Energy industry rejects Monopolies Commission call for greater competition in district heating

Industry groups have criticised recommendations by Germany's Monopolies Commission to keep the consumer cost of district heating in check – claiming the proposed measures would actually increase prices. District heating is a major pillar of German plans to cut emissions from heating. In its annual report published on July 1, the Monopolies Commission called called for greater transparency over pricing and market-based price cap in order to enable competition-compliant prices. “The Monopolies Commission strongly recommends either establishing an effective competition framework or, where this is not feasible, implementing an appropriate regulatory framework,” the report summary says. While the heat source in district heating networks is fixed, the commission recommended opening up aspects carried out by third-party groups to market competition. “A separation of heat generation, transportation, and retailing could successfully introduce competition into the district heating system making regulation of end user-prices unnecessary,” the report suggested.

The German Association of Local Utilities (VKU) rejected this approach. It warned in a press release that opening “heating networks to third-party suppliers would not result in any benefits for end consumers but would actually make the supply more expensive." The VKU argues that district heating networks are complex hydraulic systems and no two systems are alike. To be operated as efficiently as possible, therefore, “heat generation, grid operation and sales must remain in the same hands.”

Responding to the commission’s call for “a central transparency platform, which in the district heating market would enable customers to better compare prices,” the German Association of Energy and Water Industries (BDEW) said the recently launched district heat price comparison platform waermepreise.info meant “the industry has already fulfilled a key requirement of the Monopolies Commission.”

District heating has been around a long time in Germany and supplies around 15 percent of homes. The government last year unveiled plans to raise this share by connecting another 100,000 buildings to networks each year. The plan would target buildings which are unsuitable for heat pumps. However, in the 12 months to April this year, district heating prices rose by an average of more than 27 percent – even as overall heating costs fell following the peak of the energy crisis. The Federation of German Consumer Organisations has called for stronger regulation of the sector and clear rules on which costs can be passed on to consumers. Unlike the electricity sector, where power can be transmitted over long distances and consumers can choose between suppliers, district heating, which is directly linked to local generation, tends towards natural monopolies.