Introduction

Solar and wind power projects will compete for state subsidies in Denmark for the first time.

An agreement between the government and the Danish People's Party has assigned Dkr1.165 billion in total for tenders in 2018 and 2019. Of this, Dkr1.015 billion has been allocated towards a technology-neutral call for a wind and solar power tender and Dkr150 million for new test windmills on land. The aim is to achieve the highest possible capacity for the allocated amounts by increasing competition between the technologies.

It is expected that the Dkr1.015 billion will result in approximately 190 megawatts (MWs) of sustainable energy, which corresponds to the annual power consumption of approximately 140,000 households.

It is also expected that approximately 130MW test windmills will be built in 2018 and 2019, during a three-year support period.

Content of the model

The development of land windmills is subsidised with a fixed additional charge of 25 cents per kilowatt hour. This subsidy system will expire on February 21 2018. The existing subsidy system for solar power will also be discontinued.

Under the new subsidy model, project developers will be able to participate in tenders with solar power, land windmills or near-shore windmills in 2018 and 2019, which will then be evaluated against each other based on objective criteria. The projects which deliver the highest amount of megawatts for the lowest price will receive subsidies until the budget of Dkr1.065 billion is allocated.

Subsidies are awarded as a fixed additional charge to the electricity cost. Therefore, the responsibility for the price development of electricity will be carried by the supplier instead of the state. Consequently, the supplier will have access to more accurate market conditions and price indicators, which lessens the uncertainty regarding subsidy expenses.

The subsidy is given for the duration of the facility's life span (fixed at 20 years) to actual production, to provide a better incentive for maintenance and replacement.

The new subsidy model for wind and solar power in 2018 to 2019 is summarised as follows:

  • There will be annual technology neutral calls for tender.
  • A financial budget totalling Dkr1.015 billion will be distributed across the entire period.
  • The subsidy is granted as a fixed additional charge to the electricity cost for 20 years.
  • The tender system is designed with a 'pay as bid' principle, meaning that the subsidy to the winning suppliers is determined from their actual bids.
  • The project developers must obtain the necessary approvals in advance. There must also be an approved local development plan and the complaints process must have been completed.
  • Based on the experience with the scheme in the subsequent two years, it may be extended for 10 years.

Transitional arrangements for wind turbine projects

Certain projects may end up being trapped in transition from one support regime to another. The government will therefore establish a transitional scheme for wind turbine projects that meet the following conditions:

  • The local plan and Environmental Impact Assessment permit for the wind turbine project must have been approved before January 1 2017 under the state aid guidelines.
  • The project must have been subject to a complaint in 2017, which did not significantly change the project and where the approval of the local plan was maintained.
  • The wind turbine project must be connected to the grid before January 1 2021.
  • The transitional arrangement is limited to a total of 43MW, which is allocated on a first come, first served basis.
  • The rate of support in the transitional arrangement is determined by the highest winning bid in the first round of tenders.

The arrangements are subject to the approval of the European Commission.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.

For further information on this topic please contact Nicolaj Kleist at Bruun & Hjejle by telephone (+45 33 34 50 00) or email (nkl@bruunhjejle.dk). The Bruun & Hjejle website can be accessed at www.bruunhjejle.com.