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The Danish Transition - from 100% Oil Imports - via 100% Indigenous Production- towards 100% Green Energy

Anita RønneAssociate Professor in Energy Law, University of CopenhagenMember of the Danish Energy Regulatory AuthorityMember of the Evaluation Committee for Wind TurbinesChair of the Danish Energy Law Society

Energy Policy and Constitutional ChangeUniversity of StrathclydeFriday 18 January 2013

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The Kingdom of Denmark/the Danish Realm, includes 3 autonomous parts: Denmark (5.5m), Greenland (57t) and the Faroe Islands (49t). - Only DK is a member of EU

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Greenland - the Home Rule system and the step by step approach

1979 – Introduction of Greenland Home Rule Arrangement • Legislative and administrative responsibility in specified matters

• A special mineral resources regime was established • Pursuant to the Act on Mineral Resources in Greenland,and subsequent

agreements between the Prime Minister of DK and Greenland, the main elements were:

• Joint decision power and veto rights in resource matters;• Establishment of a joint Danish/Greenlandic Mineral Resource Council,

composed of 5 Danish parliamentary members and 5 Greenlandic;• Division of incomes from natural resource activities between DK and

Greenland;• Administration of mineral resources based in Greenland from 1 July 1998.

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Greenland - the selfgovernment system

2009 - The Greenland SelfGovernment Act came into force

• Provides for the Self-Government authorities to assume a number of new fields of responsibility, courts; police; aviation & mineral resource activities 

• Radically changes the Danish/Greenlandic relations regarding mineral resource activities in Greenland

• Greenland decided to take over responsibility for the mineral resource area on 1 January 2010

• Revenues from mineral resource activities in Greenland are to accrue to the Self-Government. Such revenues will have influence on the size of the Danish Government subsidy

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The Danish Point of Departure

1973-74 oil crisis

2 countries 99% dependent on imported fuels• Japan• Denmark (oil and coal)

Severe impact on the Danish society including economic decline due to energy dependent growth model

The trigger for change

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Energy Policy & Regulation in DenmarkUntil 1973:

Sufficient and cheap oil supplies, limited awareness on security and environmental impact of energy consumption and different fuels

• Energy legislation was rare and mainly dealt with safety matter

1970’ies:

Focus on energy security. Public intervention, influence and control• Adoption of sector acts, Electricity, Heating, Natural Gas• Subsoil Act already in 1936 but new act in 1981• Energy plans and strategies 1976 & 1979 -> supply flexibility

• indigenous production; national gas grid, heat planning

1990’ies:

Wave of liberalization - driven by European internal market• All energy acts amended

After 2000:

Climate Change (but still energy security and liberalization- 3rd package)- CO2 Quota Act, Act on Renewables, Amendments to Electricity & Subsoil Acts

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The Result and the Danish Energy Supply situation

In 1997 - Denmark became self-sufficient in energy

In 2005, the total production of oil, gas and renewables was 58 % higher than total energy consumption.

In 2011 and -> Self-suffiency for another decade and then need for import (some uncertainty)

0%

50%

100%

150%

200%

250%

1980 '85 '90 '95 '00 '06

Total Energy Oil

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Danish Energy Consumption Covered by:

• Domestic oil and natural gas resources• Domestic renewable energy sources

(wind, biogas, waste, straw, woodchips)• Imported coal supplies

No hydro-powerNo nuclear-power

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Does production matter? Economy 2005 & 2011• Income: the Danish state received from the activities in the North Sea

• 2005 - > DKK 24 billion (exhange rate 1 £ = 9 DKK)• 2011 – DKK 9 billion

• Oil production totalled• 2005 - 22 million m3• 2011 – 12,8 million m3

• Gas sales totalled• 2005 - 9.2 billion Nm3• 2011 – 5.6 Nm3

• Danish oil and gas reserves assessed to constitute• 2005 - 257 million m3 of oil and 122 billion Nm3 of gas• 2011 - 128 million m3 of oil and 43 billion Nm3 of gas

• Total production of oil, gas and renewable energy was• 2005 - 58 per cent higher than total energy consumption• 2011 – 110 percent of total energy consumption

• Oil companies invested almost DKK 4 billion in 2005 in developing 19 fields and DKK 4,3 billion in 2011 Source: Danish Energy Agency, Yearly Oil and Gas Report

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Production now and in the future

• Production seems to have peaked• None of the oil fields have discontinued production 34 years after

production started in the Danish part of the North Sea• New technologies have enabled the oil companies to recover

increasing volumes of oil from the same fields • water and gas injection• horizontal drilling• Injecting CO2 from power stations may prove to be a viable

option

• Shale gas?

