Danish energy policy mandates the complete phase-out of fossil fuels in the energy supply by 2050. In the long term, electricity, heating, industry and transport energy are to be provided entirely by renewable sources. In the medium term, the 2012 Energy Agreement sets targets of 35% renewable energy in final energy consumption, approximately 50% of electricity consumption supplied by wind power, and a 7,6% reduction in gross energy consumption (in relation to 2010) by 2020. (Danish Ministry of Energy, Utilities and Climate – EFKM, 2012).
Denmark’s energy model offers lessons on how an energy system can be radically changed through sectoral planning, private sector involvement and wide-reaching reforms. Denmark’s highly ambitious energy strategy is supported by a large majority in the Danish Parliament and sets an integrated framework for a transition to a society independent of fossil fuels, providing both long and medium term targets based on technical analysis and a participatory stakeholder process. The energy model provides a diverse set of instruments and mechanisms to achieve system-wide change that is aligned with national climate and economic growth strategies, and leverages public and private investment.
Energy Agreements are negotiated between the Danish Ministry of Energy, Utilities and Climate (EFKM), the Ministry of Finance, the Ministry of Taxation and the Ministry of Environment and Food (for instance regarding the planning perspective of offshore wind).
The Danish Energy Agency (ENS) undertakes research and technical analysis. Interested organisations such as energy associations, the confederation of industry, civil society actors, consumer groups and cooperatives are involved in policy dialogues.
EFKM estimates that the initiatives of the Energy Agreement will require financing of roughly EUR 470m in 2020. Denmark provides a mix of financial support schemes to create a positive investment environment that stimulates demand and promotes the expansion of renewable energy (EFKM, 2012: 10; ENS, 2015b):
Finance mechanisms to cover high initial investment costs of renewable energy - such as wind turbines - include priority access and resource-based feed-in tariffs. Feed-in tariffs for offshore wind are settled by tender and feed-in premiums with a cap to regulate onshore wind support;
The expansion of renewable electricity production is financed through Public Service Obligation schemes (PSO) that supplement the price of electricity paid by consumers. A similar PSO scheme
exists to finance subsidies for renewable energy in the gas grid;
Energy saving initiatives by energy companies are financed through tariffs and the consumers’ energy bills;
Regulation ensures that local communities have the opportunity to invest in new onshore wind turbines (20% of a commercial project must be tendered to local people);
Research, development and demonstration of new green energy technologies receive funding through a number of public-private cooperation channels, e.g. the Danish Transmission System Operator Energinet.dk (ForskEl/VE), the Danish Energy Association for energy companies (ELforsk), and the Energy Technology Development and Demonstration Program (EUDP).