Renewable Energy Technology Deployment and

Danish Experiences

Senior Policy Advisor Annette Schou

The Danish Point of Departure

1973-74 oil crisis2 countries 99% dependent on imported

energy• Japan• Denmark (oil and coal)

Supply situation exacerbated by inefficient energy use

Pollution caused by fossil fuels

Today – Some 30 Years Later

Main Results - Denmark:

Net exporter of oil and gas Lowest energy consumption per unit of

GDP in EUHighest contribution to electricity from

new renewables in EU (world)Most efficient clean coal technology world

wide

Today – Some 30 Years Later

De-coupling economic growth and energy consumption

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1980 1983 1986 1989 1992 1995 1998 2001 2004

Ind

ex Primary Energy

GDP

Intenity

High economic growth: GDP +56 % since 1980Primary energy consumption constant: 2 % higher in 2004 than in 1980CO2 reduced substantially: 35 % lower in 2004 compared to 1980

Three Main Reasons for De-coupling Economic Growth and Energy Consumption

District Heating and CHPEnergy SavingsRenewable Energy Particular emphasis on wind

power in this presentation

Renewable Energy in Denmark

Highest contribution to electricity from new renewables in EU

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1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

RE share of Gross Energy Consumption (%)

RE share of Electricity Supply (%)

Wind Power – a good business

Installed capacity = 3,118 MW (2004). 420 MW is off-shore (529 MW globally)

Wind power supplies almost 20% of the gross electricity consumption (2005)

The Danish wind turbine industry employs 20.000 persons and sells turbines for 4 Billion US$ (2005)

Most of the turbines are exported and Danish wind turbine industry serves 1/3 of the world market (2005)

16 Years of Offshore Wind Experience

• First Danish offshore wind farm 1991

• Strategic mapping 1995

• Capacity now 423 MW.

• 2 x 200 MW wind farms to be established in 2009 and 2010

• Existing and approved off-shore capacity (825 MW) = 8% of total electricity consumption in 2010

• Potentials = 50% of electricity consumption

Challenge: To Feed the Grid with Wind Power (Western Denmark as an example)

Grid Management of Fluctuating Wind Power

Large regional grids (only 2 transmission grids in DK) provide access to back-up capacity.

Nord Pool: Level playing field ensures cost-effective back-up capacity from Nordic region

Short gate closure times to allow trades close to real time

RE electricity is guaranteed transmission and distribution

Further integration of wind power is possible Storage as a future option

High Public Acceptance of Wind Power

Wide spread grass root support (except close neighbours!)

Bi-partisan political support and leadership

Incentives for small-scale local investments in the first years.

Careful involvement of the public in decision procedures. Compulsory public hearing.

BUT: Problem of the past = Oversubsidiation

Production Cost at DanishOn-shore Wind Power Plants

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1984 1987 1990 1993 1996 1999 2002 2005 2008 2011

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A wind mill on a good site is competitive with a gas-fired power plant by 2010.Feed-in tariffs must be adjusted accordingly or replaced by market tariffs.

Need to Diversify Support Mechanisms

Danish experience shows advantages with an evolution in support mechanismso Investment grantso Fixed feed in tariffo Market based tender (variable premium)

Feed in tariffs have their advantages

Market based systems to be considered on the long time frame

KWh-subsidies gradually replaced by support to R&D for new wind mills

Still support of 1.3 Eurocent/kWh for new mills

Confidence-Building Measures for Investors in Offshore Parks

Screening to mature site suitability

Fixed price in 50,000 full load hours (last tender: almost 7 Eurocent per kWh as fixed price for 12 years without compensation for inflation)

TSO to finance, construct and operate transformer station and sea cable

Security: Grid connection is available in due time

Financial compensation if the power produced is curtailed = Estimated loss from unrealised sale

Contractual agreements – adjustment in tender conditions

One stop shop communication

Lessons learned on RE-deployment

Long-term strategy and commitment needed on development and research programmes.

Develop technical standards. Technology drivers are an important incentive.

Gradually prioritize the deployment efforts - different strategies for different stages of technology development.

Mature stage => more market oriented focus Transparent and confident-building measures for investors Government coordination to facilitate smooth administrative

procedures, credit facilities, appropriate subsidy schemes

Lessons learned from Wind Power: Prices are constantly falling (don’t over-subsidize). Integration of a large capacity of wind is possible. But some support is still needed Total support for wind in DK (19%) increases the total end-

user price by ¾ Eurocent per kWh (excl. tax)

New Danish Energy Strategy in 2007

19 January 2007: The Danish government presented a new long term energy strategy entitled “A Visionary Danish Energy Policy”

Long term vision: Denmark should in the long term become entirely independent of fossil fuels

Targets for 2025:

o Reduce the use of fossil fuels by at least 15%.

o The share of renewable energy must be at least doubled to minimum 30% of total gross energy consumption by 2025. This implies that more than half of the electricity consumed will be supplied by renewable energy and 10% share of 2. generation biofuels in transport by 2020.

o Energy saving efforts will be increased by 1.25% annually with a view to holding overall energy consumption static until 2025.