Danes united behind the "most ambitious energy plan in the world"

August 15, 2013 | 00:00

Danes united behind the “most ambitious energy plan in the world”

For many of the 5.6 million Danes, March 22, 2012 was a historic day. On that day Parliament (Folketing) voted with the impressive majority of 172 to 7 in favour of the new Energy Agreement. And not only the politicians were – almost – united, with only the newly founded Liberal Alliance saying no, even the industry supported it and an opinion poll resulted in a large majority in favour. The Agreement stipulates: By 2050 the entire energy supply, comprising electricity, heating, industry and transport, is to be covered by renewable energy. This is described as a vision. The plans for 2020 are more concrete: A 12% reduction in gross energy consumption in comparison to 2006 (the transport sector has not provided its saving plans yet), a share of 35% renewable energy and 50% wind energy in electricity consumption, today’s share being 28%. Martin Lidegaard, Denmark’s Minister for Climate, Energy and Building, calls this program “the most ambitious energy plan in the world”.

Development of a wind turbine in Denmark
(c) Invest in Denmark
Denmark has for a long time been known as a country with great green ambitions. It started in the 70s after the oil crisis, when the Danes realised how dependent they were on oil, it being up to 90% of their total energy consumption. At first, the Scandinavians “discovered” not only district heating but also combined heat and power plants (CHP). In 1980, only 18% of the electricity coming from thermal plants was produced in combination with heat, today the share has increased to 63%. Today, Denmark has, with more than 55% of the net energy demand for heating supplied from district heating, one of the highest shares worldwide. At the same time, when government financially promoted the transformation towards CPH and from coal to Denmark’s own natural gas and biogas, it supported the change from a few centrally positioned plants to a large amount of relatively small district plants, covering the entire country.

Wind over nuclear

In 1985, Danish Parliament took another important decision. With a small majority it said no to nuclear power. “Since we do not have natural energy resources there was only one alternative left: wind”, argues Hans Peter Slente, Director of Danish Energy Industries Federation. Many Danes see the country’s energy situation in the same way. However, they ignore one essential fact: Denmark is since 1997 self-sufficient with oil and gas, thanks to the offshore fields in the North Sea. Between 2000 and 2005 production peaked, when the degree of self-sufficiency reached for total energy was just above 150% and for oil 230%. In 2012, the corresponding figures were 110 and 155%. These resources, especially gas, not only contribute to the country’s energy supply, additionally they make an important contribution to the State’s coffers, more than DKK 30 billion (€ 4 billion) annually.

However, Denmark is focusing on wind power. In the 1990s, the country was leading the world in wind power supply, and still, per capita the Danes have the world’s highest production of wind power. Furthermore, two of the world’s largest suppliers of wind power installations are Danish, Vestas and Siemens.

“Since we do not have natural energy resources there was only one alternative left: wind”
At the beginning of 2000, by governmental decision, the development of wind power was almost stalled. But now, wind power is a major part of last year’s Energy Agreement. Today, almost 30% of electricity originates from wind power, the goal for 2020 being 50%. Additional 1500 MW are planned. At Kriegers Flak in the Baltic Sea, Denmark shares a wind park with Germany (600 MW). There are plans for another 400 MW at Horns Rev on the West Coast, wind turbines with the capacity of 500 MW are planned on several places offshore near the coast and “new planning tools” will encourage development of onshore wind turbines with a total capacity of 1800 MW. The net effect will be 600 MW, because of the closure of older turbines.

Denmark has put a lot of effort into the energy efficiency improvements in buildings. Shortly after the oil crisis the change from private heating facilities to district heating was heavily supported and subsidised. The high price of oil and natural gas started another change from oil and gas to mainly wood. Today, 23% of the energy used for heating is renewable energy. Adding the contribution of district heating, the total share of renewables for heating is 41%. Now, in the Energy Agreement, it is decided that from 2013 the use of oil and natural gas will not be allowed in new buildings. Furthermore, from 2016 it will not be allowed to install new oil boilers in district heating and natural gas areas.

As in other countries, transport is proving to be the most complicated issue. Denmark began relatively early to introduce taxes on fuel. In addition, registration taxes are far above the European average, which makes the operation of cars very expensive. According to government figures, taxes (energy tax, NOx and CO2 tax) are approximately 92 DKK (€ 12.35)/GJ for diesel and 134 (€ 18) for gasoline. Denmark became an early supporter of the Better Place project for the introduction of electric cars *).The success rate is minimal, even negligent. The share of renewable energy used in the transport sector lies just above 3%. To improve this figure, the government ordered a 5.75% share of biofuel in gasoline and diesel from 2012. In addition, electric cars are exempt from the purchase tax and the annual owner tax. But there is a lot of uncertainty about how to solve this problem. According to the Energy Agreement, there are two ways: More use of renewable energy either with biofuel or by electricity produced by wind turbines. There is, so it is said, a need for further analysis. However, one decision has been made: the change of train operation from diesel to electricity. (* While this article was prepared for publishing the news reached us that Better Place had filed for bankruptcy).

