Towards a Market for Waste Heat Guarantees of Origin.

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

Summary

This paper proposes the establishment of a German registry for waste heat guarantees of origin (Waste Heat Certificates, WHC), modelled on the guarantees of origin registry for electricity from renewable sources (HKNR) maintained by the Federal Environment Agency. The proposal responds to a structural asymmetry in the existing regulatory framework: the Energy Efficiency Act (Section 11 EnEfG) requires data centre operators commissioned from 1 July 2026 onwards 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 renewables and unavoidable waste heat in district heating networks by 2.2 percentage points annually until 2030.

At the same time, there is no standardised market instrument that transparently, tradeably, and verifiably connects supply (data centres) with demand (district heating networks, industrial parks, residential quarters). This paper argues that a waste heat guarantees of origin registry can close this gap, outlines the key design principles, and proposes a three-phase implementation pathway.

Key Recommendations

1. Legal Basis 2026-2027. Establishment of a legal mandate within the framework of the EnEfG amendment or a standalone heat trading regulation, anchoring a waste heat guarantees of origin registry at the Federal Environment Agency or the Federal Office for Energy Efficiency (BfEE).
2. Pilot Phase 2027-2029. Establishment of a voluntary registry for measurable waste heat sources (data centres, industrial parks, wastewater treatment plants), with a standardised unit of certification (1 WHC = 1 MWh of verified, unavoidable waste heat).
3. Integration from 2030. Eligibility of WHC for crediting against EnEfG Section 11 quotas and RED III expansion obligations for district heating networks, analogous to the existing eligibility of guarantees of origin in electricity accounting.

This paper does not claim to be comprehensive and is intended as a contribution to the discussion for BAFA, BfEE, AGFW, Bitkom, the VCI, and the responsible departments of the Federal Ministry for Economic Affairs and Climate Action (BMWK).

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

1.1 Supply Side: Data Centres Must Deliver

The Energy Efficiency Act, which entered into force on 18 November 2023, requires operators of data centres with a non-redundant rated connection capacity exceeding 300 kW to meet substantial waste heat utilisation quotas (Section 11 EnEfG):

As an alternative to measurable waste heat delivery, Section 11(3) EnEfG recognises a written agreement with a municipality or district heating network operator committing to the construction or expansion of a heat network in spatial proximity within ten years.

According to surveys by the German Datacenter Association and Bitkom, there are approximately 3,000 data centres in Germany with a cumulative waste heat potential sufficient to supply around 350,000 households with climate-neutral heat and hot water (Bitkom Position Paper 2020). Section 17 EnEfG requires the registration of all existing data centres in the Energy Efficiency Register by 31 March 2027.

1.2 Demand Side: District Heating Networks Must Procure

The Renewable Energy Directive (RED III, Directive (EU) 2023/2413) requires Member States under Article 24(4) to increase the share of renewable energy and unavoidable waste heat in district heating and cooling networks by 2.2 percentage points annually until 2030, with a target of 50% by 2030.

The definition of waste heat in Article 2(9) RED III explicitly covers unavoidable heat that, without access to a district heating system, would be released unused into the air or water. Data centres unquestionably fall under this definition.

Mainova AG published a transformation plan on 6 February 2024 that aims to make the Frankfurt district heating network climate-neutral by 2040 and expand it by up to 450 km of network length. Comparable transformation pathways have been documented by Vattenfall Warme Berlin and Stadtwerke Munchen.

1.3 The Market Gap

Despite clear supply and demand obligations, there is no standardised, verifiable, tradeable market instrument connecting both sides. The current situation:

• Bilateral negotiations between individual data centre and district heating operators, often spanning 12-24 months.
• Isolated lighthouse projects such as the 2023 cooperation between Mainova and Infraserv Hochst.
• No transparency regarding available waste heat potential by location, temperature level, and availability profile.
• No methodology for crediting a waste heat delivery from Data Centre A against the quota of a district heating network at Distance B.

2. Precedent: Guarantees of Origin for Electricity

The German guarantees of origin registry (HKNR) for electricity from renewable sources has been operated by the Federal Environment Agency on the basis of Section 79 EEG since 2013. Key design features:

1. Standardised unit. 1 guarantee of origin = 1 MWh of generated energy.
2. State infrastructure. Registry at the Federal Environment Agency, electronic portal.
3. Decoupling of electricity and certificate. Certificates trade independently of physical delivery.
4. International interoperability. Transferable across Europe via AIB and EECS.
5. Verifiability. Facilities certified, measurement data auditable, double counting systemically prevented.

