On green gas, liquid biofuel and hybrid solutions in an electrification that has run into its own grid
By Rose-Marie Nielsen, MD, Arne Nielsen A/S
The Danish government’s work programme of 19 August 2026 promises three things under the heading “Electrification”: an emergency plan for the electricity grid, more electrification — and a transition away from oil and gas boilers.
The following day, 20 August, the minister for climate, energy and utilities introduced the bill on the emergency plan in the Folketing. It is 32 pages on how access to the electricity grid is to be rationed, because the capacity has been used up. The minister herself describes the work as a marathon and the emergency plan as the first step in a recovery plan.
Two days. First the promise of a faster transition to heating that runs on electricity. The next day, a bill about how not everyone can have electricity.
This is not a criticism of the emergency plan, which is necessary. It is an observation that the two documents do not talk to each other. In March, Energinet paused new grid connection agreements, with around 60 GW of new consumption in the queue against a total Danish peak consumption of roughly 7 GW. The director of Green Power Denmark has put the consequence dryly: if companies do not have access to green electricity, they are forced to carry on with oil and gas.
There is a path that does not require a single new grid connection. What it does require is that we stop regulating the appliance and start regulating what burns inside it.
There are people in the numbers
By the 2025 building register figures, around 118,000 Danish homes are heated with oil boilers and just under 367,000 with natural gas. Almost half a million households.
In the public conversation they are spoken of as if they were the problem. As stragglers who have not understood the message, or as people clinging to fossil fuels out of spite. That is neither fair nor effective.
Let us be precise, because precision is the whole point. A large share of those households can convert, want to convert and are doing so in these years. The government’s immediate subsidy scheme from June 2026 helps them. Good.
But a substantial share cannot — not within a short span of years, and not on their own. They are houses outside district heating’s planned areas, where the pipes are not coming. They are poorly insulated houses where a heat pump only makes sense after a building-envelope renovation the owner cannot afford. They are elderly people on the state pension in a house that is hard to mortgage and hard to sell. They are tenants who do not control the boiler room. They are preservation-worthy buildings with restrictions on both facade and installations.
For them, the green transition is not a choice they are failing to make. It is a choice they do not have.
The consequence of the tone is worth noting. 4,358 new gas boilers were installed in 2025 — a good twelve a day. That is not defiance. It is people whose boiler broke down in November and who bought what the installer could get hold of that week. You do not change that behaviour by calling them reactionary. You change it by making the green choice the cheapest and easiest one on the day the decision has to be made anyway.
There is also a distributional side that deserves to be said out loud: the households that are hardest to electrify are, to a large extent, also those with the fewest means and the longest way to the nearest town. A transition with only one tool hits them hardest.
The gas is already green
Start with what Denmark has succeeded at.
In July 2026, Danish biogas production corresponded to 99.7 per cent of the country’s total gas consumption. It was the highest monthly share ever, the highest monthly production ever and the highest daily production ever. In May the share was 67 per cent. For 2025 as a whole it was above 40.
This is not imports. It is slurry, food waste and residues from Danish agriculture and industry, converted at around 150 Danish plants and distributed through 18,000 kilometres of pipes that are already in the ground and paid for. At a time when threats against critical infrastructure have become a matter of security policy, it is a domestic, storable energy source — something the electricity grid is not.
And yet: a boiler that ran on that gas in July counts, in Danish energy policy, as fossil heating.
The reason is tax-technical. Because biogas and natural gas are mixed in the shared grid, they are taxed identically. The consumer pays a fossil duty on a green molecule, and the biogas producer does not get the demand pull that could carry new plants. Biogas Danmark consistently points to the same three things: tax exemption for green gas in the grid, a blending or CO2 displacement requirement on gas for heating, and faster permitting. The Confederation of Danish Industry says much the same.
The framework is already there. A broad majority adopted the target of 100 per cent green gas in the summer of 2022, and the NEKST committee recommended on that basis that remaining private gas-boiler heating can run on green biogas from 2030. This is not an industry invention. It is an official recommendation lying there, waiting for a tool.
The tool is a rising CO2 displacement requirement on heating gas combined with tax parity. It costs no subsidy kroner. It creates a demand that investments can be calculated on.
The liquid part — where it is harder
For the roughly 118,000 oil-heated homes there is a corresponding option, but it is politically more contested, and that should be said plainly.
HVO is liquid biofuel produced by hydrotreating used fats, in practice mostly used cooking oil. Technically it works: it has virtually the same properties as fossil heating oil and can be used in existing installations, neat or blended. Since the autumn of 2024 we have run a field trial in Danish homes, where fossil heating oil has been replaced with HVO in existing oil boilers over whole heating seasons. The systems run. The technology was never the problem.
