Danish imports of energy – a logical forerunner strategy
Denmark is no longer energy self-sufficient. It has to import electricity every week during summer, while last year was the first in 16 years where Denmark imported more energy than it exported. In light of the Russian-Ukrainian conflict, dependency on foreign energy seems less than desirable.
By Søren Otto Simonsen
On June 4th American President Barack Obama spoke to Europe from Warsaw condemning the Russian occupation of Ukrainian land: "The days of empire and spheres of influence are over," he said, with Ukrainian President Petro Poroshenko at his side. One of the most pivotal issues making it possible for Russia to annex Ukraine is that Ukraine is deeply dependent on Russian energy. This dependency has caught Ukraine in a dilemma: if they go to war – militarily or politically – against Russia, they will not have any energy; and if they don’t, Russia might annex the country.
It is, however, unlikely that Danish imports of energy will cause an international conflict, thanks to an integrated Northern European cooperation. But that doesn’t mean that everything is rosy. There are questions that need answers: What has caused this development? Will it continue? And if so, what will the consequences be? Just as importantly, will there be enough electricity for everybody when the European countries increasingly move their electricity production to unstable renewable production such as wind? And what will this mean to you?
In the middle of this discussion is the Northern European Electricity Market. Not only does this market compete with domestic power plants, it also provides a possibility for Denmark to under-produce electricity without threatening the supply security. “We trust the market, and continuously analyze potential threats to the Danish electrical network,” states press manager for the Danish Energy Agency and Energy Ministry, Ture Falbe-Hansen.
Once upon a time…
Denmark was energy self-sufficient, but that is no longer the case. 2013 was the first year since 1997 that the energy sector imported more than they exported, According to the Danish Energy Agency. Denmark’s degree of self-sufficiency peaked in 2004 with 156 percent (the country produced 56 percent more than it consumed) and has been falling since, ending last year at 93 percent.
While this might seem like a step in the wrong direction, it might not be: “Historically, the security of supply has been a national focus, where every country overproduced to secure that there was enough electricity to their citizens. On a broader scale this is a waste of natural resources,” Charlotte Søndergren, sector manager for the Danish Energy Association, argues. Therefore, being a country below 100 percent is a situation Denmark should get used to. A recently published report from the European Network of Transmission System Operators for Electricity (ENTSO-E) projects that Denmark needs to import electricity every week of summer under ‘normal conditions’. This is noteworthy as summer previously was when Denmark overproduced, hence exporting electricity. Bjarne Brendstrup, Head of System Planning at Energinet.dk, who is in charge of the Danish supply security, does not see this as a big issue: “I see it as a natural consequence as Denmark transfers to an energy system where more wind is incorporated,” he notes. He also argues that the country is exporting almost just as often: “We import when we have a deficit and export when we have a surplus,” he concludes.
The Danish success
Denmark is a world leader within wind energy, and a place in the top is no coincidence. It is earned by a broad political devotion to renewable energy that has been on the agenda since the 1970s. The country received an AAA rating on the UN-accredited World Energy Council’s Energy Sustainability Index, which is currently only awarded to five countries. The country is ranked as the second most energy renewable country in the world behind Switzerland. The world’s leading wind turbine company, Vestas, is also Danish and has its head quarter in the Danish city of Aarhus. One of the other huge companies within the field, Siemens, is partly Danish. This means that Danish windmills are usually state of the art, which last year on December 21st showed itself by having a production of electricity that exceeded the entire Danish consumption, a world first.
The more you get the more you want
The Danish devotion to an energy sector with renewable energy was accelerated in 2012. Here, a broad political energy agreement was achieved that lay down the most ambitious energy and climate goals in Europe for 2020 and 2050, according to the Danish Energy Agency.
