- The EC has approved Denmark’s request to clear its renewable energy generation support scheme
- Denmark will be able to select renewable energy projects through competitive auctions between 2021 and 2024 and support them with up to DKK 3 billion under the scheme
- Support will be guaranteed to winning projects through a CFD premium to be paid for a maximum of 20 years
The European Commission (EC) has stamped its approval to a renewable energy electricity production support scheme of Denmark allowing the country to set aside a maximum of DKK 3 billion or €400 million ($481 million) budget to be invested till 2024 for renewable energy produced by solar PV, onshore and offshore wind turbines, wave power plants, and hydroelectric power plants.
According to the EC that assessed the scheme under EU State Aid Rules, the new scheme will enable Denmark reach its renewable energy targets ‘without unduly distorting competition’, while contributing to the overarching European target of achieving climate neutrality by 2050.
Denmark will be able to award this budget to projects selected through competitive tenders to be held between 2021 and 2024, and will take the form of a 2-way contract-for-difference (CFD) premium. The EC describes, under the model, when the electricity price is below a reference price as established in an auction, the state will pay the renewable energy producer the difference between the actual electricity price and the reference one, for a maximum of 20 years after the project is grid connected.
This, explains EC, helps renewable energy producers make necessary investments as it guarantees them long-term price stability.
“This Danish scheme will contribute to substantial reductions in greenhouse emissions, supporting the objectives of the Green Deal,” said EC’s Executive Vice-President Margrethe Vestager in charge of competition policy. “The wide eligibility criteria and the selection of the beneficiaries through a competitive bidding process will ensure the best value for taxpayers money and will minimize possible distortions of competition.”
The scheme will replace a similar aid scheme for Denmark that expired on December 31, 2019, after which the country notified the commission of its intention to introduce a new scheme to support electricity production from renewables.
In April 2021, the EU Council and European Parliament reached a provisional agreement for the bloc to reduce its GHG emissions by 55% by 2030, while aiming for no net emissions of GHG in 2050.