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Denmark´s Second National Communication on Climate Change

Annex F: Description of energy-related Acts and measures

F.1 The Electricity Supply Act

The Act defines the rules for accounting and tariff-setting (essentially defining electricity supply as a non-profit business) and sets the regulatory framework for the sector. The Act - originally from 1976 - also enables the Minister of Energy to order electricity supply companies to use specific fuels and specific modes of generation. The "modes of generation" can be used to ensure that new capacity is in the form of combined heat and power plants, wind turbines, etc.

In 1985, it was decided not to use nuclear power in Denmark.

The same year, the Minister of Energy and the power companies signed an agreement securing the construction of 100 MW of wind power capacity before 1991.

In 1986, following an agreement between the government and the major opposition party, the power companies agreed to build 450 MW of small-scale combined heat and power plants fuelled by natural gas and (other) indigenous fuels (wood chips, straw, municipal solid waste and bio gas).

In 1990, after a similar agreement, the power companies agreed to establish another 100 MW of wind capacity before 1994.

In March 1992, Parliament passed a resolution, to be implemented by the Minister of Energy, according to which:

Electricity utilities shall be urged to set up targets for energy conservation and assess the fulfilment of the targets, and electricity utilities shall undertake fuel substitutions - from coal to natural gas and bio-mass - which are necessary to achieve the target of a reduction of 20% in CO2emissions by 2005.

Furthermore, in an agreement of June 1993 between the government and three opposition parties, it was decided that by the year 2000, power companies must utilise 1.2 million tonnes of straw and 0.2 million tonnes of forest residues per year (totalling about 19 PJ per year), primarily in large coal-fired power plants. As an element of the new energy action plan Energy 21 more flexibility will be provided for the utilities regarding the concrete use of biomass in the central power plants.

A new planning method for the utilities, Integrated Resource Planning (IRP), was introduced in 1994 by an amendment to the Electricity Supply Act. IRP is a least-cost planning method that takes account of all options for meeting a projected increase in electricity demand, including energy efficiency programmes. In December 1995, the utilities reported the results of the first round of IRP to the Energy Authorities. Although the method is still to be improved, the initial results show that expectations to IRP as an instrument to promote enhanced energy efficiency and energy conservation have been fulfilled.

Late November 1995, the Parliament passed a bill concerning the accounting price which the utilities must offer independent producers delivering power to the network. This initiative ensures that accounting practice in the utilities is based on long-term avoided costs such that the utilities - having the network monopoly - cannot set barriers for the establishment of small-scale CHP as an instrument to reduce CO2-emissions.

In February 1996, the Minister for Environment and Energy announced a new agreement with the main electricity utilities to establish an additional 200 MW wind capacity during the next four years.

In March 1997, the Government announced a coal stop, implying that new capacity in the power sector based on coal will not be permitted.

Parallel to the new energy action plan Energy 21 the Government has started a reform of the legal and economic framework of the Danish electricity and CHP sector. As a first step, Parliament passed an amendment to the Electricity Supply Act in May 1996. In the new system, private companies and distribution companies with an annual electricity consumption of more than 100 GWh will have third party access to the grid. The proposal corresponds in principle to a 90% opening of the Danish electricity market. However, the companies are required to pay for public service obligations in line with the EU directive. Thus the environmental tasks related to the fulfilment of Energy 21 are ensured by refunding the electricity producer a proportional part of the expenditure arising from environmental tasks. The funds for refusion are recovered from all consumers in Denmark through an obligation for all consumers to purchase a fair share of "green" electricity or alternatively pay a fair share of the costs. This contribution is collected when the network is used to transmit the power.

The new system will come into force following a final approval by the EU Commission.

F.2 The Heat Supply act

The Heat Supply Act requires municipal councils to draw up heating plans to determine the future supply of energy for heating based on socio-economic criteria, available supply options and government guidelines.

The options to be chosen through the planning process include individual heating or collective heating, i.e. piped natural gas or district heating systems.

