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Danish government considers tax restructuring for better competitiveness of geothermal

Christiansborg, Copenhagen, Denmark (source: flickr/ Maria Eklind, creative commons)
Alexander Richter 20 May 2020

The Danish government is looking at abolishing a co-generation requirement for heat and power production and green tax restructuring that could help geothermal become more competitive in the future of district heating in Denmark.

As part of preliminary plans for how Denmark should reduce CO2 emissions by 70 per cent by 2030 compared to the level in 1990, the government proposes a number of  bold efforts. Among them two energy islands with offshore wind, that could see wind power and effective connection to grids supplying power to Poland and the Netherlands.

The plans go beyond the key elements of the energy islands, transportation and fuels, Green industry transformation and
collaboration with business, Efficient use of energy and renovations, green waste and recycling, and mentions “Green heat for the Danes”.

“The government wants a green heating sector. Therefore, the oil and gas must be removed and replaced with green district heating or electric heat pumps. The government wants to lower taxes on green power for heating and raising them on black heat.

At the same time, we provide support for heat pumps, remove consumer bonds to natural gas and promote the use of green surplus heat
from e.g. data centers. In addition, the government will make it easier to establish new green and cheap heat production by abolishing obsolete
requirement that district heating systems must in some places able to produce both electricity and heat.”, so the report outlining the plans.

Specifically in the context of the Danish district heating sector, geothermal is mentioned in the government’s plans.

“Today, the district heating sector has a binding place on their production there makes them not always able to invest in green solutions. The government will repeal this one so-called natural gas fuel bond in order to support the phasing out of fossil fuels in the heating sector.

Today, some works are required to be able to make electricity and heat together. The so-called cogeneration requirements were introduced in time to
ensure good utilization of the surplus heat, arising from electricity generation. It is not there need for longer. Therefore, the government will
set aside the claim. This will support electrification of the heating sector, for example via utilization of new technologies such as heat pumps and
geothermal energy.

When proposing to convert natural gas areas into district heating areas, the municipalities must today take it socially economically cheapest solution, even if it is fossil.

The government instead proposes that in the socio-economic calculations of project proposals in the district heating sector can be ignored from fossil alternatives (including natural gas). This enables, for example, conversions to district heating in natural gas areas.

It is being investigated whether one can be introduced ban on fossil fuels such as oil and natural gas in the district heating sector, without it goes beyond the security of electricity supply.

An administratively simple price regulation of surplus heat, a trifle limit and a simplified agreement scheme will be introduced.

Geothermal 

Several parts of the government’s proposal will contribute to promote green heating solutions, including geothermal energy. A green tax restructuring will increase the competitiveness of geothermal energy. A repeal of the cogeneration requirement will also promote the possibility of geothermal projects as geothermal is the production of heat without simultaneous production of electricity.

The Danish Government’s proposal for a climate plan for Denmark (pdf)

Source: DR, Regeringen