The HKNR model has weaknesses, particularly the temporal-spatial decoupling of generation and consumption. For heat, however, the coupling is inherently much tighter, making a WHC registry structurally more robust.

3. Proposal: A Registry for Waste Heat Guarantees of Origin

3.1 Definition and Unit

1 WHC = 1 MWh of verified, unavoidable waste heat as defined in Article 2(9) RED III, from a registered facility, with a documented temperature profile at the point of delivery, fed into a heat network or delivered to a defined offtaker.

3.2 Qualification Criteria

• Waste heat as a by-product of another primary process.
• Metrological measurement per EN 1434, accuracy class 2 or better.
• Physical interface to a defined offtaker or district heating network.
• Non-fossil origin of the waste heat demonstrable.
• Independent annual audit.

3.3 Spatial and Temporal Binding

3.4 Prevention of Double Counting

A WHC may be credited exactly once. The registry must systemically ensure cancellation after crediting, non-parallel crediting via other certification pathways, and coordinated crediting against the EnEfG quota (supply side) and the RED III quota (demand side).

4. Why WHC Is Structurally More Robust Than Electricity GOs

1. Physical proximity enforced. The 15 km limit corresponds to the technical reality of district heat extraction.
2. Temperature profile as a quality dimension. A WHC carries metadata on temperature level that an electricity GO does not have.
3. Complementarity. WHC complement existing support instruments (BEW, KWKG, BAFA programmes) rather than replacing them.

5. Design Principles

• State neutrality. Registry operated by UBA or BfEE.
• Methodological transparency. Public, versioned methodology based on EN 1434, VDI 4655, AGFW guidelines.
• EU connectivity. Open interfaces, EECS-compliant data standards.
• Low administrative burden. Initial issuance within 20 working days.
• Protection against greenwashing. Clear distinction between the accounting class and the physical classes.

6. Implementation Pathway Germany 2027-2030

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

Amendment within the framework of the upcoming EnEfG revision 2026/2027 recommended.

Phase 2: Pilot (2028-2029)

50-150 registered facilities, predominantly data centres and industrial parks in the Frankfurt-Rhine-Main region, Rhine-Ruhr region, and Central Germany. Development effort estimated at 6-8 person-years over 24 months, comparable to HKNR modernisation projects 2019-2021.

Phase 3: Integration into Regular Operations (from 2030)

Crediting eligibility against EnEfG Section 11, RED III Article 24, and potentially CSRD Scope 3 in the future.

7. The Role of Market Infrastructure Beyond the Registry

• Data availability. Verified supply profiles (location, temperature, availability, volume) searchable while respecting trade secrets.
• Standardised contracts. A Heat Supply Contract v1.0 can reduce transaction costs.
• Regulatory clarification on connection obligations. Cost allocation for the transport route from source to network.
• Statistical infrastructure. Quarterly reports on registered volumes, prices, temperature classes, and geography.

8. Open Questions and Risks

8.1 Double Counting Risk

Can one MWh be simultaneously credited against the EnEfG quota of the data centre and the RED III quota of the district heating network? Two conceivable approaches:

• Split rule. 50:50 between both parties. Legally straightforward, economically ambiguous.
• Tiered crediting. Full credit for the data centre operator, renewable share for the network operator. Economically consistent, administratively complex.

8.2 Heat Pump Attribution

Proposal: Net waste heat share (recovered heat minus electrical input energy) counts as waste heat; the remainder counts as electricity-bound heat.

8.3 Abuse Risks

1. Fictitious waste heat sources. Solution: clear definition of unavoidable, by-product test, negative list.
2. Overpricing of low-value waste heat. Solution: temperature-differentiated pricing, minimum feed-in temperatures.
3. Accounting reclassification. Solution: WHC issuance only upon demonstrated delivery with EN 1434 measurement.

8.4 Regulatory Competition

Develop the German pilot phase as a reference model and feed it into the EU level early on, for example via the Energy Community Working Group or the Thermal Networks Stakeholder Platform.

9. Comparison with Existing Instruments

WHC fill the diagonal cell of tradeable unit + heat focus that is missing from the existing instrument mix.

10. Call for Comments

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

We welcome feedback on the following points:

1. Is the three-tier spatial classification (Direct / Regional / Accounting) sensible or overly complex?
2. Which crediting rule (split versus tiered) is more regulatory viable?
3. Is the UBA or the BfEE the appropriate host institution?
4. What role should AGFW, Bitkom, and TUV play in certification?
5. Which pilot regions would you recommend?

About the Ardor Institute

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