District heating: Monopolies Commission calls for more competition
District heating will become even more important in the future, says the Monopolies Commission. At the same time, it sees monopolies on the market.
Work on a district heating pipe in Wiesbaden's Wilhelmstrasse in 2016.
(Image: ESWE)
As district heating will become increasingly important in the planned energy transition, monopolies on the market could expand and prices could rise. The Monopolies Commission, which advises the German government, warns against this. There must be even more transparency and the price must be limited on a market basis. This would allow prices to be in line with competition without a great deal of bureaucracy.
In its main report "Competition 2024", the Monopolies Commission assumes that the heating market will continue to change significantly in the coming decades. District heating will play a special role in this. In its own words, the Monopolies Commission "urgently" recommends ensuring functioning competition or – where this is not possible - implementing a regulatory framework as a controlling "as-if competition".
Price-dampening alternatives
In most cases, district heating providers are monopolists by nature, said the Chairman of the Monopolies Commission, Jürgen Kühling. So far, however, alternative types of heating such as oil and gas boilers have had a price-dampening effect. If the switch is made to sustainable energies, such alternatives could disappear in many places. This could happen, for example, where heat pumps cannot be installed as the "only relevant remaining" decentralized heating technology or where there is no economical alternative. Once homeowners have decided on a type of heating, they are largely bound to their choice due to lock-in effects.
For the first time, the Monopolies Commission has collected price data from 251 district heating areas, which represent around 85 percent of district heating customers in Germany. This indicated that prices in the individual tariff areas are significantly correlated with prices in neighboring regions. In addition, the price differences between the tariff areas are significantly greater for district heating than for other energy sources. This could indicate reduced competition compared to gas and heat pump electricity.
At present, the district heating market is only regulated by price escalation clauses. As a short-term step, the Monopolies Commission therefore proposes, for example, a central transparency platform on which the prices of different district heating companies can be compared. The Federation of German Consumer Organizations (Verbraucherzentrale Bundesverband), for example, has so far undertaken something similar on a random basis and considers district heating prices to be at a high level.
Subordinate gas network
In the long term, more competition could be created, particularly in large networks, if the link between the natural network monopoly and heat production and distribution were to be broken up for competition. This would make regulatory intervention at the end customer level, such as price caps, unnecessary. It is also conceivable that access regulation could be as streamlined as possible to open up access for producers beyond the negotiated grid access that is currently possible.
According to the Building Energy Act, newly installed heating systems must be powered by at least 65% renewable energy. According to the supplementary Heat Planning Act, the requirement of 65% only applies to existing buildings once the municipalities have submitted their heat planning plans, i.e. by mid-2026 at the latest in large municipalities and mid-2028 in small municipalities. In contrast, gas networks play a "clearly subordinate role", writes the Monopolies Commission, with the federal government only envisaging the use of hydrogen for heating residential buildings in individual cases.
(anw)