For district heating, the method and the fuel for the heat production have also to be defined. In addition local energy resources such as straw, forest residues, industrial waste heat, waste incineration and biogas have to be examined.

To ensure proper coordination of large-scale distribution of gas and district heating from power plants, the regional authorities must be involved in the planning process together with the public, the energy supply companies and other relevant parties, such as local fuel producers. Construction projects envisaged in the plan must subsequently be carried out in accordance with a time schedule specified in the plan. Local authorities may make consumer connection to a collective system and integration of existing heating plants into the system mandatory. Moreover they may prohibit the installation of certain forms of heating (i.e. electric heating) in areas with collective supply systems (district heating or gas). In 1988, this prohibition was made mandatory.

The Minister of Energy can define the framework for the planning (which fuels and methods to consider, planning methods and deadlines). During the 1980s plans were drawn up for all 275 municipalities and the necessary distribution systems for gas and district heating built or extended. This resulted in a big increase in the market share of collective heating and a corresponding decrease in individual heating (mainly heating oil). In addition, the use of oil at district heating plants was almost eliminated through substitution by local biomass fuels, waste heat and natural gas.

In 1985, the Minister of Energy decreed that no new coal-fired district heating plants were to be built. In 1990, it was decided that approx. 300 district heating plants outside the large combined heat and power areas of the big cities should be converted to CHP plants based on natural gas, biomass or waste incineration during the 1990s, with the expected result of adding about 1,200 MW generating capacity by the end of 1998. By early 1994, about 800 MW of this capacity was running, the figure increasing to approx. 1000 MW by late 1995.

F.3 Energy-related measures, by sector

F.3.1 Residential, including public sector

1. Act on promotion of energy and water conservation in buildings

As part of Energy 21, a new legislation was introduced aiming at promoting energy and water savings in buildings. This requires that all buildings from 1997 onwards should be energy labelled and that owners draw up an energy plan. Modernised consultancy services regarding building energy plans and energy conservation will support these efforts. Based on an evaluation of the existing consultancy schemes for buildings, new schemes are implemented from 1997 modernising the following schemes:

Heating inspections and energy certificates

Since 1981, a scheme for auditing of existing buildings has been in force involving identification of measures with less than 8 to 10 years simple pay back time (in consumer prices). The audits are offered by special state-authorised energy consultants. Following implementation of all the measures identified, an energy certificate is issued. In the period 1981 - 84 heating inspection was combined with a grant scheme. In the first year of the scheme, a heating inspection was a precondition for a government subsidy for heat savings measures. Hereafter, heating inspection was a subsidised option, and in the last period of the grant scheme, heating inspections received 80 - 100% subsidies. Since 1985, the provision of a heating inspection report or an energy certificate has been mandatory when a building changes hands (although no sanctions were implied).

For small buildings under 1,500 m2 energy labelling will be mandatory from 1997, when the building is sold. The label will make it easier for potential byers to compare buildings and to evaluate their energy consumption.

Annual inspection of small oil burners (OR-scheme)

Since 1979, annual inspection of the then 900,000 small oil burners (up to 120 kW) used in central heating systems, has been mandatory. The inspection was carried out by authorised firms - chimney sweepers or oil burner maintenance firms - by persons who have attended a special course. This inspection scheme will be extended to included all oil burners by 1 January 1997.

Consultancy scheme for large buildings

In 1981, an annual inspection scheme was implemented for oil burners exceeding 120 kW. This was later extended to large gas burners as well as district heating installations in buildings with more than 1,00 m2 heated area. The scheme involves cooperation between authorised consultants and the local manager of the heating installation. The local manager regularly compiles data which are checked by the consultant for inefficient performance. Once a year, the consultant inspects the installation and instructs the local manager in energy-efficient operation of the installation.

This scheme will be extended and replaced by a consultancy scheme for large buildings.

For large buildings (large installations) the existing scheme will be integrated with initiatives ensuring wider use of local energy management in buildings. The inspection scheme will be further extended to include use of cold water and electricity, i.e. all usage of energy and water in all buildings covering more than 1,500 m2. It will be mandatory to have an energy label and an energy plan that has to be updated once a year. The initiative will be supported by an information campaign.

