Toward a market for Waste Heat Certificates.

A discussion paper on the development of tradable Waste Heat Certificates (WHC) for Germany and the European Union.

Executive Summary

This paper proposes the establishment of a German register for Waste Heat Certificates (WHC), modelled on the Register of Guarantees of Origin (HKNR) for renewable electricity, which has been operated by the German Environment Agency (Umweltbundesamt, UBA) since 2013. The proposal responds to a structural asymmetry in the current regulatory framework: the German Energy Efficiency Act (Energieeffizienzgesetz, § 11 EnEfG) requires data centre operators commissioned after 01.07.2026 to achieve an Energy Reuse Factor (ERF) of at least 10 %, and Article 24 of the Renewable Energy Directive (RED III) requires Member States to increase the share of renewable and unavoidable waste heat in district heating by 2.2 percentage points per year through 2030.

Yet no standardised, verifiable, tradable market instrument exists to connect supply (data centres, industrial sites) with demand (district heating networks, industrial parks, residential districts) transparently. This paper argues that a WHC register can close that gap.

Key recommendations

1. Legal basis 2026-2027. Statutory authorisation via the forthcoming EnEfG amendment or a standalone Heat Trading Ordinance, anchoring a WHC register at UBA or the Federal Office for Energy Efficiency (BfEE).
2. Pilot phase 2027-2029. Voluntary register for measurable waste heat sources (data centres, industrial parks, wastewater treatment plants), with standardised unit (1 WHC = 1 MWh verified, unavoidable waste heat).
3. Integration from 2030. WHCs creditable against EnEfG § 11 quotas and RED III network obligations, analogous to the treatment of electricity guarantees of origin.

Offered as a discussion contribution to BAFA, BfEE, AGFW, Bitkom, VCI, and the relevant units of the Federal Ministry for Economic Affairs and Climate Action (BMWK).

1. The Problem: Supply Obligation Meets Demand Obligation Without a Marketplace

1.1 Supply side: data centres must deliver

The Energy Efficiency Act (EnEfG), in force since 18.11.2023, requires operators of data centres with a non-redundant connected load above 300 kW to meet substantial waste heat utilisation quotas (§ 11 EnEfG):

As an alternative to physical delivery, § 11 para. 3 EnEfG recognises a written agreement with a municipality or district heating network operator committing to construct or extend a heat network in spatial proximity within ten years.

According to the German Datacenter Association and Bitkom, Germany hosts approximately 3,000 data centres with combined waste heat potential sufficient to supply around 350,000 households with climate-neutral hot water and heating. § 17 EnEfG additionally requires all existing data centres to register in the federal Energy Efficiency Register by 31.03.2027.

1.2 Demand side: district heating networks must procure

RED III Article 24(4) requires Member States to increase the share of renewable energy and unavoidable waste heat in district heating and cooling by 2.2 percentage points per year through 2030, with an indicative 50 % target by 2030.

The waste heat definition in Article 2(9) RED III explicitly includes unavoidable heat generated as a by-product that would be dissipated unused without access to a district heating system. Data centres fall unambiguously within this definition.

Mainova AG published a transformation plan on 06.02.2024 committing to a climate-neutral Frankfurt district heating network by 2040 and a network expansion from 310 km to up to 450 km. Comparable transformation plans are documented at Vattenfall Wärme Berlin and Stadtwerke München.

1.3 The market gap

Despite clear obligations on both sides, no standardised, verifiable, tradable instrument connects them:

• Bilateral negotiations spanning 12-24 months.
• Isolated lighthouse projects such as the 2023 Mainova / Infraserv Höchst cooperation.
• No transparency on available waste heat potential by location, temperature, or availability.
• No methodology for crediting waste heat from Data Centre A to the quota of a network at Distance B.

2. Precedent: Guarantees of Origin for Renewable Electricity

The HKNR, operated by UBA under § 79 EEG since 2013, provides five core design features worth adapting:

1. Standardised unit. 1 GO = 1 MWh.
2. Public-sector infrastructure. UBA-operated electronic portal.
3. Decoupling of electricity and certificate. GOs trade independently of physical delivery.
4. International interoperability. Via AIB and EECS, German GOs transfer across Europe.
5. Verifiability. Pre-issuance certification, auditable metering, systemic double-count prevention.

The HKNR's acknowledged weakness is the temporal and spatial decoupling of generation from consumption. For heat, such decoupling is physically bounded, which makes a WHC register structurally more robust than its electrical counterpart.