The problem is the tax.
Here are OK’s list prices for business customers, delivered, per 1,000 litres (valid from 16 September 2026):
| Product | excl. duty | excl. VAT | Duty |
|---|---|---|---|
| Fyringsolie Plus (heating oil), dyed | 14,776.60 kr. | 18,325.60 kr. | 3,549.00 kr. |
| HVO Biodiesel (UCO) | 21,246.00 kr. | 23,717.00 kr. | 2,471.00 kr. |
Two things leap out.
The first is the last column. Under the EU’s calculation method in the Renewable Energy Directive, HVO from used cooking oil delivers a greenhouse gas reduction of typically 83–88 per cent compared with fossil oil — provided the feedstock really is waste. That proviso is real, and we return to it in the proposals. But a product with that documentation today carries a duty of 2,471 kroner per 1,000 litres — two thirds of the duty on the oil it is meant to replace. The composition is telling: heating oil pays 1,254 kroner in energy duty and 2,284 kroner in CO2 duty. HVO is exempt from CO2 duty but pays 2,460 kroner in energy duty — almost double the heating oil’s, and more than transport diesel. Why a green fuel for heating carries a higher energy duty than the fossil fuel it replaces is a question for the Ministry of Taxation. The green molecule, in other words, is not punished for its CO2 content but for its energy. On top of that comes section 1(4) of the Mineral Oil Tax Act: a blend that can be used for producing heat is taxed at the rate of the component with the highest duty. Pour green fuel into a tank with fossil dregs, and you pay fossil duty on all of it. Blending is punished directly.
The second is that the duty is no longer the whole explanation. HVO sits 5,391 kroner above heating oil per 1,000 litres excluding VAT. Tax HVO for heating merely at heating oil’s energy duty, and the gap falls to 4,174 kroner; exempt it entirely, and it falls to 2,920 kroner — around 16 per cent. When we ran the numbers on OK’s prices in September 2024, the same exemption would have brought the gap down to 2.4 per cent. Since then, the feedstock price of HVO has risen sharply, driven by demand from transport and shipping, where HVO already counts as green.
That is not an argument against tax exemption. It is an argument that exemption cannot stand alone. The last percentage points are closed by the same tool we propose for gas: a rising CO2 displacement requirement on heating oil, which creates predictable demand and spreads the cost across the whole market instead of loading it onto the individual homeowner. And as the hybrid section below shows, the price per litre matters less the fewer litres are needed.
The pattern
Two sectors, the same mistake.
Green gas is taxed as fossil gas because it runs in the same pipe. Liquid biofuel for heating carries a higher energy duty than the fossil oil it replaces. In both cases the tax system stops looking at the molecule, and we regulate the appliance the molecule passes through instead of the molecule itself.
It is the most cost-effective mistake Denmark can fix right now. It requires no grid connection, no subsidy pool and no installer hours — only that the tax starts telling slurry and the North Sea apart.
Business, industry and marine
The debate is almost always about the detached house. But two thirds of Danish gas consumption already sits with industry and combined heat and power plants, not with households, and Evida expects that within five to six years the gas distribution system will primarily be transporting biogas, with business as the big offtaker.
Here, electrification does not suffice as the only answer, and it is not a question of will. High-temperature process heat, steam, drying processes, melting furnaces and ship engines cannot be converted on the same timeline as a radiator loop. Add to this that it is precisely the business connections that sit in the grid queue: since March, large grid companies have had a stop on new connections for large customers, with waiting times announced in the range of five to ten years for the largest projects.
The minister for climate, energy and utilities has herself acknowledged the problem to the Folketing: that fewer customers on the gas grid mean higher tariffs for those who remain, and that together with other measures this can potentially become a challenge for the competitiveness of the part of Danish industry that struggles to convert production to anything but gas.
That is a precise description of a trap, and it is self-reinforcing: the faster households leave the gas grid, the more expensive it becomes for the companies that cannot follow.
The way out is not to slow households’ transition. It is to make sure that what runs in the pipes is green — and that industry is allowed to use it without paying a fossil duty on a green molecule.
Hydrogen belongs here
Let us be precise, because imprecision damages the cause.
Hydrogen is not a realistic alternative for space heating in Danish homes. The energy loss in producing hydrogen and then burning it to reach 21 degrees indoors is too large, and we do not argue for it.
