Market Status: Denmark - Political uncertainty hurts wind ambition

DENMARK: This year, Denmark's wind industry faces a big challenge: its energy policy, implemented in 2008, is due to expire.

A general election is coming up and insiders believe this will delay progress on new policy.

In 2010, Denmark increased its wind power capacity by around 320MW, lifting wind power capacity to 3.8GW. Of this, roughly 2.9GW is onshore and 900MW offshore. Denmark now produces 25% of its electricity from wind.

"We are on the right track and following our goal, that 50% of all energy consumed in Denmark should come from wind power by 2020," says Jan Hylleberg, CEO of the Danish Wind Industry Association. He adds that, in 2010, Danish municipalities planned an additional 1.1GW of wind capacity in the next three to four years.

Electricity prices in Denmark, already among the highest in Europe, increased again in 2010. In 2009, electricity prices had dipped slightly on previous years to DKK 0.28/kWh (EUR0.04/kWh), but rose again to DKK 0.38/kWh (EUR0.05/kWh) in 2010. This was due to increased demand, problems with transmission lines and the impact of two harsh winters.

A new offshore wind farm, Rodsand II, near Zealand, went online in 2010, adding 207MW. Overall, however, Denmark has fallen in global wind ranking. The renewables industry is pressuring Danish politicians to ensure that the new policy states clearly how much wind power will be required. But Hylleberg believes it will be late 2011, at the earliest, before any new energy policy is in place.

This is taking a financial toll. Jittery investors are becoming sceptical about their return on investment in a small country like Denmark, which - with just 5.5 million people - lacks the large demand for energy of the UK and Germany.

"We have a huge challenge in 2011 to ensure that private investors do not leave our wind industry due to uncertainty about volume and requirements," says Hylleberg. "We know that this government, and later governments, will adhere to the 2020 vision, but we still need something in writing to give investors a clear indication of how much wind energy capacity Denmark needs in the next ten to 20 years."

Some groundwork has been laid. The Danish Commission on Climate Change concluded its two-year assignment in the autumn and made recommendations on achieving independence from fossil fuels, including a controversial fossil fuel tax.

Denmark's wind energy supply chain, which serves the global wind market, has been hard hit by the recession. Orders dropped sharply last year and in 2009. However, Denmark's largest wind turbine manufacturer, Vestas, ended the year on a strong note with orders totalling 366MW for projects planned in Germany, Norway and Poland.

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