energy strategy 2050 - Energy Europe

energy strategy 2050 

– from coal, oil and gas to green energy 

the danish government 

February 2011

Introduction: From coal, oil and gas to green energy 

2 

Energy Strategy 2050 – from coal, oil and gas to green energy.

Content 

Preface.......................................................................... 4 

Introduction: 

From coal, oil and gas to green energy.......................... 6 

Chapter 1 

New challenges and new opportunities 

for energy policy ......................................................... 10 

Chapter 2 

A flexible strategy ....................................................... 16 

Chapter 3 

Initiatives in the strategy............................................... 28 

Chapter 4 

On the way towards fossil fuel independence by 2050 

– effects and benefits of the government’s initiatives ......... 46 

Chapter 5 

A fully financed transition ............................................ 56 

Energy Strategy 2050 – from coal, oil and gas to green energy. 

3

Preface 

The 20th century was largely driven by access 

to cheap and plentiful coal, oil and gas. 

However, in the 21st century we will have to 

find other means of satisfying our energy needs 

4 


A new era for energy policy 

Energy Strategy 2050 is a huge step towards realising 

the Danish government’s vision of becoming independent 

of coal, oil and gas. 

In 2010 the Danish Commission on Climate Change 

Policy concluded that transition to a fossil fuel independent 

society is a real possibility. Energy Strategy 2050 

builds on this work. 

This strategy is the first of its kind; in Denmark and in the 

rest of the world. The strategy outlines the energy policy 

instruments to transform Denmark into a green sustainable 

society with stable energy supply. The strategy is 

also fully financed, taking full account of Danish competitiveness. 

The strategy presents a wide spectrum of new energy 

policy initiatives. These initiatives will already in the short 

term considerably reduce fossil fuel dependence. Just in 

the period up to 2020, the strategy will reduce the use of 

fossil fuels in the energy sector by 33% compared with 

2009. In addition, the strategy will increase the share 

of renewable energy to 33% by 2020 and it will reduce 

primary energy consumption by 6% by 2020 compared 

with 2006 due to a strong focus on energy efficiency 

improvements. 

The government’s goal of making Denmark independent 

of fossil fuels by 2050 is based on the realization that 

the world is facing a new era for energy policy. The 20th 

century was largely driven by access to cheap and plentiful 

coal, oil and gas. In the 21st century we will have to 

find other means of satisfying our energy needs. 

Within the next 25 years, the world’s total energy consumption 

is expected to increase by one-third. At global 

level, the increasing pressure on fossil energy resources 

has contributed to an energy race, in which the influence 

and growth opportunities of regions largely depend on 

their access to fossil fuels, with increasing prices and 

uncertainty as a consequence. 

The Danish government does not wish to be part of this 

race. The government’s resolve is only strengthened by 

the fact that much of the world’s fossil energy reserves 

are concentrated in just a few, often politically unstable, 

countries. This combination can have negative consequences, 

with increased dependence on producing 

countries. Therefore, the transition to green energy is 

also a foreign policy requirement. 

In addition to addressing the challenges in a new era of 

energy policy, Energy Strategy 2050 is also Denmark’s 

contribution to curbing global warming. The international 

community has committed to drastic reductions 

in greenhouse gas emissions at international climate 

change conferences in Copenhagen and Cancún. The 

world - and Denmark - can only do this by becoming 

less dependent on fossil fuels. 

Finally, the strategy will bolster Danish growth and 

wealth. The transition will strengthen companies’ opportunities 

for innovation and demonstration of new green 

solutions. This will improve the opportunities of Danish 

companies in a rapidly growing global market for energy 

solutions. 

The transition to fossil fuel independence is a huge 

task that will fundamentally change Danish society. 

Fortunately, Denmark can draw on many years of solid 

experience. Denmark has a successful track record of 

securing economic growth without energy consumption 

growth. Since 1980, the Danish economy has grown by 

78%, while energy consumption has remained more or 

less constant, and greenhouse gas emissions have been 

reduced. 

It is important to emphasise that the Danish transition 

cannot be realised in isolation, independent of the world 

around us. Denmark is not an island – not geographically 

and not in the field of energy policy. We need other 

countries – and our European neighbours in particular 

– to move in the same direction. Therefore, the Danish 

government will continue to work for ambitious global 

reduction targets. The government will strive for an EU 

commitment of 30% carbon emission reductions by 

2020. Furthermore, the Danish government is committed 

to working against green protectionism. 

The Danish government’s strategy ensures responsible 

transition to a new era of energy policy. A transition that 

safeguards affordable, stable energy supply, is gentle on 

the public purse, supports the growth potential of Danish 

companies, and protects the leeway in our foreign policy. 

The Danish government, February 2011 


5

From coal, oil and gas to green energy 

Introduction: 

From coal, oil and gas to green energy 

Energy Strategy 2050 fulfils the government’s pledge as set 

forth in its work plan “Denmark 2020”, that it would present 

a target for when Denmark is to become independent 

of fossil fuels, as well as a strategy to meet this target 

6 


The goal of the Danish government is independence 

from coal, oil and gas by 2050. With this move to fossil 

fuel independence, Denmark will also satisfy two other 

important ambitions: 

• Denmark will maintain a high security of supply and 

ensure stable, affordable energy supply. Security 

of supply will be a key challenge in a future, where 

the global demand for energy is growing in line with 

population growth and economic growth, and where 

the remaining oil and gas resources will be concentrated 

in few, and often politically unstable, countries. 

• Denmark will contribute to limiting global climate 

change as agreed in Copenhagen 2009 and in 

Cancún 2010. Therefore, Denmark must contribute 

to meeting the EU objective to reduce greenhouse 

gas emissions in 2050 by 80-95% compared with 

1990 levels. This requires the transition to an economy 

with low greenhouse gas emissions. 

In addition, the government’s strategy for fossil fuel independence 

will help secure and develop the strength of 

Danish companies within the fields of new green energy, 

climate and environmental technology. A stronger coupling 

between innovation, production and deployment 

will improve companies’ opportunities to take advantage 

of the increasing global demand for green technologies 

in order to create growth and employment. 

Energy Strategy 2050 fulfils the government’s pledge 

as set forth in its work plan “Denmark 2020”, that it 

would present a target for when Denmark is to become 

independent of fossil fuels, as well as a strategy to meet 

this target. 

At the same time, Energy Strategy 2050 supports and 

meets a number of Denmark’s ambitious targets in the 

climate and energy area in the government’s work plan, 

in the national energy agreement for 2008-2011, and as 

a consequence of the EU climate and energy package 

from 2008. 

Independence of fossil fuel 

Denmark will maintain a high 

level of energy security of supply 

Denmark will contribute its 

share to curbing global warming 

Demark will harvest opportunities for green growth and employment 

Figure 0.1. Effects of independence of fossil fuel 


7

Introduction: From coal, oil and gas to green energy 

Targets in the government’s work plan 

•• 

Denmark is to be a green and sustainable society 

•• 

Denmark is to be among the three countries in the 

world to raise its renewable energy share most by 

2020 

•• 

Denmark is to be among the three most energyefficient 

countries in the OECD by 2020. 

Danish targets arising from the EU climate and 

energy package 

•• 

The share of renewable energy will be increased to 

30% of final energy consumption by 2020 as part 

of an overall EU target of 20% renewable energy by 

2020. 

•• 

The share of renewable energy in the transport sector 

will be 10% by 2020 

•• 

Emissions in the non-ETS sectors will be reduced 

gradually in 2013-2020 and by 20% by 2020 relative 

to 2005 as part of an overall EU target to reduce 

emissions by 20% by 2020 relative to 1990. 

Targets in the national energy agreement for the 

period 2008-2011 

•• 

In 2020, primary energy consumption will be 4% less 

than in 2006. 

Danish objectives for EU climate and energy 

policy 

•• 

The government is working for an EU commitment 

to reduce overall emissions of greenhouse gases by 

30% by 2020 relative to the 1990 level. 

Box 0.1 The government’s targets underpinned by Energy 

Strategy 2050 

Fossil fuels are cheaper than renewables. This will probably 

hold true for some time yet. This implies economic 

costs in the transition to fossil fuel independence and will 

ultimately have to be paid by the Danish consumers of 

energy; in other words by companies and private households. 

The government therefore believes it is vital that 

the transition takes place as cost-effectively as possible, 

with concern for the long-term viability of public finances, 

the competitiveness of companies and ultimately for 

Danish jobs. 

On the one hand, measures should not be forced 

through with an unnecessarily high expenditure right 

now. On the other hand, the benefits of lower greenhouse 

gas emissions, lower energy consumption, more 

stable fuel costs and less dependence on fossil fuels, 

also have value in the years up to 2050. 

8 


An economically responsible transition to 

fossil fuel independence is important to the 

Danish government 

What is implied by independence 

of fossil fuel 

Obviously, any goal reaching almost 40 years into the 

future is associated with uncertainties. Therefore, the 

government’s goal of fossil fuel independence includes 

some flexibility. 

In summary, the government’s goal is a greenhouse gas 

neutral energy sector, which utilises 100% renewables, 

or a combination of renewables and coal/biomass with 

CCS (carbon capture and storage). The goal also entails 

the continued exchange of energy products with other 

countries, so that Denmark continues to exploit all the 

advantages of being part of an international energy 

market. For example, developing and participating in the 

European electricity market. 

The ambition is also for a renewable energy based 

transport sector. However, in respect of achieving this 

Denmark is dependent on international technological 

developments and therefore has to adapt the level 

of ambition to the future technological and economic 

development. 

Box 2.0 The goal of fossil fuel independence 

Principles for the transition 

to independence 

An economically responsible transition to fossil fuel 

independence is important to the Danish government. 

This means that the transition will meet the following 

principles: 

A cost effective transition 

The transition will be cost effective, with initiatives providing 

maximum security of supply and the highest reduction 

in the use of fossil fuels for every DKK of expenditure. 

This means that focus is not on large-scale use of 

technologies which require high subsidies. Instead, for 

these technologies focus is on research, development 

and demonstration, which in the long term can make 

them competitive, at lower levels of subsidy. 

Minimal impact on public finances 

The distribution of benefits and costs in connection with 

the transition must not burden public finances. Therefore, 

the transition is fully financed, with expenditures 

primarily covered by consumers of energy (companies as 

well as households). 

Retaining competitiveness 

The transition needs to take the competitiveness of Danish 

businesses into account. This requires that companies 

know the long-term framework, within which they 

must operate, and that energy costs do not increase 

significantly. 

Full utilisation of international frameworks 

The transition will make full use of the opportunities of a 

globalised world and of ever closer EU cooperation. The 

goal is not a self-sufficient Denmark. On the contrary, 

Denmark will continue to exploit all the advantages of 

being part of an international energy market. 

The strategy will also ensure that the transition does not 

undermine nature or environmental assets. This implies 

for instance, that the infrastructure will take account 

of nature and people’s opportunities to enjoy it. It also 

entails a sustainable use of biomass resources. 


9

New challenges and new opportunities 

1 

New challenges and new opportunities for energy policy 

for energy policy 

The 21st century will have to be the century 

in which we find new solutions to satisfy the 

demand for energy services, i.e. lighting, 

heating, transport, production etc. 

10 


The next 100 years will bring considerable 

change, with an increasing number of people 

demanding a share of the energy 

Energy is a prerequisite for a modern society with economic 

growth and welfare. We take power and heating 

for granted, just as we take access to clean drinking 

water and clean air for granted. This has held true for 

most of the 20th century, and it should to apply for the 

21st century. 

However, for economic, strategic and environmental 

reasons, we will have to take a completely fresh look 

at the way in which we consume and produce energy. 

Over the last hundred years, western societies have had 

access to plentiful and relatively cheap fossil energy. The 

next 100 years will bring considerable change, with an 

increasing number of people demanding a share of the 

energy, while available fossil fuels become ever scarcer 

and oil resources are concentrated in the hands of just 

a few countries. There is also the fact that global climate 

problems will require us to burn far less coal, oil and gas. 

The 21st century will have to be the century in which 

we find new solutions to satisfy the demand for energy 

services, i.e. lighting, heating, transport, production etc. 

With these challenges also come new opportunities for 

Denmark, since the majority of countries will be faced 

with the same challenges, meaning that there will be a 

considerable growth in the demand for green technologies; 

an area in which Danish enterprises excel. 

A good foundation 

Over a number of years, Denmark has enjoyed high 

security of supply with world-class energy efficiency, and 

an increasing share of renewable energy. This is due to 

a radical conversion of the Danish energy system since 

the first oil crisis in 1973. Firstly, considerable energy 

efficiency improvements have taken place at companies 

and in households, and energy production has likewise 

been made more efficient, for example through the 

expansion of district heating and combined heat and 

power production (CHP). Secondly, the fuel mix has 

changed from 95% dependence on imported oil to a differentiated 

energy supply based on coal, oil, natural gas 

and renewables. 

Independence of fossil fuels is to preserve this favourable 

situation in a future where Denmark and the rest of 

the world will experience increasing demand for energy 

services, while the production of fossil fuels, especially 

oil and gas, will be concentrated in ever fewer countries 

and regions. 

1973 

1985 

2011 

2050 

95% of 

Danish energy 

consumption 

covered by 

imported oil 

Electricity and 

heating from coal 

and natural gas 

Increased 

energy efficiency 

Oil and gas from 

the North Sea 

Figure 1.1 Phases in the transition of the Danish energy 

system 

High energy 

efficiency 

Large share of 

renewable energy 

Net exporter 

of energy 

Denmark is 

independent 

of fossil fuels 


11


Security of supply under pressure 

The world’s population will increase towards 9 billion by 

2050. Many people will become wealthier and as a consequence, 

the demand for energy for electricity, heating, 

transport and industry will increase. Within the next 25 

years alone, it is expected that the world’s total energy 

consumption will grow by approximately 34% according 

to calculations by International Energy Agency, IEA. This 

development is driven primarily by a growing demand in 

large developing countries and growth economies such 

as China and India. 

18,000 

16,000 

14,000 

12,000 

10,000 

8,000 

6,000 

4,000 

2,000 

0 

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 

Mto 

China 

United States 

European Union 

India 

Middle East 

Japan 

Inter-regional (bunkers) 

Rest of world 

Figure 1.2. World primary energy demand by region up to 

2035 (scenario based on national climate and energy policy 

targets). 

(World Energy Outlook © OECD/IEA, 2010) 

As the need for energy grows, ever fewer fossil fuels will 

be available. In particular, the world’s oil reserves will be 

exhausted more quickly than new oil fields are discovered. 

Furthermore, for part of the remaining oil, extraction 

involves considerable environmental challenges. 

This applies, for example, to oil in the Arctic regions or to 

deepwater oil fields. Furthermore, it applies to oil production 

from natural gas and coal, tar sand and oil shale. 

As regards natural gas production, the situation is 

less critical, at least in the short and medium term. As 

regards coal, global occurrences are plentiful, but other 

factors, primarily the consideration for the global climate, 

necessitate limited use. 

In addition to this pressure on reserves, the world’s oil, 

and to a certain extent natural gas resources as well, are 

increasingly concentrated in just a few countries. Thus, 

the OPEC countries will account for an ever growing 

share of global oil supply, as illustrated in figure 1.3. 

