Poul Erik Grohnheit

Competition in the market for space heating. District heating as the infrastructure for competition among fuels and technologies

Abstract None of the EU directives on liberalisation of the electricity and gas markets are considering the district heating systems, although the district heating networks offer the possibility of competition between natural gas and a range of other fuels on the market for space heating. Cogeneration of electricity and heat for industrial processes or district heating is a technology option for increased energy efficiency and thus reduction of CO2 emissions. In the mid-1990s less than 10% of the electricity generation in the European Union was combined production with significant variations among Member States. These variations are explained by different national legislation and relative power of institutions, rather than difference in industrial structure, climate or urban physical structure. The ‘single energy carrier’ directives have provisions that support the development of combined heat and power (CHP), but they do not support the development and expansion of the district heating infrastructure. The article is partly based on a contribution to the Shared Analysis Project for the European Commission DG Energy, concerning the penetration of CHP, energy saving, and renewables as instruments to meet the targets of the Kyoto Protocol within the liberalised European energy market. The quantitative and legal differences of the heat markets in selected Member States are described, and the consequences of the directives are discussed. Finally, we summarise the tasks for a European policy concerning the future regulation of district heating networks for CHP, emphasising the need for rules for a fair competition between natural gas and district heating networks.

Market Prices in a Power Market with More Than 50% Wind Power

Denmark has the highest proportion of wind power in the world. Wind power provided a world record of 39.1% of the total annual Danish electricity consumption in 2014 with as much as 51.7% in Western Denmark. Many would argue that the present power markets are not designed for such high shares of wind power production and that it would be hard to get good and stable prices. However, analyses in this chapter show that the Nordic power market works, extreme events have been few, and the current infrastructure and market organization has been able to handle the amount of wind power installed so far. It is found that geographical bidding areas for the wholesale electricity market reflect external transmission constraints caused by wind power. The analyses in this chapter use hourly data from West Denmark—which has the highest share of wind energy in Denmark and which is a separate price area at the Nordic power exchange. Data have been collected from the last ten years and periods with extreme wind conditions are used as case studies to illustrate the robustness of our findings.