Regulatory Frameworks and Business Models for Data Centres Integrated to the Energy System:A comprehensive review of the rules and incentives affecting the provision of flexibility and waste-heat recovery by data centres in Denmark

The main objective of this report is to present the relevant regulatory framework and discuss the barriers that prevent data centres from participating as active entities in the Danish energy system. Data centres that provide flexibility to the electricity grid and feed waste heat into district heating networks offer an opportunity to support the energy transition by, among other things, enabling a higher share of non-dispatchable renewable sources through demandresponse and reducing the costs of grid reinforcement and heat generation, while decarbonising both the electricity and district heating systems. Over the past decade, data centre energy consumption has remained relatively stable despite massive increases in computing demands, largely thanks to the shift towards larger and more efficient hyperscale and cloud-based data centres. However, data-centre workloads are expected to continue growing exponentially over the next decade, even though there is still uncertainty as to whether the trend towards greater energy efficiency can continue further or it will reach its limits. Denmark has proven to be an attractive location for the development of new data-centre projects, with reliable data and power infrastructure, as well as cold environment and low-carbon electricity. As a result, Danish data centres are estimated to consume 8.8 TWh by 2030, which is approximately 28% of Denmark's final electricity consumption in 2020. It is therefore crucial that this fast-growing industry is taken into account in policy-making and energy planning to mitigate its negative impacts, but more importantly, to unlock its potential to become an active player at the interface between the electricity and district heating sectors. The Danish Energy Agency prioritises flexibility in the future development of electricity markets. However, independent provision of flexibility is not yet allowed in Denmark’s wholesale energy markets, though new legislative proposals emphasise the