Saudi Arabia 

Iraq 

Brazil 

Kazakhstan 

Canada 

Venezuela 

UAE 

Kuwait 

Iran 

Qatar 

Nigeria 

Libya 

Algeria 

0 1 2 3 4 5 

OPEC 

Non-OPEC 

mb/d 

Figure 1.3. Incremental oil production by key country, 2009- 

2035 


12 


On the basis of the IPCC’s recommendations, 

the EU has committed to the objective of 

reducing emissions by 80%-95% by 2050 

Security of supply can be expressed as the probability 

that there will be energy services available at competitive 

prices when consumers demand it, without this leaving 

Denmark in the unfortunate grip of dependency on other 

countries. 

(Source: Energiforsyningssikkerhed – Redegørelse om 

forsyningssikkerheden i Danmark, 2010; Report on energy 

security of supply in Denmark, 2010) 

Box 1.1 Definition of security of energy supply 

The increased concentration of oil and gas resources in 

relatively few countries and transit routes increases the 

vulnerability to accidents, war and terror, threatening 

security of supply and price stability. Furthermore, this 

exacerbates the potential for producer countries to exert 

political pressure, wield market influence and thus push 

prices upwards. The consequence of such a development 

is growing dependence on the oil and gas producing 

countries. Another consequence is the transfer of 

wealth from the oil and gas importing countries to the oil 

and gas exporting countries. This transferral of wealth 

would be minimised if the consuming countries were to 

reduce their consumption and imports by instead investing 

in energy efficiency improvements and renewable 

energy. 

On the other hand, a shift to an energy supply based 

on renewables is not without security of supply challenges 

either. For example, incorporating large amounts 

of fluctuating electricity produced from wind power into 

the energy system presents a huge technical challenge. 

As regards biomass and biofuels, availability of these 

resources may also come under pressure both domestically 

and abroad. All indications are, however, that Denmark 

can manage these security of supply challenges, 

although this requires continued integration, expansion 

and liberalisation of the European energy market. 


13


The lasting climate challenge 

Future climate change due to greater greenhouse 

gas effects seems inevitable. Even in a very ambitious 

scenario, where global emissions of greenhouse gases 

peak within the next few years and fall quickly hereafter, 

the atmosphere’s content of greenhouse gases will only 

stabilise at present levels. This will undoubtedly contribute 

to a continued global temperature rise within this 

century. This prediction is confirmed by global temperature 

measurements which point at a continued rise in 

global mean temperatures. Furthermore, observations 

indicate, for example, that climate change in the Arctic 

is now occurring at an even faster pace than anticipated 

only a few years ago. 

With the Copenhagen Accord concluded at COP15 in 

December 2009, a large number of countries agreed 

that the greenhouse gas concentration in the atmosphere 

should be stabilised at a level corresponding to a 

global average temperature rise below 2 degrees Celsius. 

This objective was confirmed at COP16 in Cancún, 

in December 2010. According to the Intergovernmental 

Panel on Climate Change (IPCC), satisfying this objective 

requires the developed countries to reduce their combined 

emissions by 25%-40% by 2020 relative to 1990 

levels, and by 80%-95% by 2050 relative to 1990 levels 

as a step towards cutting global emissions by 50% by 

2050. 

On the basis of the IPCC’s recommendations, the EU 

has committed to the objective of reducing emissions 

by 80%-95% by 2050 relative to 1990 levels as a part 

of concerted efforts by the developed countries. The 

EU objective cannot readily be transferred to a Danish 

reduction commitment by 2050, however it provides a 

good indication of the climate challenge which all EU 

member states, including Denmark now face. 

A global green growth market 

Denmark will become independence of fossil fuel. Over 

the coming years, many other countries will likewise 

have to decarbonise their economies. The global market 

for renewable energy and climate technologies, and for 

energy efficiency improvement solutions, will therefore 

grow considerably. 

Figure 1.4 below illustrates the combined, expected 

investment in renewable energy technologies, broken 

down by electricity production technologies and biofuels, 

in key countries and regions during the period 2010- 

2035, assuming current climate and energy policy objectives. 

This development in the global market will primarily 

take place in large growth markets such as India and 

China, where energy demand will grow at an explosive 

rate in the coming years. China has a goal of meeting 

15% of its energy consumption from non-fossil fuels by 

2020. However, also within the EU, the national plans of 

member states to meet the EU 2020 renewables targets, 

witness the need for large investments in green technologies 

over the next ten years. 

Indonesia 

Canada 

Russia 

Japan 

Brazil 

India 

USA 

EU 

China 

0 

300 600 900 1.200 1.500 

Billion dollars (2009) 

Electricity Biofuels 

Figure 1.4. Energy technology share of total goods exports 

in 2009, from Denmark and EU15 average 


14 


Exports of energy technologies and equipment 

accounted for approximately 12% of total 

Danish goods exports in 2009 

The International Energy Agency (IEA) estimates that, in 

the period 2010-2030, the required overall global investment 

in renewable energy will amount to USD 6 billion, 

provided countries realise their existing climate and 

energy policy goals. If global emissions of greenhouse 

gases are to be reduced in line with IPCC recommendations, 

according to the IEA this will require significant 

extra investments in climate and energy technology solutions 

at the consumer and supply sides, respectively. 

Exports of cleantech solutions 

Exports of cleantech solutions are already playing an 

ever increasing and ever more important role for overall 

production and exports. Exports of energy technologies 

and equipment accounted for approximately 12% 

of total Danish goods exports in 2009. This is almost 

twice the figure in 2000, and far more than in any other 

European country, see figure. 1.5. 

12 

10 

8 

6 

4 

2 

0 

% 

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 

Denmark EU15 

Figure 1.5. Energy technology share of total goods exports 

in 2009, from Denmark and EU15 average 

Source: Danish Energy Agency 

Danish companies therefore already possess an array of 

key competences in the energy area. However, global 

competition to deliver solutions to the rapidly growing 

market is intensifying considerably. Retaining and 

developing Danish skills and international market shares 

therefore places great demands on Danish companies. 

It is also essential to ensure Danish companies have optimal 

framework conditions in comparison with competitors 

abroad. 

Amongst other things, it is important that the transition 

of the energy system, in combination with targeted 

efforts within research, development, demonstration 

and preparation for market uptake, allows companies to 

assist in developing the new solutions. This will create 

the best business setting for developing new export 

technologies in Denmark. Obviously, it is important that 

this platform for cleantech companies is not detrimental 

to the competitiveness of the rest of the Danish business 

community. 


15

A 

2A strategy 

flexible strategy 

The great challenge is to ensure an appropriate 

transition process. Over the next 40 years more 

or less the entire energy system will be replaced 

16 


Measures should be organised cost effectively 

to achieve the highest levels of security of supply 

and reductions in fossil fuels 

In 2050 Denmark could well be a wealthy society which 

uses considerably less energy than at present and which 

covers its energy needs with renewable energy sources. 

This is clear from the analyses by the Danish Commission 

on Climate Change Policy. The great challenge is to 

ensure an appropriate transition process. Over the next 

40 years more or less the entire energy system will be replaced. 

In some areas, the consequences of investments 

and decisions made now will have an impact right up to 

2050. Therefore, it is important that energy policy supports 

the goal of fossil fuel independence. Without this, 

the goal will be harder and more expensive to reach. 

Denmark also has a number of energy and climate policy 

goals which set the scene for immediate measures. 

Therefore, it is necessary to adopt initiatives pointing 

towards the long-term goal of fossil fuel independence, 

and which contribute to meeting goals in the short and 

medium term. Energy efficiency and renewables are the 

two key focus areas to put Denmark on track to meeting 

the long-term goal of fossil fuel independence and 

to help meet the 2020 targets of increasing the share of 

renewables, reducing gross energy consumption, and 

reducing non-ETS greenhouse gas emissions. 

Measures should be organised cost effectively to achieve 

the highest levels of security of supply and reductions 

in fossil fuels for each DKK invested. This means that 

measures should be targeted, and timing is vital. On the 

one hand measures should not be forced through with 

unnecessarily high expenditure right now. On the other 

hand, the benefits of less dependence on fossil fuels and 

lower greenhouse gas emissions also have value in the 

years up to 2050. 

An energy and transport system 

without fossil fuels 

Achievement of fossil fuel independence requires efficiency 

improvements in energy consumption to a level 

which can be covered by massive renewable energy 

expansion – although we will still exchange energy (electricity, 

biomass, biofuels etc.) with the world around us. 

The transition is outlined very generally in figure 2.1. 

800 

700 

600 

500 

400 

300 

200 

100 

PJ/year 

0 

Households 

Trade and service 

Production 

Transport 

Efficiency improvements 

RE 

(possibly also CCS) 

Figure 2.1. Energy consumption and renewable energy 

2009. Source: Danish Energy Agency 

Waste 

Other RE 

Biogas 

Wood 

Straw 

Wind 

Energy consumption 2009 Renewable energy consumption 2009 


17

A cost effective energy system, independent 

of fossil fuels, requires significant 

A flexible strategy 

improvements in energy efficiency 

Key elements 

A number of technologies and focus areas already well 

known today will probably be pivotal in a cost effective 

transport and energy system without fossil fuels. The 

energy technologies with significance for the energy 

system today have been known and used for more than 

40 years. Clearly these technologies will develop, but it 

is likely that the energy system of 2050 will be borne by 

technologies we already know today. Likely elements in 

an energy and transport system independent of fossil 

fuels are: 

A highly efficient energy consumption 

A cost effective energy system, independent of fossil 

fuels, requires significant improvements in energy 

efficiency. Demand for energy services will very likely be 

considerably higher than today, but energy services will 

be supplied using a lower amount of energy. Therefore, 

in 2050 Danish energy consumption could be more than 

50% more efficient overall. This is partly due to the fact 

that far-reaching energy efficiency improvements could 

make more financial sense than increasing energy supply. 

Electrification of heating, 

industry and transport 

There are strong indications that in 2050 many more 

energy services than today will come through electricity. 

District heating, individual heating systems and industrial 

installations can be based on electricity. Transport can 

be electrified by converting cars, railways and, to a certain 

extent, busses and lorries to electricity. This will also 

provide massive efficiency improvements as combustion 

motors typically waste four-fifths of the energy, while only 

one-fifth is lost in electric motors. Electric cars will probably 

be an important transport technology, but in 2011 

it is not possible to predict exactly the comparative roles 

and advantages of, for example, electric cars, plug-in 

hybrids or fuel-cell cars, in 2050. 

More electricity from wind power 

It is very likely that wind power will account for a very 

large amount of future electricity production. Wind is 

one of the renewable energy sources showing greatest 

physical potential in Denmark, and costs are expected to 

drop. In principle, wind power could cover current levels 

of electricity consumption many times over. Today, production 

costs are lowest for onshore turbines, but there 

are only limited locations to site them. Therefore, offshore 

wind turbines will probably be crucial, even though production 

costs are higher than for onshore installations. 

An efficient utilisation of 

biomass resources 

In the future, biomass will play an even more important 

role in the energy system than today. This will be to 

cover a large proportion of CHP production, and also 

probably to produce biofuels for heavy and very energydemanding 

modes of transport such as aircraft and 

heavy goods vehicles. However, the potential in biomass 

is not unlimited. If global demand for biomass increases, 

so will the costs of utilising biomass. 

18 


Utilisation of biogas 

The natural gas grid and its associated storage facilities 

could also play a key role in an energy system without 

fossil fuels. This may be through utilising biogas and 

possibly other types of gas from organic sources. RE 

gasses can be used at CHP plants in the same way as 

solid biomass and thereby they can act as a balance for 

the fluctuating electricity production from wind turbines. 

Photovoltaic solar modules and 

wave power as supplements 

In the longer term, photovoltaic solar modules and wave 

power could replace some wind power. How much wind 

power they will replace will depend on technological development. 

Photovoltaic solar modules are a well tested 

technology, but at present they are more expensive than 

electricity from wind turbines. However, there may be 

technical and financial advantages in spreading electricity 

production between different technologies. Wave 

power is still at the developmental stage, but it may play 

a role in the long term. 

An intelligent energy system 

Energy production with significant amounts of fluctuating 

energy places pressure on the energy system to ensure 

that energy consumption can be covered hour by hour. 

Most important is exchange with foreign countries, and 

this requires gradual expansion of transmission capacity. 

In addition, there is the need for more flexible (intelligent) 

electricity consumption so that electricity is used for heat 

pumps, electric boilers and to recharge electric cars, for 

example, when there are strong winds and normal electricity 

consumption is low. Finally, there will be a need for 

electricity storage capacity which can be supplied cost 

effectively by the Norwegian and Swedish hydropower 

facilities. However, it is possible that other types of electricity 

storage, for example based on battery technology, 

could in the future supplement foreign electricity trade. 

Spreading RE-based district 

heating and individual heating 

District heating systems make it possible to incorporate 

large amounts of fluctuating renewable energy at relatively 

low investment requirements. Continued exploitation 

and expansion of this infrastructure is an important 

element. There are strong indications of significant cost 

effectiveness potentials in converting from individual 

natural gas supply to district heating. The challenge is to 

find an appropriate cut-off between district heating and 

individual heating in a technical and economic context. 


19


Nuclear power - still many arguments against 

In 1985 the Danish Parliament (the Folketing) decided 

that nuclear power would not be part of Danish energy 

planning. There remain arguments against nuclear power 

in Denmark. It would be difficult to find locations for 

nuclear power plants in Denmark and there is limited 

Danish growth potential in the technology, because the 

technology has to be purchased from abroad. Finally, 

there are still challenges with regard to safety and disposing 

of radioactive waste. 

Experience with regard to the economics of nuclear 

power varies greatly. In many cases installations are fully 

or partly owned by the state, with a number of direct or 

indirect subsidies for nuclear power. Theoretical comparisons 

between the economics of nuclear power and 

other types of production indicate that nuclear power 

provides relatively cheap electricity. In practice, however, 

there are many examples of nuclear power plants which 

significantly exceed budgets. 

On the basis of information from the new Finnish nuclear 

power plant, Olkiluoto-3, which has been plagued by 

long delays and budget overshoots, investment per unit 

of electricity capacity is about 3.5-times more than coal 

power, approximately eight-times more than gas power 

and two-three-times more than wind power. The high 

investment costs of nuclear power must be recouped 

through operating revenues, and this is possible if the 

plants are in operation for a long time. With considerable 

uncertainty, it has been estimated that for Danish 

conditions, nuclear power and offshore wind power cost 

almost the same, although it should be noted that the 

economics of nuclear power plants are very sensitive to 

interest rates. 

There are system challenges linked to incorporating nuclear 

power in Denmark into an electricity system dominated 

by fluctuating wind power and electricity production 

bound to heating. Furthermore, there are relatively 

large variations in electricity consumption over a 24-hour 

period in Denmark (compared with countries with more 

energy-intensive industry and more electric heating, for 

example Finland and Sweden). For economic and technical 

reasons, nuclear power plants should preferably 

operate at full capacity all the time, and therefore they 

are not very suitable for adjustment to compensate for 

variations in wind production. 