2. Mandatory energy management in State-owned buildings

Since 1992, energy management and annual reporting on energy consumption have been mandatory in every building used by the State (central administration and state institutions, defence, and state-owned entities like the railways, etc.). Local energy managers must be appointed in every institution. A special consultancy service for energy audits and assistance, computer programmes etc. are offered to the managers. Coordinated purchase of office equipment of high energy standard is encouraged.

3. Improved funding of energy management in government buildings

The possibilities for financing investments in energy-saving measures in central government buildings are being improved by through a special grant scheme totalling USD 1.4 million per year. Besides the energy tax, the governmental institutions have to pay a special tax of 5% of their energy expenses.

4. Energy conscious buying in the public sector

This initiative is aimed at getting central and local government authorities to pursue a more energy-conscious buying policy, especially with respect to electrical equipment and appliances. The Danish Energy Agency co-operates with the Danish EPA to ensure that due consideration is accorded to environmental and energy aspects when products are bought by government authorities. Information material on energy consumption of the best products on the market is distributed to the public purchasers.

5. Energy management in local government buildings

The government will improve the incentives to implement energy conservation in public buildings. Among other things, this can be achieved by ensuring that a proportion of the money saved on the energy bill can be used for other purposes. Local commitment should be ensured at the county and municipal level. They shall promote energy-saving efforts at the local level, including the introduction of "green accounts". In addition, it is intended to promote the use of third-party financing of the implementation of energy-saving measures in the public sector.

6. Luxury holiday homes

An information campaign targeted at owners, lessees and users of luxury holiday homes in the tourist sector is being launched to ensure that consideration is paid to energy consumption in connection with the installation and use of installations with a high energy consumption (jacuzzis, swimming pools, solaria, etc.).

7. State subsidies for energy savings in pensioner's dwellings

From 1993 State subsidies have been granted to energy-saving measures in dwellings inhabited by pensioners with low incomes and relative high bills for heating. Subsidies of up to 50% of investment costs can be obtained up to a maximum of USD 3,600 per dwelling. Approx. 5,000 houses are granted subsidies each year at a total cost of approx. USD 7.1 million per year.

8. CO2 tax (tax and subsidies - the CO2 laws)

Following the former energy plan from 1990, Energy 2000, a packet of new laws was approved, introducing a CO2 -tax and a number of subsidy schemes recycling some of the revenue for various energy-saving measures:

"Act on a Carbon Dioxide Tax on certain Energy Products" and "Act on Change of Tax on certain Oil Products", "Act on tax on Coal, Lignite and Coke etc", "Act on Tax on Electricity" and "Act on Tax on Gas", of 21 December 1991

The Act implemented a CO2-tax on oil, coal and gas of approx. USD 14,300 per Gg of CO2. The tax is fully paid by households and the public sector, while industry and the commercial sector were originally entitled to a 50% or more refund. The Act has entered into force on 15 May 1992 for households and the public sector, and 1 January 1993 for industry and the commercial sector. (Taxes for industry and the commercial sector have been changed from 1996 - see No. 11, below). For electricity, the Act institutes a CO2-tax of USD 0.014 per kWh, roughly corresponding to USD 14,300 per Gg of CO2 emitted in the production of the electricity.

9. "Act on State Subsidies for Conversion of Older Dwellings to CHP",

of 3 January 1992

As a subsidy scheme connected to the CO2 Acts (No. 8), this Act grants subsidies for installation of water-borne central heating in dwellings erected before 1950, motivated by connection to CHP-supplied district heating networks (mainly in the centres of the large cities), totalling up to USD 214 million over 10 years. The estimated impact is the connection of around 65,000 dwellings. Apart from the CO2 and energy savings obtained by changing to CHP-derived heat, conversion also contributes to lower SO2 and NOx emission levels in the cities.