Cross border connections remain important

Denmark has in its energy supply always been dependent on its neighbours and coal suppliers further away. This dependency will not change with the introduction of more renewable energy.

The share of renewable energy used in the transport sector lies just above 3%
Rather the opposite is the case. For that reason, the Scandinavians are looking intensively at the extension of their transmission cable network in all directions. Denmark is connected to Norway through three cables, the fourth is under construction, and there are three cables to Sweden. There are two connections to Germany, and a third one will be added through Kriegers Flak. New cables to the Netherlands and the United Kingdom are also in the planning. Most preferably, the Danes would like to see an extension of the network to France, Poland and the Baltic States.

Domestically, smart grid is the key word for an efficient electricity supply. In March, the industry started with the introduction of DataHub. This is a system to help with the central collection of consumer data in order to provide an efficient supply system, as well for the customers as for the supplier. By now, all of the about 3 million households are connected to the DataHub, whilst about 1.5 million are already supplied with remote-read meters. A major step forward will be taken when the state owned utility DONG is supplying its 500,000 customers with remote-read meters. However, there are some problems to be solved. Martin Trolle from the branch federation Intelligent Energy says: ”Smart grid has growth pains, which can be healed with political vitamins.” He is looking forward to the government’s National Energy Strategy expected for mid-2014. Already in April this year Minister Martin Lidegaard presented the Smart Grid Strategy, which “set the course for developing a smart network which will reduce the cost of converting to sustainable energy, cut electricity bills and create brand new products.” Anders Stouge, Deputy General Director of the Danish Energy Association, comments: “Businesses are ready. The next major challenge will be to encourage electricity companies to increase investment in the smart grid.”

Generally, the Danish Energy Association describes the Energy Agreement as “there is no alternative direction for Danish energy politics. Just disagreement about who has to pay and who will receive most subsidies.” The parties behind the Agreement made it clear: “The total financing requirement will increase annually until reaching DKK 3.5 billion (€ 470 million) in 2020. The initiatives are to be fully financed and should not impact the public purse.”

”Smart grid has growth pains, which can be healed with political vitamins”
Danish energy policy is littered with tax rebates, subsidies, direct contribution and investment in RD&D. On the other hand, regarding its reduced tax income from fossil fuels, the government decided to introduce a new “security of supply tax” to compensate for this shortfall. In addition, investments in the train system are expected to be financed by higher taxes on oil and gas production in the North Sea. However, the most important tax system in the energy sector is the Public Service Obligation (PSO) which is paid for by all electricity consumers. It was introduced in 1998. PSO’s purpose is to guarantee energy and decentralised heat producers a fixed price independent of the market price. The grid agency Energinet.dk fixes the tariff four times a year for the upcoming quarter. The industry is criticising the system as a negative impact on Danish companies’ competiveness.

Despite the fact that Denmark’s GNP has increased by almost 50% since 1995, energy consumption has stayed stable. According to figures from the Danish Energy Agency, in 2012, total energy consumption fell by 4.5% to 756 PJ compared to the year before. The reduction in coal input was strong, down 23.4%, gas following by 6.5 and oil by 4.3%. To Denmark’s total energy production of 830 PJ, down 6.4%, crude oil contributed with 434, natural gas with 241 and renewable energy with 137 PJ. The total energy consumption amounted to 756 PJ, 290 PJ coming from oil, 146 from natural gas, 104 from coal and coke, 180 from renewable energy and 19 PJ being exported. The CO2 emissions were reduced by 10.2% compared to 2011 and compared with the basic (according to the Kyoto treaty) by almost 20% to 39.8 million ton. For the period 2013-2014 the energy producing industry promised support methods in order to cut energy consumption for end users by 10.7 PJ and in 2015 by further 12.2 PJ. This is supposed to happen through information and technical and financial support.

Jesper Tornbjerg, Editor-in-chief of the Danish Energy Association’s periodical publication Dansk Energi, describes the Agreement as “rather good, at least until 2020”. Until then, the conditions are fixed and no one expects a major political upheaval which could blow up the Agreement. The Danes face the next Folketing election in 2015. However, shortly the negotiations start for the period beyond 2020. In governmental circles it is expected that it will not be as easy to find common ground as in March 2012.

 

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