Potential from redesigning the Danish energy savings obligation need careful implementation

Copenhagen Economics was asked to quantify the potential savings of redesigning the Danish Energy Company Savings Obligation by moving the obligation from the DSOs to the energy retailers.

Since 2006 the DSOs in Denmark have agreed to achieve certain targets of energy savings on a yearly basis. The purpose is to reduce CO2 emissions, thus contributing to the green transition that eventually will result in a fossil free Danish society. In the current system the activities of the DSOs are not exposed to competition. Costs for achieving energy savings are therefore passed through one-to-one to consumers, creating relatively poor incentives to ensure cost-effective solutions.

In this analysis we investigate the potential for increased cost-effectiveness by moving the obligation for energy savings from the DSOs to the trading companies. Based on interviews and data from DSOs, trading companies and external parties in the market for energy savings we carry out calculations estimating the potential savings from moving the obligation.

The potential arises from two different sources: Lower prices (subsidies) to realise energy saving investments and lower administration costs related to the efforts of identifying, monitoring and quality assuring energy savings. We calculate both static and dynamic effects.

We find a static annual savings potential in the range of DKK 100 to 220 m. from moving the obligation.We find a dynamic annual savings potential in the range of DKK -20 to 345 m. The wide range of especially the dynamic potential emphasises the uncertainties in the calculations and the uncertainties of the dynamic outcomes.



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