20060531-IEA-Energy_Policies_of_IEA_Countries_Denmark_2006_179页_1mb

Summary of Denmark's Energy Policies (2006 IEA Review)

Core Content

The 2006 IEA in-depth review of Denmark's energy policies highlights the country's leadership in renewable energy and energy efficiency, while also identifying challenges and areas for improvement. Denmark's energy strategy is characterized by proactive government involvement, market reforms, and a focus on sustainability and competitiveness.

Main Points

1. Overview of the IEA and OECD

• The International Energy Agency (IEA) is an autonomous body within the OECD that promotes energy policies and international cooperation.
• The IEA includes 26 OECD member countries and the European Commission participates in its activities.
• The review of Denmark's energy policies was conducted by a team of energy experts from IEA member countries and the IEA Secretariat.

2. Denmark's Energy Policy Context

• Denmark is a leading country in renewable energy and energy efficiency, offering valuable lessons for other IEA members.
• The country has a very challenging Kyoto target, making its renewable energy policies particularly significant.
• The renewable energy sector has grown substantially, with renewables accounting for 13.4% of total primary energy supply (TPES) in 2003 and 25% of electricity generation by 2004.

3. Benefits of Renewable Energy

• GHG Emissions Reduction: Renewables reduced 6.5 million tonnes of CO₂ in 2004, or 10% of that year's emissions.
• Energy Security: As a domestic resource, renewables enhance supply diversity and security.
• Economic Impact: The Danish wind turbine industry is a global leader, contributing to employment and exports.

4. Costs and Challenges of Renewable Support

• PSO Payments: A surcharge on electricity bills to support renewables, reaching 5.4 øre per kWh in 2005.
• Cost-Effectiveness: Historically, the cost of reducing CO₂ through renewables was EUR 35–50 per tonne, higher than other methods.
• Market Impacts: Government support can distort market competition and create over-subsidisation.
• Intermittency Risk: Wind energy's intermittency can challenge energy security, requiring reliance on hydro-rich neighbors and continental connections.

5. Energy Efficiency Achievements

• Denmark has the lowest energy intensity in the EU, 35% below the IEA average.
• The government has implemented stringent building codes, public service campaigns, and industry agreements to improve efficiency.
• Efficiency Measures: These have led to cost-effective emissions reductions, with some efforts being completely cost-free.

6. Challenges in Energy Efficiency

• Transport Sector: Largely excluded from efficiency programmes, despite representing 33% of final energy consumption and showing the fastest energy growth.
• District Heating: Currently regulated with cost-plus tariffs, which are not effective in promoting efficiency. Benchmarking and managed competition could improve this.
• Measurement Complexity: There is a need for standardized measurement methods to assess efficiency savings accurately.

7. Market Reforms and Integration

• Denmark is a member of Nordpool, part of the most competitive electricity market globally.
• The DONG merger (combining gas, electricity, and distribution) raises market power concerns, potentially impeding competition and raising prices.
• The government and regulator should monitor and investigate potential price increases due to the merger.

Key Recommendations

General Energy Policy

• Review and Refine Taxation: Implement more targeted and efficient price signals to achieve energy policy objectives.
• Monitor Market Impacts: Assess the competition effects of market integration, especially from the DONG merger.

Energy and Climate Change

• Account for Compliance Risks: Consider the availability and cost of JI and CDM credits and EU-ETS allowances.
• Address Emissions Obligations: Evaluate the competitive implications of emissions reduction requirements for EU-ETS sectors.
• Investigate Domestic Measures: Explore cost-effective domestic solutions for emissions reduction outside the EU-ETS.
• Avoid Double-Burdening: Analyze the double-burdening of CO₂ emissions by EU-ETS and Danish taxes.
• Address Windfall Profits: Investigate the profit implications for installations receiving free EUAs.

Energy Efficiency

• Continue Ambitious Targets: Maintain efforts to increase energy security, reduce emissions, and enhance competitiveness.
• Cost-Benefit Analysis: Conduct further cost-benefit evaluations of individual efficiency measures.
• Clarify Market-Oriented Systems: Define the "market-oriented" system for distribution companies, and consider examples from Italy, France, the Netherlands, and the UK.
• Standardize Measurement Parameters: Establish clear and standardized parameters to assess efficiency programmes, especially with the 2008 review providing limited time for evaluation.
• Implement Regulations for Buildings: Enforce new energy regulations across all levels of government to ensure compliance and effectiveness.

Conclusion

Denmark's energy policies have been proactive and effective, especially in renewable energy and energy efficiency. However, the cost-effectiveness of these policies and their market impacts require further analysis and refinement. The country's leadership in wind energy and efficiency measures serve as a model for other IEA members, but challenges remain, particularly in transport, market integration, and policy coherence. The government and regulator are encouraged to improve transparency, enforce regulations, and develop objective methodologies to ensure sustainable and cost-effective energy policies.