Copenhagen Economics has conducted an analysis of the gross efficiency potential in the Danish district heating sector for the Ministry of Business and Growth
District heating covers more than 63 per cent of the Danish heating consumption. The sector is defined by a string of local natural monopolies creating a risk of both price and cost inefficiency. This may ultimately imply that consumers may pay too much – the question is how much?
The main conclusions of the study are:
- District heating companies have limited opportunity to price their services with a monopoly mark-up due to current cost+ regulation. However, there is no current regulation fencing off against cost inefficiency.
The extent to which the companies are cost inefficient is measured to a gross potential between 1.1 and 1.2 billion DKK. This implies that there is room for improving efficiency triggering annual consumer savings of an amount equal to the efficiency gains.
For further information please contact Partner, Sigurd Næss-Schmidt