10. Green taxes in the 1994 - 98 general tax reform

The general tax reform phased in during the period 1994 - 98 has the aim of introducing a gradual shift of the weight of the tax system away from taxing earned income towards taxing the consumption of scarce resources and pressure on the environment. The tax reform involves a gradual increase of green taxes, primarily in the household sector. The main increase in energy taxes applies for coal and electricity, and in the average tax on household heating will increase to approx. USD 86,000 per Gg CO2. The tax reform's increases in green taxes do not apply to energy use by enterprises. A series of new initiatives has therefore been introduced to come into force from the beginning of 1996 and to be phased in during the subsequent years. (see No. 11, below)

F.3.2 Industry and Trade

11. Green taxes and agreements for improvements in energy efficiency

in industry

The Danish energy tax on industry has been revised so as to improve energy efficiency in industry. The new legislation which entered into force in January 1996, introduced different carbon tax rates in the industry for room heating, heavy processes and light processes. The tax rates are to be gradually increased from 1996 to 2000. All of the revenue raised by the tax will be recycled to the industry through extended possibilities for investment grants and through a reduction of the social security contribution paid by the employers. A number of energy-intensive companies will receive a reimbursement, provided they agree to implement energy efficiency measures under agreements negotiated between the individual companies and the Danish Energy Agency. If the companies do not fulfil the agreements, reimbursements already paid will have to be returned and the tax will be imposed in full. Together, the energy and the carbon tax on room heating will gradually be increased to the same level as for households, an average of approx. USD 86,000 per Gg CO2. The rates for light and heavy processes are somewhat lower. A sulphur tax corresponding to USD 1.4 per kg SO2 was also introduced. The revised energy and carbon tax system related to the industry is estimated to reduce total CO2 emissions in Denmark by about 5%. The new system will be reviewed in 1998.

12. "Act on State Subsidies for covering Expenditure in certain Com-

panies with a large Energy Consumption", of 3 January 1992

As an element of the CO2 Acts (No. 8), this Act defined the conditions for partial refunding of CO2-taxes, which is linked to the implementation of energy audits and energy management. The scope of the Act is to deal with the special problems of energy-intensive industries caused by the non-implementation of CO2-taxes in other countries. This subsidy scheme was changed from 1 January 1996 in accordance with the new CO2-taxes and agreements on energy audits for industry (see No. 11, above)

13. "Act on State Subsidies for Energy Savings in Trade and

Industry", of 3 January 1992

As an element of the CO2 Acts (No. 8), this Act implements a general subsidy scheme in the industrial and commercial sectors. Grants for large projects are limited to 30% and are based on an individual evaluation. Smaller projects can receive 26% if the measures are standard measures defined for specific industrial or commercial branches. Energy audits may receive 50% support and information campaigns 100%. With the new taxes on energy consumption in industry and the commercial sector, the general subsidy scheme is increased from USD 28.6 million in 1995 to approx. USD 100 million per year until the year 2000.

F.3.3 Energy transformation sector

14. "Act on State Subsidies for Electricity Production", of 27 Dec. 1991

As an element of the CO2 Acys (No. 8), a subsidy of USD 0.014 per kWh electricity is granted for CHP-plants based on natural gas or renewable energy. The subsidy is to compensate for the CO2-tax levied on the consumer's electricity price, rather than on the main fuel (coal) used for electricity production. An additional subsidy of USD 0.024 per kWh can be obtained for electricity produced by wind turbines or from bio-mass. For CHP plants based on natural gas the rate of USD 0.014 per kWh will be reduced to USD 0.01 in 1997 in combination with special compensating subsidies to economically vulnerable projects.

15. "Act on State Subsidies for the Promotion of CHP Plants and Ex-

ploitation of Biomass Fuels", of 3 January 1992

As an element of the CO2 Acts (No. 8), this Act encourages the conversion of coal-fired district heating plants to combined heat and power plants based on natural gas, waste or biomass, and the use of biomass in areas not supplied by natural gas, large existing combined heat and power plants or heat from waste incineration. Subsidies of up to 50% of investments can be obtained, but typical grants are in the range of 15% to 25% of investments. Subsidies amount to up to approx. USD 7.1 million annually.