Hydrogen and hydrogen derivatives belong, on the other hand, exactly here: in high-temperature industrial process heat, in parts of shipping, and in the applications where electrification is not physically possible. That has a concrete political consequence. When investments are being made in burner technology for industry and marine anyway, new equipment should be prepared for later conversion to hydrogen and hydrogen derivatives. It costs a little more to buy, saves a replacement in fifteen years — and it keeps a Danish supply chain alive until the moment the hydrogen is actually there.
It is an export issue too
Danish energy technology was exported for 123.4 billion kroner in 2024, and the energy industry accounts for around one in five kroner of Danish goods exports. Bioenergy technology is one of the items that has grown.
Denmark has built an international position of strength in biogas plants, district heating technology, burner engineering and energy efficiency. These are technologies whose home market is precisely the applications we are now in the process of defining as belonging to the past. You do not credibly sell a technology abroad that you have declared unwanted at home.
DI Energi’s own survey points to what is holding things back: two out of three energy companies name uncertainty as a significant barrier to growth, and it is above all the future regulatory framework that creates the uncertainty. This is not a wish for laxer rules. It is a wish to know what the rules will be.
The work programme promises, under the heading “Tax, growth and competitiveness”, to strengthen competitiveness and present reforms of business taxation. The tax treatment of green molecules belongs in that reform, not only in climate policy.
The hybrid — where it all meets
Finally, the place where the green molecules and electrification stop being competitors.
A heat pump that alone has to handle the coldest days of the year is a large electrical load in exactly the hours when the power system is under the most strain — windless frost, what is known as dunkelflaute. Its sizing is determined by a few hundred hours a year, and those are the hours that drive both the customer’s connection size and the grid’s expansion needs.
A hybrid solution turns that around. The heat pump covers the base load, and the boiler already standing in the boiler room steps in at peak load. That takes the great majority of the year’s heat demand off fossil fuel, but requires a markedly smaller electricity connection. If the boiler at the same time runs on biogas or documented liquid biofuel, the last hours are green too.
Technically there is nothing new or untested here. The UK’s Energy Saving Trust distinguishes between bivalent systems, where the heat pump works alongside a separate heat source, and packaged solutions, where heat pump and boiler form one unit. The two common operating modes are just as simple: the boiler runs as a supplement when the heat pump cannot deliver enough in cold weather — or hot water and space heating are separated, so the boiler takes the hot water and the heat pump the house.
The interesting part is the controls. Modern hybrid controllers automatically choose between the heat sources based on the electricity price, the fuel price, the time of day and — most importantly in a Danish context — whether the house’s own solar panels are producing or exporting right now. A house with solar, a battery and hybrid heating is no longer a passive consumer in the queue for the grid. It is a unit that moves its own consumption away from the expensive, strained hours. That is exactly the behaviour the emergency plan asks for when it speaks of grid friendliness.
The advantages stack up:
- Less draw on the electricity grid, precisely where it is scarce. A hybrid system loads the grid less in the peak hours than a fully sized heat pump.
- Cheaper for the customer — in existing buildings. When the boiler is already there, a smaller heat pump and a retained boiler cost less than a full conversion, and often avoid an expensive upgrade of the electrical installation. When both units are bought new, the advantage does not apply.
- Faster to carry out. No waiting for a connection, no queue, no digging. The system can be running in the season the decision is made.
- Robust. Two independent energy sources in the house are real security of supply in long cold spells — and, with a battery in the house, in outages too.
- Flexible consumption instead of fixed consumption. With price-controlled switching, the house becomes an active part of the balancing rather than a burden.
Where the hybrid belongs — and where it does not
We must be as precise here as we demand of others, because hybrid systems are debated for good reason.
The most thorough criticism comes from Fraunhofer ISE, whose field monitoring over twenty years is the best body of data in the area. The conclusion there is that pure heat pump systems are the right choice in the great majority of cases, and that hybrid systems with fossil backup only make sense in narrowly defined exceptions. We agree with most of the analysis, and it deserves to be rendered correctly rather than quoted selectively.
Heat pumps can deliver the heat — in cold weather too, in older houses too. In Fraunhofer’s measurements, the electric heating element’s share of total electricity consumption averaged under two per cent. The argument that a heat pump cannot keep up in a detached house does not hold, and we do not make it.
On the climate ledger the boiler hours lose as well — and more clearly in Denmark than in Germany. Fraunhofer works with a German emission factor of around 363 grams of CO2 per kWh. The Danish Energy Agency puts the Danish figure below 75 grams and falling. A heat pump on Danish electricity beats a boiler on emissions per delivered kWh of heat in practically every hour. Our argument for green peak load is capacity, speed and price — not climate per kilowatt-hour.
