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EU, National and Local Policy Measures Affecting
the DHC Sector

• REGENERGY
• 2nd Workshop Component 2
• Berlin, 10 May 2006
• Michael Krug
• Environmental Policy Research CentreFreie
  Universität Berlin

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Presentation Outline

• 1. Recently adopted or proposed EU legislation
  affecting DHC
• Biomass Action Plan (2005)
• Directive on Energy End-Use Efficiency and Energy
  Services (2006)
• Directive Promoting Heat from Renewable Energy
  Sources (2006?)
• 2. National legislation for DHC the case of
  Germany
• Legislation affecting DHC
• Promotional policy measures for DHC
• 3. Municipal policies promoting DHC in Germany

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Overview Selected EU Directives relevant for DHC

• Common Rules for the Internal Market for
  Electricity (2003/54/EC)
• Common Rules for the Internal Market for Gas
  (2003/55/EC)
• Electricity from Renewable Energy Sources
  (2001/77EC)
• Promotion of Cogeneration Based on Useful Heat
  Demand (2004/8/EC)
• Taxation of Energy Products and Electricity
  (2003/96/EC)
• Reduced Rates of Value Added Tax (2006/18/EC)
• Greenhouse Gas Emissions Allowance Trading
  Scheme (2003/87/EC)
• Pollution from Large Combustion Plants
  (2001/80/EC)
• Sulphur Content of Certain Liquid Fuels
  (93/12/EEC)
• Integrated Pollution Prevention and Control
  (96/61/EC)
• Management and Quality of Ambient Air (96/62/EC)
• Energy Performance of Buildings (2002/91/EC)
• Energy End-Use Efficiency and Energy Services

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Recently adopted or proposed EU legislation
affecting DHC

• Biomass Action Plan (7 Dec 2005)
• Directive on Reduced Rates of Value Added Tax
  (2006/18/EC)
• Directive on Energy End-Use Efficiency and Energy
  Services
• Action Plan on Energy Efficiency (spring 2006?)
• Directive on Renewable Heating/Cooling (proposal
  2006?)

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Biomass Action Plan (7 Dec 2005)

• Commission will encourage DH scheme owners to
  modernise them and convert them to biomass fuel.
• Commission will encourage MS to systematically
  incentivise in their support systems the
  production of heat and electricity in biomass
  fired CHP plants.
• Commission to encourage those MS that apply a
  reduced VAT rate for gas and electricity to apply
  such a rate to DH too.
• Commission may bring forward a legislative
  proposal on tax issues affecting DH. It will
  examine whether other measures should be proposed
  at the same time.

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Directive onEnergy End-use Efficiency and Energy
Services

• Legislative process
• Ambitious proposal by the EU Commission in Dec
  2003
• Discussions in EU Parliament and EU Council in
  2004/2005
• Compromise agreement between Parliament and
  Council reached during second parliamentary
  reading (6 Dec 2005)
• Directive formally adopted by the Council (14
  March 2006)
• Publication in the Official Journal pending/
• Entry into force (20 days)

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Directive on Energy End-use Efficiency and
Energy Services

• What is the purpose?
• To enhance the cost-effective improvement of
  energy end-use efficiency in the MS
• indicative targets
• mechanisms, incentives, institutional, financial
  and legal frameworks to remove existing market
  barriers and imperfections
• conditions for the development and promotion of
  a market for energy services

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Directive on Energy End-use Efficiency and
Energy Services

• General provisions
• Overall national indicative energy savings target
  of 9 for the 9th year of application (2009-2017)
• Annual energy savings of 1 to be reached by
  energy efficiency improvement measures and energy
  services
• MS have to draw up National Energy Efficiency
  Action Plans (to be approved and reviewed by the
  Commission)
• Public sector fulfills an exemplary role
• Harmonised MV system for energy savings
  (Comitology)

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Directive on Energy End-use Efficiency and
Energy Services
Obligations for energy distributors and retail
sales companies (I)

• Provide aggregated statistical data on their
  final customers (e.g. load profiles, customer
  segmentation, etc.)
• Refrain from activities impeding the demand for
  or delivery of energy services and other EE
  measures, or hindering the development of markets
  for energy services

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Directive on Energy End-use Efficiency and
Energy Services
Obligations for energy distributors and retail
sales companies (II)

• MS to select one or more of the following
  requirements for energy distributors/retail sales
  companies

1. offer and promote energy services
2. offer energy audits for final customers
3. contribute to EE funds
4. Voluntary agreements/other market-oriented
schemes (White certificates)
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Directive on Energy End-use Efficiency and
Energy Services
Further provisions affecting energy distributors
and retail salers

• Volume-driving incentives in tariffs for
  net-bound energies to be removed
• Optional use of funds to subsidise EE
  improvements
• Individual metering where technically possible
  and financially reasonable
• Informative billing
• Qualification/accreditation/certification systems
  for energy service providers

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Directive on Energy End-use Efficiency and
Energy Services

• Typical energy services
• Indoor thermal comfort
• Domestic hot water
• Cooking
• Lighting/illumination
• Refrigeration/cooling
• Mobility etc.