This subsidy scheme also enables subsidies to be granted for service pipes, both in existing biomass-based CHP districts and district heating networks planning to convert to biomass-based CHP and in connection with completely new biomass-based CHP supply networks (bare-field projects).

16. "Law on State Subsidies for the Completion of Distribution Net-

works for District Heating", of 3 January 1992

As an element of the CO2 Acts (No. 8), this Act implements a subsidy scheme for extending and renovating district heating networks supplied from large central power stations. Grants up to 50% are given for renovation of existing networks, and grants up to 100% for new networks. The subsidies total USD 0.2 million over 6 years. In the case of subsidies for new networks it is a condition that the local municipality makes connection to the network compulsory. These subsidies will cease by the end of 1997.

17. Wind energy planning

To ensure that an adequate number of new sites for wind turbines can be found to reach the target of 1,500 MW installed by the year 2005, the government has demanded that municipalities integrate plans for future wind turbine siting, into local zoning plans. Plans were finalised in many municipalities by 1 July 1995. The planning procedures will continue to ensure that all municipalities comply.

18. Catalogue of ideas for increasing connection to district heating

A study has been made of the steps taken in the various municipalities to increase connection to district heating. The results are summarised and communicated to the municipalities in the form of a catalogue of ideas.

19. Subsidies for renewable energy and demonstration projects

Since 1981 government subsidies have been granted for renewable energy at an almost constant level of about USD 21.4 million per year. About 40% of the subsidies have been given as general subsidies covering up to 30% of investment cost for the purchase of equipment that has been approved by one of the test-stations for renewable energy (test stations for wind, solar energy, biomass and heat pumps). Subsidies have been eliminated completely or partially (examples: biomass burners for district heating and wind energy, for which subsidies have been reduced from 30% to 0%) following successful achievement of market penetration. Another 40% of the funds has been granted to pilot- or demonstration projects, and has been used to bring several technologies to market maturity, starting with wind farms, continuing with large district heating stations for wood and straw, and large biogas plants. The focus is now on biomass-based co-generation and gasification. From experience, repetition of projects in numbers of 6 to 10, geographical dispersion, and location in realistic organisational and economical environments, are very effective means of accelerating the necessary technological development and the subsequent market take-up. The final 20% of the funds are used for basic activities e.g. test stations and information.

As part of the State Budget for 1997, some of the subsidies are earmarked for the development of new technologies in renewable energy, among others wave energy and offshore wind turbines.

F.3.4 Cross-sectoral

20. Energy Research and development

Starting in 1976, the national energy research programme expanded rapidly. From 1981 to the present time, government funding has been of the magnitude of USD 17 - 21 million per year. Energy conservation and renewable energy have had a large share of the programmes. In the present programme, increased emphasis is given to electricity conservation, biomass combustion, wind energy and super conductors.

The energy research and development programme supplements funding from other government sources (approx. USD 21 million per year), from the EU (approx. USD 5 million per year) and from industry and utilities (approx. USD 43 million per year).

21. Building codes

The code for new buildings has been tightened in several steps. The Building Regulation of 1977 introduced stricter insulation requirements from 1979. In 1985, the Regulation for small buildings was modified to allow flexible solutions within a total limit for heating and ventilation (in terms of maximum net heating requirement per m2), among other things the intention being to encourage increased use of passive solar concepts.

As decided in the previous energy action plan Energy 2000 a new code has been introduced, which will cut an additional 25% of net heating demand, reducing it to about 70 kWh per m2 per year. The code also sets limits on electricity consumption for ventilation and will enforce low temperature heating systems in order to increase the efficiency of various heat supply systems, such as district heating systems, condensing boilers, solar energy and heat pumps. The new code entered into force in May 1995.

A planned further reduction to half of the present level, i.e. to 45 kWh per m2 is scheduled to enter into force around the year 2005. Development work by building companies and research institutions to this end is being pursued. Buildings respecting this limit through combined exploitation of passive solar techniques, insulation and coated glazing are already being built.

