Danish renewables auction too successful at driving down public cost of clean energy

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The results of the latest renewable energy auction in Denmark may have been too successful for the industry, with the government stating clean energy prices have fallen so low as a result, the public money allotted for solar and wind power subsidies may be diverted elsewhere.

“We have contracted far more renewable energy for far less money than expected,” said Minister of Climate and Energy Dan Jørgensen. “That’s good news for the green transition. The subsidy rate has dropped by another 30% in just one year.”

The minister said the low bids received in the renewables capacity auction would result in savings of around DKK101 million ($15 million) as not all of the DKK258 million allotted for the second national procurement exercise was required.

The Danish government said the auction’s result indicated an increasing number of projects can be implemented without subsidy, offering the chance for it to divert public funding elsewhere. The authorities said the budget for renewables auctions could be allocated for other energy transition uses such as backing the use of clean fuel in aircraft and shipping.

Savings

The government had put aside DKK842 million for the procurement rounds last year and this year with a further DKK4.2 billion for 2020-24.

The Ministry of Climate, Energy and Building said the Energystyrelsen procurement round launched at the end of September had allocated 252 MW of clean energy projects, including three solar projects with a total 82.7 MW of capacity, two solar-wind hybrid facilities offering 93.1 MW and two onshore wind farms for a further 72 MW.

The weighted average price premium, which will be paid for the power generated by the projects on top of spot market prices, is DKK0.0154/kWh ($0.00229). The ceiling price for the tender was set at DKK0.06/kWh. The average premium recorded in last year’s exercise was DKK0.0228/kWh, from a round with a ceiling price of DKK0.13. In that procurement, the Energystyrelsen assigned contracts to three solar plants with a total capacity of 104 MW and three wind farms for a further 165 MW after receiving 17 bids for 280 MW of solar and 260 MW of wind capacity.

The winning projects

In the latest exercise, the lowest bid – DKK0.010/kWh – was submitted by Overgaard 1B K/S, for a 36 MW wind turbine the company wants to build in the municipality of Randers. The second lowest offer, of DKK0.0148 was for two solar-wind hybrid plants with capacities of 53 MW (including 15.2 of PV) and 44.1 MW (with 18.9 MW of solar capacity) which Eurowind Energy A/S intends to build in Mariagerfjord and Herning og Holstebro, respectively.

PV project companies Solar Park Harre ApS, Solar Park Agersted ApS and Solar Park Holmen ApS submitted identical DKK0.0184/kWh bids for facilities in Skive (with a 38.1 MW generation capacity), Brønderslev (26.4 MW) and Ringkøbing Skjern (18.2 MW), respectively.

The highest bid posted in the auction, of DKK0.0197, was submitted by Wind Estate A/S for a 36 MW wind power project proposed in Randers.

Denmark had around 1 GW of installed solar capacity at the end of last year, according to International Renewable Energy Agency statistics, most of it residential and commercial PV systems. Last year, new additions totaled around 92 MW.

Unsubsidized large scale solar projects have started to appear in Denmark of late. Despite the high price of electricity in a highly-taxed economy, it is unclear whether unsubsidized PV projects are profit driven or attributable to the corporate social responsibility commitments of businesses.