But precisely for that reason it is worth noting where the same analysis opens the door. For existing apartment buildings, Fraunhofer itself writes that a hybrid solution can be considered as a transition where the heat source cannot be adequately accessed, or where there is no room for an adequately sized pure heat pump — and that the fossil part then covers the peak load while the heat pump delivers the energy-efficient base load. The analysis also explicitly acknowledges that hybrid configurations with renewables, including solar and battery storage, are sensible.
That is exactly the configuration we are talking about — except that with us, the peak load is not fossil.
And here lies the decisive distinction. Fraunhofer’s sharpest objection is that hybrid systems risk being a poor investment: there are documented systems where the fossil boiler almost never ran, so the money spent on it was wasted. The criticism is correct — when someone buys two systems. In new buildings it is a fair argument against double infrastructure, gas connection and flue system, and we do not propose hybrids in new buildings.
In an existing oil-heated house, the boiler is already standing there. It is written off. The marginal cost of leaving it standing as a peak-load reserve is close to zero, while the saving from being able to choose a smaller heat pump — and avoid an upgrade of the electrical installation — is real. What is a poor investment in a new building is cheap insurance in an existing one.
Our proposal therefore does not apply broadly. It applies to existing buildings with high flow temperatures, larger properties and buildings where the connection really is constrained. Not new buildings. Not well-insulated detached houses, where a pure heat pump is the right choice.
Fraunhofer names two further problems, which are our industry’s responsibility and not the technology’s: controls that let the boiler step in too early and for too long, and complex hydraulics producing needlessly high flow temperatures. Both are real. Both can be made visible with a metering requirement.
Finally, Fraunhofer writes that even in the permitted exceptional cases, a binding path towards a fully renewable solution is decisive. We agree. That is why the peak load must be green from day one.
We supply both burners and heat pumps ourselves. So we have no interest in one technology beating the other — and the hybrid is precisely the place where the two stop being competitors.
Six proposals
1. Introduce a rising CO2 displacement requirement on gas for heating, and give green gas tax parity. That turns the adopted target of 100 per cent green gas into a demand pull that can carry new biogas plants — without new subsidy pools.
2. Exempt liquid biofuel for heating from energy duty, and introduce a CO2 displacement requirement on heating oil — conditional on verifiable origin. Feedstock collected within the EU, physical traceability rather than pure mass balance, and authority access to spot checks. At the same time, exempt blends from section 1(4) of the Mineral Oil Tax Act, so blending is not punished.
3. Recognise hybrid solutions with green peak load as a fully valid transition — on three conditions. The heat pump is sized for the base load and documented; the peak-load boiler runs on documented green fuel; and the system is delivered with metering of the actual split between the heat sources. The metering requirement is not a formality — it is the answer to the well-documented risk that a misconfigured controller lets the boiler run too much. Subsidy schemes should reward documented fossil displacement, not only full replacement.
The grid-friendliness criterion in the emergency plan has just been clarified after the consultation. The clarification should include solutions that reduce the connected power requirement — not only those that shift consumption in time. A hybrid does both.
4. Set the date for a stop to new installation of fossil systems — and define “fossil” by the molecule. 4,358 new gas boilers were installed in 2025, a good twelve a day, with lifetimes reaching far into the 2050s. A date is better than ambiguity, for us too. But a system that demonstrably runs on green fuel is not fossil.
5. Secure industry’s access to green molecules, and place it in the business tax reform. Exempt green gas delivered to business from CO2 duty, and set a time horizon for the gas grid’s future role, so that companies which cannot electrify know what they are investing in.
6. Require hydrogen readiness for new burner equipment for industry and marine. Not for home heating.
The objection, and the answer
The serious objection is that biomass is a scarce resource. Biogas and liquid biofuel cannot cover everything, and there are higher-value uses: heavy transport, shipping, process industry, and biogas’s CO2 as a carbon source for Power-to-X. If we spend the green molecules on detached houses, they will be missing elsewhere — and the risk is that we conserve a fossil capital stock under a green name.
The objection is real, and it is exactly the reason we do not propose green molecules as a permanent base load in home heating.
We propose them as peak load and as a bridge. That is the very point of the hybrid: it uses a small quantity of green molecules in the few hundred hours a year when the power system is under the most strain, and lets electricity handle the rest. Measured in CO2 saved and grid capacity saved per unit of fuel, that is the use where a scarce green molecule does the most good. It uses less biomass than running purely on biofuel, and less electricity grid than pure electrification.
And the bridge is necessary, whatever one thinks of it. District heating will not reach everyone. Installer capacity is finite. The grid is full. In the meantime, the houses are being heated with something. The only question is whether it is fossil.