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Directive on Energy End-use Efficiency and
Energy Services

• Summary
• No binding targets, but binding measures
• Subsidiarity, flexibility for MS
• Untapped cost-effective savings potential of 2.5
  annually
• Green Paper (2005) 20 of total final energy
  consumption (realisable by 2020)
• Methodological challenge MV ex-post evaluation
  of EE policies and measures
• Germany Many utilities and Stadtwerke are active
  in offering multiple energy services, like energy
  performance contracting etc.

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Towards a European Directive for Renewable
Heating and Cooling (RES-H)
Legislation on renewable energy in heating is
the missing piece of the jigsaw. (Biomass Action
Plan 2005)

• The Commission will bring forward a Renewable
  Energy Road Map. This would cover () a new
  Community Directive on heating and cooling,
  complementing the Community energy saving
  framework.
• Green Paper A European Strategy for Sustainable,
  Competitive and Secure Energy (8 March 2006)

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Towards a European Directive for Renewable
Heating and Cooling (RES-H)

• Initiative Report for Heating and Cooling from
  RES adopted by the European Parliament (14 Feb
  2006)
• Commission to submit a legislative proposal on
  increasing the share of renewable energy for
  heating and cooling
• Objective to double the share of RES-H to 20 by
  2020
• National binding targets, definitions, National
  Action Plans
• No harmonisation, but different national support
  schemes and incentive mechanisms
• Accompanying measures (e.g. support schemes for
  highly efficient CHP)
• Announcement by Energy Commissioner Piebalgs in
  the EP plenary session proposing new legislation
  by end of 2006

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Towards a European Directive for Renewable
Heating and Cooling (RES-H)

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National legislation for DHC - the case of
Germany

• Ordinance on DH Supply (AVB FernwärmeV)
• Regulates the contractual relationships between
  DH suppliers and customers
• Enables DH supply companies to charge prospective
  DH customers
• - to partly cover the costs for the construction
  of the distribution networks (up to 70)
  (Baukostenzuschuss)
• - to cover the costs for house service
  connection (Hausanschlusskosten)

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National legislation for DHC - the case of
Germany

• Further legislation affecting DHC
• Energy Industry Act
• Grid Access Ordinances for Electricity/Gas
• Cogeneration Act
• Renewable Energy Sources Act
• Biomass Ordinance
• Ecological Tax Reform
• GHG Emissions Trading Act/National Allocation
  Plan/ Allocation Act 2007
• Energy Savings Ordinance
• Urban Restructuring Programme East
• Draft Energy Tax Act
• Renewable Heat Law (discussed)

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Promotional policy measures for DHC in Germany

• DH Investment programmes ZIP I/II
• DH Rehabilitation Programme for New Länder
  1992-1995
• Market Incentive Programme
• KfW Promotional Bank
• RD programmes, e.g. Solarthermie 2000plus (solar
  assisted DH schemes)
• Regional support programmes promoting biomass CHP
  and DHC by several Länder (e.g. Bavaria,
  Baden-Wurttemberg, Schleswig-Holstein)

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Municipal policies promoting DHC in Germany (I)

• Local self-government has a long tradition in
  Germany
• Local authorities traditionally provide public
  services directly through public
  (multi-)utilities
• Each federal state has ist own Local Authority
  Act leading to differences regarding the scope of
  manoevre for local governments
• Local development planning for new construction
  areas/energy concepts/Municipal energy management
  for public buildings, etc.
• Several German federal states authorize
  municipalities to impose mandatory connection and
  use of DH by a municipal by-law
• Generally to be based on a public need, but
  also local or global environmental protection
  rationales, e.g. climate protection

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Municipal policies promoting DHC in Germany (II)

• Mandatory connection implies a supply duty.
• Mandatory connection implies a monopoly situation
  and DH tariffs are subject to price control
  according to antitrust law.
• Mandatory connection is controversial, but
  jurisdiction positive.
• Many municipalities reserved/prefer alternative
  strategies by offering competitive prices and
  attractive conditions
• AGFW survey 12 of overall DH sales
• German Federal Building Code enables
  municipalities to use urban planning contracts
  under private law to enforce use of renewables or
  mandatory connection to DH

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Thanks for your attention...

...and do not fall asleep!