Denmark’s Energy Commission says incentives for renewables should be phased-out

Denmark’s Minister for Energy, Utilities and Climate, Lars Chr. Lillehol announced the creation of a new Energy Commission to analyze recent developments in the energy sector and make recommendations for the country’s future energy policies in April 2016.

The commission has now provided a series of recommendations, which will be included in Denmark’s future energy strategy by 2030, and comprise the request to phase-out renewable energy incentives at the same rate as clean power sources become competitively viable.

The authority stressed that a complete change in energy policy is needed, and that the country’s future energy sector should be more market-based. “Concluding the work of the Energy Commission,” said Chairman Niels B. Christiansen, “it is obvious to us that an ambitious energy policy starting as early as 2020 is mandatory if we are to meet our long-term objective of a low-emissions society based on renewable energy in 2050.”

Lillehol has welcomed the commission’s recommendations, claiming that there is no contradiction between being ambitious and focusing on cost. “We need to adjust our energy and climate policies,” Lillehol stated, “in order to gain as much green transition for our expenses as possible. That’s common sense, and I think that the commission has given us some excellent, clear advice as to how we can take the next smart step in Denmark’s green transition.”

In December 2016, Lillehol decided to close the second phase of the incentive scheme for solar (the so-called ‘transitional model’), after revealing that there were 1,660 MW of PV projects under the scheme which were unapproved due to budget issues. The vast majority of these projects, the government stated, was submitted for approval during 2016, after the transitional model was launched in late 2015. The minister claimed that, if approved, these projects would have resulted in an additional cost of DKK 4.5 billion ($659.8 million).

In December 2016, the Danish Parliament also approved the government decision to gradually abolish during the period 2017-22 the Public Service Obligations (PSO) levy, which finances the country’s renewable energy incentives program. Starting from 2023, eventual incentives for renewables, which are currently being financed by power consumers, should be paid with the state budget.

Meanwhile, the country’s cumulative installed PV capacity reached 854.8 MW as of Mar. 3, 2017, according to the latest statistics from Danish energy operator Energinet.dk.

New additions for the first two months of this year totaled only 3.7 MW, while newly installed PV capacity for 2016 was 71.4 MW. This compares to 181.2 MW in 2015, 40.5 MW in 2014, 162.4 MW in 2013, and 373.7 MW in 2012.

Most of the country’s PV capacity was installed under the first phase of the incentive scheme between 2012 and 2013, while the above-mentioned transitional model of the scheme with lower tariffs was mainly responsible for the growth of the past three years.

Energinet.dk expects Denmark will reach an installed PV power of around 2.1 GW by 2025. The country is targeting to become fully independent of fossil fuels by 2050.