Regulatory and policy options to encourage development of ...

SUSTAINABLE ENERGY REGULATION AND POLICYMAKING TRAINING MANUALpage 9.78The average domestic electricity price in Denmark for small-scale consumers in2003 was €0.2558/kWh after tax, making it the most expensive in the EuropeanUnion. However domestic energy use is heavily taxed in Denmark and the pretaxprice of €0.134/kWh is comparatively low for the EU. (Eurostat, 2003) Theprices available within the tariff were effectively 30 per cent lower for new turbinesthan the prices paid for turbines already generating. (ECN, 2003).It was planned that Denmark would attempt to switch over to a green tradingmechanism from 1 January 2003, however, this deadline was not met, and insteada scheme wherein wind turbines erected after 1 January 2003 receive the marketprice plus ~€¢1.34/kWh was instituted. The scheme includes a maximum allowableprice of €¢4.83/kWh. Turbines that qualify for the subsidy are eligible toreceive it for up to twenty years. (Techwise, 2002).Electricity from biomass maintains the feed-in tariff of 8.1 ct/kWh. The premiumfor renewables is financed as an addition to the electricity price per kWh, sharedequally among all electricity consumers in relation to their electricity use. Theresult of the return to the more stable tariff mechanism was a boom year forinstallation and sales of wind turbines in Denmark, with over 400 MW ofincreased wind capacity.Denmark typically has a spinning reserve 1 of around 20 per cent of the load andthis has generally been sufficient to cope with any fluctuations in the output ofwind power. Interconnection with Norway and Sweden, both with large amountsof hydropower has proved to complement the Danish system, with output fromhydropower easily able to be altered to respond to windpower output.Nevertheless Denmark has had to be at the forefront of developing new technologyto deal with balancing the distribution and transmission grids with high levelsof intermittent generation. Neilsen gives consideration to the technicalproblems associated with this (Neilsen, 2002a; Neilsen, 2002b).6. CONCLUSIONThe Danish renewables support mechanisms have led to the substantial developmentof wind power and its use of feed-in type mechanisms (with guaranteedprices and connection agreements) has also favoured small-scale wind developmentmuch of which was undertaken through community ownership. Even in 20041Generating capacity which is currently unused but is synchronized with the network such that it canbe brought on line to respond to system needs instantaneously.