Although there are several arguments against basing 

Danish electricity production on nuclear power, at all 

events Denmark will continue to trade electricity with 

other countries and therefore also import electricity from 

countries where nuclear power will account for a considerable 

amount of electricity production in the future. 

Box 2.1 Nuclear power 

20 


Observed climate change 

The average temperature in Denmark has increased by 1.5°C and precipitation has increased by 15% since systematic 

national records began in 1873. The Danish wind climate has also changed over the period. More powerful storms 

and hurricanes have been observed. In the future even greater climatic changes can be expected, with potential 

consequences for the energy system. 

The energy need 

Up to 2050 it is expected that winters will become warmer, with correspondingly shorter heating seasons. Therefore, 

there could be slightly less need for space heating. In contrast, the need for cooling in summer (primarily in offices, 

shops etc.) is expected to rise in line with longer heat waves. In new housing, the new building standards will limit the 

need for cooling, but for existing housing there may be increased demand for cooling installations. 

Energy production 

Up to 2050 there are chances of a longer growing season. Together with higher temperatures and more precipitation 

in the summer, this could lead to more biomass production in both agriculture and forestry. As winters become wetter 

and milder, there will also be good opportunities for more energy production from hydropower in Norway and Sweden. 

In addition a modest increase in wind energy potential is also expected. 

Extremes 

Towards 2050 more, and more powerful hurricanes may disrupt the electricity grid and infrastructure and mean that 

wind turbines will be shut down for short periods. However, it has been estimated that these effects will only have 

marginal significance for the security and stability of the electricity system. On the other hand more, and more powerful 

hurricanes, in conjunction with more precipitation, could lead to a greater likelihood of massive windfalls and this 

may affect international markets for chippings and wood pellets. 

Consequences 

Overall, the conclusion is that the expected milder winters in the future will have a modest, yet positive impact on 

the Danish energy system and the possibilities for the transition to fossil fuel independence, although there is a large 

degree of uncertainty regarding the future demand for cooling. 

The strategy for fossil fuel independence proposes a number of new energy policy initiatives, which are deemed as 

robust in relation to future climate change. Furthermore, there is the ongoing monitoring and evaluation of climate and 

energy policy, and this will also have to take account of observed climate change. 

Box 2.2 Potential changes in the Danish climate and the 

possible effects on the energy system 

Energy Strategy Energistrategi 2050 – from coal, 2050 oil – farvel and gas til to kul, green olie energy. og gas 

21


An unpredictable future 

demands flexible answers 

On the one hand, it is possible to mark out the contours 

of an energy system in 2050 without fossil fuels and to 

identify a number of the key elements. However, on the 

other hand it is impossible to predict economic growth, 

technological development or fuel and CO 2 prices 40 

years ahead, and in so doing detail the optimal energy 

system for 2050. 

Development and costs of technologies and fuels will 

depend to a large extent on the level of ambition for 

climate and energy policy set by the rest of the world. At 

the same time these aspects are crucial for determining 

how best to achieve a cost effective energy system without 

fossil fuels. For example, investors’ choice between 

electricity production technologies will be based on the 

relative costs of the various fuels, technologies, financing 

etc. In the long term, cost effective transition will 

therefore involve securing more or less uniform support 

across technologies in which account is also taken for 

the effects of the technologies in relation to, for example, 

relevant political objectives, environmental impacts and 

security of supply. 

A robust and cost effective strategy 

The government will organise the transition so that it is 

robust and cost effective. On the basis of the knowledge 

available today, it is expected that the goal of fossil fuel 

independence will be realised most cost effectively by 

making energy consumption more efficient; with more 

electrification of energy consumption in combination 

with greater electricity exchange and a more intelligent 

energy system; with more district heating and individual 

RE-based heating; with expansion of wind power and 

other renewables; and finally with effective utilisation of 

biomass resources for CHP and parts of the transport 

sector. 

On the other hand, electric cars, solar energy, wave 

power, CCS and so on are currently relatively expensive 

technologies, which require continued subsidies. However, 

this can change over time. Therefore, the strategy 

should be flexible, i.e. open for all technological possibilities. 

For example, the government will not yet exclude 

some utilisation of coal with CCS, if this proves to be 

a more cost effective and environmentally appropriate 

solution in a green transition. If it turns out to be technically 

and economically untenable to convert the entire 

transport sector to non-fossil alternatives, it will also be 

necessary to manage the security of supply issue and 

climate impacts in some other way. 

CCS 

Coal power combined with CCS (Carbon Capture and 

Storage), could also be a relevant technology in the longer 

term, possibly in combination with biomass, whereby 

CO 2 is “withdrawn” from the system. There are relatively 

large coal resources globally and Denmark has geological 

formations well suited to depositing CO 2 . The CCS 

technology is not yet commercially viable and involves 

high costs and energy consumption. However, there is 

no reason to exclude this technology from being part of 

the Danish energy system at a later date. 

Hydrogen 

Biomass could be a limited resource in the future. A 

replacement could be other fuels such as hydrogen in 

the transport sector rather than biofuels, or hydrogen 

for electricity and heating instead of biomass. Hydrogen 

cannot be found in nature and therefore it has to be 

manufactured, for example using electricity from wind 

turbines for electrolysis. There is great potential, but at 

present prospects are inhibited financially because of 

losses in manufacture, storage and conversion of the 

hydrogen. 

Box 2.3 Examples of technologies which could play a role in 

a 2050 perspective 

22 


The government will organise the transition 

so that it is robust and cost effective 

Figure 2.2 illustrates that, in addition to the key elements, 

there are a great many possible variations with clear 

significance for how the energy and transport system of 

the future is best designed. For example the relationship 

between wind, photovoltaic solar modules, wave power 

and other RE technologies will depend on technological 

developments and how they compare financially. 

Correspondingly, transition from fossil fuels to biomass 

will depend on potentials to produce as well as import 

biomass at reasonable prices. 

There is a crucial uncertainty in developing competitive 

alternatives to the combustion engine. The solutions 

which come to dominate the transport sector will have 

an impact on other parts of the energy system. Finally, 

but also importantly, the need for foreign trade should 

be considered in the light of relative prices for imported 

electricity compared with Danish adjustable production, 

or possible new storage options. 

Less need for wind 

Cheap wood/straw for 

electricity production 

Coal with CCS 

commercially attractive 

Less need for wind 

Fewer savings 

realised 

Need for more 

wind and biomass 

•• 

Efficient energy consumption 

•• 

Increased use of district heating and 

individual heating based on renewable 

energy 

•• 

Wind power for electricity production 

supplemented by other RE technologies 

•• 

Efficient use of biomass (including biogas) 

for CHP and parts of the transport 

sector 

•• 

Electrification of the energy system 

•• 

Intelligent electricity consumption and 

increased storage and exchange of 

energy with other countries 

Need for greater 

imports of biofuels 

Limited electrification 

of transport 

Less exchange of 

electricity due to 

high electricity prices 

Commercial breakthrough 

for new RE 

Figure 2.2 Key elements 

in the future energy system 

and variations 

More controllable 

domestic production 

Less need for 

wind and biomass 


23


A strategy with robust choices 

and the right timing 

In this strategy for fossil fuel independence, the government 

is focussing efforts on elements which are robust 

and expected to make up the core of a cost effective 

energy and transport system without fossil fuels. Efforts 

should also take account of the lifetimes of the relevant 

technologies and installations, the length of time from 

decision to practical implementation, the need to retain 

knowledge and skills, as well as the issue of maturity and 

prices of the relevant technologies. 

Long operational life in the energy sector 

The energy system is made up of both the producer and 

consumer sides of a number of technologies and installations 

which call for huge investment and which have a 

long operational life. For example, power plants typically 

run for 30 years or more and the buildings often stand 

for more than 100 years. This means that in the transition 

of the energy system it will have to be considered 

when the existing installations will wear out and require 

replacement or renovation, in order to avoid unnecessarily 

scrapping well functioning installations. It is also 

vital to choose future-proof solutions when replacement 

or renovation of, for example, buildings is carried out. In 

some circumstances this will only happen once before 

2050. 

Long time from decision to 

practical implementation 

Many types of installation in the energy sector require a 

long time for decision-making, planning and establishment 

processes. A large offshore wind farm often takes 

at least five-six years from decision to commencement 

of operation. New high tension installations or central 

power plants can easily take up to 10 years from decision 

to implementation. This means that many of the 

decisions made today will not take effect for five, 10 or 

even 15 years. 

Great need for skills and knowledge 

The rate of transition should also be considered in the 

context of development and retention of skills as well 

as building new knowledge. Danish companies already 

possess an array of key skills in the energy area. These 

include RE technology and efficient technologies, as well 

as knowledge and experience on integrating renewables. 

A crucial element in retaining these companies’ development 

departments is that it is possible to realise results 

and to develop new knowledge on the basis of specific 

experience from applying new technology. Innovation, 

production and application cannot be considered independently 

of each other. 

Large differences in technological 

maturity and prices 

Today there are already technologies in a number of subsectors 

in the energy system which are or are expected 

to soon becoming financially and technologically competitive 

with technologies using fossil fuels. For example, 

wind turbines and biomass to produce electricity. In 

other areas technologies have yet to be fully developed 

to be able to completely replace fossil fuels. In this context 

there is a need for further research and demonstration 

in collaboration with foreign knowledge centres. For 

example, in transport there remain a number of challenges 

before full transition to non-fossil technologies such 

as electric cars, biofuels or fuel cells can take place. 

24 


Innovation, production and application 

cannot be considered independently of 

each other 

Degree of commercialisation 

Mass market 

Niche markets 

Technologies on the 

verge of being mature for 

market and with low costs 

(e.g. wind power and 

biomass) 

Technologies on the 

verge of being mature for 

market but with high costs 

(e.g. photovoltaic solar 

modules) 

Technologies 

mature for market 

(e.g. hydropower) 

Development 

Technologies at the 

prototype and 

demonstration stage 

(e.g. hydrogen technologies 

and CCS) 

Figure 2.3 Non-fossil-based energy 

and transport technologies 

Time 


25


A strategy with three tracks 

Operational life, decision-making processes, technological 

maturity and prices vary across the energy system. 

The same applies for the need to retain and develop 

knowledge and Danish skills. Therefore the government’s 

strategy follows three tracks. The strategy starts up 

immediate initiatives in all three tracks, but the types of 

initiative vary. 

Immediate initiatives 

Track 1 

Transition to more efficient energy consumption and energy supply based on renewable energy 

Track 2 

Preparation and planning of the 

next phase of the transition 

More utilisation and integration of new 

solutions in the energy and transport system 

Track 3 

Research, development 

and demonstration 

Large-scale demonstration 

and preparation for market 

Utilisation and integration in the 

transport and energy system 

2011 

2050 

Figure 2.4 Illustration of the three tracks in the strategy 

The transition track (track 1) deals with the areas in 

which physical conversion can already start today because 

the technology is cost effective with long operational 

life and decision-making processes. In addition, 

because the areas involved also contribute to realising 

short and medium-term objectives. 

The planning and preparation track (track 2) deals with 

areas in which initially there is a need to ensure establishment 

of the framework before specific measures towards 

2050 can be initiated. 

The technology development track (track 3) deals with 

areas in which the primary need is for more knowledge, 

analysis, research, and development as well as demonstration 

and preparation for market efforts before concrete 

incorporation into the energy and transport system 

of the future can be implemented. 

Chapter 3 describes the specific initiatives in the strategy 

which can be implemented within the three tracks 

immediately. 

26 


Track 1. Examples where the transition will commence immediately: 

Making buildings more efficient 

Extensive improvements in the energy efficiency of existing 

buildings should be implemented in connection with 

renovation and replacement in order for them to be cost 

effective. At the same time, efficiency improvements 

contribute immediately to meeting the 2020 targets. 

Electrification of heating and process installations 

Installations to heat buildings and for industrial processes 

have a long operational life; typically 25 years or more. 

Therefore it is advisable to start converting to electricity 

or heat pumps already now, as oil and gas furnaces and 

boilers have to be replaced. This will also contribute to 

meeting the 2020 targets. 

Expansion of wind power 

Wind power seems to be cost effective and robust 

against future developments in fuel and CO2 prices, 

and it will be able to replace a great deal of the existing 

electricity capacity which will have to be replaced over 

the next 10-20 years. 

Increased use of biomass 

Biomass can play a central role in combination with wind 

production and possibly also in connection with coal and 

CCS. In the short term, conversion to more biomass at 

power plants could reduce use of fossil fuels and thereby 

contribute to meeting the target of 30% renewable 

energy by 2020. 

Track 2. Examples where transition has to be prepared and planned: 

Planning of the energy infrastructure 

Integration of more fluctuating electricity production 

and electrification of end use involves a long-term need 

to develop the infrastructure. In this context, the gas 

infrastructure of the future should also be planned with 

a view to enabling biogas and other RE gasses to take 

over from natural gas to a certain extent. This means 

that planning must commence immediately. 

Framework for future district heating production 

District heating production will change as consumption 

of fossil fuels at electricity and CHP plants is phased out. 

As this involves long-term investments, there is a need 

to set the framework for future district heating production 

now, through amongst other things strategic energy 

planning. 

Track 3. Examples of areas with a need for further research, development and demonstration: 

Research focussing on incorporating wind power 

Denmark’s vast wind resources provide future opportunities 

to harvest large parts of energy consumption from 

the wind. Increased incorporation of wind requires, however, 

continued research and technological advances 

to reduce the energy costs and optimise the interplay 

of wind power with the electricity grid and electricity 

consumption, including methods to store the energy for 

a period. 

Large-scale demonstration 

A large number of technologies may require large-scale 

testing before subsequent preparation for market and 

full-scale implementation. For example, this applies for 

offshore wind, fuel cells for CHP production, smart grids, 

biorefineries, low-energy building and energy renovation. 

Box: 2.4 Examples of the initiatives in the three tracks 


27

in the strategy 

Initiatives in the strategy 

3 

The package includes initiatives with 

immediate effect, initiatives setting out 

long-term frameworks, and initiatives that 

encourage more technological development. 

28 


With this strategy, the government presents a package 

of energy and climate policy initiatives. The package includes 

initiatives with immediate effect, initiatives setting 

out long-term frameworks, and initiatives that encourage 

technological development. 

The package consists of initiatives that promote: 

• Good framework conditions for future electricity and 

heat production 

• Increased expansion of wind power 

• Greater use of biomass 

• A solid foundation for biogas expansion 

• Highly efficient energy consumption 

• Efficiency improvements in households and in buildings 

in general 

• A cohesive and intelligent energy system 

• Transition to green energy in the transport sector 

• An energy system with appropriate financial incentives 

• A transition which creates green growth through 

research, development, demonstration and preparation 

for market 

• Ambitious endeavours for a global transition 

• An EU independent of fossil fuels 

• Long term reduction in the emission of greenhouse 

gases from agriculture 

• Efficient and environmentally sound use of North Sea 

resources. 


29

Energy efficiency improvements 

Enhancement and targeting of saving efforts by energy 

companies aimed at private homes and businesses. 

Future-proof efficiency standards for 

building components to ensure houses 

which are more energy efficient. 

