2024
Energy Storage Report
Key Regional Markets
Denmark
GDP (Current Prices) USD (2022) | 401.13bn |
GDP Growth Forecast (constant prices) (2023-2027) | 1.38% |
10yr Govt Bond Yield (12-month rolling average) | 2.64% |
Country Credit Rating (S&P) | AAA |
Battery Storage Capacity | NA |
Pumped Hydro Storage Capacity | NA |
RE share of Total Electricity Capacity | 69.7% |
Battery Storage Outlook | NA |
Energy Mix and Case for Storage
Note: The chart above excludes hydro power’s 0.1% share in 2022 for representational purposes. Source: Statista (Statista, 2023)
The Danish energy mix is characterised by its high renewable energy share. As of end-2023, the monthly generation reports of Danish Energy Agency indicated an almost 70% share of renewable energy in the net power generated. This includes primarily wind and solar, with a marginal role of hydropower (DEA, 2023). Distributed energy systems (deployed primarily in district heating and cooling) have been the hallmarks of the Danish energy system. Progressively, renewable energy generation is instrumental in catering to heating/cooling needs (such as heat pumps powered by clean energy sources).
The policy focus towards energy transition helps sustain the momentum. Presently, the country follows a binding target of 70% reduction in emissions by 2030, relative to the 1990 level. Furthermore, the Danish Energy Council (in its official advisory capacity) deliberates on the 2035 targets (Danish Council on Climate Change, 2023). Fossil fuel phase-out is part of the ongoing policy-level steps to enable the emerging energy transition – the Danish policy authorities indicated this effect for the COP28 scheduled for November 30, 2023 (Reuters, 2023).
The accelerating share of renewable energy has been accommodated through a mix of measures, including procurement of capacities for frequency management (among other grid ancillary services) and network capacity. The latter has been a significant avenue for grid reliability. The network operator’s (Energinet) cross-border interconnector infrastructure, connecting Denmark to the Nordic and Central European power trading systems, is integral to maintaining balance. The existing power market design is thus aligned with the cross-border power market transactions that lend flexibility for the generation capacities in the grid.
Capacity: Status and trend
The Danish power market has yet to have a viable grid-connected standalone battery storage business. However, it is slowly coming up, led mainly by the equipment and technology providers. With rising renewable energy penetration in total grid-connected power supply, one can expect more technology demonstration projects in grid-scale storage applications. Frequency regulation and renewable energy firming are among the preferred applications in battery deployments.
Some recently commissioned projects stand out for the technology deployment or the application. For instance, Kyoto Group’s 18MWh molten salt-based project is the first of its kind worldwide to cater to the district heating requirement. In this regard, it replaced a coal-based combined heat and power (CHP) project. It enabled a viable renewable energy-based alternative for CHP units engaged in district heating and cooling roles. Vestas, a wind power equipment manufacturer, installed a 2.3MWh battery system at its headquarters location as a proof-of-concept to establish the grid-connected storage configurations. It is also meant for electric vehicle charging, among other applications.
Notable Installed Battery Storage Projects
| Name | Capacity | Storage Type |
|---|---|---|
| Norbis | 18MWh | Thermal storage based on molten salt |
| Vestas Aarhus | 2.3MWh | Lithium-Ion; Proof-of-concept demonstration |
| RISO Syslab | 15kW | Redox Flow battery; Renewable energy firming role |
| Vesetas Lem Kær | 1,200kW | Lithium-Ion; Frequency regulation demonstration |
Policy and Regulation
Denmark has no specific policy or regulatory framework to promote grid-scale energy storage. In energy transition and grid management, the country has relied on various solutions, including interconnection, frequency reserve services and others. The Danish TSO Energinet devises the norms and practices related to grid management and the related services potentially relevant to energy storage. The TSO relies significantly on the interconnector network instrumental for cross-border transactions. From a grid management perspective, the interconnectors enable network congestion management, capacity markets, and ancillary service markets to ensure seamless integration.
Since early 2020, Denmark and other EU countries, namely Sweden, Finland, and Norway, launched the common Fast Frequency Response (FFR) market (Fluence Energy, 2023) involving 300MW worth of procurement to manage frequency deviations arising from renewable energy integration. In Denmark, the power procurement for grid ancillary services (of which frequency reserve is one part) is done separately for the power markets of eastern and western Denmark. Thus, for the eastern market, the ancillary services to be delivered include primary reserve, secondary reserve, manual reserve and network stability properties. The Western market is distinct due to additional services, such as FFR, frequency-controlled disturbance reserves (upward and downward) and frequency-controlled normal operation reserves (Energinet, 2023).
Energinet’s study (as of 2020) commissioned for the feasibility of engaging energy storage systems in the Danish network points to the limited value in the existing power market framework (Energinet, 2020). Thus, the storage assets’ scope of market participation is mainly in the ancillary services segment.
Market Developments and Opportunities
The Danish market is yet to be effectively tapped for battery storage in grid management. The opportunity will unfold as the power system expands while phasing out all operational thermal capacities.
As referred to earlier, Energinet’s study in this context has some pointers. The ancillary services segment is one. Battery storage technologies satisfy the market’s technical requirements and can accommodate the demand related to primary and secondary reserves in the frequency response market. In the analysis, the Danish primary frequency reserve offered attractive returns on investments for a potential future rollout.
More demonstration projects are underway to establish the business case in the upcoming grid scenario. The Bornholm Smartgrid Secured System (BOSS) is one grid-scale storage demonstration project operational since 2021. This 1,110kW, DKK30 million project was co-funded by the Danish Energy Technology Development and Demonstration Program. The BOSS project partners are ready to expand the testing and experimentation for various grid services and use cases. Bornholm is one of the two islands tentatively marked for setting up as hubs collecting offshore wind energy generation to route it further to Danish and other neighbouring European power transmission networks. The Bornholm Island will have an estimated 2GW capacity for power transfer.
A vital demonstration project conducted in 2020, jointly by Energinet and Energi Danmark (energy trading company), sought to explore the possibility of a wind power project in a grid balancing mechanism or ancillary service segment. The project concluded that with forecasting precision, wind power projects could participate in the market for balancing services. With further investments, this could be scaled up for opportunities to pair wind power plants with storage facilities to fetch higher value in the grid balancing services market.
Outlook
The future rationalisation of the costs of battery storage systems and the commercialisation of better technical configurations could change the existing paradigm. Some of the technologies under testing hold promise in this context. Furthermore, the Danish power system is likely to rely on interconnectors to ensure the system’s reliability and balance till battery storage systems offer a competitive and efficient alternative for the network operator.
The Danish energy storage market carries significant potential with a conducive market design. It is now at a nascent stage for battery storage developers. There is limited scope in value-stacking, and the need for incentives against existing market mechanisms with Nordic countries deters potential large-scale investment. Yet, the ongoing energy transition, the battery storage demonstration projects, and the planned rapid scaling up of wind power capacity could collectively shape the outlook for the better.