Danish government U-turn on clean energy and climate change deterring investors

If you use this photo, please link to www.CGPGrey.com for attribution.
If you use this photo, please link to www.CGPGrey.com for attribution.

Denmark is well known as a pioneer in European wind energy, particularly with regard to its massive offshore wind farms. These have been installed steadily since 1991 when the first facility, with a capacity of 5 MW, was first constructed about 2 kilometres off the Danish coast. Denmark has constructed four other offshore wind farms since then, increasing its offshore capacity to 1,271 MW. The country also has over 300 onshore wind turbines, bringing overall wind capacity to 5,070 MW.

The Danes have been able to achieve this success because of the very good wind speeds in the country, which generally reach an average of about 7.6 metres per second. Currently, about 40 to 42 percent of the country’s electricity is generated by wind and it also has a target of generating half its power from wind by 2020.

Another area in which Denmark has excelled in recent years is energy efficiency. Despite a doubling of the country’s GDP, energy consumption has remained stable. The Danish government has been able to achieve this by structuring its regulatory practices in such a way that the main driver of regulation is negotiation between government and industry until a consensus is reached. Generally, this works through a process in which the government sets the energy conservation targets and then leaves industry to decide how best to achieve them. Furthermore, power distribution companies are separate from generation companies, enabling the former to profit from energy saving services via specially established ‘sister companies’. This strategy has enabled businesses in Denmark to optimise their processes such that the country is now one of the most energy efficient countries in the EU.

CHP Andy W A Combined Heat and Power (CHP) plant (Image: Andy Wright, Flickr)

Denmark also plays a lead role in combined heat and power (CHP) with 12 percent of power generated from biomass and organic waste. There are over 670 CHP plants in the country and more than 80 percent of space heating is now provided in this way. CHP enables waste heat to be used for heating buildings. The largest plants are centralised and situated in larger cities while the smaller plants are more local concerns that support the larger plants. Most of the biomass feedstock consists of straw and biodegradable waste, 30 percent of it imported from Eastern Europe and Canada. A great deal of this imported feedstock consists of wood pellets and wood chips and that is problematic in that there is currently a sizeable debate going on about just how sustainable woody biomass actually is. This prompted the Danish Ministry of Climate, Energy, and Building to announce in December 2014 that only sustainably produced biomass would be imported.

Danish engineers are increasingly taking their expertise abroad, for example just recently to China, where the first of 10 offshore wind farms are now being constructed. These will consist of 100 turbines with an overall capacity of 400 MW, representing enough energy to supply 35,000 households.

This all sounds very impressive, but there is a continuing problem with escalating costs, prompting the Danish government to announce recently that it intends to abandon plans to build five more offshore wind farms. Danish electricity bills are already the highest in Europe, so you can see why the Danes are concerned about this, especially when you consider that the five new wind farms would have cost the government $10.63 billion.

Brendan W Image: Brendan Wood, Flickr

In addition to cancelling the five wind farms, the Danish government also intends to scrap the green taxes that have driven the country’s clean energy programme, on the grounds that these are inefficient and expensive. These taxes currently represent about 66 percent of the average Danish electricity bill, with another 18 percent paying for transport and just 15 percent for the electricity itself. Despite criticisms that scrapping the taxes would effectively end Danish clean energy installation, the government is determined to carry on, but is now trying to find alternative means of supporting wind power without resorting to further green taxes.

One suggestion has been that the country could make up the funding shortfall by drawing money from basic income tax. However, this idea is opposed by the Liberal Alliance and the Danish People’s Party.

Unfortunately, the knock-on effect of these discussions has been to scare off investors, just as companies such as Sweden’s Vattenfall, ScottishPower Renewable Energy and Boralex were getting ready to bid for 950 MW of new capacity planned for various locations around the Danish coast.

“This situation would send a negative message to foreign investors like Boralex as predictability is key when it comes to such major investment” said Julie Cusson, Boralex’s head of communications, in an email conversation with Bloomberg recently.

The decision goes against EU advice recommending that all companies should have equal access to subsidies. The gloomy prediction is that this would reshape the clean energy sector in Europe, with the Wind Energy Association estimating that new capacity would fall from 215 MW per year in 2013-2016 to 50 MW per year in 2017-20, less than a quarter of its present level. Even worse is the fact that it is just one of several policy U-turns that have soured Denmark’s previously excellent clean energy reputation. One example, being the phasing out of tax breaks on electric cars that will cause the price for models such as Tesla to triple. This will mean the price of a Tesla S soaring from 650,000 kroner ($97,665) to around 1.8 million kroner ($276,166).

Even worse perhaps is the fact that last year the country announced plans to abandon its plans to become completely fossil-fuel free by 2050.

What is causing this? The answer lies in the surge to the Right following the election of June 2015 that saw the Centre Right Venstre win power, supported by other Right wing parties, including the Danish People’s Party (DPP), which is widely regarded as a Right wing populist party by academics with some members of the international media even going so far to describe it as a Far Right party, given its anti-immigrant stance. Venstre itself follows a tradition of ‘green realism’ when it comes to environmental issues, prioritising economic growth above green policies. The DPP and the Liberal Alliance are both climate sceptic. Perhaps it’s not surprising then that climate change denier Bjorn Lomberg once acted as director of the Danish government’s Environmental Assessment.

It doesn’t really bode well for the future unfortunately.

About Robin Whitlock
I am an experienced freelance journalist with a wide and varied portfolio to my credit including web content, magazine articles, reporting, features, interviews, reviews and blogs. My special interests include environmental issues, particularly climate change, renewable energy, transport, green building and sustainable infrastructure. I have numerous secondary interests ranging from politics and current affairs to social justice, science, technology and innovation, historical topics and lifestyle subjects such as literature, psychology, contemporary spirituality and culture.

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