Denmark: New report from the Cool-Data project assesses using waste heat from data centers in district heating

Nov 21, 2022 | Posted by MadalineDunn

As part of the EU's Fit for 55 legislative package, it is pushing for data centers to be connected to surrounding district heating networks to use surplus heat. A new report from the Cool-Data project has comprehensively reviewed the rules and incentives around waste-heat recovery by data centers in Denmark and the barriers preventing data centers from participating as active entities in the Danish energy system.

It found that the main barriers are the following:
  • The dampening of price signals by the current energy-based tariffs, 
  • The complexity and entry barriers for independent participation in balancing markets, 
  • That the flexibility providers and suppliers have to agree bilaterally on a compensation level, giving the latter the power to reject the independent provision of flexibility.

It did, however, outline that now, small participants are no longer as hindered from participation because administrative burdens have been passed on to district heating companies. It also noted that accessibility would be improved if more certainly was provided about the calculation methodology that determines the price ceiling. Likewise, it said the early engagement of developers with district heating companies is most impactful, as retrofitting for district heating infrastructure is usually "too expensive."

The researchers outlined that, especially in light of the EU's preparation of a mandatory regulation on waste heat reuse, there is a great interest being shown by the industry. However, it made a number of additional recommendations to help facilitate a successful transition. This included:
  • That regulators prioritize providing clarity on how electricity suppliers will be financially compensated for the foregone revenues and imbalances resulting from flexibility activation.
  • Making balancing markets more accessible to smaller market participants, for more flexibility potential. It explained this could be done by either lowering minimum bid sizes or allowing independent aggregation in wholesale electricity markets. 
  • Ensuring the final methodology for setting is defined in order to successfully reduce project developers' uncertainties on how stable the price ceiling will be against cost fluctuations. 
  • Introducing support schemes for investments in heat pumps and connection to existing district heating networks to improve accessibility for smaller and larger data centers.