No new oil boilers in new buildings from 2012 

and Initiatives in existing in buildings the strategy from 2017. 

Market promotion of RE-based 

alternatives to oil and gas heating. 

Promotion of new buildings with very 

low energy consumption. 

Enhanced energy saving efforts in the public sector. 

Heating and electricity production 

Call for tenders for a 600MW offshore 

wind farm at Kriegers Flak. 

Call for tenders for smaller offshore wind turbine 

installations totalling 400MW closer to the coast than 

the actual wind farms. Initiatives for more onshore 

wind power, aiming at an additional 500MW. 

Fuel shift from coal to biomass at large-scale 

plants with greater freedom of agreement 

between producers and buyers. 

Shift from natural gas to biomass at smallscale 

CHP plants with free choice of fuel. 

Improved framework conditions 

for production of biogas. 

Funds for strategic energy planning in 

municipalities with a view to better utilisation of 

local resources, including district heating. 

Transport 

A 10% biofuels obligation in the transport 

sector by 2020. Technology assessment 

in order to support the right framework 

conditions for new transport technologies. 

Fund to promote the establishment of 

recharging stations for electric cars. Efforts 

to tighten EU standards on vehicle energy 

efficiency and CO 2 emissions. 

Push for EU harmonisation and standardisation 

of technologies for electric cars. 

An intelligent and international energy system 

Central elements of the 

energy system in 2050 

Efficient energy 

consumption 

Increased use of district 

heating and individual 

heating based on 

renewable energy. 

Wind power in electricity 

production supplemented 

by other RE technologies. 

Efficient use of biomass 

(including biogas) for CHP 

and parts of the transport 

sector. 

An electrified energy 

system. 

Intelligent electricity consumption 

and increased 

storage and cross-border 

trade in energy. 

Cross-sectional 

measures 

Enhanced prioritisation 

and cohesion in 

research, development 

and demonstration in the 

climate and energy area. 

Support for large-scale 

demonstration and 

preparation for market 

of new RE technologies 

(solar, large heat pumps, 

geothermal energy etc.). 

Review of regulation of 

the Danish electricity 

supply sector. 

Examination of the subsidy 

and tax systems. 

Efforts to increase the 

EU greenhouse gas 

reduction target to 30% 

by 2020. 

New international electricity transmission capacity in 

connection with the offshore wind park at Kriegers Flak. 

Analysis of the need to expand 

international transmission grid. 

Roll-out of intelligent electricity meters. 

Strategy for the promotion of smart grids. 

Analysis of the regulation of the future gas structure. 

Figure 3.1 From 2011 to 2050. Key initiatives in the strategy 

30 


Background 

The government will 

Good framework conditions for future 

electricity and heat production 

A large part of Denmark’s consumption of fossil fuels, in 

the form of coal and gas, is used to produce electricity 

and district heating. Extensive conversion of the electricity 

and heating sector to renewable energy is an essential 

step towards independence of fossil fuels. 

Since supply technologies and infrastructure in electricity 

and heat production generally have very long life spans, 

in many cases there will be only one opportunity to convert 

before 2050. It is anticipated that a great number 

of Danish plants will either be taken out of operation or 

will wear out before 2020 and have to invest if they are 

to maintain production of heat . All things being equal, it 

will be cheaper to replace worn out installations than to 

replace still functioning installations. Therefore, the most 

appropriate solution is to make the shift away from fossil 

fuels when an existing plant is worn out. Furthermore, 

it must be anticipated that electricity consumption will 

increase as an ever greater share of energy consumption 

is electrified. It is therefore important that frameworks are 

established today which underpin investments in technologies 

bringing us closer to the 2050 target. 

Furthermore, in the short term, the need for new RE 

capacity is justified by the target of a 30% share of renewables 

by 2020. Meeting and upholding this target will 

require significant efforts in the years to come. 

Being the most developed and most cost-effective 

sources of energy, biomass and wind will play primary 

roles in an energy system without fossil fuels. In the 

long term, other technologies may also come into play. 

Continued support will therefore be necessary for the 

development of a wide range of RE technologies. 

As a general rule, the government’s goal of fossil fuel 

independence means no use of fossil fuels in 2050. 

However, the government will not a priori exclude some 

use of coal with CCS, if this turns out to be an efficient, 

feasible and environmentally appropriate solution in a 

green transition. 

• Launch an in-depth review of electricity supply legislation 

and regulation in order to ensure that incentives 

and rules support the transition to fossil fuel independence. 

In the long term, other areas of energy 

supply will also be reviewed 

• Allocate DKK 20 million for strategic energy planning 

partnerships between municipalities, local companies 

and energy companies. These funds are to promote 

the integrated development of energy demand and 

energy supply which underpins the transition to fossil 

fuel independence. This is to take place e.g. through 

the expansion of district heating 

• Allocate DKK 10 million for demonstration of large 

heat pumps in the district heating sector, and analyse 

the conditions for, and implications of, the phasing-in 

of large heat pumps 

• Allocate DKK 20 million for geothermal energy exploration 

projects 

• Extend the existing PSO scheme that supports small 

electricity-producing renewable energy technologies 

such as wave power, bio-gasification and solar 

photovoltaics for a further four years, so that a total 

of DKK 100 million is allocated for the period 

• Allocate DKK 10 million to support demonstration 

projects on solar heating for household solutions, 

including use of solar heating in combination with 

other RE solutions such as heat pumps. Efforts will 

also include an information campaign and the launch 

of a certification/quality assurance scheme 

• Work for a revision of the EU’s CHP Directive towards 

an efficient energy system in a future EU free of fossil 

fuels. 


31


Background 


An increased expansion of wind power 

To the extent that suitable locations can be found, 

onshore wind turbines are far cheaper than offshore 

wind turbines and most other RE technologies. Due to 

technological development and rising electricity prices, it 

is expected that wind power in the long term will be able 

to compete with conventional electricity production, and 

that subsidies for onshore wind turbines can therefore 

gradually be phased out. 

The majority of existing onshore turbines are more than 

ten years old and will most likely be scrapped before 

2020. The need to designate more locations suitable for 

new and larger turbines is therefore great. In order to 

cater for the technological development of new turbines, 

it will also be necessary to designate suitable land where 

the wind turbine industry can test and demonstrate new 

turbines. 

Future wind turbines will increasingly have to be placed 

offshore, since there are only a limited number of suitable 

locations available onshore. The potential for offshore 

wind turbines is huge in Denmark. In order to promote 

technological development of offshore wind turbines, it is 

necessary, that newly developed turbines can be erected 

and operated on a continuous basis, preferably closer 

to the coast than previously. This will also provide opportunities 

for the general public, private organisations, 

municipalities etc. to be involved in the projects. 

• Call for tenders for a 600MW offshore wind farm at 

Kriegers Flak. Kriegers Flak can be realised as a joint 

project between Denmark and Germany (and possibly 

also Sweden) with expected operationalisation 

2018-2020 

• Call for tenders for smaller offshore wind turbine 

installations totalling 400MW closer to the coast 

than current wind farms. This will enable testing and 

demonstration of new turbines, foundations etc., as 

well as sites for conventional wind mills, up to 2020. 

Suitable locations will be found through a screening 

process 

• Improve tendering procedures for offshore wind 

farms to reduce the costs of expansion and prepare 

the basis for offshore wind turbine expansion decisions 

in the period after 2020 

• As part of a general analysis of subsidy systems examine 

how subsidies for onshore turbines from 2014 

can be designed most appropriately, so that they are 

adjusted to rising electricity prices and technological 

development 

• Support continued municipal planning for new onshore 

wind turbines and at the same time look more 

closely at planning tools for onshore wind turbines. 

Up to 2020, in combination with other external conditions, 

this is expected to contribute to new turbines 

totalling a capacity of 1800MW. This is 500MW more 

than expected so far 

• Analyse the opportunities for reducing the distance 

requirements for wind turbines placed along roads 

and railways with a view to better use of locations in 

such areas 

• Commission a strategic environmental assessment 

with a view to both call for tenders on nine 

state-owned land plots for the erection of onshore 

wind turbines, and to assist municipalities with wind 

turbine planning 

• Designate land for testing prototypes and ‘series 0’ 

wind turbines 

32 


• In cooperation with industry, continue the wind 

turbine secretariat, including the mobile wind turbine 

task force, which assists municipalities with wind 

turbine planning.

Background 


A greater use of biomass 

Biomass has the potential to replace large amounts of 

coal and natural gas cost-effectively in the relatively short 

term. In the long term, conversion from fossil fuels to 

renewable energy outside Denmark can lead to pressure 

on biomass resources and thus rising prices, and possible 

challenges to security of supply. On the other hand, 

it must be anticipated that the technologies used in the 

production of biomass and biofuels will undergo developments 

which can lower the price of energy produced 

from biomass. 

At present, the majority of large-scale power plants in 

Denmark can use biomass for part of their production, 

while many natural gas fired small-scale plants have 

long had an ambition to convert to biomass-based heat 

production. 

The largest Danish cities have ambitious climate plans 

and have expressed their wish to make heating from 

large-scale plants carbon-neutral within the next 20 

years. The government will therefore allow for a greater 

degree of freedom of contract between producers and 

buyers of district heating in the larger cities. Furthermore, 

the government will remove the restrictions on the free 

choice of fuel for smaller plants outside the ETS sector, 

so that these plants can replace natural gas with 

biomass. 

• Change the provisions of the Danish Heat Supply 

Act, so that the settlement of prices on heating 

produced from biomass at large-scale CHP plants 

will no longer be limited by non-profit regulation. In 

this way, producers and buyers of CHP can agree 

on a price by which they share the tax benefits of the 

transition to biomass 

• Allow plants of up to 20MW a free choice of fuel, 

which will enable a number of natural gas fired plants 

to convert to production based on biomass 

• Carry out an analysis of the use of biomass for 

energy-related purposes in Denmark. The analysis 

will focus on whether the right framework conditions 

for efficient and environmentally sustainable use of 

biomass resources are in place. The analysis will 

prepare a long-term strategy for the use of biomass 

resources for energy purposes and will draw on 

experience from other counties 

By removing these restrictions and introducing the free 

choice of fuel, the government can also contribute to 

lower heating prices in the district heating areas involved. 

This will especially benefit the open-field plants, some 

of which today charge very high prices. The free choice 

of fuel will also make for greater use of local biomass 

resources by smaller plants, for instance straw and chippings, 

to the extent that this is profitable. 


33


Background 


A solid foundation for biogas expansion 

Agriculture will play a key role as a green energy supplier 

in the transition to fossil fuel independence. In accordance 

with the national Green Growth agreement, the 

government wants Denmark to aim for the exploitation 

of up to 50% of livestock manure for green energy. There 

are large unexploited biogas resources, especially in 

the form of livestock manure in agriculture. These can 

replace natural gas, oil and coal for energy purposes. 

Greater use of livestock manure will also benefit the 

aquatic environment and will contribute to reducing 

emissions of greenhouse gases from agriculture, which 

in turn will contribute significantly to meeting Denmark’s 

international climate commitments. 

The government is monitoring closely the expansion of 

biogas and has agreed with the Danish People’s Party 

to take stock of these developments at the end of 2012, 

see the Green Growth agreement. However, even now 

the government is presenting a package of initiatives to 

support realisation of a 50% use of livestock manure by 

2020, whilst taking into account the effects of introducing 

the free choice of fuel. 

The biogas package proposes raising the start-up aid 

and introducing a new subsidy system, which will provide 

subsidies for a greater variety of uses. It is the government’s 

ambition that a greater share of the subsidies 

be paid directly to the biogas plants, so that the plants 

may receive subsidies for all biogas production irrespective 

of ultimate use. Biogas plants will therefore be able 

to choose whether to use biogas in their own processes 

or sell it off to the highest bidder. In the longer term this 

will help improve financial performance in the biogas 

sector and it will enhance the use of biogas for a greater 

variety of purposes, e.g. in the natural gas grid and in 

industry. In order to cover the costs of livestock manure 

separation, the government will moreover introduce a 

subsidy for biogas from livestock manure. 

• Introduce a subsidy of DKK 27/GJ for biogas production 

from 2012. The subsidy will be paid to the 

biogas plant regardless of how the plant uses the 

biogas 

• Retain current levels for preferential treatment of 

biogas in CHP production, and for the average plant 

this will correspond to approximately DKK 75/GJ, 

including the biogas production subsidy, in 2012 

• Introduce a subsidy for biogas in the natural gas grid 

on equal terms with CHP production, entailing a total 

subsidy of DKK 75/GJ, including the biogas production 

subsidy, in 2012 

• Introduce a subsidy for biogas in industry and transport 

of net DKK 12/GJ, so that the total subsidy for 

biogas in industry and transport is raised from 2012 

by net DKK 39/GJ, including the biogas production 

subsidy 

• Introduce an additional subsidy of DKK 22.5/GJ for 

biogas from livestock manure. The subsidy will be 

reduced in line with natural gas prices 

• Increase the aid from a start-up construction fund 

from 20% to 30% 

• Set aside funds of DKK 25 million in 2012 to safeguard 

the required expansion of the biogas infrastructure 

with a view to alleviating any negative consequences 

for existing biogas plants in connection 

with the introduction of the free choice of fuel 

• Allow, on a voluntary basis, changing from fixed electricity 

settlement to an electricity price supplement for 

100% biogas-based plants. 

34 


Background 


A highly efficient energy consumption 

A cost-effective realisation of the goal of Danish fossil-fuel 

independence requires considerable energy efficiency 

improvements in the various sectors. In many cases, 

energy efficiency is cheaper than the otherwise required 

renewable energy expansion, both in the short, medium 

and long term. 

The energy efficiency improvements of companies must 

be enhanced. Although many companies have already 

carried out large energy efficiency improvements, considerable 

cost-effective potential still exists for reducing 

energy consumption in the different business sectors 

through energy efficiency improvements. 

The EU plays a key role in the promotion of energy efficiency 

improvements. Greater and cheaper efficiency 

improvements can be obtained through concerted 

efforts in a number of sectors. This applies not least to 

appliances, because the Danish market is too small to 

efficiently push the development of more energy efficient 

products. Concerted efforts will also mean equal terms 

of competition for producers and consumers. 

Energy consumption in the public sector is relatively 

limited compared with other sectors, but the public sector 

has a special obligation to also contribute its share, 

as ever stricter efficiency requirements are placed on the 

business community and private households. 

• Target the saving obligations of energy companies 

towards companies in general. These efforts must 

cover energy efficiency improvement as well as 

conversion away from oil and natural gas. The obligations 

of energy companies will be raised by 50% 

from 2013 and by 75% in 2017-2020. Efforts will be 

financed via net tariffs 

• Push for the EU to achieve at least 20% improvement 

in energy efficiency by 2020 by means of instruments 

and policies at EU level and at national level. This will 

take place through e.g.: 

• more requirements, and more ambitious requirements, 

for the energy efficiency of appliances and 

products; and tightening of the requirements for 

efficiency and labelling of appliances and products 

in connection with upcoming revisions of the 

Ecodesign and Energy Labelling Directives 

• push for the future framework directive on energy 

efficiency to be ambitious and action-based 

• push for a further tightening of the Energy Performance 

of Buildings Directive 

• push for a higher level of ambition among businesses 

in the EU with regard to energy efficiency 

• Enhance public sector energy savings efforts from 

2012: 

• before the end of 2011, a proposal will be presented 

to replace the existing requirements for 

a 10% reduction in energy consumption by the 

state, relative to 2006 

• in 2012, when the current agreement on energy 

savings with Local Government Denmark 

and Danish Regions elapses, the government’s 

budget agreements with municipalities and regions 

will include voluntary agreements on energy 

consumption in buildings 

• Continue the efforts by the Knowledge Centre for 

Energy Savings in Buildings. 


