Denmark
With a cumulative score of 2.86, Denmark ranks number 2 among developed markets and number 2 in the global ranking.
- Developed markets
- Europe
2.93 / 5
Power score
2.62 / 5
Transport score
2.88 / 5
Buildings score
Low-carbon strategy
Net-zero goal and strategy
Denmark has a target of net-zero emissions by 2050, in line with the European Union’s goal. The country also has an interim 2030 target of a 70% reduction in greenhouse gas emissions, compared to 1990 levels.
Nationally Determined Contributions (NDC)
Denmark is part of the EU’s joint nationally determined contribution (NDC) to the Paris Agreement. The updated NDC, submitted to the UNFCCC in 2020, pledges to reduce emissions by 55% before the end of 2030, compared to 1990 levels.
Fossil fuel phase-out policy
Denmark has a phase-out plan for coal and oil in power and heat generation by 2030. For coal power, this is not particularly ambitious as many plants are likely to shut before this date. Its target for 100% renewable electricity generation by 2030 also implicitly means that gas will phase out by 2030.
Power
Power policy
Denmark is characterized by a bipartisan and almost unilateral energy policy, which has survived several changes in government and energy market trends. The country has committed to achieving 100% renewable electricity supply by 2030 and net-zero greenhouse gas emissions by 2050. Denmark has already met its legally binding 2020 renewable energy goal, with a 37% share of renewables in final energy consumption in 2019 compared to a 30% target. The country also achieved 65% renewables in electricity consumption in 2019. Denmark has two major auction schemes to support renewable energy projects with government offtake contracts. These are a technology-neutral auction scheme (primarily for onshore wind and PV) and a separate tender scheme for offshore wind. Offshore wind tenders have been in place since 2015 and have awarded contracts to 600MW of capacity at Krieger's Flak, 400MW at Horns Rev III, and 350MW in a near-shore auction. Technology-neutral auctions were introduced in 2018, and there is an agreement to run these annually until 2024. The first round in 2018 awarded contracts to 261MW of wind and solar projects, and the second round in 2019 supported 271MW. The third round was delayed until 2021 due to a redesign of the contracts on offer (from fixed to variable feed-in premiums). The government aimed to award contracts to around 428MW of capacity in the round but received no bids. Denmark encourages developers to offer nearby communities at least a 20% stake in onshore wind farms taller than 20 meters and has put a limit on the number of onshore wind turbines to be installed in the country by 2030.
Power policies
Power prices and costs
Wholesale power prices in Denmark are generally low, which has led to some concerns about a lack of investment in new firm capacity. This is a characteristic of all NordPool markets, which are dominated by low marginal cost sources like hydro and wind. In 2020, the average day-ahead baseload power price fell to 28.61 euros ($32)/MWh on low demand, below the EU average. However, the average residential retail price of electricity in 2020 was 10 times the baseload power price at 282 euros/MWh – one of the highest rates in Europe. In Denmark, the majority of the retail price came from levies and taxes – of which the renewable public service obligation (PSO) accounted for more than half. In 2021, the government restructured electricity taxes to reduce these costs for consumers, by fully phasing out the PSO tariff and gradually shifting the financing of clean energy subsidies over to the state budget.
Power market
Denmark shares a wholesale power market with Norway, Sweden and Finland, but has a separate and sovereign energy policy. The country is split into two power price zones. Wind power is the dominant source for electricity, accounting for 65% of generation in 2020 – up from 62% in 2019. The country has been committed to build out wind capacity for decades and aims to reach 100% renewable electricity by 2030, which will include launching two 2GW offshore wind 'islands'. Increasing renewables penetration has led to concerns about security of supply, particularly in east Denmark. There was a plan to implement a strategic reserve to combat this, but this was postponed when it became clear that the European Commission would reject it as it was likely to be in breach of state aid rules. More recent reviews conducted by the system operator from 2019-2020 suggest that there is no longer a need for a strategic reserve, so the plans are shelved until 2030. Instead, the country has decided to place greater focus on flexibility and interconnection capacity.
Installed Capacity (in MW)
Electricity Generation (in GWh)
Utility privatisation
Which segments of the power sector are open to private participation?
Wholesale power market
Does the country have a wholesale power market?
Doing business and barriers
There are few legal barriers to entry into the Danish power market, shown by the fact that there are several hundred local generators and around 50 suppliers active in the market. There is, for example, no local content rules to develop renewables projects onshore or offshore. However, the country promotes community ownership and has put an obligation on developers to offer 20% ownership for onshore wind farms taller than 20 meters to nearby communities. Denmark also has a cap on onshore wind turbines to be installed in the country by 2030 (1,850 turbines). This will require the number of turbines installed to approximately halve from today's installations. Since many of the onshore wind turbines in Denmark are old and relatively small, these could be replaced with fewer, higher capacity turbines to limit the impact of this cap on installed onshore wind capacity.
