Renewable Energy Market Trends in Denmark

Per Hemmer and Johan Weihe, partners at Bech-Bruun, explore the diverse sources of renewable energy that Denmark is looking to exploit in the coming years.

Published on 15 August 2022
Per Hemmer, Bech-Bruun partner, Expert Focus contributor
Per Hemmer
Ranked in 1 department in Chambers Europe 2022
View profile
Johan Weihe, Bech-Bruun partner and Expert Focus contributor
Johan Weihe

Denmark has large amounts of renewable energy (RE) resources, a high level of security of supply and a well-connected electricity transmission system.

Promotion of renewable energy has been a priority in Danish energy policy for decades. The urgency of the green transition has, however, only become more obvious in 2022 due to Russia's invasion of Ukraine and the impacts on the European energy market.

"Denmark is aiming for a 100% green power supply by 2030."

In the second half of 2022, multiple broad political agreements were reached in Denmark to boost the development of renewables and thereby tackle the climate crisis and the EU's dependence on Russian fossil fuels.

The Climate Agreement of 25 June 2022 introduced initiatives that shall realise a historic expansion of RE production and phase out Danish households use of natural gas for heating by 2035. Denmark is aiming to be a net exporter of green energy in 2030 and for RE power to be exported to the EU and used to produce e-fuels.

An expansion of a range of RE technologies is to be expected generally in Denmark in the coming years. This update focuses on offshore wind, energy islands, bioenergy, and green hydrogen.

Offshore wind

There are currently 15 offshore wind farms (OWFs) in operation in Denmark, and several more are being established, including Vesterhav Syd OWF (168 MW) and Vesterhav Nord OWF (176,4 MW) and Thor OWF (1 GW).

"The world's first energy islands are to be built in Denmark."

Licences to construct OWFs can be obtained through tenders announced by the Danish Energy Agency (the DEA) or through a so-called open-door procedure.

Upcoming tenders

  • Bornholm energy island OWFs (3 GW)
  • Hesselø OWF (800–1200 MW)
  • North Sea energy island OWFs (3–4 GW)
  • OWFs in total (6 GW)

According to the Danish Energy Agency, the procurement processes for all upcoming OWFs, except Hesselø OWF, are planned to be launched in 2023 and the OWFs are to be in full operation by 2030. The tender for Hesselø OWF is planned to be launched in 2024 and the OWF is to be completed by 31 December 2029.

The future tender model is subject to political discussion due to the recent tender for Thor OWF resulting in several bids at the minimum price of DKK0.01 per kWh (approximately EUR 0.0013).

Open-door procedure

Recently, there has been great interest in applying for pre-investigation licences under the open-door procedure.

Within the open-door procedure, only applications for OWFs located within 15 km from the shoreline are allowed and the relevant local municipalities can veto the projects.

A government announcement of state area reservations to be cancelled, thus making new areas available for OWFs under the open-door procedure, was expected in autumn 2022 but has not yet been announced.

Energy islands

The world's first energy islands are to be built in Denmark, in the Baltic Sea on Bornholm and in the North Sea, respectively.

Bornholm energy island

The energy island is to be in operation in 2030 and will consist of:

  • offshore facilities (a 3 GW OWF with internal grid, transformer platform and export cables to Bornholm) to be tendered;
  • land-based facilities on Bornholm (cables and station) to be constructed by Energinet (the Danish national transmission system operator);
  • an export cable from Bornholm to Zealand, a land-based facility on Zealand and an interconnector to be constructed by Energinet; and
  • an export cable from Bornholm to Germany, making it easier to sell energy on the EU energy market.

The tender for Bornholm energy island OWF is expected to be held in 2024 with the winning tenderer to be announced in Q4 2024.

North Sea energy island

The energy island is planned to be operational from 2033. It will consist of an artificial island that will connect and distribute power from the surrounding OWFs (3–4 GW in the initial phase and 10 GW by the end of 2040 at the latest).

The Danish State and a private partner will be joint co-owners of the energy island (minimum 50.1%/maximum 49.9%).

The DEA will announce a tender for construction and co-ownership of the energy island.

The tender has been postponed on the grounds that more time was needed to consider the business model and the technical concept for the island. The tender is expected to be announced in the spring of 2023.

"PtX projects totalling approximately 7 GW of electrolysis capacity by 2030 have been announced in Denmark as of May 2022."

The ambition is a flexible energy island concept that allows for combining a dammed island with electricity transmission and energy conversion on platforms at the island that will not limit the possibilities for innovative activities such as PtX (flexibility systems that use, store and convert surplus, renewably-generated electric power). 

The OWFs in connection to the energy island will be tendered out later.

Bioenergy

The amount of upgraded biogas injected into the Danish gas system has been increasing for years. According to Energinet, biogas accounted for 33.9% of the gas in the Danish gas system in December 2022.

The ambition is that Denmark will be 100% supplied with green gas by 2030, and that by 2035 use of natural gas for heating in Danish households will be phased out.

Towards 2030, state funding for upgraded biogas and other green gas production (so called eMethanol) will be available through tenders. The first tender is expected to be launched in 2023 and the second in 2024.

Overall tender framework for support to green gas production

  • Winning tenderers will be awarded a fixed price premium for 20 years.
  • If the gas price exceeds an upper limit of DKK120/GJ, support will be reduced correspondingly.
  • There will be an obligation to meet a minimum gas production quota and this obligation will be subject to a penalty for non-compliance.

Sustainable biomass is on the political agenda in Denmark

Requirements for the use of energy crops in biogas production apply to supported and unsupported biogas production.

Lower thresholds for the use of energy crops will apply from the 2023/24 reporting period. From 1 August 2025, maize may not be used as an energy crop.

Green hydrogen and PtX

There is a growing interest in green hydrogen and PtX products in Denmark as well as abroad. According to the Minister for Climate, Energy and Utilities, PtX projects totalling approximately 7 GW of electrolysis capacity by 2030 have been announced in Denmark as of May 2022.

With a political agreement from March 2022 (known as the PtX Strategy), the Danish Parliament has set a target of 4-6 GW of electrolysis capacity by 2030.

The PtX Strategy introduces specific initiatives aimed at improving the regulatory framework and reducing the production costs of hydrogen and PtX products. These include, for instance:

  • funding (DKK1.25 billion) through a tender for operational support of the production of hydrogen and other PtX products (the tender is expected in 2023);
  • an application-based scheme for construction of direct links between PtX plants and wind farms/solar parks where such direct links provide socio-economic benefits; and
  • a framework for construction of hydrogen infrastructure that can eventually be linked to a common European hydrogen infrastructure.

Bech-Bruun

Bech-Brunn logo, Chambers Expert Focus contributor firm
13 ranked departments and 43 ranked lawyers
Learn more about the firm’s ranking in Chambers Europe
View firm profile

Chambers Global Practice Guide Alternative Energy & Power 2022

Learn more about global developments in alternative energy and power.