaller consumers.
b) A variable rate calculated per consumed GJ heat or per cubic metre circulated supply water. This rate is normally applied equally to all consumers.
The DH meters In use in Denmark can be divided roughly into two equal groups: flow meters and energy meters. A number of DH companies are converting from flowbased to energybased billing. At the same time, there is a tendency for the companies to include an incentive item in their tariff structures so that consumers can be rewarded for reducing the return temperature (better cooling of the DH water)
Through the years, DH has shown Itself to be a reliable and flexible supply form, and, as such, a major element in Danish energy and environment policy.
Collective supply systems like DH, based on integrated systems in major urban areas, and decentral CHP in the smaller town communities have been decisive in making it possible to fulfill the alms of both energy and environmental policies.
In most other countries where goals are set as they are in Denmark, the same kinds of measures can be applied.
i.e.:
- The organisation of a DH energy supply system should be based on: (1) highest possible energy efficiency (Integrated and decentral CHP systems). (2) exploitation of surplus heat and lowtemperature heat sources, and (3) exploitation of biofuels. wastes and renewable energy sources.
The organisational structure determined in the legislation must be clearly understand able and the organisational responsibility must be clearly defined.
-Cost structure must be clearly described at all levels of organisation.
- There must be a fair price construction and set procedures for purchasing heat from power companies or selling power from CHP companies when these are owned by the DH company.
- The energy prices and tariff structure must reflect the actual costs, and all sale of energy must be based on the measurement of consumption .
-Consumer Information campaigns should be carried out to make consumers aware of the economic and environmental advantages gained in using DH.
The experience acquired in Denmark has been utilised in developing a computerised planning tool called DETECT created for the International Energy Agency's Programme of Research, Development and Demonstration on District Heating and Cooling.
The object of this computer model is to demonstrate the environmental impact and feasibility of using district heating and cooling.
DETECT has been developed in cooperation among experts from Canada, Denmark, Germany, Finland, Italy, The Netherlands, Norway, Sweden, United Kingdom, and USA, and includes default data from all these countries.
To run DETECT and carry out a preliminary feasibility study requires only a minimum of input data, and the model will then generate extensive reports and graphs demonstrating the reductions in emissions and the economics In a given DH or DH&C project.
The DETECT computer model is included in the IEA District Heating and Cooling Committee's information activities and is donated as public domain software.