35


Background 


Efficiency improvements in 

households and in buildings 

Buildings have long life spans; up to 100 years or more. 

In addition, buildings are typically only renovated at 30- 

40 year intervals, and perhaps only once before 2050. 

Therefore, it is vital to choose future-proof solutions 

when constructing new buildings and when renovating 

old ones, so as to realise the full potential for savings. 

Denmark currently has some of the strictest standards 

for the energy performance of new buildings, and the 

government has agreed to tighten these standards by 

at least 75% no later than 2020. The government has 

moreover stepped up preparation of a voluntary ‘low 

energy rating 2020’, expected to be announced in spring 

2011 However, new buildings on a yearly basis only account 

for 1% of the total existing building stock. Accordingly, 

increased efforts will be directed towards existing 

buildings. 

Existing technologies and solutions provide great opportunities 

to reduce the energy consumption of existing 

buildings through improved insulation, replacement of 

inefficient windows etc. If the improvements are implemented 

in connection with ongoing maintenance, heating 

consumption in existing buildings can be reduced 

by approximately 50% of consumption levels today at a 

reasonable cost. Realising these opportunities calls for a 

combination of ambitious standards which must be met 

in connection with renovation, replacement, etc. and assistance 

to carry out these projects. 

Along with a reduction in energy consumption in buildings, 

the buildings which today are heated by oil and 

natural gas must undergo a fuel shift. This conversion 

should take place when existing heating installations 

wear out. In densely populated areas, district heating 

may be expanded, but for a large number of existing oil 

and gas furnaces, a heat pump, possibly in combination 

with solar heating, will however be the most cost-effective 

alternative. 

• Target the saving obligations of energy companies 

towards renovation of buildings and conversion of oil 

and natural gas heating. Obligations will moreover be 

increased by 50% from 2013 and by 75% in 2017- 

2020. Efforts will be financed via net tariffs 

• Future-proof the minimum efficiency standards for 

building components (windows, insulation etc.) which 

have to be met when renovating buildings, relative 

to future challenges and expected energy prices. 

Whether new components are to be included will be 

examined. The standards will be determined by taking 

into account the financial situation of home owners, 

a healthy indoor climate and freedom of architectural 

expression. Initiatives which can ensure greater 

compliance with the standards will be considered 

• Convert heating by oil, and eventually also natural 

gas heating, to district heating, heat pumps and 

other renewable forms of energy. This will be through: 

• a ban on installing oil furnaces in existing buildings 

from 2017, and a ban on installing oil and 

natural gas furnaces in new buildings from 2012. 

Derogations may be allowed in cases where no 

suitable alternatives are available 

• market-promotion of initiatives for energy-efficient 

heat pumps and solar heating, including labelling 

schemes, certification schemes, package solutions 

and ESCO models 

• rules on compensation for gas companies 

converting from individual natural gas to district 

heating 

• a model and timetable for the phase-out of 

natural gas furnaces, taking account of the need 

for gas for production purposes in industry and 

potentials for utilising biogas 

• Incorporate a ‘low-energy rating 2020’ in the building 

regulations with a view to promoting the establishment 

of new buildings with very low energy consumption. 

36 


Background 


A cohesive and intelligent energy system 

Electricity will be the dominant energy carrier in the 

future energy system with rapidly increasing electricity 

consumption. Moreover, wind power’s share of electricity 

production will grow. Against this backdrop, flexible consumption 

will be important for operation of the system. 

This will require enhancing cross-border transmission 

capacity considerably, in order to ensure efficient 

incorporation of wind power in particular into the Danish 

electricity supply system. 

Furthermore, an intelligent system with ongoing temporal 

adjustments between production and consumption of 

electricity can provide for even greater flexibility. In this 

context, increased use of electricity boilers for district 

heating production, flexible electricity consumption in industry, 

and flexible recharging of electric cars will be key. 

This will reduce the need for investments in production 

capacity, however there is still the need to develop 

cheaper solutions for intelligent electricity consumption in 

a number of areas, and a large-scale roll-out is therefore 

not appropriate at present. 

Gas will come to play an important role in a future with 

fossil fuel independence. For example, biogas-fired CHP 

plants can serve to balance intermittent wind power 

production. Hence, an up-to-date gas infrastructure for 

the use of biogas and other renewable gasses will be 

needed, e.g. gas formed from gasification of biomass or 

from electricity. 

• Establish new international electricity transmission 

capacity in the form of a transmission line to Germany 

and possibly also to Sweden in connection with 

the future offshore wind farm at Kriegers Flak. A new 

type of technology will be used providing new operational 

experience. Ultimately, this will achieve better 

connections between electricity markets. This project 

is supported financially by the EU with approximately 

DKK 1.1 billion 

• Analyse the need to expand international transmission 

lines in order to achieve a socio-economically 

optimal expansion as well as ensure the necessary 

reserves/back-up in an electricity system with a large 

share of wind power 

• Work for an agreement with the distribution companies 

to install intelligent electricity meters when 

electricity consumers install heat pumps, or recharging 

stations for electric cars. Furthermore, the limit 

for installation of intelligent meters will be lowered in 

2013 from 100,000 kWh to 50,000 kWh annual consumption. 

The government will also ask the distribution 

companies to replace all electricity meters which 

are replaced after 2015 by an intelligent electricity 

meter 

• Continue to encourage the electricity sector to 

perform demonstration projects with dynamic tariffs 

in specific distribution grids and prepare a strategy 

for the promotion of smart grids in Denmark, and in 

this connection determine investment needs and a 

financing model 

• Analyse regulation of the gas infrastructure in future 

years in order to ensure optimal use and maintenance 

of the existing gas infrastructure; both in the 

transitional phase, while natural gas still plays a role, 

and in the future, when biogas and other renewable 

gasses have taken over 

• Work for a strengthened grid infrastructure in the 

EU in order to ensure a well-functioning electricity 

market. 


37


Background 


A transition to green energy 

in the transport sector 

The transport sector accounts for approximately onethird 

of the total use of fossil fuels and is today almost 

fully dependent on fossil fuels. The transport sector will 

therefore have to go through a radical transition before 

2050. This transition will depend extensively on international 

technological developments within the field, as 

currently there are no alternatives to fossil fuels which are 

competitive in terms of technology and price. However, 

several promising technologies are emerging, with for 

example biomass and electricity. At the same time, 

alternative transport technologies are showing a clear 

tendency towards falling costs. 

In the short term, increased use of biofuels is expected, 

and it is anticipated that improved fuel efficiency in traditional 

combustion engines will play a key role. In the long 

term, much of the transition to fossil fuel independence 

in the transport sector will probably have to be based on 

more electric power. Electric power will moreover represent 

a huge energy efficiency improvement, as electric 

motors are far more energy efficient than combustion 

engines. 

Transition in the transport sector will firstly have to be 

promoted by establishing the required framework as well 

as an infrastructure in Denmark and in the EU, which 

can ensure the initial transition and a basis for building 

experience. When the technologies have achieved sufficient 

technological and price maturity, the subsequent 

phases of transition will have to pave the way for a 

broader roll-out of, as well as a large-scale transition to, 

these technologies. The work to establish the required 

framework and infrastructure is already well under way 

in Denmark, e.g. the government has agreed to exempt 

electric cars from the vehicle registration fee and car tax 

up to and including 2015. 

• Carry out a technology assessment in 2011 and 

subsequently every three years in order to ensure the 

right framework for new technologies to support the 

targets for reducing greenhouse gas emissions from 

the transport sector in the short term up to 2020, 

and in the long term up to 2050 

• Secure a requirement for 10% biofuels by 2020 

• Push in the EU for more comprehensive sustainability 

requirements for first generation biofuels, and the option 

to prioritise second generation biofuels 

• Establish a fund of DKK 25 million to provide state 

co-financing for the establishment of recharging stations 

for electric cars in order to kick start development 

in the area and design appropriate regulation 

• Push in the EU for the promotion of electric cars, 

amongst other things through enhanced harmonisation 

and standardisation of technologies for electric 

cars; and push for the establishment of a car 

recharging infrastructure throughout the EU, which is 

coordinated with the regulation of intelligent infrastructure 

• Push in the EU for more intensive research and 

development efforts within green transport technologies; 

and for tighter requirements for the energy 

efficiency and carbon emissions of cars. 

38 


Background 


An energy system with appropriate 

financial incentives 

A cost-effective transition to fossil fuel independence 

requires financial incentives, which as far as possible 

are uniform across different sectors of society. This will 

ensure the expansion of the renewable energy technologies 

that are the most competitive under current world 

market prices for fossil fuels, CO 2 emissions and renewable 


The government will therefore analyse the existing subsidy 

and tax system in the energy and transport sectors 

and examine the consequences of gradually increasing 

the taxes on fossil fuels. The dual purpose is to ensure 

government revenues, and thus the basis for continued 

welfare, and at the same time reduce the use of fossil 

fuels with cost-effective incentives. Tax-related issues 

with relevance for heat production, e.g. excess heat, will 

be examined in connection with the analysis. 

In light of the uncertainties linked to technological 

development and fuel prices, the results of efforts will 

be monitored systematically and they will be subject to 

regular evaluation. 

• Carry out regular evaluation of the effect of instruments 

deployed in order to ensure adequate progress 

towards the goal of fossil fuel independence 

and to ensure cost-effectiveness in overall efforts, 

including developing an analysis tool which can help 

clarify security of supply issues 

• Carry out an evaluation of overall efforts every four 

years 

• Carry out an examination of the subsidy and tax system 

in order to assess the need for adjustments of 

the existing system. This should be seen in the context 

of Denmark’s international climate and energy 

commitments as well as the objectives for fossil fuel 

independence in the strategy, and the public budget 

• Establish an economic model for use in the energy 

sector, in order to improve the basis for performing 

socio-economic analyses within climate and energy. 


39


Background 


A transition which creates 

green growth through research, 

development, demonstration 

and preparation for market 

In a number of areas development of more efficient and 

cost-effective energy technologies is required. Strong efforts 

are therefore needed in research, development and 

demonstration (RD&D) in the energy area. 

Enhanced energy research initiatives also support the 

possibilities of the Danish energy and climate sector in 

the growing international market for green technology by 

enabling large-scale demonstration and access to test 

environments. 

With the Erhvervsklimastrategien (climate strategy for 

companies), the government improved the framework 

conditions for Danish clean tech companies, e.g. 

through the establishment of Green Labs and through 

the market maturity efforts of the Innovation Foundation. 

In overall terms in 2010, the government ensured for 

instance more than DKK 1.5 billion for RD&D and market 

preparation of new green solutions to make them more 

profitable on market terms. 

Further focus and coordination of the allocations for energy 

technology (RD&D) is needed. Danish research and 

development cannot lead the way in all green technology 

areas. It is important that efforts are more targeted and 

support the focus areas in Energy Strategy 2050. 

Therefore, the government will identify and assess 

energy-technology RD&D initiatives, in cooperation with 

relevant players, in order to identify areas where strategic 

support for research, development and demonstration 

has the greatest societal value. On the basis of such an 

assessment, a number of specific “flagships” could be 

established, underpinning the robust focus areas in Energy 

Strategy 2050 as well as current Danish commercial 

strengths. 

• Undertake a strategic review of the public research, 

development and demonstration initiatives in the 

climate and energy area in order to support the transition 

to fossil fuel independence as well as the needs 

of the business community. Ways to improve coordination 

and interaction between relevant programmes 

and councils will also be identified 

• Prioritise a doubling of the funds in the EU’s future 

budget for research, development and demonstration 

up to 2020 in the energy and climate change areas, 

particularly for renewable energy, smart grids and 


• Enter into partnerships with private enterprises, 

research institutions and others, where this can 

contribute to developing, testing, and preparing for 

market of Danish cleantech solutions, e.g. wind solutions 

and bio-based products 

• Actively support the establishment of larger test environments 

for green solutions in Denmark such as the 

wind turbine test centre at Østerild. The large, green 

support programmes such as the EUDP, Green Labs 

and the Innovation Foundation will be supplemented 

by partnerships or additional support for setting up 

more specific testing grounds such as “Samsø as a 

fossil fuel free island” 

• Present an overall plan for test turbines 

• Carry out a series of technology assessments in 

collaboration with experts from the business community 

and research in order to support a cost 

effective framework for using renewable energy. The 

technology assessments will focus on a wide array of 

technology areas 

• Investigate the need and opportunities for ensuring 

sufficient recruitment of university graduates and 

researchers into the green area. 

40 


Background 


Ambitious endeavours for 

a global transition 

Security of energy supply is best achieved when all 

countries cooperate to minimise and make the consumption 

of scarce resources more efficient. Similarly, 

only global action can solve the climate challenge. Most 

countries have submitted reduction initiatives to the 

UNFCCC. Enhanced global reduction efforts are required 

to meet the climate challenge and bring about greater 

focus on efficient and innovative solutions which can realise 

reduction commitments and develop new solutions 

to adapt countries to climate impacts. 

At the same time, such a transition to a global green 

economy will create a significant international economic 

growth potential; a potential from which Denmark can 

also benefit through exports of Danish green solutions. 

In addition, if other countries also implement stricter 

requirements for their industry and businesses, the risk 

of impairing the competitiveness of the most ambitious 

countries will be reduced. 

Therefore, Denmark will push for a global green transition 

in international forums. Further to this, the government 

will work to establish a Global Green Growth Forum 

to create an annual global forum for dialogue between 

leading international politicians, businesses, experts 

and investors on the transition to a global green growth 

economy. The main themes will be the role of the business 

community in the green transition, financing green 

growth, and the political framework conditions for green 

growth within sectors such as transport, energy and 

water. The initiative is to contribute to the development 

of specific solutions and responses to the global growth 

challenges and also to help maintain and enhance Denmark’s 

brand in the green area. 

• Work in international forums such as the UN, the 

OECD, the Rio+20 Conference, the International 

Energy Agency, and the Clean Energy Ministerial etc. 

for: 

• ambitious, global efforts for the climate. Primarily 

by having countries’ reductions efforts implemented 

and enhanced through negotiations within the 

UNFCCC as well as through expansion of the 

regional allowances trading systems, enhancing 

the global carbon market through improvements 

in the institutional framework for international and 

national project-based reductions after 2012, 

and by enhancing environmental integrity through 

requirements and standards for utilising climate 

credits in the EU and UN after 2012 

• promotion of a green growth agenda, for example 

Green Economy is a main theme for the Rio+20 

conference in 2012 on sustainable utilisation 

of natural resources in a social and economic 

context 

• energy efficiency and transition to clean and 

renewable energy such as ”smart grids”, electric 

cars etc. 

