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Denmark

Denmark

Politicians bring Danish market back to life -- Two offshore tenders this year and major repowering for next

Denmark's new energy strategy includes provision for development of 750 MW of wind power over the next five years, both on land and offshore. An international tender for construction of two offshore wind farms is to be issued this year, followed by the construction of 350 MW of new wind plant on land to replace several hundred older turbines. Denmark's political agreement includes planning for "increased security of supply, creation of a well functioning competitive market and integration of renewable energy" up to 2010.

Denmark's new energy strategy, the result of a broad cross-party political agreement reached at the end of March, includes provision for development of 750 MW of wind power over the next five years, both on land and offshore. An international tender for construction of two offshore wind farms of 200 MW each is to be issued this year, followed by the construction of 350 MW of new wind plant on land to replace several hundred older turbines.

The plan results from an agreement in which wind power became a major negotiating brick between the right wing government and its opposition parties, led by former energy and environment minister Svend Auken. Although Denmark gets 20% of its electricity from wind, construction of new wind plant ground to a halt last year when a program for replacement of old turbines ended. Opposition parties have fought long and hard for a return to a market framework that would allow further wind development.

"Altogether it was a good day for Danish wind power," says Asbjørn Bjerre, director of the association of Danish wind turbine owners, referring to March 29, the day the deal was announced. "The tangible results are important, but even more important is the fact that the government has changed horses and with the opposition is committed to a continual and long term development of wind power."

Bjerre's comments are echoed by the director of Denmark's wind turbine industry association, Bjarne Lundager Jensen. "It is important for the industry that the Danish domestic market continues to be a shop window for the newest technology, also on land," he says. Exports of wind technology from Denmark last year were the primary reason for the country's positive trading balance.

Cables paid for

As well as the 750 MW of wind power, a main outcome of the agreement is the creation of a state-owned national transmission company, EnergiNet Denmark, which will take over management of the national power system from Eltra and Elkraft System, Denmark's two existing independent system operators. EnergiNet will provide and pay for the transmission wires for the two new offshore plant.

The details of how the future energy market is to be structured -- including the terms of the forthcoming offshore tender -- will be decided in coming weeks. What is known is that the offshore stations will be built at Omø Stålgrunde in the southern part of the Great Belt that separates the two halves of Denmark, and at Horns Reef, as an extension of the 150 MW plant of Vestas turbines commissioned in 2002. Unlike proposals published earlier in the year for the offshore tender, there will be no cap on the sales price of electricity from offshore wind plant.

On land, under a five year incentive program starting January 1, 2005, the government will use economic instruments to stimulate the replacement of all wind turbines operating in Denmark today with rated capacities of 450 MW or less. The aim is to improve the productivity of windy sites by replacing old technology with new and to encourage the removal of wind turbines installed in areas no longer designated for wind development.

ECONOMIC INCENTIVE

Under the agreement, scrapping an old turbine and investing in a new wind plant earns the right to a bonus of EUR 0.029/kWh, paid in addition to the market price for production from twice the capacity of the old plant, payable for 12,000 hours of full load operation. The conditions are not as good as the previous repowering program, which over 2001-2003 resulted in a net increase of 200 MW. "Whether the economic incentive is enough is a matter of discussion, but I don't believe it would have been possible to get more," says Lundager Jensen. "The intention is to take 900 old turbines down and erect 175 new high technology machines." Denmark has 3117 MW of installed wind power today.

To ease the permitting process for new wind turbines, Denmark's regional authorities have until October 1 to designate new areas for wind development. Not until then will it be decided if the repowering program can be carried out. Both Lundager Jensen and Bjerre point out that much is dependent on the willingness of local authorities to include long term wind power development in their future plans. "The fact is, there are still many good potential wind turbine sites in Denmark -- it's first and foremost a matter of priorities," says Lundager Jensen.

Priority power

A significant restraint on sales of wind power on the open market in Denmark has been the protection afforded to the many local combined heat and power (CHP) stations. Since much of their electricity production is dictated by demand for heat, they often produce surplus power, which, until now, Denmark's power system operators have been mandated to buy whether they needed it or not -- undermining the market price for wind power, especially on windy winter days when they were also producing at full power.

From January 2005, market forces will be employed to persuade CHP plant to produce electricity only when it is needed, removing the risk of "zero" prices for wind power producers selling their output on NordPool, the Nordic power exchange.

The new regulations will benefit an increasing number of Denmark's wind plant that no longer qualify for price subsidies. A task left for the wind lobby is to persuade government to remove the EUR 0.048/kWh cap it has placed on wind power's free market price. Wind plant on the free market receive the average NordPool price, plus a EUR 0.01/kWh "CO2 bonus" payment. If NordPool prices rise above EUR 0.038/kWh, wind plant owners are not allowed to benefit from the higher prices.

Denmark's political agreement on "securing the future energy structure" includes planning for "increased security of supply, creation of a well functioning competitive market and integration of renewable energy" up to 2010. New high voltage cable connections within Denmark and to its neighbours are prioritised. Furthermore, light must be shed on the "perspectives for future energy supply up to 2025, including the use of new energy technologies."

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