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Energy - Taking forward our National Conversation

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Annex B

Case Study: Denmark's green energy economy

  • Denmark is now a net exporter of energy; however, projections suggest this position will last for only another 10 years or so.
  • Denmark is a leader on renewable energy; with a 17% renewable share of total energy consumption through wind power and biomass. 28% of Denmark's electricity is from renewables: wind (20%); and biomass (8%) (this is the world's highest penetration of wind power in any one country). They have also invested in grids to share renewable energy between the Nordic countries.
  • Use of Combined Heat and Power stations where waste water is used to heat households through district heating, can increase power plant efficiency to 90%, and there are strict energy efficiency measures. Incineration of waste contributes to 6% of Danish electricity production. The government now plans to cut final energy consumption by a further 4% by 2020. The result is that Denmark has seen virtually no increase in energy use since 1980, whilst increasing its GDP by more than 70% and in the context of a population increase of 7%.
  • Since 2003, exports of energy technologies and equipment have doubled and now make up almost 10% of Danish exports. The Danes aim to lead on introducing electric cars; charging car batteries at night is an efficient use of excess wind energy.

Background

Despite being world leaders in renewables, the Danes are still very dependent on fossil fuels (83% of energy consumption). Coal is 45% of this share. Although they see coal as part of their short and medium term energy plans, they are not keen on CCS, arguing that it detracts from investment in renewables and that there are still safety questions. They will have to rely heavily on foreign offsets to get to meet their Kyoto target of 21% reduction on 1990 levels of admissions by 2012.

Danish Energy Market

The liberalisation of the Danish electricity and gas markets commenced in the late 1990s. Both markets have since been fully opened to competition, but remain highly concentrated with electricity generation and the gas market being dominated by a single state-owned entity. There is a separate electricity and gas transmission system operator, which is owned by the Danish state, while supply and distribution companies have been legally unbundled. Supplier switching is fairly common among large customers, but is much more limited for small companies and households, which have the option of remaining on a regulated tariff with a 'default supplier'. Pre tax prices for electricity and gas are generally lower than European averages, but final prices are among the highest owing to the imposition of high taxes and other levies.

Wind Power and Grid Issues

To better organize its energy mix, Denmark decided to merge its three gas and power grids to form a state-owned Danish transmission system operator, Energinet.dk. The company banks on regional interconnectivity (Denmark, Sweden, Norway and Finland have a joint electricity market) and massive hydropower storage resources in neighbouring Norway to integrate its renewables. When the country produces more wind energy than it needs, it's exported to Norway, where hydropower plants are taken off the grid. When Danish demand is high, the Norwegians open their water gates and send power back to Denmark. Energinet.dk's modern grid control centre gets real-time updates on the Danish renewable energy production, knowing exactly when to steer electricity into or out of the grid.