Energy Strategy 2050 – from coal, oil and gas

A stable energy costs framework for
Danish households
The government’s new energy policy initiatives, and the
financing of these, affect households in two ways. Firstly,
energy saving efforts will be enhanced and there are
a number of initiatives to promote conversion; initially
away from oil, and later away from natural gas. This will
require investment, but it will also reduce heating costs.
Secondly, households will have to contribute to financing
the green transition through slightly higher electricity and
heating bills.
Under all circumstances energy costs will increase as a
result of amongst others the growth in oil prices on the
world market. However, the new initiatives in the strategy
mean that households will have to pay slightly more for
the energy they use because of the gradually increasing
taxes on energy for heating, gradually increasing PSO
costs for renewable energy as well as gradually increasing
grid tariffs as a result of enhanced savings efforts.
The government’s strategy has been planned so as to
ensure that households’ total bills for electricity, heating
and transport develop reasonably over the next few
years. Increases in taxes and tariffs will be gradual. This
means, that households will be able to react, for example
by fitting additional insulation, replacing windows,
converting to other types of heating or by buying more
energy-efficient appliances when they need replacing.
Costs of households for
heating and electricity
Considered in isolation, households’ expenditure on
heating will increase, although modestly, as a result of
the gradual phase-in of the security of supply tax on
fuel for heating. By far the majority of households will
have several options to maintain their heating bill at an
unchanged level, and in some cases even reduce it; with
the additional benefit of simultaneously reducing consumption
of fossil fuels.
By far the majority of households will have
several options to maintain their heating bill
at an unchanged level
All else being equal, a detached house heated by oil,
natural gas or district heating based on CHP will have
increased heating costs in 2020 of approximately DKK
900, corresponding to 4-5% compared with the current
cost. Similarly, all else being equal, houses heated
by wood pellets will have almost double the increase,
although this will still be a financially attractive type of
heating.
Energy consumption for heating could in many cases be
reduced cost effectively in connection with renovation,
replacement and purchase of new equipment. Enhanced
efforts to promote energy savings are therefore expected
to result in the average household using 5% less energy
for heating in 2020 than it would otherwise have done.
At the same time, worn out oil furnaces can be replaced
with heat pumps, and this reduces heating bills
considerably more than replacement with a new oil
furnace. Natural gas installations will also benefit from
replacement with heat pumps in many cases. In smaller
district heating areas, introduction of free choice of fuel
provides an opportunity to convert to biomass-based
district heating, and this can reduce the price of heating
because of lower taxation on biomass. In large district
heating areas, amended regulation can reduce the price
of heating because there is an incentive to increase the
use of biomass, in that producers and buyers obtain
freedom of contract in setting the price of heating, and
thereby share the advantages of lower taxes when using
biomass.
In 2020, the strategy will lead to an increase in the price
of electricity of approximately DKK 0.06 per kWh, including
VAT, corresponding to an increase of approximately
3% compared with an expected price of electricity in
2020 of approximately DKK 2.15 per kWh, including
taxes. For an average detached house with an annual
electricity consumption of 4,000kWh, this corresponds
to additional costs of DKK 250 including VAT per year in
2020.
Energy Strategy 2050 – from coal, oil and gas to green energy.
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