3. Proposal: A Register for Waste Heat Certificates

3.1 Definition and unit

1 WHC = 1 MWh of verified, delivered, unavoidable waste heat within the meaning of Art. 2(9) RED III, originating from a registered installation, with documented temperature profile at the handover point, fed into a heat network or delivered to a defined offtaker.

3.2 Qualification criteria

• By-product of another primary process.
• EN 1434-compliant metering, accuracy class 2 or better.
• Physical interface to a defined offtaker or network.
• Non-fossil origin demonstrated.
• Independent annual audit.

3.3 Spatial and temporal binding

3.4 Avoidance of double counting

A WHC may be credited exactly once. The register must ensure retirement after crediting, non-parallel claiming via other proof paths, and coordinated crediting on the supply-side EnEfG quota and the demand-side RED III quota.

4. Why a WHC Register Is Structurally More Robust than GO-Electricity

1. Physical proximity is enforced. The 15 km limit reflects the technical reality of district heat injection.
2. Temperature profile as quality dimension. A WHC carries temperature metadata; a GO does not.
3. Complementarity. WHCs complement rather than replace existing support schemes (BEW, KWKG, BAFA programmes).

5. Design Principles

• Public-sector neutrality. UBA or BfEE as registrar.
• Methodological transparency. Public, versioned methodology on EN 1434, VDI 4655, AGFW foundations.
• EU interoperability. Open APIs, EECS-compatible data standards.
• Low administrative friction. First issuance under 20 working days.
• Protection against green-washing. Clear demarcation of the accounting-only class from physical classes.

6. Implementation Path 2027-2030

Phase 1: Legal basis (Q3 2026 to Q4 2027)

Amendment within the forthcoming EnEfG revision recommended.

Phase 2: Pilot (2028-2029)

50-150 registered installations, predominantly data centres and industrial parks in Frankfurt-Rhine-Main, Rhine-Ruhr, and Central German clusters. Estimated build effort 6-8 person-years over 24 months.

Phase 3: Integration (from 2030)

Creditable against EnEfG § 11, RED III Art. 24, prospectively CSRD Scope 3.

7. Market Infrastructure Beyond the Register

• Data availability. Verified supply profiles searchable by qualified offtakers under a confidentiality regime.
• Standardised contracts. A Heat Supply Contract v1.0 could play a role analogous to SAFE agreements.
• Regulatory clarity on connection obligations. Who bears transfer-line costs between source and network.
• Statistical infrastructure. Publicly accessible quarterly reports on volumes, prices, temperature classes, geography.

8. Open Questions and Risks

8.1 Double-counting risk

Can one MWh of waste heat be credited against both the EnEfG quota of the data centre operator and the RED III quota of the network operator? Two candidate rules:

• Split rule. One WHC credited 50:50 between supply and demand side. Legally simple, economically ambiguous.
• Staged crediting. Full credit to the data centre operator, renewable fraction to the network operator. Economically consistent, administratively demanding.

8.2 Heat pump treatment

Proposal: the net waste-heat share (delivered heat minus electrical input) counts as waste heat, the remainder counts as electricity-bound heat.

8.3 Abuse risks

1. Sham waste-heat sources. Mitigation: tight definition of unavoidable, by-product test, negative list.
2. Over-compensation of low-grade heat. Mitigation: temperature-differentiated pricing, minimum injection temperatures.
3. Accounting reclassification. Mitigation: WHC issuance only against documented physical handover with EN 1434-compliant metering.

8.4 Regulatory competition

Develop the German pilot as an EU reference model and feed it into EU-level processes early, via the Energy Community Working Group or the Thermal Networks Stakeholder Platform.

9. Comparison with Existing Instruments

WHCs fill the diagonal cell tradable unit + heat focus, which is absent from the current instrument mix.

10. Call for Comment

The Ardor Institute invites BAFA, BfEE, AGFW, Bitkom, VCI, BMWK, BMUV, individual district heating operators, industrial park operators, and academic institutions to comment on this paper. Comments to contact@ardor.institute.

Specific feedback welcomed on:

1. Is the three-class spatial framework (Direct / Regional / Accounting) useful or excessively complex?
2. Which crediting rule (split versus staged) is more workable?
3. UBA or BfEE as host institution?
4. Role of AGFW, Bitkom, TÜV bodies in certification?
5. Recommended pilot regions?

About the Ardor Institute

The Ardor Institute is a Frankfurt-based independent provider of compliance and market-data infrastructure for the waste heat economy. Ardor operates ardor.institute, which produces BAFA-compliant waste heat assessments under §§ 12-17 EnEfG for data centre operators, and is building a European marketplace for verified waste heat sources from 2026.