• phase-out of subsidies etc. for fossil fuels 

• Work to establish a Global Green Growth Forum 

• Support green transition in developing countries, not 

least the very poorest, in accordance with the countries’ 

economic and social development goals, in 

particular through conversion of the energy sector to 

more renewable energy and greater energy efficiency 

of the transport sector and other relevant sectors. 

This involves developing reduction and adaptation 

strategies, including methods to calculate emissions. 


41


42 


Background 


An EU independent of fossil fuels 

An efficient step for both Danish and global transition 

would be if the entire EU were to move towards fossil 

fuel independence. 

In May 2010 the government sent a proposal to the 

European Commission to contribute to the preparation 

of a new European energy policy for the short, medium 

and long terms. 

The Danish government believes, that the energy 

agenda should be incorporated in all relevant EU policy 

areas: research, development, transport, agriculture, 

foreign affairs and the EU budget; and that EU energy 

policy and energy research should be given higher priority 

financially. 

In May 2010, the European Commission highlighted a 

number of advantages in increasing the greenhouse 

gas reduction target for 2020 from the current 20% to 

30% compared with 1990, including the advantage of 

stronger incentives for energy savings and more use of 

renewable energy throughout the EU. This would be a 

strong signal globally, but it would also contribute specifically 

to less dependence on fossil fuels and a better 

climate. Of course it should be done in such a way as to 

ensure employment, competitiveness and a fair burden 

sharing. 

• Promote a long-term vision for an EU independent 

of fossil fuels as a starting point for a strengthened 

European energy policy, including time perspectives 

and possible milestones within a socio-economically 

sustainable framework 

• Endeavour to raise the common EU greenhouse gas 

emissions 2020 target from 20% to 30% compared 

with the 1990 level in a way that ensures employment, 

competitiveness and fair burden sharing 

• Urge the EU to adopt an ambitious long-term 

strategy to support a low-carbon energy supply and 

greater fossil fuel independence in the transport sector 

• In the EU, prioritise a doubling of the funds for 

research, development and demonstration in the 

energy area by 2020 compared with the todays level, 

including a significant increase in the EU’s future 

budget, particularly for renewable energy, smart grids 

and energy efficiency 

• Push for the adoption of minimum standards for energy 

and CO 2 taxes in the EU in connection with the 

revision of the EU Energy Tax Directive 

• Endeavour to develop EU’s energy infrastructure so 

that Denmark and EU member states can incorporate 

still larger amounts of renewable energy. 


43


Background 


Reductions in agriculture’s emissions 

of greenhouse gases in the long term 

The realisation of fossil fuel independence through initiatives 

in the energy and transport sectors will ensure that 

Denmark comes a long way towards reducing emissions 

of greenhouse gases and meeting climate targets in 

the short and longer terms. However it is important that 

emissions are also reduced in other sectors. 

In addition to the energy and transport sectors, agriculture 

is the largest emitter of greenhouse gases. Emissions 

of nitrous oxide and methane from agriculture have 

been showing significant falls over a number of years, 

partly because of limits on nitrogen emissions in the action 

plans for the aquatic environment. Today, agriculture 

accounts for 16% of total greenhouse gas emissions and 

approximately one-third of greenhouse gas emissions for 

the non-ETS sectors. 

A number of initiatives to reduce greenhouse gas emissions 

from the sector have already been decided and 

are being implemented. For example the Green Growth 

agreement for better conditions for using biomass and 

biogas for energy purposes is helping support farmers to 

supply green energy. The government’s proposed biogas 

package will also contribute to reducing emissions from 

agriculture. In the future it is important, that Danish efforts 

stay in line with other countries to avoid unequal 

competition which will impact the competitiveness of 

Danish farmers. 

• Analyse long term opportunities to reduce emissions 

from agriculture as part of cost effective climate efforts 

• Promote a sustainable common EU agricultural 

policy, for example in relation to climate, so that 

agricultural policy can be used to promote climate 

friendly production forms, including innovative efforts 

and efforts targeted on shallow soil, and to ensure 

common green terms for competition in the agricultural 

sector 

• Evaluate the pilot project and potential to establish a 

possible permanent scheme for national JI projects 

in 2011 

• Improve conditions for expansion of biogas with the 

biogas package. 

44 


Background 


An efficient and environmentally sound 

utilisation of North Sea resources 

In recent years, oil and gas production in the North Sea 

has been crucial for the Danish economy. Since 1995 

Denmark has had a surplus on its trading balance for oil 

and gas, and up to 2009 government revenues from oil 

and gas activities have corresponded to more than DKK 

250 billion in today’s prices. 

This has given economic leeway for more welfare and to 

the repayment of national debt. At the same time, oil and 

gas activities have created economic growth and a large 

number of specialist jobs in oil companies, research, 

and not least in western Denmark, where there are more 

than 250 offshore-related companies in the Esbjerg area 

alone. This has provided experience and knowledge 

which could also be developed in connection with future 

green offshore activities. 

Oil production peaked in 2004, and it is expected to 

drop by 37% up to 2014 in relation to 2009. Although 

North Sea production has been falling in recent years, 

it has been estimated that there are still oil and gas 

resources in the Danish subsurface to contribute to the 

economy. 

The technology of today only extracts approximately a 

quarter of the oil lying in the known fields. More effective 

exploitation of oil and gas resources as well as new 

discoveries could therefore provide government revenues 

and contribute to securing sound public finances 

whilst helping to cover the increasing global demand for 


• Secure a more transparent framework for using the 

existing infrastructure in order to improve possibilities 

to expand economically marginal oil and gas occurrences 

• Implement a review of the framework for oil and gas 

extraction for future tendering rounds and for the use 

of CO 2 injection to improve extraction rates 

• Analyse the exploration potential in Denmark and 

assess when, and on what terms, new exploration 

licences can be offered (7th round) 

• Promote a new phase of the Joint Chalk Research 

collaboration between Danish and Norwegian authorities 

and oil companies with a view to increasing 

oil extraction from chalk fields 

• Promote exploration for new oil and gas fields in 

deeper layers through a project led by the Geological 

Survey of Denmark and Greenland (GEUS) in research 

collaboration with oil companies. The project 

will assess opportunities for new oil/gas finds and 

reassess existing finds in deep layers 

• Negotiate with oil companies for a new action plan 

to replace the existing plan for more energy efficient 

extraction of oil and gas from the North Sea 

• Examine possibilities to improve and coordinate authority 

administration of oil and gas activities onshore 

• Analyse opportunities to secure recruitment for the oil 

sector through education initiatives in the field of oil 

and gas 

• Negotiate a new environment action plan with the 

oil companies to secure lower environmental impact 

from oil and gas extraction in the North Sea and 

evaluate and possibly revise the strategy for inspection 

by the Danish Energy Agency of safety and 

health conditions in the North Sea. 


45

4On 

the way towards fossil fuel independence by 2050 – effects and benefits of the government’s initiatives 

the way towards fossil fuel independence by 2050 

– effects and benefits of the government’s initiatives 

In addition to the benefits for the environment 

and climate from the new initiatives, the 

strategy will also provide Danish companies 

with new opportunities to exploit the global 

green growth potential. 

46 


‘The largest contributions come from increased 

wind power, increased use of biomass and 


The government’s strategy contains a wide range of 

initiatives to bring Denmark closer to its objective of 

an energy and transport system without fossil fuels by 

2050; initiatives which will also help meet the energy and 

climate targets already set out in the short and medium 

term. The strategy will already have significant effects 

in the period 2011-2020, in the form of reduced use of 

fossil fuels, increased use of renewable energy, reduced 

energy consumption, cuts in greenhouse gas emissions 

and enhanced security of supply. With this strategy, the 

government is establishing a flexible framework for longterm 

efforts, but needless to say the transition will require 

further initiatives in the period after 2020 to realise the 

goal by 2050. 

In addition to the benefits for the environment and 

climate from the new initiatives, the strategy will also provide 

Danish companies with new opportunities to exploit 

the global green growth potential by ensuring stronger 

cohesion between innovation, production and sale of 

new technologies to the advantage of Danish exports. 

Phase-out of fossil fuels 

in the energy sector 

As appears from the government’s three tracks for the 

transition, the phase out of fossil fuels will take place at 

different rates. The transition will first be in the energy 

sector, whereas large-scale conversion of the transport 

sector is expected later, once the non-fossil based alternative 

fuels have become financially and technically more 

attractive. 

The government’s new initiatives to improve energy efficiency 

and expand renewable energy will already provide 

a significant reduction in the use of fossil fuels over the 

next ten years. With the initiatives the government is 

presenting, the use of fossil fuels in the energy sector will 

be cut by 33% by 2020 relative to the 2009 level. The 

greatest contribution to this reduction will come from the 

government’s initiatives to increase the use of biomass, 

biogas and biofuels, expand wind power and increase 

energy efficiency. 

400 

250 

0 

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 

Without initiatives With new initiatives 

PJ 

350 

300 

Figure 4.1 Fossil fuel use in the energy sector 2009-2020 

(excluding transport, extraction and refining). 


The electricity sector in particular will see a very significant 

reduction in the use of fossil fuels. With the government’s 

new initiatives, the share of renewable energy 

will account for more than 60% of overall electricity 

consumption in 2020, against 29% in 2009. Wind power 

alone will cover more than 40% of electricity consumption 

in 2020, compared with just 19% in 2009. A high 

share of renewables in the electricity supply also implies 

electrification of an ever greater share of energy consumption 

for transport, heating and industrial processes. 

33% reduction 


47

On the way towards fossil fuel independence by 2050 – effects and benefits of the government’s initiatives 

19% 

10% 

71% 

20% 

38% 

42% 

2009 

2020 

Wind Biomass Fossil fuels Wind Biomass Fossil fuels 

Figure 4.2 Share of renewable energy in electricity production 

2009 and 2020. Source: Danish Energy Agency 

Lower oil consumption in 

the transport sector 

A substantial conversion of the transport sector to nonfossil 

alternatives will not happen within the next ten 

years. A substantial shift of this type is both technically 

and financially unrealistic in the short term. It is expected 

that the use of oil will stabilise within this decade, 

amongst other things because of greater use of biofuels 

and increased efficiency. A more efficient transport 

sector provides a sound basis for subsequent reductions 

in the transport sector’s use of oil as alternatives 

to transport powered by petrol and diesel become more 

competitive. A technology shift from oil-based transport 

to non-fossil alternatives is the challenge that will have to 

be dealt with in the next decades. 

250 

225 

200 

175 

PJ/year 

0 

1990 1995 2000 2005 2010 2015 2020 

Figure 4.3. The transport sector’s use of oil 1990-2020 


48 


The government strategy entails ambitious 

efforts for the period up to 2020, but also 

points onwards to 2050 

On the way towards fossilfuel 

independence 

Total use of fossil fuels in Denmark, that is, the use of 

fossil fuels for energy, transport, and for extraction and 

refining purposes, will be reduced by 18% by 2020, 

relative to 2009, due to greater use of biomass, wind, biogas 

and biofuels as well as increased energy efficiency. 

600 

The government’s strategy entails ambitious efforts for 

the period up to 2020, but also points onwards to 2050. 

With considerable reductions in the use of fossil fuels in 

the energy sector, stabilisation of oil use in the transport 

sector, and a framework for future efforts, the government’s 

strategy is a huge step towards the target of 

phasing out fossil fuels completely by 2050, see figure 

4.5. However, realising the goal by 2050 will require a 

continuation of existing efforts and implementation of 

new initiatives in the period after 2020. 

900 

500 

400 

300 

200 

800 

700 

600 

500 

400 

300 

200 

100 

PJ/year 

0 

1990 2000 2010 2020 2030 2040 2050 

Historical 

Without new initiatives 

With new initiatives 

Figure 4.5. Consumption of coal, oil and natural 

gas 1990-2050. Source: Danish Energy Agency 

100 

PJ 

0 

2009 

2020 

Oil Gas Coal 

Other RE Wind Biogas Biofuel Biomass 

Figure 4.4 Consumption of fossil fuels and RE in 2009 and 

2020 (excluding extraction and refining) 


Phasing in renewable energy 

With the proposed initiatives, it is estimated that the 

share of renewable energy will reach 33% in 2020, up 

from around 20% in 2009. In other words, with this 

strategy, Denmark will exceed the EU target of a 30% RE 

share by 2020 by 3 percentage points. 


49


% 

33 33% by 2020 

30 

25 

20 

15 

0 

2006 2008 2010 2012 2014 2016 2018 2020 

Without initiatives With new initiatives EU target 

Figure 4.6. Share of renewable energy in final energy consumption 

2006-2020. Source: Danish Energy Agency 

The significant expansion of renewable energy will 

ensure, that Denmark keeps its place as a global leader 

in raising its RE share. Up to 2020, consumption of biomass, 

wind, biogas and biofuels will increase significantly 

as a consequence of existing and new initiatives. With a 

significant increase in solid biomass, biogas as well as 

biofuels, bioenergy will continue to make up the majority 

of total renewable energy consumption in 2020, see 

figure 4.7. 

250 

200 

150 

100 

50 

It has been estimated that the RE share will continue to 

increase after 2020, depending on price developments, 

new initiatives etc. With the government initiatives for 

expansion of wind and biomass, Denmark is well on its 

way to having an energy and transport system based 

on renewable energy by 2050. This is illustrated in figure 

4.8. 

100 

90 

80 

70 

60 

50 

40 

30 

33 % by 2020 

20 

10 

0 

2010 2015 2020 2025 2030 2035 2040 2045 2050 

Without initiatives With new initiatives 

Figure 4.8. RE-share 2010 to 2050 


% 

A lower energy consumption 

With the proposed initiatives, this strategy will help 

reduce gross energy consumption in 2020 by significantly 

more than expected, as it has been estimated, 

that gross energy consumption will be reduced by 6% 

by 2020, relative to 2006. Thus, the target of reducing 

gross energy consumption by 4% by 2020 compared to 

2006 will be more than met. This means, that Denmark 

is well on its way to meeting the government’s goal of 

being one of the three most energy-efficient countries in 

the world by 2020. 

0 

2000 2005 2010 2015 2020 

Other Wind Biogas Biofuel Biomass 

Figure 4.7 Renewable energy in primary energy consumption 

2000-2020. Source: Danish Energy Agency 

PJ 

50 


Denmark is well on its way to meeting the government’s 

goal of being one of the three most 

energy-efficient countries in the world by 2020. 

900 

875 

850 

825 

800 

775 

PJ 

0 

2006 2008 2010 2012 2014 2016 2018 2020 

Primary energy consumption 

Figure 4.9. Primary energy consumption 2006-2020 


With new initiatives 

Maintaining the high security 

of energy supply 

Without new initiatives 

2020 target for primary energy consumption 

The government strategy will improve Denmark’s energy 

supply security in the short term as well as in the long 

term. Ever-lower gross energy consumption and reductions 

in imports of fuels will mean that Denmark will be 

less dependent on politically unstable regimes and will 

result in a greater robustness with regard to unstable energy 

prices and supply crises. Thereby, a higher degree 

of security of supply will be achieved than in a system 

with greater energy consumption and more dependence 

on imports of fuels. 