22. Energy efficiency activities of the electric utilities

The Danish power distribution companies, which are either consumer-owned or publicly owned, have established extensive information and consultancy schemes recognised as a natural activity by the regulatory authorities. Most companies are involved in local information activities directed towards consumers and educational institutions and offer a certain basic package of consultancy on electricity savings free of charge. Other initiatives include arrangements with stores and electricians to supply low-energy light bulbs to consumers funded via the electricity bill, schemes for distributing low-energy bulbs to all their customers free of charge, or for buying back old, inefficient appliances when new efficient ones are sold.

A large project for determining methods to be used for implementing integrated resource planning (least-cost planning) has been carried out by the sector, in the framework of the EU's SAVE Programme.

23. Council for Sustainable Development and Renewable Energy

A new Council was established in spring 1996 to act as an advisory body to the Government and the Parliament and to provoke debate and create new ideas. The Council is independent, and include experts from important sectors and organisations. It is a merger of two previous councils pertaining to electricity savings and renewables.

24. Energy labelling

An extensive scheme for energy labelling of appliances was notified to the EU by the Danish Government in April 1990. In August 1991, the EU Commission presented a Directive for energy labelling to the Council of Ministers. An EU Directive for labelling of the first category of appliances (freezers and refrigerators) entered into force in January 1995. EU Directives for washing machines and dryers were implemented in October 1996. Directives for other major household appliances and light sources will follow.

A Danish system for informing consumers of the electricity consumption of various appliances, and for facilitating easy comparisons between different competing products (so-called energy arrows) has been devised by the utilities with support from the government. These complete market lists of various consumer appliances work with and supplement the labelling scheme.

25. Efficiency standards

The Danish Parliament has approved an Act empowering the Minister of Energy to set efficiency standards for electrical appliances and other equipment. The schedule and efficiency improvements envisaged are as follows:

For household appliances, standards are foreseen for refrigerators/freezers, washing machines, dishwashers, tumble dryers, electric stoves, lighting, equipment with a stand-by facility such as TVs, and water beds. Efficiency standards for refrigerators/freezers were adopted in 1996 as EU-wide standards and will become effective from late 1999, bringing efficiency improvements of 15% compared to the 1992 market. The Directive does not include a second phase. For washing machines and dishwashers, phase 1 was expected to enter into effect in 1996 and will imply exclusion of 50% of the models that were on the market in 1993. Phase 2 will go into effect in 1999 and will be designed to minimise total discounted cost (see below). For other domestic appliances, phase 1 was scheduled to go into effect in 1999, and phase 2 in 2002.

For manufacturing companies and the public and private service sectors, it is foreseen that standards will be introduced for refrigerators/freezers, washing machines and dishwashers, office equipment, lighting, electric motors, process ventilation, pumps, boilers and technical insulation. Phase 1 was expected to start in 1996, and to be in effect for all the appliances mentioned before 1998.

The first two draft executive orders under the Act regarding washing machines and dishwashers were notified to the EU in August 1994. The political reaction from the Commission and several Member States was quite negative. An analysis under the revised technical basis will be made as soon as possible and a decision will subsequently be established on the further process depending on the political situation in Europe.

Hitherto experiences and difficulties in the actual implementation of standards implies that the above schedule and the levels of efficiency improvement expected will have to be revised.

26. Individual metering

The Ministry of Housing is in a process of issuing new regulations concerning metering and accounting of the use of electricity, district heating, gas and water. Individual metering of the use of resources in buildings has become mandatory in new buildings from 1996 and in existing buildings from 1997.

27. Informative electricity bills

This initiative comprises in introducing informative electricity bills for households and for customers in the public and private service sectors. The initiative will include more frequent meter readings, regular billing of actual consumption and graphic presentation of the customers' electricity consumption. The Danish Association of Power Companies has appointed a working group to prepare the practical implementation of informative electricity bills. The group reported in February 1994. The informative electricity bills are currently being implemented by the utilities.

