Friday, July 16, 2010

The Danish energy industry – a model for Germany?

In partnership with Energie-Fakten.

The heavily state-controlled Danish energy industry is sometimes held up as a model for Germany. On closer examination, we observe interesting developments, but also specific features, weaknesses and, more recently, a departure from its initial objectives.

Denmark has about the same area as Lower Saxony, but with 5.3 million citizens only about two thirds as many inhabitants. Energy consumption per capita per year is slightly lower than in Germany. Similar to Germany, energy supply is for 81% based on fossil fuels, namely 39 (34%) mineral oil, 20 (22%) natural gas and 22 (24)% coal; 19 (7)% comes from renewable energy (2008 figures in brackets for Germany).

With around 10 tonnes per capita per year (2005/2006), the specific CO2 emissions in Denmark are approximately equal to Germany, although unlike Germany, it has no significant heavy industry or other energy intensive industries. These relatively large specific CO2 emissions are a.o. the result of abandoning nuclear energy. Nevertheless, climate risk is taken very seriously because of a possible rise in sea level. The Danish Government therefore formulated very ambitious targets in the nineties to increase the contribution of renewable energies, to improve energy efficiency and to further reduce the use of coal.

The Danish electricity industry is still partially "built from the bottom up". Regional and local electricity networks belong to regional companies. This limits competition. With 7217 MW in 2008, about 56% of the electricity capacity was installed in large central systems, most of which are situated on the coast - because of the possibility of favorable sea water cooling - and fired with imported coal.

Most of these plants can generate combined heat and power and are mainly owned by two companies, Dong Energy and Vattenfall. Public power and heating plants used in 2008 76% coal and 14% natural gas. They supply 59% of electricity production in Denmark. An additional 1,829 MW are in decentralized combined heat and power (CHP) systems, 3,166 MW in wind power plants and 596 MW in other plants. Wind power covered 20% of electricity supply in 2008.

District heating supplies about half of the heat demand. About 40% of the heat for space heating in recent years came from CHP plants, mainly from large plants.

Especially high is the percentage of electricity produced in CHP plants. Their development was promoted through artificially high oil and gas prices and high electricity feed-in tariffs. Energy taxes in Denmark are particularly high. Until 2000, these charges were mitigated by low prices for imported coal and an energy infrastructure with low production costs.

The Danish government elected in 2001 has directed its attention more towards costs. The costly promotion of renewable energy has been reduced significantly. Wind no longer benefits from priority dispatch in the network. It is marketed in the Nordic power exchange. As it is more expensive than coal power, wind power generators receive financial support.

The Danish energy industry is only of limited use as a model for Germany.

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