Danish parliament discusses 2018-2019 multiple-technology RES auctions

This story was originally published for ICIS Power Perspective subscribers on 07 May 2018 at 17:48 CET

The Danish parliament is set to have the second and third reading of the draft amending renewable energy act and related laws on 8 and 17 May 2018. For the first time, this law will establish multiple-technology renewable electricity auctions in 2018 and 2019. These auctions are expected to bring around 190MW capacity online. Simultaneously, the Danish government plans to add 1.08GW of multiple-technology auctions in 2020-2024.

Background

• The first reading took place on 10 April 2018, and the law is expected to enter into force on 1 July 2018
• The Danish Energy Agency expects that the call for bids for multiple-technology tenders will be announced in September 2018, with a deadline for bids in November 2018
• The date for the 2019 tender is yet to be specified
• Solar PV, onshore and offshore wind power plants that undergo open-door procedure can compete in the tender
  • Onshore wind and solar panels will have to be realised in two years, and offshore projects in four years
  • The government expects these tenders to bring online around 190MW renewable electricity capacities
  • The aid will consist of fixed feed-in premiums (FiPs), distributed using pay-as-bid principle
    • The FiP would be handed out for 20 years
    • A price ceiling is Danish krone (DKK) 130/MWh (around €17.50/MWh)
  • Initially DKK1.015bn (€136.3 m) was expected to be deposited for these two multiple-technology auctions: DKK365m in 2018 and DKK650m in 2019)
  • Currently, the expected tender budget in 2018 is DKK250m and in 2019 DKK579m
  • The time frames and tender budgets are not final and can consequently still change
  • Please see the links to the summaries of the current Electricity Supply Act and Act on the Promotion of Renewable Energy on Power Perspective Portal
• Furthermore, Denmark plans a set of multiple-technology auctions in 2020-2024 that is expected to bring online more than 1GW of RES capacities (link to an analyst update)
  • The Danish government announced the strategy for achieving 50% renewables by 2030 at the end of April 2018
  • A total of DKK4.6bn (€560m) to be invested in renewable electricity production between 2020 and 2024, distributed in annual multiple-technology auctions
  • In these auctions solar, onshore wind, offshore wind, wave and hydropower projects would compete against each other for subsidies
  • This is expected to lead to 215MW of capacity per annum 2020-2024 (1.08GW total)

Analysis

• The law will very likely be amended and technology neutral auctions announced as planned, as it was drafted based on a political agreement
  • Denmark has a tradition of broad political agreements in the energy policy since the 1980s (link to the full list of the energy policy political agreements in Danish)
  • Governments reach those agreements with other political parties in the parliament or with energy companies
  • The 2018-2019 solar/wind auction framework was agreed in a political agreement between the government parties and Danish People’s Party in September 2017
    • This was necessary as the previous scheme of onshore and open-door offshore wind was expiring in February 2018
    • Besides, the support scheme for solar PV had been repealed earlier (link)
  • Potential results of multi-auction tenders – other countries
    • Spain: although mainly onshore wind producers were successful in the first 2017 multi-technology auction, the second one in July 2017 resulted in solar power projects winning the largest share of the capacities (link to an analyst update)
    • Germany: the multi-technology auction in Germany in 2018, held in February, resulted in solar PV winning all 210MW (link to an analyst update)
    • Lithuania: geographically located on the other side of the Baltic Sea to Denmark, it also plans 250MW multiple-technology auctions in 2019, and the Danish results will be a litmus paper to measure competitiveness of solar PV (link to an analyst update)

Vija Pakalkaite is Analyst – EU Carbon & Power Markets at ICIS. She can be reached at Vija.Pakalkaite@icis.com

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