These goals are agreements made with the European Union about how sustainable a country’s energy sector should be at these points in time. So when the Danes have jumped down from their chairs and sung (this must be a Danish saying? I don’t know what it means! Is there another equivalent?) in the year 2020, at least 35 percent of their energy consumption must come from renewable energy. At the same time 49,5 percent of all electricity should be produced by wind. While these goals are ambitious in themselves, they are only appetizers before the green main course that awaits three decades later. In 2050 Denmark’s entire energy sector should be running on renewable energy. In comparison, a little less than a fourth came from renewable energy in 2013.
How do they do it?
Today, Denmark has more than 5.000 windmills spread over land and sea, for instance on the wind farm Horns Rev outside of Esbjerg, where 80 sea mills are mounted. Together, all the Danish mills produced 33 percent of the entire electricity consumption last year, according to Energinet.dk. One of the real benefits of windmills is that when they are installed and connected to the electrical network, it is a really cheap way of producing electricity.
However, there are issues connected to relying that heavily on windmills, which to a large extent is what has caused Denmark to become dependent on energy imports. First of all there are times with no, or very little, wind in Denmark, although people from Esbjerg would beg to differ. This means that Danish windmills cannot produce electricity all the time. A windmill off the coast of Denmark (“at sea” sounds more like a boat/things that move) produces energy at maximum capacity every other day on average. On land it is every fourth day. This is a challenge because there is not yet a way to effectively store wind energy, so it needs to be used the second it is produced.
Secondly, “when windmills are running they lower the price on electricity,” Søndergren notes. This is good for both the consumer and the environment. It is, however, not so good for fossil fueled power plants that cannot compete with the lower prices. This forces them to close. Last year alone two power plants, Stignæs and Ensted, were shuttered. (same meaning as “put up the shutters.”)
So at the same time, Windmills are making the production of electricity unstable, because they can only produce when there is wind and it cannot be stored, and they out-compete the more expensive power plants. This development, sometimes, leaves a situation where it is calm, hence windmills are not producing electricity, and there are not enough power plants to satisfy the Danish demand for electricity, which is why importing electricity from our neighbors has become necessary.
Denmark is committed to achieving the 2020 and 2050 goals so the situation is not likely to change, rather, a government grant to power plants that expires in 2018 suggests that even more plants will close. This means that, until there are technological breakthroughs within either storing wind energy, or other renewable energy sources, Denmark will become increasingly dependent on foreign energy.
Nord Poll – the liberal way of importing electricity
Denmark imports electricity from the Northern European electricity market, Nord Poll. Created as the world’s first exchange for electrical power in 2004, Nord Poll functions almost as a stock exchange. The Nordic countries, the Baltics and to a certain extent Germany, the Netherlands and Belgium are members. It is a free market where supply and demand determines prices, and there is no fixed amount of electricity a country can or shall bring to the exchange. Today, more than 70 percent of all electricity consumed in the Nordic countries is traded on the exchange.
The market has had a positive effect on electricity prices. In 2009 it was estimated by Frans Clemmesen, chief economist at the Danish Energy Association, that the market contributed to a saving of 8,2 øre / KWH, which is a little more than 400 kroner in annual savings for an average family. One of the market’s setbacks is that it is not specified what kind of electricity a country buys. This means that while Denmark doesn’t produce nuclear power, there is no guarantee that it is not imported via the exchange. Because of connectivity Denmark trades with Norway, Southern Sweden and Northern Germany.
Countries are like lemmings
There is another apparent challenge with Nord Poll and its liberal foundation. According to Søndergren, the real challenge in connection to Danish import of energy is in the future: “Countries are like lemmings, and when it comes to renewable energy Denmark is the leader,” she notes. Renewable energy is a shared European focus, which has been made clear by the European Union’s Director-General, Dominique Ristori. This means that the development Denmark experiences at the moment is likely to occur in other countries in the future. “If all countries in Nord Poll suddenly want to import electricity, then there is no one to import from, which would be a serious problem,” Søndergren states. In ENTSO-E’s 2013 winter report Sweden was projected to have troubles covering their own electricity demand. If this tendency extends to the rest of the market there could be calm days where it would be a struggle to satisfy everybody’s demand. In the worst-case scenario it could result in an unstable electrical network where power shortages are common.