Paradoxically, an energy and transport system with 

greater electrification of end consumption, and therefore 

greater electricity consumption as a whole, is not 

significantly more vulnerable to physical breakdowns in 

the electricity system. This is because by far the greatest 

part of the extra electricity consumption is flexible and 

will therefore not be affected by any brief failures in the 

electricity supply. On the other hand, maintaining the security 

of supply in an energy and transport system based 

on fluctuating energy sources such as wind requires a 

strong electricity infrastructure, more trade with foreign 

suppliers, a well functioning electricity market and backup 

capacity. It also requires storage facilities for electricity 

and heating. 

On the way to meeting climate 

objectives by 2020 and 2050 

Greenhouse gas emissions will be reduced in line with 

the phase out of fossil fuels. With the government initiatives, 

Denmark is well on the way to meeting the Danish 

climate commitment for the period 2013-2020, while at 

the same time setting a long-term course towards an 

economy with a very low climate impact. 

However, reducing greenhouse gas emissions poses a 

challenge that extends beyond the energy and transport 

sector. CO 2 constitutes just under 80% of Denmark’s 

total greenhouse gas emissions. After CO 2 , the greatest 

contributors to Danish greenhouse gas emissions are 

nitrous oxide and methane, which primarily stem from 

agriculture. However, emissions from waste and industrial 

processes also contribute to total greenhouse gas 

emissions. 

1.4% 

8.7% 

10.5% 

79.4% 

F-gases Methane Nitrous oxide CO 2 

Figur. 4.10. Observed emissions by type of greenhouse 

gas in 2008. Source: National Environmental Research Institute (NERI) 


51


Reduction of non-ETS emissions 

Efforts to reduce greenhouse gas emissions are required 

in the short term if Denmark is to meet its commitments 

for 2020, i.e. to reduce non-ETS emissions by 20% 

by 2020 in relation to 2005. In 2008, non-ETS emissions 

made up approximately 58% of Denmark’s total 

emissions and included greenhouse gas emissions 

from transport, agriculture, households, waste and less 

significant parts of industry and the energy sector, e.g. 

small-scale CHP plants. ETS emissions primarily stem 

from electricity and heat production as well as energyintensive 

companies, and are regulated by the EU Emissions 

Trading Scheme. 

As part of the EU climate and energy package of 2008, a 

common EU target for the non-ETS sectors was set for 

a reduction of approximately 10% by 2020 in relation to 

2005. The common target has been divided into national 

reduction commitments. Denmark has committed itself 

to reducing non-ETS emissions by 20% by 2020 in relation 

to 2005. Denmark’s reduction commitment is one 

of the highest in the EU. In comparison, other member 

states have reduction commitments that lie between 

-20% and +20%, see Figure 4.11. 

In contrast to the commitment period 2008-2012, where 

the emissions average throughout the period may not 

exceed the commitment target, commitments for the 

period 2013-2020 are annual commitment targets. This 

means that member states must meet a fixed reduction 

target every year. Reduction targets follow an ever 

increasing linear path with a fixed increase from the 

start in 2013 until the final target is reached in 2020. In 

Denmark’s case this corresponds to 20 % reduction in 

relation to 2005. Thus a reduction path is created made 

up of annual sub-targets. Member states may exceed 

their commitment targets in the first years, so as to ‘save 

up’ for years to come. 

Figure 4.11 Burden sharing of the EU reduction commitment 

in non-ETS sectors by 2020 relative to 2005 

Portugal 

Slovenia 

Malta 

Czech Republic 

Hungary 

Estonia 

Slovakia 

Poland 

Lithuania 

Latvia 

Romania 

Bulgaria 

Denmark 

Ireland 

Luxembourg 

Sweden 

Netherlands 

Austria 

Finland 

United Kingdom 

Belgium 

Germany 

France 

Italy 

Spain 

Cyprus 

Greece 

-20 -15 -10 -5 0 5 10 15 20 

Box 4.1 Target for 20% reduction in non-ETS emissions by 

2020 

52 


Total greenhouse gas emissions will be 

further reduced in line with the phase 

out of fossil fuels. 

Efforts for greenhouse gas reductions made until now 

have laid the foundation for compliance with the reduction 

commitment. A number of the government initiatives 

to reduce fossil fuel use will also lead to significant 

reductions in the non-ETS sectors. All in all, it has been 

estimated, that the government’s new initiatives will 

reduce non-ETS emissions by 4-5 million tonnes CO 2 

equivalents in the period 2013-2020. The greatest effect 

will be achieved from enhanced efforts to improve energy 

efficiency. In addition, effects will also be achieved 

by conversion away from individual heating based on oil 

and gas, a greater share of biofuels, an improved framework 

for using biogas and free choice of fuel. 

This will allow for a flexible and dynamic choice of further 

climate initiatives in sectors such as agriculture, waste 

and transport. The government will follow up on efforts 

regularly to ensure compliance with the 2020 climate 

commitment, and launch new initiatives as required. 

Significant greenhouse gas 

reductions in the long term 

The need for significant reductions with regard to total 

greenhouse gas emissions in the long term also requires 

that the right foundation is laid down early in the process. 

Thus short term efforts will contribute to steering 

Denmark in the right direction with regard to the common 

EU objective of an 80%-95% reduction by 2050 

relative to 1990. Even though the EU target cannot be 

translated into a Danish reduction commitment, it gives 

an impression of the challenge facing Denmark with 

regard to long term reductions. 

Total greenhouse gas emissions will be further reduced 

in line with the phasing out of fossil fuels. Calculations 

made by the Danish Commission on Climate Change 

Policy show that when Denmark’s energy and transport 

systems no longer use fossil fuels, and therefore have 

more or less no carbon emissions, Denmark’s greenhouse 

gas emissions will be reduced by approximately 

75%. Thus Denmark will be able to contribute to meeting 

the EU objective, as well as the objective to limit the average 

temperature rise to 2°C, as agreed in Copenhagen 

in 2009 and in Cancún in 2010. However, cost-effective 

reduction of total emissions requires efforts to limit 

greenhouse gas emissions outside the energy sector, 

both CO 2 and other greenhouse gases, see figure 4.12. 

mill tonnes CO2 eq. 

80 

70 

60 

50 

40 

30 

20 

10 

0 

1990 2008 2020 2050 

Other Agricultural CO 2 from fossil fuels 

Figure 4.12. Denmark’s greenhouse gas emissions in 1990, 

2008, 2020 and 2050 (adj. emissions, excluding carbon 

storage). Source: Danish Energy Agency/Danish Commission on Climate 

Change Policy (2050-scenario) 


53


A transition creating green growth 

Many other countries are facing the same challenge; to 

move their economies away from dependence on fossil 

fuels. This will lead to a growing global market for renewable 

energy technologies and energy-efficiency improvement 

solutions. 

The government has already launched a number of initiatives 

to support Denmark becoming an attractive place 

for research, development, demonstration and testing 

of energy technologies; for Danish as well as foreign 

companies. With the Erhvervsklimastrategien (climate 

strategy for companies), the government presented its 

vision to create a new green growth economy in Denmark. 

In connection with this, framework conditions for 

clean tech companies were strengthened by e.g. establishing 

Green Labs DK and the market maturity efforts 

of the Innovation Foundation. In overall terms, in 2010 

the government allocated more than DKK 1.5 billion 

for research, development, demonstration and market 

preparation of new green solutions. In addition to this, 

the government has initiated establishment of a national 

test centre for wind turbines in Østerild in the northwestern 

part of Jutland. This test centre will meet the 

requirements of the wind turbine industry and research 

institutions for full-scale test facilities of the highest international 

standard. 

Initiatives with green growth potential 

In addition to energy and climate effects, the wide range 

of initiatives in Energy Strategy 2050 will also support 

Denmark’s strong position as a laboratory for green 

technology research, development and demonstration, 

notably for energy technology. 

• With regard to wind power, opportunities for a close 

interplay between test, demonstration and production 

of wind turbines will be enhanced, equipping 

Danish companies to continue taking full advantage 

of the global expansion of wind power. 

• With regard to biomass and biofuels, increased use 

in combined heat and power production and transport 

will improve Danish companies’ opportunities 

for development and innovation in a promising area 

in which Denmark has already demonstrated core 

competences. 

• With regard to biogas, improved framework conditions 

will underpin Danish skills and strengthen the 

role of agriculture as a green energy supplier. 

• With regard to smart grids and electricity transmission, 

these will be expanded, and there will be greater 

integration of renewable energy into the electricity 

system; all areas in which Danish companies already 

have a strong position. 

• Last but not least, with regard to energy saving 

efforts, these will place Danish companies at the 

forefront of developments within energy efficiency 

solutions; solutions which will be in high demand by 

other countries. In addition, jobs will be created in the 

building and construction sector. 

Research, development, demonstration and preparation 

for market will also in future be pivotal and contribute to 

continued innovation and testing of Danish energy technology. 

The government initiatives aim at stronger focus 

and coordination of allocations for energy technology research, 

development and demonstration. Moreover, the 

Danish government will enter into partnerships with the 

business community to strengthen coordination of private 

and public efforts in the areas above, for example. 

The government will also increase its focus on providing 

Danish and foreign cleantech companies in Denmark 

with access to highly qualified labour and research communities 

with skills in green energy. 

Government initiatives will strengthen cohesion between 

development, testing, production and sale of new technology, 

and thereby strengthen companies’ opportunities 

for innovation and demonstration of new green solutions. 

Thus this strategy provides Danish companies with 

a good launch pad for exporting to a rapidly growing 

global market. 

Under the auspices of the EU, the Danish government 

is pushing to promote CO 2 reductions, energy savings 

and the use of renewable energy across member 

states. These efforts are contributing to securing sales 

of efficient and renewable energy technologies within the 

EU and to ensuring fair competition, which will benefit 

Danish companies. 

54 


Thus this strategy provides Danish companies 

with a good launch pad for exporting to a 

rapidly growing global market. 


55

A 

5A 

fully financed transition 

fully financed transition 

An economically responsible transition 

is important for the Danish government. 

Therefore all the new initiatives in the 

government’s strategy are fully financed. 

56 


The transition to fossil fuel independence 

will not be free. 

The transition to fossil fuel independence will not be free. 

It will cost money to convert to more energy efficient 

technology and renewable energy. It will require investment 

which in the long term will mean lower fuel costs, 

but which in the short term will often be more expensive 

than the fossil alternatives. In the longer term, transition 

will result in an economy less vulnerable to fluctuating 

energy prices, and Denmark will make its contribution to 

meeting the costs arising from extensive global climate 

change. If these benefits are taken into consideration, 

the extra costs of the transition to a society without fossil 

fuels will overall be modest, although transition will have 

to be gradual and over a long time period. 

An economically responsible transition is important for 

the Danish government. Therefore all the new initiatives 

in the government’s strategy are fully financed. Furthermore 

the financing has been designed with full respect 

for existing economic policies and in a way, which retains 

the overall competitiveness and employment of Danish 

companies, and which provides new opportunities for 

green growth. 

In line with the phasing out of fossil fuels, government 

revenues from taxes on fossil fuels will naturally fall as 

well. This means that the government’s revenue base will 

deteriorate with an unchanged tax system. This in turn 

means that there will be a need to gradually introduce 

taxes on other energy sources to ensure government 

revenues, and thus the basis for continued welfare. 

Together with continued taxes on fossil fuels, transition 

can be financed while also ensuring the right incentives 

to reduce the use of fossil fuels. 

In any case, changes in the existing tax system will have 

to take full account of the competitiveness of Danish 

businesses and the finances of individual households. 

There is no benefit in conducting energy and climate 

policy at the cost of Danish businesses and Danish jobs. 

However, neither is it possible to exempt the business 

community entirely from the burden of transition to fossil 

fuel independence. The government’s strategy has 

established a balance between competitiveness and the 

need for a fair distribution of the burden of transition. 


57

A fully financed transition 

Increased energy efficiency in 

buildings and businesses 

Financed through energy company 

tariffs and thus by energy consumers 

(electricity, heating, oil, gas). 

Estimated at 

DKK 0.6 billion in 2020 

New initiatives for renewable 

energy expansion 

Estimated at 


Financed primarily through the Public 

Service Obligation (PSO), which is charged 

over the electricity bill. In addition, a new 

gas PSO scheme will be introduced 

and charged over the gas bill. 

State revenue losses due 

to reduced consumption 

of fossil fuels 

Financed through the introduction of a 

security of supply tax which will contribute 

to a revenue-neutral green transition. 

Estimated at 


Other new initiatives 

Estimated at DKK 0.2 billion 

over the period 2011-2014 

Financed by re-allocating existing funds 

in the energy and climate budget, 

including remaining funds from the existing 

scheme for scrapping oil furnaces. 

Figure 5.1 Financing the government’s proposal 

A fully financed package of initiatives 

The government’s new climate and energy policy 

initiatives up to 2020 are fully financed. This also applies 

to tax revenue losses resulting from lower energy 

consumption and in particular lower consumption of 

fossil fuels. This implies, that the transition to fossil fuel 

independence will primarily be financed by the energy 

consumers, who will also reap advantages in the form of 

lower fuel costs and better security of supply. 

Financing energy saving initiatives through grid 

tariffs and energy consumers 

The costs of energy companies relating to energy saving 

initiatives are covered through the companies’ grid 

tariffs, and thus ultimately paid by energy consumers. 

The grid tariffs are subject to financial regulation set in 

advance. The regulation is implemented by executive order 

following political negotiations. If the increases in the 

obligations are distributed proportionately on the basis 

of current consumption, the higher costs will be more or 

less equally distributed between electricity consumers, 

district heating consumers and oil and gas customers. 

58 


An important tool to achieve more efficient 

buildings and businesses is to increase the 

energy saving obligations 

Most of the funds charged by energy companies to energy 

consumers in 2020 to meet the savings obligations 

will be used as subsidies for companies and households 

to buy energy efficient equipment and energy consultancy. 

The costs of energy saving efforts will therefore to 

a large extent be recouped through falling energy consumption 

and thus lower energy costs for consumers. 

Financing renewable energy expansion through 

the PSO scheme 

Government initiatives to expand renewable energy 

up to 2020 include an offshore wind farm at Kriegers 

Flak, coastal wind turbines and onshore wind turbines, 

biomass in electricity and heat production, as well as 

biogas. These initiatives are financed through the PSO 

scheme (Public Service Obligation). The PSO contribution 

is a supplement to the price of electricity which, 

in addition to expanding renewable energy, finances 

subsidies for small-scale CHP plants, electricity-related 

research, development and demonstration, as well as 

other common costs of the electricity system. The PSO 

contribution is paid by all electricity consumers through 

their electricity bills, although there is an upper limit. 

As a new element, a small proportion of the PSO costs 

will be covered by gas consumers. This will finance the 

costs of replacing some of the natural gas in the grid 

with biogas. Gas consumers are expected to have to 

pay DKK 0.2 billion of the total PSO costs in 2020. In 

addition to this, some of the expansion of biogas will be 

financed through the security of supply tax. 

