Wind power policy in Denmark

David Waller writes a good article in the Financial Times on the consensus in Denmark towards wind power and the importance of stability in policies.

 

Denmark considers wind a less volatile option

When oil soared to almost $150 a barrel in 2008, the drive to develop new ways to generate renewable energy seemed unstoppable. Seven years on, with oil prices about a third of that level, the arguments for going green appear more nuanced.

Now, the focus of governments hit by persistent economic downturn is to reduce the cost of subsidising renewable energy.

There are fears the drop in the oil price will destroy hopes of further rapid growth in the renewables, but they are not shared by Henrik Stiesdal. The Danish wind energy pioneer, a former chief technology officer at Siemens Wind Power, says: “The key is stability. You can talk about the low oil price, but you can look at it in a different way. What about the high volatility? How will that affect renewables,” he asks.

“The oil price is falling now, but you know that falls tend to be linked to hikes, so you have the chilling thought that prices will rise again. People who take a long-term view see volatility and therefore uncertainty, but you know what you get with renewables — there is very little volatility.”

Initially driven by co-operatives and farmers, the rise of wind power in Denmark has led to the creation of a vibrant corporate sector. In Copenhagen at least, the current glut of cheap hydrocarbons has not undermined a consensus in favour of continued state support for the green energy source.

Dong, the country’s leading energy company, has emerged as a leading force in the global wind power market. Jakob Askou Bøss, senior vice-president, says: “In the 1970s, all our energy came from oil from the Middle East, so when the oil crisis hit, it demonstrated how vulnerable we were.”

Since then, a remarkable political consensus has developed around the strategic desirability of building Denmark’s wind power fleet, says Mr Bøss. As a result, arrays of wind turbines now produce about 40 per cent of the nation’s power and are expected to deliver 50 per cent by 2020. On a particularly windy winter’s day last year, the sector even managed to meet 105 per cent of quotidian power needs.

This consensus “has created a stable and consistent political framework, which is important for investor security”, according to the Danish Energy Agency.

A combination of economic self-interest and environmental altruism continues to underpin the investment appeal of the sector, even though financial subsidies have gradually been cut.

This persisting political consensus began to form in the 1970s, when environmentalists and farmers established the sector. Although the industry is now dominated by large corporations focused on offshore wind farms, the early mass involvement means that “hundreds of thousands of Danes became co-owners in a country of just 5m people”, according to Mr Stiesdal.

Denmark initially introduced a scheme where the purchase of equipment was subsidised by 30 per cent, before switching to a feed-in tariff with a guaranteed energy price. Mr Stiesdal explains: “This turned out to be too lucrative, so after some years they restructured the scheme so you received support for only part of the life of the turbine.

“But the key word in this is stability. They say renewables are too expensive, but onshore wind is the cheapest form of energy in Denmark. It wasn’t originally like that and isn’t yet with offshore wind, but competition has driven down the price.”

Conversely, across the North Sea, the decline in the cost of carbon-based fuel stock and a clear election victory for the Conservative party has led to concerns among green energy advocates of a reversal of support for renewables.

Last month, Amber Rudd, the UK’s energy and climate change secretary, announced plans to reduce guaranteed prices (or feed-in tariffs) for small solar, wind and hydroelectric power installations from next year.

The Conservatives, no longer reliant on their former Liberal Democrat coalition partners, had already signalled their intent to end new subsidies for onshore wind.

Greenpeace has attacked these policy changes, saying: “The cheapest form of low carbon electricity is onshore wind, followed by solar, both of which the government is doing its utmost to sabotage.”

Ms Rudd’s department has defended the curtailment in financial support for further onshore projects, insisting her policies balance the interests of developers and the public properly.

Beyond the war of words, the UK continues to invest heavily in expanding its fleet of offshore wind turbine arrays, even as the debate about support for renewables becomes more fractious.

Last month, Ms Rudd granted consent for world’s biggest offshore wind farm on the Dogger Bank in the North Sea. That decision takes the total number of approved projects in the North Sea zone to 4.8 gigawatts, almost equal to all the offshore wind capacity currently in operation in the UK.

In 2014, close to 10 per cent of the UK’s electricity came from onshore and offshore wind. Onshore turbines accounted for 5.5 per cent, while offshore arrays delivered 4 per cent of grid supplies.

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