The European Commission has approved, under EU State aid rules, a Danish aid scheme to support electricity production from renewable sources: onshore and offshore wind, wave power plants, hydroelectric power plants and solar PV.
The measure will help Denmark reach its renewable energy targets without unduly distorting competition and will contribute to the European objective of achieving climate neutrality by 2050.
“This Danish scheme will contribute to substantial reductions in greenhouse emissions, supporting the objectives of the Green Deal. It will provide important support to a wide range of technologies generating renewable electricity, in line with EU rules,” said Executive Vice-President Margrethe Vestager, in charge of competition policy. “The wide eligibility criteria and the selection of the beneficiaries through a competitive bidding process will ensure the best value for taxpayers’ money and will minimize possible distortions of competition.”
The measure follows a previous Danish aid scheme for electricity from renewable energy approved by the EC in August 2018, which expired on Dec. 31, 2019. The scheme has a total maximum budget of about €400 million ($482 million) and is open until 2024.
The aid will be awarded through a competitive tendering procedure to begin this year and will take the form of a two-way contract-for-difference premium. This model guarantees renewable energy producers long-term price stability, helping them to make the necessary investments while limiting the cost for the state.
The Commission sees the aid as vital to meet Denmark’s environmental goals. It also has an incentive effect, as electricity prices do not fully cover the costs of generating electricity from renewable energy sources.
According to the International Energy Agency (IEA), Denmark is considered a leading nation in the global energy transition. The country aims to cut emissions by 70% from 1990 levels by 2030 and for renewables to cover at least half of the country’s total energy consumption by 2030.
The Nordic country has significant offshore wind potential and is home to some of the largest wind turbine producers, such as Vestas and Orsted.