Environmental concerns and electricity growth in the 1990s

The first phase of Danish heat planning was to a large extent wound down at the end of the 1980s. All areas covered by the expansion plans then being implemented were zoned for public heat supply as part of the local authorities' heat supply plans.

Planning directives

With an amendment to the law on heat supply in 1990, a new planning system was introduced to adapt policies to future heat supply requirements. A so-called "project system" was developed on the basis of a general framework formulated in an agreement between the government and the Social Democrats on 20 March 1990 and in the 1990 law on heat supply.

The objective of the agreement was to promote expansion of decentralised CHP through:
- conversion of existing installations to co-generated heat and electricity supply
- increased use of natural gas
- increased use of environmentally friendly fuels
- electricity growth.

The agreement was a solution to two particular issues: reducing Denmark's CO₂ emissions and ensuring economic energy use through the expansion of the natural gas grid.

The conversion of DH (heat production only) to co-generated heat and electricity, as formulated in the agreement of 13 March 1990, was to take place in three phases, as specified in general and specific planning directives sent to all local authorities. Furthermore, a planning directive on large-scale customers’ conversion to public supply was also issued. The planning directives, which remain the legal basis for heat supply, contain specific regulations governing conversion to co-generated heat and electricity and the introduction of environmentally friendly fuels. Local authorities were also directed to ensure that this conversion was carried out.

The conversion of DH plants was divided into the following three phases:
- Phase 1 (1990-1994)
- Phase 2 (1994-1996
- Phase 3 (1996-1998).

Phase 1.

Large coal-fired DH plants with access to a natural gas supply were to convert to natural gas-fired, decentralised co-generated heat and electricity.

Large natural gas-fired DH plants were to convert to natural gas-fired, decentralised co-generated heat and electricity.

In connection with the foregoing, waste installations were to be introduced as well.

Phase 2.

Remaining coal-fired DH plants with access to natural gas supply were to convert to natural gas-fired, decentralised co-generated heat and electricity.

Medium-sized natural gas-fired DH plants were to convert to natural gas-fired, decentralised co-generated heat and electricity.

The majority of DH plants outside the public systems were to convert to straw, wood chips or other biofuels.

Phase 3.

Smaller natural gas-fired DH plants were to convert to natural gas-fired, decentralised co-generated heat and electricity.

Remaining DH plants outside the public systems were to convert to straw, wood chips or other biofuels.

For the most part, these conversion phases were successfully completed, which is why Denmark has the most extensive co-generation of heat and electricity in Europe.

Heat is generated automatically when electricity is generated but not necessarily in periods when the market price for electricity is advantageous. Production of heat-connected electricity gradually increased to such an extent that, during certain periods, it had to be sold to surrounding countries for less than it cost to produce. The result was economic loss, for both the state and producers.

Therefore, as of 1 July 2003, CHP were exempted from the obligation to co-generate electricity and heat continually in order to qualify for electricity production subsidies. Now, plants are motivated to produce electricity when there is demand and when the price is therefore favourable, and to produce heat when there is demand. Further initiatives to encourage more economic co-generation of electricity and heat were introduced with a far-reaching energy agreement in March 2004.