It is all about Mr. and Mrs. Jensen
Brendstrup is not worried though: “At the end of the day, it is all about brining electricity to Mr. and Mrs. Jensen, and in Denmark we have one of the most reliable electrical networks in Europe – hence the world,” he argues. According to the Danish Energy Agency’s analysis of the electrical network’s functionality it is estimated that from 2007-2011 the average time a home was without power was 25 minutes per year. This is a clear improvement from previous years, but it is also the third best in Europe, only beaten by Germany and the Netherlands.
Mr. and Mrs. Jensen – the Danish consumers – are important, and often forgotten in the discussion of Denmark’s future as a renewable energy frontrunner. There is massive public support for Denmark being an environmental frontrunner. Mads Jürgensen, 27-year-old Dane and food waste coordinator at a catering company states that: “it is both reasonable and necessary that we as a developed country take the lead in the environmental battle,” he states. Megafon, a Danish analysis company conducted a survey in 2011, which said that no less than 88 percent of the Danish population believed that “Denmark in the future should have more windmills than we have now.” However, if Denmark starts to experience problems with the supply security, this support might not continue.
Brendstrup admits that while there are no current threats to the supply security, the closing of more power plants and/or a Northern European electrical market with fewer possibilities of import might pose a challenge: “Supply security is of outmost importance to Energinet.dk. That is why we have launched several pro-active initiatives to counter future threats,” he states. Currently Energinet.dk is looking into three initiatives: The first is strategic reserves, in-country power plants that don’t operate on a daily basis but can help locally if an electricity deficit occurs. Within Nord Poll both Finland and Poland have these. The second initiative is called Market Model 2.0, a national effort to gather suppliers to plan how future problems might be solved. One way to solve these is by the third initiative – the COBRA cable. This is an electrical cable from Denmark to the Netherlands, who has a somewhat different renewable energy setup than Denmark. While Denmark is close to Germany and Sweden, both geographically and in the approach to renewable energy, the Netherlands and Norway are both further away and have a different approach focusing on, for instance, water energy. This provides security if Denmark’s closest neighbors struggle to deliver the electricity needed.
So…
The Danish need to import electricity should not be seen as a national failure. Rather it should be seen as a natural development towards the 2020 and 2050 goals. At the moment, it should not be seen as a challenge, as there is an effective apparatus, Nord Poll, in place to make sure that Danes will be able to get the electricity they need. Therefore, Denmark should continue to be a frontrunner in renewable energy.
However, this conclusion must not cause Denmark to rest on their laurels, because there are challenges ahead. Nationally it is important that Energinet.dk continues to ensure a reliable electrical network, no matter if the electricity comes from Nord Poll, the Netherlands or strategic reserves. By securing a steady supply of electricity, Mr. and Mrs. Jensen will stay happy and supportive.
Internationally it is important that Denmark doesn’t run away from everybody else – as it is a real possibility that Nord Pool could end up with an electricity deficit in the future. This tendency can be countered in two ways – and both should be facilitated. Firstly, there should be research into ways of storing wind energy more effectively, while also researching other types of renewable energy that fit the Northern European climate. Secondly, there should be increased Northern European cooperation. As Nord Poll is based on liberal values, it is difficult to control it politically and still call it a free market. Therefore, there should be initiatives such as Market Model 2.0, but on an international scale. It is important to realize that no country can win the climate battle alone, so it is time for Denmark to use its frontrunner role to cooperate across Northern Europe.
Søren Otto Simonsen is an aspiring, ambitious journalist with a focus on business, finance and sports, who enjoy a humorous twist on journalism.
Photo by Kim Hansen via Wiki Commons.
