By Jake Brooks
A small country that seems to affect the energy industry in large ways, Denmark is a growing player in both renewables and co-generation. Poised to contribute significantly to Canada’s power industry in the near future, in this special feature IPPSO FACTO profiles the Danish energy sector.
What happens when a country achieves a national consensus that it must place a high priority on environmentally preferred energy technology – and designs energy policy to achieve that goal over a period of years? The answer is probably pretty close to what you see in Denmark today. Despite a resource base that is heavy on carbon, Denmark is meeting its emission reduction targets under the Kyoto protocol, pioneering in a range of renewable energy technologies, and profiting by selling its green technology and expertise to the international market.
Both by example and through its commercial activity, it could be said that Denmark is offering its energy experience to the rest of the world. Although Danish energy industry benefits from reasonably positive domestic conditions, many of the energy strategies and techniques used within Denmark appear to be readily transferable for use in other jurisdictions. And although it is not the only country using sustainable energy as an economic strategy, it is one of the most remarkable given its scale compared to the size of the country.
Denmark’s economic success has been maintained, and its emissions reduced, through a challenging combination of energy policies. Notably, there appears to be general satisfaction with domestic energy policy even though it has meant increases in energy prices and changes to the traditional ways of doing things in nearly every corner of the country. Many would ask of course – what is the key to this kind of success?
A good part of the answer seems to be well coordinated public policy and a consumer base that is willing to make the changes that follow from treating electricity as a high value commodity. Denmark’s energy policy relies on diversity. At the same time as fostering large players in the global renewable energy market, the system is continually encouraging small scale, decentralized energy projects, many owned by local community groups. The educational and economic benefits of having so many of its citizens directly engaged in the energy sector can only be imagined. Neither can it hurt to have so many citizens with personal knowledge about what goes into the price of a kilowatt-hour.
Danish engineers were struggling with the challenges of integrating intermittent wind energy to local distribution grids long before many others in Europe or North America. Their achievement is evident in the country’s ability to manage with higher proportions of wind energy than many would have thought possible a few years ago. No doubt, a significant part of this ability is based on the intensive use of fossil fuels as well. Denmark has one of the highest rates of cogeneration (combined heat and power) plants, which efficiently use fossil fuels to compensate for the intermittent renewables.
The share of district heating produced at CHP plants in Denmark has more than doubled, from 39% to 80%, since 1980. Similarly, the share of electricity co-generated with heat has gone up from just under 18% to almost 53%.
Unusual approach to pricing policy
Thomas Friedman, writing in the New York Times, observed that “There is little whining here about Denmark having $10-a-gallon gasoline because of high energy taxes.” The shaping of the market with high energy standards and taxes on fossil fuels by the Danish government has actually had ‘a positive impact on job creation,’ added Connie Hedegaard, Denmark’s previous minister of climate and energy. “For example, the wind industry — it was nothing in the 1970s. Today, one-third of all terrestrial wind turbines in the world come from Denmark.” As a result, more than 24.000 people are working in this industry in Denmark. At the same time, the sale of energy efficiency products is Denmark’s fastest growing export industry. It has more than tripled over the last decade. According to Friedman, Hedegaard contends that higher energy prices resulting from energy taxes forced Danish Companies “to innovate more — like the way Danes recycle waste heat from their coal-fired power plants and use it for home heating and hot water, or the way they incinerate their trash in central stations to provide home heating. There are virtually no landfills here.”
The Danish approach to energy pricing may seem counter-intuitive to many. Denmark’s Prime Minister at the time (now Secretary General of NATO), Anders Fogh Rasmussen, told Friedman, “The cure is not to reduce the price, but, on the contrary, to raise it even higher to break our addiction to oil. We are going to introduce a new tax reform in the direction of even higher taxation on energy and the revenue generated on that will be used to cut taxes on personal income — so we will improve incentives to work and improve incentives to save energy and develop renewable energy.”
This kind of result is clearly the product of a very deliberate national focus on energy policy. However, the focus was not derived from an innate green conscience as one might be tempted to infer. In 1973, when the oil crisis hit Denmark, it was entirely dependent imported petroleum from the Middle East. Shocked by the crisis and wary of the risks of allowing an unstable supply situation to continue, Denmark began a set of national initiatives to reduce consumption and secure energy supply; and maintained its drive for greater energy efficiency and a more diversified energy supply after the oil crisis.
The effect of energy history
Denmark has gone from being 99% dependent on sources of foreign oil to becoming completely energy self sufficient in thirty years. It has also gone from a centralized system, dominated by few large fossil-fired power plants in a vertical one-way system, to a cornucopia of energy enterprise. In the last 20 years Denmark has installed 900 local CHP plants and more than five thousand wind power plants. Almost all small wind turbines are connected to the distribution network, i.e. from 20 kV and lower, whereas the large land-based wind turbines use the 30-60 kV network. Only the large offshore wind turbines generate power direct to the transmission grid (132 and 150 kV).
