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Denmark

Denmark

Denmark back on track

When Denmark's right wing government came to power in 2001, its proposal to put a stop to all further wind development -- in a country where wind turbines had shot up without a pause since 1976 -- was something of an eye-opener. Until then wind power had not only secured 20% of national electricity supply and 40% of the carbon dioxide emission reductions Denmark had committed to, but also 20,000 jobs.

It was more party political infighting that lay behind the new government's decision than a fundamental disagreement on energy policy priorities, at least seen in the light of Denmark's evolution over the previous 25 years. Indeed, the spin-off economic and welfare benefits of wind energy are at least part of the reason why a broad political majority -- including the government coalition parties -- are now reviving Denmark's wind power development. Over the next five years, 750 MW of new generation is to be installed, 400 MW offshore and 350 MW on land.

In terms of the global market it is perhaps just a small step, but it is also a clear indication of the long term resilience of wind energy. What's interesting about the political decision is that it is not primarily about wind power, but about social and economic welfare. And here Denmark, on an admittedly small scale, can perhaps present a picture of the way things hang together -- and how they do so -- in a country where wind power's additional benefits for society as a whole have long been recognised.

Wind's contribution to electricity supply, CO2 reduction and employment are the physical signs of a point British energy economist Shimon Awerbuch from the University of Sussex made at a conference organised by the government in the autumn. Awerbuch warned against focusing too narrowly on the pure costs of establishing wind power, because these are well known and can be projected with a certainty not associated with the variable and unpredictable prices of oil, gas and coal, he said. In other words, wind

power as a technology is characterised by a very small financial risk. That security is something the financial markets usually reward.

What should be noted, said Awerbuch, is that wind power is as an insurance for society -- it delivers more than a guarantee of stable energy prices. In a modern society, economic growth can be braked or stopped altogether by high energy prices. Indeed, the socio-economic losses associated with sudden rises in energy prices can exceed by far the potential extra costs of establishing wind power. That takes us back to the late 1970s, when the world oil crisis was a sharp recent memory. At the time, an often used argument in support of wind power's advantages was that investment in a turbine was like buying a house instead of renting one -- it represented freedom from the price tyranny imposed by oil and electricity companies.

So that is what one in 20 households did in the years between 1976 and 2002, with the encouragement of successive governments who were unanimous in their agreement on national energy policy. The political stop to it all in 2001, with the new government's introduction of the lowest wind electricity rates in Europe, put an end to the people's engagement in wind power. Since January 1, 2003, not one wind turbine has been sold for installation in Denmark.

It is that situation that the government and parliament now want to change with new wind development and improvements in the conditions for existing wind plant. Better rates of pay, a new five year repowering program for replacement of old turbines, and improved arrangements for wind power's access to the grid network are the main elements of the policy package.

A new approach

Seen from an energy political viewpoint, the decision by an almost unanimous Danish parliament to set wind power rolling again is interesting because of the method being used, which is not something Denmark is used to. As part of the energy policy agreement, it has been decided to structure the market to ensure that electricity is not generated in periods when there is no demand for it. At the same time, wind power is to contribute to security of supply in the long term. Denmark, which is linked to the German and Scandinavian transmission networks, has not been totally immune to the power failures of recent times.

As part of the new strategy for a market that responds to the rules of supply and demand, an incentive payment to distributed combined heat and power (CHP) plant -- which encourages them to generate electricity at the same time as heat whether there is demand for it or not -- is to be removed from January 1, 2005. The incentive has had the effect of dumping market prices for electricity from wind turbines when they have been generating at full power. In future, it will best pay CHP plant to generate electricity when it is needed. Last but not least, the government and parliament have agreed to develop a plan for increased security of supply, which includes upgraded cable connections, improved competition parameters and integration of wind power.

In Denmark's knife-edge political balance, there is reason to believe that all the grand talk will end with results. For some time now, public opinion polls have put the opposition out in front -- and it has made it clear that it considers the newly agreed energy policy to just be a beginning.

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