We have seen these transitions before
We have supplied heating technology to Danish installers, industry and marine since 1969. That gives a perspective worth putting on the table, precisely because it is not a spreadsheet.
When we started, Denmark was almost entirely dependent on imported oil. Then came the oil crises, and the country changed course. In the 1980s the natural gas grid was rolled out across the country as the answer to that dependence. Alongside it, district heating grew to cover two thirds of homes. Three great transitions in half a century — and we have supplied equipment through all of them.
Two things recur.
The first is that every one of them took longer than the plan said. The oil boiler was supposed to be history several times over. Around 118,000 still remain.
The second is more important: none of the transitions was accomplished by banning the old. They were accomplished by making the new cheaper and easier to choose on the day something had to be replaced anyway. Natural gas did not win because oil was demonised. It won because there was a pipe in the road and an economy that added up.
This is not an objection to electrification. Electrification is right, and today we make our living as much from heat pumps as from burners. It is a reminder of what actually moves half a million boiler rooms: not a deadline, but a better offer on the day the boiler gives out.
Finally
Under the 2022 climate agreement, the government is due back this year with the ambitions for phasing out gas boilers in 2035 and 100 per cent green gas. The year is now, and the work programme gives four words without a date.
This autumn, the parties to the agreement are also due to negotiate faster grid expansion and an overall energy infrastructure plan towards 2035. That is where the gas grid’s future role will be decided — and with it, whether the green molecules get a place in the transition or are defined out of it.
Denmark has spent ten years and considerable sums building a gas system that in July was 99.7 per cent green. It would be a striking moment to define it as fossil.
When the answer is written, we hope it will be written about the molecules rather than the appliances. Then a large part of the phase-out will solve itself — at the pace homeowners and boiler rooms can keep up with, and without asking for a place in a queue that does not exist.
Arne Nielsen A/S has supplied heating technology to installers, industry, agriculture and marine since 1969 — today both combustion technology and renewables. So we have no technology to defend, only an interest in buildings being warm without fossil fuel. Which is why biogas, hydrogen and HVO belong in the conversation.
Tel. (+45) 56 21 50 50
https://arnenielsen.com/
Sources and caveats
- The Danish government’s work programme, Prime Minister’s Office, 19 Aug 2026
- Biogas Danmark / DR, Aug 2026: biogas production in July 2026 corresponded to 99.7% of gas consumption; May 2026: 67%
- Biogas Danmark, Jan 2026: above 40% of gas consumption in 2025 (Energinet figures); Evida: biogas share and 18,000 km of gas grid
- Climate agreement on green power and heat, June 2022: 100% green gas, gas phase-out 2035, follow-up in 2026
- The NEKST committee’s recommendation on green biogas for remaining private gas heating from 2030
- OK, business list prices per 1,000 litres valid from 16 Sep 2026, incl. duty breakdown (energy/CO2/NOx); comparison with OK’s list prices of September 2024
- The Mineral Oil Tax Act, section 1(4) (blends taxed at the highest rate)
- Energinet, 2 Mar 2026: pause in new grid connections; approx. 60 GW queued against approx. 7 GW peak consumption
- Ministry of Climate, Energy and Utilities: political understanding on the emergency grid plan, 29 Jun 2026; the bill introduced in the Folketing 20 Aug 2026 after 77 consultation responses, with the grid-friendliness criterion clarified; immediate subsidy scheme June 2026
- Green Power Denmark: without access to green electricity, companies must carry on with oil and gas
- Ingeniøren, 17 Aug 2026: the grid companies’ assessment of the emergency plan
- HVACFOKUS, 18 Mar 2026: 4,358 new gas boilers installed in 2025
- Bolius/BBR: approx. 118,000 homes with oil boilers and just under 367,000 with natural gas, 2025
- DI Energi et al.: Exports of energy technology and services 2024 (DKK 123.4bn); regulatory framework as a growth barrier
- Evida: industry and CHP account for approx. two thirds of gas consumption
- The minister’s parliamentary answer on rising gas tariffs and the competitiveness of gas-dependent industry (as reported by BygTek)
- Energy Saving Trust (UK): Hybrid heat pumps, updated 16 Jul 2026
- Marek Miara (Fraunhofer ISE) / heatpumpswatch.org: Hybrid Heat Pump Systems, 8 Dec 2025, updated 29 Apr 2026
- Danish Energy Agency: emission factor for Danish electricity consumption, 73.8 g CO2e/kWh (2024), projected to fall
- The Renewable Energy Directive (RED II), Annex V: default and typical GHG reduction values, HVO from used cooking oil
