Denmark: Strategic Market Outlook

With the massive political focus on phasing out fossil fuels, heat pumps for residential heating are today a popular form of heating among Danish homeowners, and sales have doubled in the last five years, where heat pumps have displaced mainly oil boilers. The climate goals to reduce CO2 emissions by 50-54% in 2025 and 70% in 2030 compared to the 1990 level, and the fact that the district heating companies aim to phase out biomass by 2040 to achieve the target, means that it is necessary to implement a large proportion of heat pumps in the district heating network and utilize excess heat in a higher proportion than today.


The gas network was greatly expanded from 1980 to utilize the gas from the North Sea, but as the production is declining, there is now a great focus on reducing the use of natural gas and oil and converting it to district heating or heat pumps. At the same time, an energy agreement was made which banned the installation of oil boilers and natural gas in new buildings from 2013 and banned the installation of oil boilers in existing buildings with access to natural gas and district heating from 2016. A scrappage scheme was established to provide incentives for the scrapping of oil-fired boilers, and the building renovation scheme was also established, which incentivizes energy renovation and conversion to heat pumps or district heating.

In addition, it is a requirement that to receive financial support; the heat pump installer must have passed the course renewable heat installer for heat pumps. The main policy drivers for individual heat pumps in the Danish market have been the bans on the installation of oil and gas boilers in new buildings from 2013 and the ban on installation of oil boilers in natural gas and district heating areas from 2016, as well as the reduction of electricity tax which makes electric heat pumps competitive with gas on running costs. Another driver has been the availability of alternative ways to buy heat pumps like leasing and subscription models, which means heat pumps are available to consumers for a low investment cost.

As gas prices in the period from 2015 have generally been low, it has been difficult for heat pumps to compete in the replacement market for gas boilers, but this currently seems to be changing with the current increases in oil and gas prices, which are to the advantage of heat pumps, also supported by the reduction in tax for electricity used for heating. Today, district heating heats 54% of the heated area in Denmark. In recent years, there has been a conversion from coal-burning to biomass at the CHP plants, and the transition is now underway from biomass to heat pumps and other renewables. The pressure to convert from gas and oil to district heating with heat pumps is high. District heating plants in Denmark have traditionally been incentivized to connect to the natural gas networks and operate cogeneration plants to produce both heat and electricity. In addition, district heating plants have been able to apply for subsidies for the establishment of heat pumps.

Svend Vinther Pedersen, Danish Technological Institute

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