28. Campaigns for replacement of appliances

This initiative means that the campaigns run by some power companies for replacement of electrical appliances (particularly refrigerators and freezers and low-energy lighting) will be expanded into longer or permanent schemes/campaigns covering consumers throughout the country. The schemes can also be expanded to cover other types of appliances. Danish power companies have carried out a successful country-wide replacement campaign for freezers. Possibly more country-wide campaigns will be carried out in the future for other types of appliances.

29. Buying clubs and buyer policies

This initiative consists in organising buying clubs, each composed of users of a specific product - for example, housing associations, large companies, and retail chains. The buying clubs draw up strict requirements concerning the product's energy efficiency, price, materials, etc. The manufacturer that best meets these requirements is rewarded with guaranteed sales of the product in question. This initiative works in two ways - it influences the buying process and promotes the development of more energy-efficient equipment. In 1997, initiatives will be taken to organise buyer policies within housing associations. Emphasis will be on demand of the most efficient appliances on the market. Later the initiatives will be extended to include demands for better products than those already on the market.

30. Supplementary training in energy labelling

A pilot project for supplementary training of store personnel to motivate them to use the EU's energy labelling of kitchen hardware as an active selling tool was carried out in 1994. The experience from the project was used as the basis for a proper, country-wide supplementary training scheme when the first EU energy label was brought into effect in early 1995 and disseminated to all EU countries.

31. Ban on conversion to electric heating in exiting buildings

In 1994, the Government passed an amendment to the Heat Supply Act that enables the scope of the ban on electric heating to be extended to include a ban on the conversion to electric heating of existing buildings situated within a district heating or natural gas supply network.

32. Conversion of electrically heated buildings

This initiative comprises in getting existing buildings with electric heating converted to district heating or natural-gas heating. This conversion will promote electricity savings and better utilisation of the district heating and natural gas networks. Conversion is advantageous both from a general socio-economic point of view and environmentally.

Conversion from electric heating to district heating or natural gas heating requires substantial investments in the buildings in question for installation of a central heating system. To overcome this barrier to conversion, a state subsidy system has been established.

Electrically heated buildings for use in industry and trade can receive subsidies for conversion to central heating by means of the general subsidy scheme for energy savings in industry (Nos.11 - 13).

In 1995, the Act on State Subsidies for Conversion of Electrically Heated Buildings was passed. This Act, which came in force on January 1 1996, enables subsidies to be given for the installation of central heating in electrically heated dwellings and public buildings in areas not presently supplied with district heating or natural gas. The immediate substitute will be oil-heating, but additional subsidies may be given to convert to biomass heating etc. This grant scheme for supporting conversion from electrical heating to central heating (especially in combination with renewable energy) amounts to USD 8.6 million annually.

A new subsidy scheme has been established for the installation of district heating or natural gas heating in electrically heated dwellings and public buildings. These subsidies will be used in areas presently supplied with district heating or natural gas. This initiative is expected to come into force in 1997. The proposed subsidy will be managed by a committee composed of representatives of consumers, interest groups, utility companies and the Government. The committee will be named Electricity Savings Fund, and members are to be appointed by the Minister for Environment and Energy. The fund will also be charged with granting subsidies to promote energy efficiency in electrical appliances in dwellings and public institutions. USD 7.1 million will be set aside for the scheme in 1997. From 1998, the scheme will be financed by a fixed amount of USD 0.0086 per sold kWh.

The potential for conversion of electrically heated buildings is estimated to be approx. 50,000 buildings in areas supplied with district heating or natural gas and approx. 25,000 buildings in areas not supplied by these sources.

33. Subsidy scheme for product-oriented saving efforts

As proposed in Energy 21, a new subsidy scheme will be established in 1997. The aim is to grant subsidies for the development and implementation of energy-efficient appliances and products, especially in dwellings and the public sector. Subsidies will amount to USD 6.4 million per year and will also be granted for marketing and procurement of energy- efficient products.

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