Introduction of incentive tariffs

Introduction of incentive tariffs – a benefit for the environment

The introduction of incentive tariffs in the district heating sector gives rise to a reduced consumption of resources and, hence, an environmental advantage. In Roskilde, a town situated 30 km west from the centre of Copenhagen and supplied with district heating from the West Copenhagen heat transmission company VEKS, a cooling tariff has been introduced from 1 October 2003. The purpose of this tariff is to motivate the district heating customers to cool off the district heating water the best way possible - i.e. to obtain the greatest possible difference between forward and return temperature and, by doing
so, obtain a down-at-heel heating bill. In 2001/2002 the district heating customers’ cooling level (i.e. the average temperature difference) was, on average, only 28.5°C, and the goal of this new tariff is to increase the average cooling to 35°C over a four year-period. The district heating customers who have a cooling larger than 35°C obtain a reduction on their heating bill, while customers with a cooling smaller than 30°C have to accept an extra charge on their bill.

Background
The reason for introducing an incentive tariff on cooling in Roskilde is an overall wish to maintain a district heating tariff as cheap as possible. This is achieved by reducing the costs for:

  • Production and transmission of the heat
  • Pumping for local distribution of water
  • Heat loss in the local distribution network
  • Construction of new systems and renovations of the distribution pipes
  • An effective cooling of the district heating water will result in a reduced consumption of resources and, consequently, lesser impact on the environment.

When introducing an incentive tariff, the district heating company depends completely on the information campaign and training work carried out prior to the introduction, in order to obtain the subsequent success.

Before the cooling tariff takes effect
When the decision of introducing a cooling tariff – beginning 1 October 2003 – was made in 2002, the following activities were launched.

Registration of cooling level at each individual district heating costumer
The district heating companies began their registration of all district heating customers’ cooling 1 October 2002 so that each individual customer knew their cooling level for the heating season 2002/2003. The cooling was shown in the annual statement, which the customer received in the autumn of 2003, and this statement made sure that each individual customer knew his starting point.

Preparation of information data
The district heating company made an information folder which was sent to each individual customer. The folder had the following contents:

  • The background for introducing the cooling tariff
  • A check form, so that the customer could follow the cooling process on his system
  • A description of the way the tariff was calculated so that the customer could see if he got a discount or an extra charge
  • A reference to the annual settlement of 2002/2003
  • Guidance on how to read the energy meter, focusing on the cooling level
  • Good advice which could change habits, thus increasing the average temperature difference (see figures)
  • A reference to more information, including topic evenings, arranged by the district heating company and information in the local press

Training of plumbing and heating engineers
Since optimizing the customer’s in-house heating system is not part of the district heating company’s business area, the company has increased its collaboration with the local plumbing and heating engineers.
When it comes to having the car drive most economically, most people agree it is a good idea to take the car to be serviced. In the same way, it is a good idea to have a periodic inspection of the in-house district heating system made by a professional. Therefore, the district heating company organized a course where 36 of the municipality’s plumbing and heating engineers were trained in fast and efficient adjustment of the district heating system in the customer’s house. At the same time they were taught how to show the customers what they themselves could do in order to obtain the largest possible average temperature difference.

Before the course, the knowledge on this area varied considerably amongst the plumbing and heating engineers - maybe because so far not all plumbing and heating services have shown interest in that part of the service work. The district heating company has motivated the plumbing and heating engineers to take part in the classes by rewarding the participants for completing the course.
After a two days-course, the participants are put on a so-called “positive list” of those plumbing and heating services that have accepted the district heating company’s offer to join the classes. In this way the company can, in the future, recommend their customers to contact the companies on the list, if the customers are facing difficulties in getting their district heating installations to function the best way possible. The courses have been a great success - and fully booked - so they were repeated in February 2005.

The first year of the cooling tariffs
Around 1,000 of the district heating company’s 6,500 customers did not register any change in their heating bill in connection with the introduction of a new cooling tariff. The cooling level of these customers was placed in the interval between 30°C and 35°C. However, for 1,000 of the company’s customers, namely those with an average temperature difference larger than 35°C, the cooling tariff has resulted in a reduced heating bill. As a whole these customers were paid back EUR 133,000. The remaining 4,500 district heating customers have realized the impact. Since their cooling level has been less than 30°C, they have to make an additional payment of EUR 520,000 to the district heating company.
A lot of customers have understood the new settlement system and less than 1% of the customers (approx. 60 customers) have called up the district heating company, expressing their doubts in the new cooling tariff. Therefore the effort made by the district heating company has to be described as a success and a step in the right direction. However, there is still a number of customers that the district heating company would like to help improve both the economy and the heating system. The next initiative will be for the district heating company to focus on the 50 systems with the poorest cooling level. On the basis of the readings they have received from the customers, the company's employees will make an extra effort so that also these customers will obtain an acceptable cooling and, consequently, a lower heating bill.
Among other things, the reason for the big success is the fact that through the first year (2004), the introduction of a cooling tariff was followed up with an intensive information campaign directed at the customers.

In this campaign, the district heating company worked closely together with Danish District Heating Association’s own advertising agency FIF Marketing, which helped communicate the technical instructions and good advice on how to save money. In the beginning of 2004 six information meetings were held by the district heating company, and these were visited by more than 600 district heating consumers.
With the introduction of the new cooling tariffs, it has been very important for the district heating company to let their customers know that they are not only encouraged to make use of the hot water the best way possible - there is also a big reward. It has been important to emphasize that the cooling tariff should not be seen as a new energy tax. It is rather part of a collective effort to secure a low price on district heating in the long run. The district heating company would like to see that improving the cooling has become a “sport”, and that the customers think about the fact that the heating system in the house should be serviced now and then - just like getting your oil-fired burner or natural gas boiler serviced.

Failures of the systems
The district heating company is helping customers, cooperative housing societies and companies to obtain a better economy in the heating budget.
In 2004 the district heating company received a number of calls from the customers about the new cooling tariff. In connection with the reading of the new meters, as well as inquiries from the customers, it turned out that in 80% of the cases faults were occurring in the heating systems, e.g. bad adjustment or real errors in the system. At the moment it is the customer who has to pay the extra charge of the unnecessary poor cooling.
A typical problem is that the system's delta-p regulator is wrongly adjusted. Another problem is scaling of the customer’s hot-water tanks or geysers. It is the customer’s responsibility to see to the fact that the system works optimally, and therefore the district heating company recommends for the custom ers to have their systems serviced by a professional.

Special circumstances to take into consideration
The district heating company is convinced about the fact that the intensive campaign has been a success and has created an increased focus on heating consumption and heating behaviour.
Naturally, the method has been somewhat criticized, but altogether it has proved less painful than expected. For some customers it has been technically impossible to get an acceptable return temperature of the district heating water, and because of this they received an exemption. More than 100 consumers were expected to be granted an exemption, but only 48 out of almost 6,500 consumers complained and applied for it.

Conclusion
Over the last five years the district heating company has obtained such good business economics that the heating prices will not rise. At the moment the company is hoping (and expecting) that the customers also in the future will take the campaign about cooling tariffs seriously in order to have the success with the low settlement continue in the future.
Generally, an optimization of the system's operation means saved costs – also on initial expenditure – and ultimately the district heating customers will benefit from this.
In order to change the customers’ behaviour, targeted and relevant information has to be given to the customers both before the introduction of the incentive tariffs and in a long period after. Furthermore, it is crucial that the customers are informed about where to get well educated and pro-fessional help regarding the regulation of their heating system.