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Denmark is a renewables leader, but its ambitious policy has caused problems

Denmark is one of the most progressive countries in the world when it comes to energy, and is aiming to be fossil free by 2050, in both electricity production and transportation. The optimistic strategy was announced in 2011. By 2020, the government aims to generate half of electricity from wind power. This ambitious policy is well on its way – the country generated 39% of its electricity by wind power in 2014, dropping slightly from the 41.2% generated in the first six months of the year.

Denmark-Renewables

Former Climate Minister Rasmus Helveg Petersen said, “We will definitely hit our 2020 goals. We have set a one-of-a-kind world record. And it shows that we can reach our ultimate goal, namely to stop global warming.”

However, when considering the fact that electricity makes up one tenth of Denmark’s total usage, according to the Danish Energy Association, the country still has a long way to go to reach its 2050 target. Fossil fuels still account for around three quarters of Denmark’s total energy use.

Despite the Danish success in pushing for its renewable goals, a difficult situation has arisen. As renewable power sources cost nothing to run once installed, this causes power prices to crash at what as previously the most profitable times of day. On paper, and in the long term, reduced prices are a huge benefit of renewable energy. However, Denmark still relies on conventional power plants, which operate on gas, coal, or uranium, to supply backup power at certain times.

Many of these plants are now, due to price crashes, uneconomical to run. Many electricity suppliers in Denmark have applied to shut down newly unprofitable plants, but the government has offered small subsidies, afraid of being caught short.

As well as being incredibly disruptive, any potential blackout could spell disaster for the renewables sector as a whole, politically. Any blackout attributed to the reliance on renewables could quickly turn public opinion and support. One solution Petersen has suggested is real-time pricing of electricity – for example, when the sun is shining brightly or the wind blowing strongly, prices would drop. However, in a shortage they would rise just as sharply. Despite these problems, Denmark’s meeting of its ambitious targets show the rest of the world that wind can provide a great deal of a country’s electricity.

Related product: case study – “Government energy legislation: Cutting emissions and increasing renewables” can be accessed by MarketLine subscribers here, or purchased from our store.

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