System balancing
Integrating 20 per cent wind-generated electricity into the power system was a challenge for the utilities and the dispatch centres in Denmark. However, dealing with obstacles to introducing large volumes of wind has given Denmark’s grid operators valuable experience that is now being sought out by grid operators from other countries.
The Danish system operator, Energinet.dk, ensures the balance between consumption and production in the Danish electricity system largely through the use of ancillary services. The two principal levers used are upward and downward regulation. According to Energinet.dk, the principle resembles that of operating a car: If you want to increase the speed, you step on the accelerator. If you are going too fast, you hit the brakes. In this system, the accelerator equals the power stations that can increase their power production precisely when needed. They fire their boilers harder. The brakes are the power stations that can quickly halt some of their power production.
The need for regulating power provides a revenue stream for power producers offering these services. On an ordinary day, the levers are pulled approximately 50 times. As a result Energinet.dk contracts for ancillary services in the range of DKK 1.045 Billion (CAD $ 210 billion) annually from Danish and neighbouring power producers. This figure is expected to increase as Denmark approaches its goal of 50 % wind power by 2025 and increasing levels of wind energy is integrated in neighbouring countries.
Project development
Of course, project development comes with challenges. Today, Middelgrunden Offshore Wind Farm is internationally known as a unique story of world’s largest cooperatively owned wind development. The 20 turbines, owned by Middelgrunden Wind Turbine Cooperative and DONG Energy, are spinning just outside the Copenhagen Harbour, providing 4% of the electricity for the city and adding a new landmark to Copenhagen. However, in its initial stages it met much opposition from local communities and organizations, and it took 5 years of work by the proponents to get it established.
From an Ontario perspective, it is interesting to note that the challenges of developing wind capacity in Denmark today have little to do with grid integration. The relationship between generators and distributors is mature. Electricity production from renewables has had priority on the grid since the 1990’s, so local distribution companies now have a wide range of tools and experience to connect generation to the grid. Over a period of decades, distribution companies and power producers resolved issues with technical requirements and cost allocation for grid connection. Today, there are also clear and well defined lines as to who bears the cost of grid connection. For wind in particular, the large majority of costs fall on the local distribution company.
According to several industry experts, the challenges for new power production today are mainly related to local opposition, environmental applications and municipal zoning issues. In fact, as a consequence of such obstacles, the number of Danish onshore wind turbines has declined since 2001. Not surprising however, Danish generators have often become experts in municipal planning tools: Not willing to wait for local politicians to take new initiatives, generators often find themselves developing suggestions for municipal plans to present to local authorities, assuming costs associated with environmental studies and other local initiatives.
CHP
Among the many techniques for increasing energy efficiency, co-production of electricity and heat has played a vital role in the Danish energy story. Denmark has the most extensive co-generated heat and electricity system in Europe. The spread of co-generated heat and electricity has meant that most plants, which previously generated either heat or electricity, now produce both electricity and heat.
Today, more than 80 per cent of Danish district heating is co-produced with electricity, and over one-half of Danish electricity is co-generated with heat.
Typically, CHP in Denmark is organized in one of two forms: centralized or decentralized. 16 centralized and approximately 415 decentralized plants supply public heating in Denmark. Centralized CHP plants are usually much larger and typically are built on the site of previous simple cycle power stations. While some of the decentralized CHP plants are new, the main purpose of all such installations is to generate heat, conveyed to customers by means of District Heating pipes.
The most efficient CHP plants have efficiency ratings exceeding 90 per cent. Local CHP operations are successfully participating in the Nordic power market (both in the day-ahead market and in the market for regulating power). Estimates from an Energinet.dk ECOgrid study indicate that the wind power variability balanced through export in West Denmark has fallen from 85 % in 2004 to approximately 70 % in 2008 – probably thanks to increased CHP.
Changes afoot
New regulations and subsidy schemes have been put into place. With the new Renewable Energy Act (December 2008), the Danish Government has made an agreement with Local Government Denmark to find sites for new turbines capable of generating 150 MW in total. This may help overcome some of the localized problems with siting.
The Act was also intended to motivate local entrepreneurs, and offers schemes that make it more profitable to scrap old turbines and replace them with new, more effective ones. Another new initiative is local co-ownership, which is to help reopen the possibility of erecting new onshore wind turbines. The act entitles neighbours to buy shares in the wind turbines (at least 20 % must be offered for co-ownership), thus ensuring that the investment benefits the local community.
Excelling in the world market
A small country facing big challenges, it could be said that Denmark needed to focus on limited areas in which it could excel in order to succeed economically in a competitive world. Their collective decision to focus on energy efficiency and renewables looks like it’s just beginning to pay off. Clearly, as the Danish experience has shown, the promise of new technology is greatly enhanced with an engaged consumer base and coordinated public policy pulling in the same direction.
