A premium tariff and net-metering are used to promote renewable electricity in Denmark, which ensures successful development levels, particularly for commercial and industrial projects. It is supported, however, by the Danish Climate Agreement for Energy and Industry, which promotes a market-driven expansion approach for solar power and onshore wind. The agreement included DKK2.5 billion being allocated in the form of subsidies for electrification and energy efficiency improvements in industry, and DKK2.9 billion for low-carbon gases. Additionally, it increased taxes on fossil fuels being used for heating buildings and introduced tax incentives for using renewable electricity. All these are part of 2020 Climate Act, which sets a target to reduce Denmark’s greenhouse gas emissions by 70% in 2030 compared to 1990 levels and climate neutrality by 2050. In 2021 the act was amended to include the emission reduction target for 2025 of 50-54%.
Recent years have seen a rapid proliferation of unsubsidized utility-scale PV projects in the country. Unsubsidized solar PV represented the lion’s share of all PV systems deployed in 2022, followed by commercial and industrial installations. Corporate bilateral PPAs are the foundation of this segment. Few notable deals that took place in the market involve large conglomerates like Telia, Telenor, Toms Group and Carlsberg signing deals to offtake considerable amount of renewable electricity thereby facilitating the construction of PPA solar plant projects.
In Denmark, the government is increasingly putting forward robust funding and decarbonization strategies to encourage extensive use of renewables. The Danish parliament and the government reached three agreements in June 2022 covering a green investment fund, an enhanced unified carbon tax, and a renewable energy package that will quadruple solar and onshore wind energy production by 2030. The fund covers €7.2 billion in investments from 2024 to 2040 prioritizing larger and longer-term investments in climate, green energy and the environment.
The carbon tax emphasises the government’s intention to decarbonize the economy, especially the commercial and heavy industrial sectors at a cost-effective pace. The proposed agreement introduces an increased CO2 tax at a rate of DKK750 per tonne of emitted CO2 for companies not covered by EU Emissions Trading System (ETS), DKK375 per tonne for companies covered by ETS and DKK1,125 per tonne for companies who are large emitters and exempted from both agreements. Mineralogical companies receive a charge of DKK125 per tonne emitted. The charge will be increased over time, from DKK350 in 2025 to DKK750 per tonne in 2030. The reform is set to reduce Denmark’s CO2 emissions by 4.3 million tonnes, representing the largest single contribution to Denmark’s 2030 climate goals since the adoption of the Climate Act.
Another reason for the high volume of utility-scale installations in 2022 is probably the upcoming tariff scheme for grid connection that will significantly increase grid connection costs. The scheme will introduce a per-MWAC grid connection charge between €17,600 and €329,000 depending on connection voltage (from 10 kV at DSO level to 400 kV at TSO level) and geographical zone (production dominated vs. consumption dominated).