With these government initiatives, PSO costs will gradually 

increase up to 2020, when additional PSO costs will 

amount to DKK 1.4 billion and the total PSO payments 

will therefore amount to almost DKK 4.5 billion (2011 

prices). 

6000 

5000 

4000 

3000 

2000 

1000 

DKK million 

0 

-1000 

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 

Basis Onshore wind Near-shore turbines Biogas in the gas grid Heating settlement Kriegers Flak Biogas changes 

Figure 5.2 PSO costs 2002-2020 (2011 prices) 

Note: the negative contribution to PSO costs from the 

new biogas initiatives is because some of the subsidies for 

biogas will in future be granted outside the PSO system. 


59


Since the introduction of the scheme in the late 1990s, 

the PSO payment has fluctuated as a result of varying 

market prices for electricity, which affect the need for 

support for renewable energy; varying rates of renewable 

energy expansion; and changes in RE subsidy rates. 

Even with significant expansion of renewable energy 

towards 2020, both as a result of the government’s new 

initiatives and policies already implemented, the total 

PSO payment will not reach more than the level in 2002- 

2004 (at fixed prices). The reason it is possible to finance 

more renewable energy without the total PSO payment 

increasing to record levels is that the need for support 

for renewable energy per unit is falling and that previous 

support is falling away. In other words there will be more 

and more renewable energy for the same cost. 

Financing lost state revenue through a security of 

supply tax 

As the consumption of fossil fuels drops as a consequence 

of energy-efficiency improvements and more 

renewable energy, state revenues from taxes on coal, 

oil and gas will also drop. Revenue losses will increase 

gradually in line with the phase-out of fossil fuels and 

will amount to approximately DKK 1.6 billion in 2020. In 

order to finance this loss in revenues, the government 

will introduce a security of supply tax which, mirroring 

revenue losses, will gradually raise energy taxes on all 

fuels for space heating, i.e. coal, oil and gas as well as 

biomass. It is estimated that a security of supply tax of 

approximately DKK 17 per GJ in 2020 will secure neutral 

government finances and therefore this figure has been 

used in the following calculations. The exact tax rates 

and phase-in will be finally determined in connection with 

the specific implementation in future legislation. 

In order to relieve the burden of the security of supply 

tax for consumers already paying high taxes on fossil 

fuels, the tax increase on fossil fuels already taxed will be 

reduced by approximately DKK 7.5 per GJ in 2020. This 

adjustment will also establish a better balance between 

taxation of fossil fuels and taxation of biomass, which the 

Tax Commission proposed and which the Commission 

on Climate Policy Change also suggested. The security 

of supply tax will provide revenues of approximately DKK 

2.0 billion in 2020. 

Furthermore, taxes on electricity and fossil fuels used for 

industry will be reduced by approximately DKK 3-3.5 per 

GJ in 2020 compared with what was otherwise planned 

in the Spring Package 2.0 in order to relieve the tax 

burden for the business community by DKK 0.4 billion in 

2020 for reasons of competitiveness. This means total 

revenues will amount to approximately DKK 1.6 billion in 

2020, ensuring that overall the government’s proposal is 

neutral in terms of total government revenues. 

2500 

2000 

1500 

1000 

500 

DKK million, fixed prices 

0 

-500 

2012 2013 2014 2015 2016 2017 2018 2019 2020 

Security of supply tax (incl. lower tax on fuels already taxed) 

Lower energy tax on process energy 

Total tax revenues to cover revenue losses 

Figure 5.3 Tax revenues from the security of supply tax 

2012-2020 (2011 prices) 

60 


The strategy includes a large number of 

smaller initiatives to support and prepare 

for the transition to fossil fuel independence 

The goal of fossil fuel independence will increase 

pressure on public budgets gradually up to 2050 as a 

consequence of tax revenues lost by reduced use of 

fossil fuels. In order to support the objective of fossil fuel 

independence, it is necessary to amend the environmental 

clause of the government’s tax freeze, so that the 

guidelines for the tax freeze are expanded as follows: 

“The government’s objective is that Denmark is to be 

independent of fossil fuels. This has the effect, that fossil 

fuels that are highly taxed will be replaced by other, more 

environmentally friendly types of energy taxed at a lower 

rate and in some cases tax exempt. In order to counteract 

this detrimental effect on tax revenues, other energy taxes 

may be increased, provided the overall tax burden is not 

increased.” 

Box 5.1. Relationship with the government’s tax freeze 

The proposed security of supply tax, combined with 

the tax relief for energy use for industrial processes will 

especially affect households, but it is also important to 

consider a number of benefits for heating consumers 

from the other initiatives in the government proposal. 

The proposed changes in heating settlement and the 

free choice of fuel means better access to lower taxed 

fuels such as biomass and biogas and therefore lower 

heating bills for a large number of consumers. Efforts for 

energy savings will also be intensified with corresponding 

benefits for consumers. From an overall perspective 

therefore regulation will be adapted on market terms to 

the benefit of consumers. This is then financed through 

a security of supply tax, which adjusts taxes on fuel used 

in heat production. 

The security of supply tax in itself also provides an incentive 

for more efficient energy consumption for heating 

– for example to insulate housing better and to install 

heat pumps instead of gas furnaces when replacing old 

installations. 

Financing new energy policy initiatives through 

reprioritisation 

The strategy includes a large number of smaller initiatives 

to support and prepare for the transition to fossil fuel 

independence. There are very specific initiatives such 

as demonstration projects and subsidy pools for smaller 

renewable energy technologies. There are also broader 

initiatives to establish the right framework for the future 

transition. In total these initiatives will cost DKK 0.2 billion 

for the period 2011-2014. 

Of course the initiatives require that financing is in place. 

It is proposed that the initiatives be financed by non-utilised 

funds from the oil furnace scrapping scheme, which 

was decided in connection with the Central Government 

Budget for 2010. It has been assessed that it is possible 

to reallocate these funds partly because the scheme has 

not seen the expected demand and partly because it 

has been estimated that it is still financially viable to convert 

to other types of heating, even without government 

subsidies. The full return on investment of for example 

installing a heat pump instead of an oil-fired furnace 

when replacement is due is typically of 5-10 years. 


61


Micro economic effects of the transition 

The transition towards fossil fuel independence will 

strengthen growth opportunities considerably for Danish 

energy and climate companies. However, it is crucial for 

the government that the transition to fossil fuel independence 

takes account of the competitiveness of all 

Danish companies. 

Considered in isolation, financing the government’s new 

initiatives will incur additional costs for private businesses, 

growing gradually to DKK 1.2 billion in 2020. This 

represents approximately DKK 600 per employee or approximately 

0.1% of the gross added value in the entire 

private sector. In the longer term, it has been estimated 

that the burden will fall, in part as a result of falling costs 

of supporting RE production. Table 5.1 shows specifically 

what the initiatives will mean for energy costs for 

a medium-sized service company and a large energyintensive 

manufacturing company. 

The calculations have been made on the basis of fuel 

and tax assumptions for 2020; the year in which additional 

costs are estimated to be highest. The increase will 

take place gradually up to 2020. Companies therefore 

have good opportunities to adapt to the new conditions. 

For most of the business community, exemplified here 

by a medium-sized service company, this will involve 

modest additional costs and will not affect the competitiveness 

of companies. However, increases in PSO 

contributions and taxes could impact competitiveness 

for a number of energy-intensive companies. 

Therefore, the government proposes that energy taxes 

on energy for industry be relaxed by DKK 0.4 billion, so 

that the whole business community escapes additional 

costs as a consequence of tax increases. However, 

companies will still contribute to renewable energy expansion 

and further energy efficiency efforts by paying a 

PSO contribution and a grid tariff. For a large, energy-intensive 

company, this will mean, that additional costs are 

reduced to approximately 1.3% of the company’s energy 

costs in 2020. This will ensure the right balance between 

competitiveness and the need for a fair distribution of the 

transition costs. 

Furthermore, the government will direct half of the increase 

in energy companies’ energy saving obligation towards 

production companies, for example as subsidies 

to purchase energy-efficient equipment etc. Enhanced 

energy saving efforts could be a competitive advantage 

for energy-efficient companies in periods of increasing 

energy prices. 

With regard to conversion to more biomass in electricity 

and heat production, it is still possible to differentiate the 

price of heating and in so doing take account of business 

customers. The government presupposes, that 

producers and buyers agree heating prices which are 

not unnecessarily detrimental to the competitiveness of 

businesses. 

Fully implemented 

in 2020 

Medium-sized 

VAT-registered enterprise 

(About 250 employees) 

Large industrial enterprise 

in energy-intensive sector 

(About 400 employees) 

Total energy 

expenditure 

without proposal 

Expenditure in 

connection with 

proposal without 

reduction of 

energy taxes 

Expenditure in 

connection with 

proposal with 

reduction of 

energy taxes 

Change in 

relation to a 

situation without 

the proposal 

DKK 0.65 mill. DKK 0.69 mill DKK 0.69 mill. +5,5 pct. 

DKK 100.0 mill. DKK 104.0 mill. DKK 101.3 mill +1,3 pct. 

Table 1: Examples of increases in energy costs in 2020 with the strategy in place 

62 


By far the majority of households will have 

several options to maintain their heating bill 

at an unchanged level 

A stable energy costs framework for 

Danish households 

The government’s new energy policy initiatives, and the 

financing of these, affect households in two ways. Firstly, 

energy saving efforts will be enhanced and there are 

a number of initiatives to promote conversion; initially 

away from oil, and later away from natural gas. This will 

require investment, but it will also reduce heating costs. 

Secondly, households will have to contribute to financing 

the green transition through slightly higher electricity and 

heating bills. 

Under all circumstances energy costs will increase as a 

result of amongst others the growth in oil prices on the 

world market. However, the new initiatives in the strategy 

mean that households will have to pay slightly more for 

the energy they use because of the gradually increasing 

taxes on energy for heating, gradually increasing PSO 

costs for renewable energy as well as gradually increasing 

grid tariffs as a result of enhanced savings efforts. 

The government’s strategy has been planned so as to 

ensure that households’ total bills for electricity, heating 

and transport develop reasonably over the next few 

years. Increases in taxes and tariffs will be gradual. This 

means, that households will be able to react, for example 

by fitting additional insulation, replacing windows, 

converting to other types of heating or by buying more 

energy-efficient appliances when they need replacing. 

Costs of households for 

heating and electricity 

Considered in isolation, households’ expenditure on 

heating will increase, although modestly, as a result of 

the gradual phase-in of the security of supply tax on 

fuel for heating. By far the majority of households will 

have several options to maintain their heating bill at an 

unchanged level, and in some cases even reduce it; with 

the additional benefit of simultaneously reducing consumption 

of fossil fuels. 

All else being equal, a detached house heated by oil, 

natural gas or district heating based on CHP will have 

increased heating costs in 2020 of approximately DKK 

900, corresponding to 4-5% compared with the current 

cost. Similarly, all else being equal, houses heated 

by wood pellets will have almost double the increase, 

although this will still be a financially attractive type of 

heating. 

Energy consumption for heating could in many cases be 

reduced cost effectively in connection with renovation, 

replacement and purchase of new equipment. Enhanced 

efforts to promote energy savings are therefore expected 

to result in the average household using 5% less energy 

for heating in 2020 than it would otherwise have done. 

At the same time, worn out oil furnaces can be replaced 

with heat pumps, and this reduces heating bills 

considerably more than replacement with a new oil 

furnace. Natural gas installations will also benefit from 

replacement with heat pumps in many cases. In smaller 

district heating areas, introduction of free choice of fuel 

provides an opportunity to convert to biomass-based 

district heating, and this can reduce the price of heating 

because of lower taxation on biomass. In large district 

heating areas, amended regulation can reduce the price 

of heating because there is an incentive to increase the 

use of biomass, in that producers and buyers obtain 

freedom of contract in setting the price of heating, and 

thereby share the advantages of lower taxes when using 

biomass. 

In 2020, the strategy will lead to an increase in the price 

of electricity of approximately DKK 0.06 per kWh, including 

VAT, corresponding to an increase of approximately 

3% compared with an expected price of electricity in 

2020 of approximately DKK 2.15 per kWh, including 

taxes. For an average detached house with an annual 

electricity consumption of 4,000kWh, this corresponds 

to additional costs of DKK 250 including VAT per year in 

2020. 


63

A En fully fuldt financed finansieret transition og erhvervsvenlig omstilling 

The example is based on two families. Both families live 

in a detached house of 150 m2, with average insulation, 

and with an annual electricity consumption for light, appliances 

a.o. of 4,000kWh. 

For both families, the new taxes and tariffs involve a 

gradual increase in energy bills up to 2020, when the 

increase will be greatest. In 2020, the increase will 

amount to approximately DKK 1,150 including VAT per 

year, compared with a situation without this strategy. Of 

this, support for renewable energy and energy savings 

amounts to about DKK 250, whereas the remaining 

amount is attributable to the new security of supply tax 

on heating. 

Energy bill 

(electricity and heating), 

DKK per annum, VAT incl. 

2010 2020 

Without 

proposal 

With 

proposal 

With proposal 

and savings* 

With proposal 

and heat pump** 

House heated 

by oil 

Heating 17.300 20.900 21.800 21.100 13.800 

Electricity 

consumption 

7.900 8.650 8.900 8.900 8.900 

Total 25.200 29.550 30.700 30.000 22.700 

With proposal 

and conversion 

to biomass 

House heated 

by district 

heating from 

natural-gas-fired 

CHP plant 

Heating 16.800 16.800 17.700 17.200 15.200 

Electricity 

consumption 

7.900 8.650 8.900 8.900 8.900 

Total 24.700 25.450 26.600 26.100 24.100 

*after amortisation of additional investment for energy improvements 

** after amortisation of additional costs of a heat pump 

The family with the oil furnace can save approximately 

DKK 700 per year on energy consumption, if it at the 

same time reduces heat consumption by 5% through 

energy improvements when replacing old windows, 

roofing, etc. (after amortisation of additional investment 

for energy improvements). If, when it is worn out, the 

oil furnace is replaced with a heat pump, the family can 

save additionally DKK 7,300 per annum (after amortisation 

of the additional expense for a heat pump). 

The family with district heating can save approximately 

DKK 500 per annum on energy consumption by reducing 

its heating consumption by 5% (after amortisation 

of the additional investment on energy improvements). 

If the district heating plant converts production from 

natural gas to biomass, expenses for heating may be 

reduced by a further DKK 2,000. 

Box 5.2 Economic consequences for two families in 2020 with the proposal 

64 



65

Energy Strategy 2050 

– from coal, oil and gas to green energy 

February 2011:7 

For information about this publication, please contact: 

The Danish Ministry of Climate and Energy 

Stormgade 2-6 

1470 Copenhagen K 

Denmark 

Telephone: +45 3392 2800 

Email: kemin@kemin.dk 

www.kemin.dk 

ISBN printed publication 

978-87-92727-13-8 

ISBN electronic publication 

978-87-92727-14-5 

Cover: BGRAPHIC 

Layout/illustrations: Solid Media Solutions 

Print: Litotryk København A/S 

Number printed: 500 copies 

This publication can be downloaded 

and ordered on www.ens.dk 

and via www.kemin.dk

energy strategy 2050 - Energy Europe

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