Focus on renewable energy in Denmark
The long-term target for Danish energy policy is that the entire energy supply, including transport, is to be covered by renewable energy by 2050. This is an ambitious target, and to pursue the target, a number of sub-targets must be achieved initially by 2020.
The targets for 2020 are the following:
- By 2020, the CO2 emissions must be 34 percent lower than in 1990.
- The energy supply must have decreased by 12 percent compared to 2006.
- Approximately 35 percent of the energy supply must come from renewable energy.
- 50 percent of the electricity consumption must be supplied by wind power.
In addition, the general target is that, as a whole, the terms and conditions of the Danish business community – and the energy sector in particular – must remain stable.
The high ambitions mean that, in Denmark, a strong focus is on energy optimization and renewable energy. Below, we describe some of the political measures taken to achieve the above targets.
Investments and other subsidies
Shift from fossil energy to renewable energy
In Denmark, the primary fuels for production processes include fossil fuels such as natural gas and oil. Danish politicians are committed to shifting from fossil energy to renewable energy by phasing out the use of fossil fuels and replacing them with renewable energy. However, this will not happen overnight, and different incentives are often needed to speed up the process of change.
Therefore, it has been decided that energy optimization projects supporting the energy targets set should be subsidized. The decision includes the establishment of a pool of Danish krone (DKK)500 million per year until 2020, effective as of 1 July 2013. The pool for 2013 is DKK250 million. Depending on company size, the possible subsidy is 45–65 percent of investment costs. Projects that aim to replace fossil fuels with renewable energy for production processes are eligible for investment support from this pool. In addition, projects that aim to replace fossil fuels with district heating for production processes are also eligible for investment support from the pool.
The support received per project may not exceed EUR7.5 million as the support is comprised by the EU's General Block Exemption Regulation.
However, the above support is received on the condition that no other operating support is received for the project.
We believe that many Danish enterprises will use this opportunity to receive support for projects aimed at replacing fossil fuels with renewable energy — in particular, those enterprises that already have or wish to have a green profile. We also believe that the support scheme will make it possible to complete projects where the profitability is uncertain.
With easy access to the sea, Denmark’s renewables focus is still on wind energy and offshore wind farms. However, other types of renewable energy such as solar energy are becoming more popular.
In order to support the use of solar cells in private homes as well as in business enterprises, support schemes have been introduced that are now being discussed by the Danish parliament. Basically, these support schemes offer a guaranteed price for the electricity generated that is sold to the public power grid, typically over a 10 year period. After this period, the electricity generated can be sold to the public power grid at market price.
The following support schemes are expected:
- Shared solar panels installed on rooftops in, for example, housing associations
- DKK1.45/kWh for 10 years if the solar panel system is connected to the public power grid in 2013
- the subsidy decreases by DKK0.17/kWh per year between 2014 and 2018, depending on the date of grid connection. This means that if the solar panel system is not connected until 2014, the subsidy will amount to DKK1.28/kWh for 10 years.
- Shared solar panels, such as those in housing associations, which are not installed on rooftops but in other areas such as the ground
- DKK0.90/kWh for 10 years.
- Roof systems
- DKK1.30/kWh for 10 years if the solar panel system is connected to the public power grid in 2013
- the subsidy decreases by DKK0.14/kWh per year between 2014 and 2018 depending on the date of grid connection. This means that if the solar panel system is not connected until 2014, the subsidy will amount to DKK1.16/kWh for 10 years, etc.
- Solar panel systems not installed on rooftops, such as those on the ground
- DKK0.60/kWh for 10 years and, subsequently, DKK0.40/kWh for the next 10 years
The phasing out of the subsidy means that solar panel systems that are connected to the public power grid after 2018 will be eligible for a subsidy of DKK0.60/kWh for 10 years and, subsequently, DKK 0.40/kWh for the next 10 years.
The subsidy or the guaranteed price only applies to the electricity generated that is sold to the public power grid. If the electricity generated is used for the generating entity’s own consumption —in the business enterprise, for example — this energy supply will not be eligible for subsidies. However, it will be possible to save money because no electricity charges and no power grid tariffs will be payable. In addition, savings can be achieved on Public Service Obligation (PSO) contributions and the price for power.
The increased subsidies only apply to solar panel systems installed on rooftops that have been established for the purpose of covering the user’s own consumption of power. Following the introduction of differentiating subsidies and the above condition regarding the entity’s own consumption, the previous limit of 400 kWh has been abolished.
The purpose of differentiating subsidies is to equate the comparatively inexpensive installation of solar cell panels on the ground with solar cell panels installed on rooftops, which is a more expensive investment. Abolishing the maximum limit of 400 kWh also means that it will no longer be profitable to divide solar cell systems in order to receive subsidies.
Denmark is an agricultural country, which allows us to produce biogas based on animal fertilizers (liquid manure). As a consequence, it would be natural to launch incentives to produce energy based on biogas.
In the spring of 2012, a new political agreement on energy was reached. Under this agreement, users of biogas receive a subsidy of DKK26/gigajoule (GJ) and a subsidy of DKK10/GJ. However, these subsidies will not become available until they are approved by the EU.
According to Act to Amend the Danish Promotion of Renewable Energy Act, certain rates have been changed. This means that when power is produced based on biogas, a fixed subsidy of either DKK0.793/kWh or a variable additional charge of DKK0.431/kWh is granted.
Moreover, the above energy agreement introduces an additional subsidy of DKK0.26/kWh (converted from DKK26/GJ) and DKK0.10/kWh (converted from DKK10/GJ). The fixed subsidy and the variable additional charge are adjusted on the basis of 60 percent of the increase of the net price index.
The additional charges of DKK0.26/kWh and DKK0.10/kWh are reduced annually by an amount corresponding to the amount by which the price of natural gas for the previous year exceeds any given basic price of DKK53.2/GJ.
The additional total support of DKK0.36/kWh is almost a doubling of the variable support of DKK0.431/kWh. In our opinion, this will definitely increase the incentive for producing power based on biogas.
It has not previously been possible to receive subsidies for using biogas for process purposes in business enterprises. However, in order to increase the incentive, a general subsidy of DKK0.39/GJ will now be introduced, which may be received together with the subsidies of DKK0.26/GJ and DKK0.10/GJ granted for any use of biogas. This also applies to biogas used for transport, which was previously also not eligible for subsidies. In this area, the same support applies to the use of biogas for process purposes in enterprises.
The above support and subsidy schemes aim at increasing the incentive for using renewable energy for the production of energy for resale. These schemes can support our national energy consumption and help Denmark achieve its ambitious climate and energy targets, first by 2020 and later by 2050.