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Policy Developments on changes in the energy mix – Renewables & Efficiency!!!!European Union:

20-20-20 by 2020

• 20 % reduction of CO2 emissions • 20% binding renewable energy target (including a 10% RE in transport)• 20% indicative target for improvement of EE

Denmark:• Political Strategy of 2011 &• Political Agreement between the Government and the opposition of March 2012

independence from fossil fuels by 2050

By 2020:• 35% RES of gross energy consumption (primarily wind and biomass) 50% RES of electricity consumption will come from wind (today 25%) 30% reduction of fossil fuel consumption Energy consumption will decrease by more than 12% in 2020 compared to 2006.

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Energy Policies of IEA Countries – Denmark - 2011 Review (Feb. 2012)

”Denmark is a leader among OECD member countries in terms of its well-designed policies for renewable energy, energy efficiency and climate change.”

• Denmark’s long-term energy goal is to become completely independent of fossil fuels use by 2050.• In 2011, the government published the Energy Strategy 2050• a detailed and ambitious policy document that sets out a series of new energy-policy initiatives.

• A long history of consensus-based policy making• political stability • clear long-term vision for low carbon future

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Types of Renewables in Denmark

Wind pow er; 3%

Organic Waste; 3%Biomass; 10%

Solar, ambient heat ; 1%

Share of Gross Energy Consumption: 17 % by 2007

(share doubled in 10 years)

Share of Electricity Supply: 29½ % by 2007

(share tripled in 10 years) Wind power; 20%

Organic waste; 4%

Biomass; 6%

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Renewable energy in Denmark – current consumption and future potential

020406080

100120140160180

PJ/year

Consumption Potential

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Wind Power in Denmark

Installed capacity = 3,124 MW (2007). 423 MW is off-shore.

Wind power generates 20% of the electricity production (2007)

The Danish wind turbine industry employs 28.000 persons and sells turbines for 7 Billion Euro (2008)

Most of the turbines are exported and Danish wind turbine industry serves 30% of the world market (2007)

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> 20 Years of Offshore Wind Experience

First Danish offshore wind farm 1991. Now 423 MW.

2 x 200 MW new wind farms in 2009 and 2010 and one 400 MW in 2012.

Existing and planned off-shore capacity (1225 MW) = 12% of total electricity consumption in 2012.

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3.2 Danish Status of Offshore Wind

Offshore wind farms No. of wind turbines, MW

1. Vindeby (1991) 11 turbines, 5 MW

2. Tunø Knob (1995) 10 turbines, 5 MW

3. Middelgrunden (2000) 20 turbines, 40 MW

4. Horns Rev I (2002) 80 turbines, 160 MW

5. Rønland (2003) 8 turbines, 17 MW

6. Nysted (2003) 72 turbines, 165 MW

7. Samsø (2003) 10 turbines, 23 MW

8. Frederikshavn (2003)  3 turbines, 7 MW 

9. Horns Rev II (2009) 91 turbines, 209 MW

10. Avedøre Holme (2009/10)

3 turbines, 10-13 MW

11. Sprogø (2009) 7 turbines, 21 MW

12. Rødsand II (2010) 90 turbines, 207 MW

13. Anholt (2012) 400 MW

14. Kriegers Flak (Planned) 600 MW

15. Horns Rev III (Planned) 400 MW

16. Coastal wind (Planned) 500 MW

Total: 1,168 MW(Including Anholt)

(2,668 MW)

Source: Danish Energy Agency

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DENMARK [Population 5,5 mill] Electricity developments 1985-2009

Decentralisation of production

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sø

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Samsø an island that transitioned from oil dependency to RES from wind, solar and biomass.

