A Sustained Portfolio of Policies Have Transformed Denmark’s Power Sector

Denmark’s power sector has undergone a transformational shift over the past 30 years from coal-dominated generation to mostly renewable sources. Power generation from renewable sources rose nearly 30-fold from 1990 to 2020, from 3% of the generation mix to more than 80%. This has mostly been due to massive deployment of wind, which increased 24-fold over the same time period and reached seven gigawatts of installed capacity as of January 2022.

More recently, solar generation has become a contributing factor, doubling between 2015 and 2020 to contribute 4% of the power mix. Use of renewable sources for heat has also been on the rise, with renewable energy currently composing more than half of total heat generation. The scale-up of renewables has contributed to a 76% decline in carbon dioxide emissions from Denmark’s power and heat sector from 1990 to 2020 (Figure 1).

This transformation has been driven by a combination of sustained, well-designed policies and actions, including the following:

• Sustained investment in research and development (R&D): Denmark began expanding wind energy in response to the 1970s oil crisis by scaling up R&D investment. Today, Denmark has one of the highest ratios of R&D spending on wind energy as a share of gross domestic product (GDP) in the world and was the top investor in the European Union in terms of R&D spending on renewable energy as a share of GDP from 2000 to 2020. This has made Denmark a world leader in wind energy and an exporter of wind technology.
• Implementation and adjustment of a feed-in tariff for wind: Denmark first introduced a feed-in tariff for wind in the 1980s and raised it in 2008 in response to a stall in development of new wind capacity. The increase reinvigorated wind development by providing developers with stable revenue to make long-term investments.
• Institutional support for planning and installation of renewable energy: Government support and streamlined planning processes facilitated development of onshore wind with requirements beginning in 2008 for municipalities to designate areas for onshore wind. Likewise, the Danish Energy Agency conducts mapping and site identification for offshore wind, working with developers to streamline the licensing processes, which has reduced barriers and transaction costs. The Danish Energy Agency provides a single point of access for project developers through the permitting and approval process.
• Strong grid interconnection: Denmark has been a world leader in renewables integration by maintaining strong grid interconnection and market integration with other countries for export, complemented by use of combined heat and power. The transmission grid is owned by a public company under control of the government’s Ministry for Climate and Energy, which finances projects and passes costs on to consumers.
• Community ownership of renewable energy projects: Denmark’s 2008 Renewable Energy Act requires local citizens to be offered at least a 20% share in new wind projects and requires investment of revenues into local projects, increasing buy-in for new wind projects and helping communities share the benefits. Denmark’s Samsø Island, the first to be 100% powered by renewable energy, illustrates a successful shared ownership model, where offshore turbines are owned by investors, municipal government and local cooperatives.
• Upgrading aging turbines: In 2001, Denmark implemented a scrapping program to speed replacement of aging, less efficient turbines with more modern models.
• Increasingly ambitious renewable energy targets: Because of the interventions described above, Denmark surpassed targets set for renewables for 2011 (20% of Denmark’s gross energy consumption) and 2020 (35% of final energy, 50% of electricity consumption). Now, the government has further increased targets for 2030 (100% of electricity generation, 55% of total energy consumption, and 90% of district heating, or non-fossil sources), which will continue to drive the increased scale-up.

Throughout the transition, Denmark has had ongoing dialogues with unions and employers to work toward fair sharing of costs and benefits and to support workers in fossil fuel industries. Building a strong industry for renewables has been central to Denmark’s approach, paired with a robust social safety net.