The main recommendations are:

• Taxes and tariffs must support flexibility
• The tax should incentives the use of green energy
• The tariff must depend on the load in the network
• Geographical and thematic test zones to ensure the pricing system works

We are looking into a future with increased electrification that places great demands on our electricity grid. We, therefore, need to provide incentives for both consumption and production, which support the flexibility more than today and that enables us to develop and operate a green energy system for as little money as possible.

Variable taxes and tariffs should support flexibility
Taxes have typically been a balance between a tax revenue for the state and payment for an externality such as environmental impact and pollution. Tariffs are payment for transport in infrastructure, and electricity tariffs are under discussion in these years. Both are means to an end; they can be defined and arranged in different ways, but there are freedoms as to what they should support.

We need to support a smart, green energy system that is based to a much greater extent than before on decentralized production and is integrated to a much greater extent across technologies. Therefore, both variable taxes and tariffs should provide incentives for both consumption, production and innovation, which better support the flexibility that enables us to operate a green energy system for as little money as possible. This applies to investments in infrastructure, capacity, energy and digitization. We do this, among other things, by fees and tariffs that follow the physics more closely.

The tax should incentives the use of green energy
For taxes, this means that a large part of the tax must follow the externalities, and the most important thing in this context is CO2. In addition, taxes are the right incentive to save energy. Another important point is that increased tax revenue must be returned to companies in a way that accelerates innovation in and implementation of flexible and energy-efficient low-emission technologies.
In this way, we can support the green transition in Denmark and create the next generation of sustainable winning companies that can scale their solutions globally.

The tariff must depend on the load in the grid
For tariff design CITIES task force recommend that tariffs follow the physics in the grid. Therefore, the tariff must depend on the load in the network.
The ultimate right solution, in the end, is to make dynamic tariffs determined by the load now and here. Until we are ready for that, it is important to focus on tariffs that support this green transition, and therefore reward players who are flexible and therefore do not give rise to increased investment. Examples of flexible consumption are both electric cars that can control charging, and especially large electric boilers and heat pumps in district heating systems. But there is a big difference in the duration of flexibility. CITIES task force recommend that the flexibility also should be reflected in the pricing of a tariff system.

Geographical and thematic test zones 
To test and ensure the setup of the pricing system CITIES task force recommend using larger and smaller geographical test zones with different technological set-ups and price models with flexible tariffs and taxes and in relation to cities and buildings that are characteristic of Danish society.

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