Samsø’s success inter alia:- local ownership- local commitment - practical action plans based on

proven technology and feasible goals

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Facts: Designated in November 1997100% RE in 10 years (2007) - > 120%Area of 114 square kilometresPopulation: 4,100 inhabitants (2008)Business sectors:

1) Agriculture2) Tourism (½ mill. overnight p.a.)3) RE projects

• Investment in RE projects: DKK 368 million21 modern wind turbinesAll six towns on Samsø have district heating65% of Samsø homes receive heating from biomass (district heating)

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Key challenges for the grid/infrastructure• Integration of substantial higher amounts of RES• Implying more fluctuating energy – wind, solar –

- output varies according to availability of the resource• Increasing number of smaller production units• Influencing production & demand - > smart grids• Consumers information and options for choice of supply. • Energy storage and linking new sectors like transport in

the form of plug- in and electric cars

The keyword: FLEXIBILITY

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Key Instruments to promote renewables Public support to research & demonstration of RE-

technologies Investment grants for standardized RE-equipment Favourable prices for electricity fed into the public grid Obligation to buy and use RES Tax incentives A suitable legislative and planning framework

2008 Act on Promotion of Renewable Energy Binding planning obligations for municipalities Promotion of local ownership Agreements between the Government and the opposition

and Government and the utilities

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Wind turbines: Main challenges

Local resistance on more land turbines• from land owners and municipalities

Best sites taken by old turbines

Grants may be better in other countries big companies go abroad

Lack of test facilities for MEGA- turbines

How to meet these challenges?

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Planning, Information and Public Participation

Through thorough planning and identification of suitable sites

Through involvement in thedecision-making process (planning participation – EIA)

Through information about theproject and the ongoing development

Through economic incentives or financial involvement in the project (financial participation)

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New instruments• Binding planning obligations for municipalities

• In 2010 & 2011 all municipalities have collectively prepared and adopted a supplement to their municipal plans,• with areas reserved for a total wind-turbine capacity of 75 MW in each of the years.

• National testcenter for MEGA-turbines is under construction• Owned by the Government• Enforced by law• 7 sites for turbines up to 250 m/ 20 MW• Visible 50 km away• Industry rents the site temporally

• Additional price supplement for scrapping certificates• Old ineffective turbines on good sites• Disfigures the landscape• When taken down you get a scrapping certificate, fully negotiable• For new turbines you obtain 5-6 cent instead of 4 cent /kWh

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New ways of balancing conflicting interests

1. Green scheme to enhance local scenic and recreational values- reward to the municipalities for planning,

about 25.000 EURO for 1 turbine – site

1. Guarantee fund to support financing of preliminary investigations by local wind turbine owners’ associations- State guarantee for loan taken by local groups to investigate for local turbines

3. Offer on 20 % ownership of production facilities- IF Wind turbines at least 25m in height onshore- person over 18 years, living < 4.5 km from the site of installation

4. Compensation for losses of property value

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Compensation Scheme Any person who, due to the construction of wind turbines, causes the loss of value to real property, shall bear the costs

In addition to EIA process - obligation to hold a public meeting to explain the consequences for surrounding real properties

A Valuation authority shall decide on the size of the loss of value on the basis of an individual assessment

• Composed by legal chairman and a real estate agent

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↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓ ↓

• Extra cost for erecting turbines

• Some uncertainty for the economy when investing

• Gives wind turbines a bad reputation on domestic & export markets

• Spoils the respect of physical planning

• Could spread to other sectors (agriculture?)

↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑ ↑

• Gives incentive to place turbines, where they causes minimum loss of value

• Helps to overcome local resistance as losses are now compensated

• Makes it easier for the municipalities to reserve land for turbines

Good or bad measure?Does it meet controversies in wind energy projects?

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Climate Change, Energy, Sustainability and Law

• ”a secure, competitive and low-carbon energy sector is possible””Energy Roadmap 2050, December 2011

Thank you for your attention!

Anita RønneFaculty of LawUniversity of Copenhagen, DenmarkEmail: anita.ronne@jur.ku.dk