Currency of PPAs
Are PPAs signed in or indexed to U.S. Dollars or Euro?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Fossil fuel subsidies
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) down through subsidies?
Bilateral power contracts
Can a C&I (Commercial and Industrial) customer sign a long-term contract (PPA) for clean energy?
Fossil fuel taxes
Does the government influence the wholesale price of fossil fuel (used by thermal power plants) up through taxes?
Transport
EV market
Denmark has lagged on electric vehicle (EV) uptake compared to its Nordic counterparts Norway and Sweden, due to historically lower levels of subsidy support. The government has a mixed record with EV incentives – but recent changes to registration tax deductions available to EVs, tighter EU fuel economy standards and falling technology costs are boosting adoption of EVs in Denmark. Sales of passenger EVs in Denmark more than doubled between 2019 and 2020, reaching more than 17,000 units sold despite the Covid-19 pandemic. EVs represented a record 9% of total new vehicle sales in Denmark in 2020.
EV policy
The Danish government has set a target for a fleet of 775,000 EVs by 2030, which would represent around 23% of the total fleet – up from around 1.5% (37,000) in 2020. However, the Danish Climate Council says that 1 million EVs could be required by 2030 to reach the country’s climate targets. Denmark has also set a target to phase out new sales of ICE vehicles by 2030, although this is not legislated due to an EU dispute about the proposal. Despite these ambitious targets, Denmark has a rocky history with EV subsidies. The government removed tax incentives designed to support EVs in 2015, which damaged the market and led to several years of very low uptake. The move demonstrated the harmful impacts of subsidy cuts on EV adoption, as EVs were still particularly dependent on subsidies to reduce upfront costs and incentivize adoption at this time. Denmark re-introduced policy support with registration tax deductions in 2020, and in June 2021, the tax deduction scheme entered a new phase with steeper benefits for EVs relative to combustion engine vehicles. The country still does not offer direct incentives to support EV charging point rollout, unlike many EU member states, although tax exemptions are available for commercial EV charging. As an EU member state, EU regulations direct fuel economy standards for sales of new vehicles in Denmark. BNEF expects these standards to be an important driver of increased EV model availability among automakers and adoption of EVs in the region over the coming decade.
Transport policies
Fuel economy standards
Does the country have a fuel economy standard in place?
Buildings
Buildings market
Residential heating plays an important role in Denmark due to the country’s cold climate. The average home in Denmark consumes 36% more energy per year than the equivalent-sized home in the Netherlands. Denmark is the only Nordic country that has a gas distribution grid serving residential homes, but only around 15% of Danish homes currently rely on gas for space heating – and the government has no plans to build out its gas grid further. The economics for gas boilers in Denmark are relatively strong, but the government is working to phase them out altogether as part of its net-zero goals. Heat pump sales have almost tripled between 2010 and 2020 and supplied more than 6% of residential heating in 2020. More than 45% of residential heating in Denmark is supplied by district heating networks, of which still 20% is fueled by gas and coal.
Energy performance standards
Are there minimum energy performance standards for buildings?
Energy efficiency plan
Does the country have a national energy efficiency plan?
Buildings policy
Compared to Sweden, Denmark has a much smaller heat pump market. A lack of stable policy has had a negative impact on heat pump market development: Denmark had a brief period of subsidies in the late 1970’s, but all subsidies were removed by 2001. More recently, Denmark has begun the process of phasing out fossil fuel heating systems as part of its climate targets. The government instated a ban on oil boilers in new homes in 2013 and banned the replacement of oil boilers in existing buildings in 2016, with only limited exceptions. The government has also banned the installation of gas grid connections in new homes since 2013 but has not set a date to end gas boiler replacements in existing homes. Danish consumers have had access to a range of incentives aimed at encouraging switching from fossil heating to heat pumps. The government put in place a carbon tax on oil and gas heating in 1992, which has risen over time from 24 euros to 144 euros/ton CO2 from 1991 to 2021. This has been particularly important in supporting a switch to biomass boilers, which supplied a quarter of residential heating demand in 2019. The government also had a grant program available for households installing a heat pump, with up to 6,000 euros per installation if the building is located outside of district heat areas until end-2021. A tax deduction for annual electricity consumption exceeding 4,000kWh for heat pump owners is also available.
